June 2014
Everybody has a plan until they get punched in the mouth.
- Mike Tyson
Paul Moses (pemoses@prf.org; director of Purdue Research Parks in New Albany and Indianapolis; manager and co-founder of INnovation Angels; president & chair‑elect of Venture Connectors) told us about Purdue University’s new emphasis on getting things done. The result is a record-breaking 24 startups (based on Purdue’s intellectual property) formed in fiscal year 2014, triple that in 2013.
Mr. Moses helps people turn an idea into a business. One of the first things he asks a startup founder (not someone else hired by the founder) to do is to put the horse before the cart, to adapt the startup to fit the market. This not only increases the startup’s probability of success, but also attracts investors with evidence of guaranteed customers (i.e., profit) and with evidence that the founder is a good business person—adaptable, coachable, and capable of making good decisions.
Mr. Moses asks the founder to fit the startup to the market in the same way that s/he fits an invention to its purpose—by developing a working prototype. The founder learns by trial and error: who the startup’s customers are (people ready to buy the startup’s goods and services); what it is, exactly, that the customers want; and what the startup needs to offer to the customers to succeed. Only the founder can do this because only s/he has the authority to change the whole nature of the startup.
Guides available to the founder include:
Steve Blank’s:
online course, How to Build a Startup;
book, The Startup Owner’s Manual;
book, The Four Steps to the Epiphany;
book, The Startup Owner’s Manual;
book, The Four Steps to the Epiphany;
online tool, The Business
Model Canvas;
online course, Business Models That Work & Value Propositions That Sell; and
book, Business Model Generation;
online course, Business Models That Work & Value Propositions That Sell; and
book, Business Model Generation;
Purdue University’s:
The process looks something like this.
- Use the business model canvas to design a first draft of your startup prototype. Base this prototype on your best guesses as to who your customers are, what problems they want to solve, and what solutions the startup should provide to be profitable. (Note: the canvas is not a business plan. It is a container that holds guesses about the startup, which the founder tests. It shows the latest version of the startup prototype, that is, the founder's current logic of how the startup creates, delivers, and captures value.)
- Get out of the building to see if your guesses match reality, to see if your product fits the market. Talk to potential customers. Are they really middle age men or are they teenage girls? Do they really want an expensive, durable product or do they want an inexpensive, single-use product?
- Go back into the building and use these new facts to revise your canvas.
- Repeat steps 2 and 3 until almost all of your newly identified customers demand your newly identified products and services. When you guess wrong, figure out why you guessed wrong so you can understand the logic of the product-market fit.
- Pretend you know what your business model is, prepare to sell your products and services on a small scale, get out of the building, and try to sell to people you think are your customers. Ask them which features persuaded them to buy.
- Go back into the building; figure out what you didn’t understand about your customers, what they need, or how to relate to them; and modify your prototype accordingly. Once again, when you guess wrong, figure out why you guessed wrong so you can understand the logic of the product-market fit.
- Repeat steps 5 and 6 until you have a repeatable, scalable business model.