Here’s an article from one of my talks in Madrid, where I launched Steve Blank’s and my El Manual del Emprendedor last week. My host for this session was an intriguing, high-energy consultancy, Opinno, which drives innovation inside major corporations throughout Latin America, the US and other locales from its headquarters in Madrid…a team of 30+ customer development evangelists, protypers, consultants and coaches. Hola!
The entrepreneur Bob Dorf acknowledges that the business approach is not the most suitable for scientific research.
In recent decades, society has undergone a transformation that encompasses even the way they operate their businesses. The businessman and entrepreneur Bob Dorf, has been one of the main agents of this change by developing a methodology for customer acquisition, a business method known as Lean start-up, based on the ongoing review of the business model thanks to feedback from customers and consumers. Dorf has visited Spain to present his new book, El Manual del Emprendedor.
Bob Dorf spoke during a meeting in Spain with MIT Technology Review.
Source: Carlota Iglesias (Opinno)
What kind of mentality is needed to accept business methodologies based on trial and error?
The biggest challenge in the Spanish culture is that there is no room for failure. That fault is stigmatized for life, which is terrible. On the contrary, this methodology is based precisely on detecting failures in a company. And this is achieved in small ways, improving and continually looking for mistakes over and over again. To generate a cultural change that encourages this procedure it’s necessary to change the laws so that they can create new businesses exempted from penalties do that in case of failure, you can try again.
How to prepare for governments and society to do?
Probably the best way is to show examples of success, as the case of the company Groupon, which currently enjoys great success but had previously been on the verge of closing. When they realized that they were doomed to fail, they decided to change its business model to the present, based on the discounts. Thanks to that, they have become a company billions of dollars. The presentation of several success stories like this, and others that have taken place in Spain, is the best way.
What advantages should provide a government to facilitate the companies to continue this method?
The most immediate measures are not even economic sphere. In Spain, it’s necessary to facilitate and encourage anyone to invest small amounts of money in new companies, for example, through tax advantages, especially in cases of failure. There are many people who have money, but only want to invest in business insurance and risk. Generating this stimulus should be the first task of government. Secondly, it would be necessary to reduce the amount of control that governs the start-up . These companies should be exempt from taxes, regulations and other formalities until they have reached a certain minimum size, which will help them to accept certain risks and increase your chances of success.
The methodology for developing new clients is aimed at small businesses, but also in large, are there any companies where you can not apply this methodology?
In large companies, it cannot be applied unless the advisory board, the board and investors are willing to take risks. If they are not willing, no one can do it. We know that nine out of ten start-ups fail. For large companies this is a very high figure, and they do not like failure. However, it is necessary to take this risk in order to achieve success. But the rate ofstart-up success for every nine failed is a very bad figure for an already established company.
Furthermore, failure is a risk to the company’s image.
Well, it would be a failure at the level of growth, not about the company in general. The best example is the Colombian company Carvajal, valued at 2,00 million dollars. It carried out 12start-up experiments. The director felt that if only one of them could generate revenues of between 50 and 100 million in the next three years, the entire program would have been a success. They had good ideas and a good team, they succeeded with three of them. However, this success rate represents a very special case and unusual.
The start-up have it easy, but must be brave and take risks for the company to advance and get investors. However, first it is necessary to assume that most of them fail.
What is the difference between this method and market research?
In market research, interviews and averages are made in bulk. Three out of five like this, four out of seven hate the other …. This methodology is based on interviews face to face, one on one, to find an audience that has a passion for the product and idea. If you can not find a customer base with this kind of enthusiasm, you will have no business opportunity.This approach also seeks to own clients’ ideas to improve business, product or advertising.This is accomplished by intense talks to generate a feedback, random and depth is not achieved with market research.
Is it applicable in science where developments take years to develop?
There are two areas where it is difficult to apply this methodology. One is the research and pharmaceutical industry. When it takes five or ten years to develop a product, as a cure for malaria, your customers will not worry because you will have thousands and will create a better world. No customer level risk, but innovation. We, however, are not smart enough to advise how to improve innovation, to teach only get customers.
There is a range where the method can be easily applied to another which is very complicated. In the easier area, a business can take only half an hour, changing the proposals or presentations, for example. In this area, it includes web pages, developers and software developers … At the other end, for example, is the construction of aircraft, where it is very difficult to get a feedback from the client.
So the sectors they find it complicated should remain as they are?
They may apply the methodology in the early stages, before they built anything. They could attack the project specifications in the abstract and ask your customers their opinion on them, before carrying out the project. There are very few companies in the voice of the customer that does not serve to improve them. They only question is how long it takes and how much it costs.
How many companies are applying the method?
We do not have specific numbers, but very anecdotal examples. We are being taught in over 200 universities in the U.S. alone. The National Science Foundation USA, currently is funding training in this methodology to more than 400 teams of scientists so they can create businesses based on their scientific research. This funding represents an investment of $50,000 USD (36,000 euros) to create research-based business. In addition, the book has been translated into a multitude of languages and examples of their application know worldwide.
Could governments also use this in their policies?
We have seen, especially in Colombia, the government is pouring money into the country to train entrepreneurs to apply this methodology in order to accelerate the creation of new businesses. Not only do they seek to train them but to demonstrate to the small start-up, the benefits to be gained through the application of the methodology.