I thought that this article had a good point to it and it relates to the idea of testing an idea out with a few people to see if it works. If it does not, you have failed and learned at the same time, and you have saved some money.
http://mashable.com/2015/10/14/entrepreneurship-rules-brandspeak/#qgGcFsXtAPqK
This article explains the Lean Startup Concept and clarifies it. The lean startup method does not mean that companies do not put money into their product or service. I think that takeaway is key.
https://www.entrepreneur.com/article/286701
Eric Ries on 4 Common Misconceptions About Lean Startup
January 23, 2017
If you believe that lean startup methods lead to cheap products and companies, or that lean startup companies don’t think big, think again. The digital revolution, globalization and technology platforms have forced companies to bring products to market faster than ever to stay alive, and even behemoths such as Experian are benefiting from a lean startup philosophy.
In light of the numerous misconceptions about lean startups, I thought it would be useful to clarify a few things for entrepreneurs and innovators. That’s how I came to talk about the subject with Eric Ries, consultant, and author of The Lean Startup, during Lean Startup Week in November.
The lean startup methodology is an approach for getting new products — and startups — to market using the fundamentals we learned in science class. Many hear the term “lean” and assume it means a startup that frequently cuts corners to save time and money. That’s incorrect. Instead, a lean startup creates efficiency by minimizing wasted resources.
The ultimate goal? Streamlining the process for bringing a big idea to market.
Ries is one of the true champions of the approach and is a goldmine of information for anyone interested in avoiding the costly pitfalls that occur in the critical early stages of product development. This was actually the third time I’d had the opportunity to interview him; our last discussion covered marketing’s role in the lean startup process.
Our most recent discussion focused on what “lean startup” means in today’s business climate and how most entrepreneurs and corporate leaders have a faulty understanding of the approach. Here are a few of the misconceptions Ries described to me about how entrepreneurs still view lean startups.
Misconception 1: “Lean” means you’re cheap or not thinking big.
Customers often perceive early iterations of products as “cheap” or, at best, inadequate. In reality, the first iteration of a product — the minimum viable product — is a practical way to test an innovation with the consumer before fine-tuning the process.
Measuring and learning early in the development process ultimately saves startups time and resources. With my own organization’s venture companies, for example, we define an MVP (minimum viable product) as the smallest amount of design and code necessary to conduct the first product or market experiment while maintaining a positive user experience.
Customers might not know what they want, Ries said, but hypothesis-testing with your audience is still valuable.
Let’s assume the problem you’re trying to solve is how to make it easier for people to get from point A to point B. The MVP isn’t a broken car, an ugly car or a Lamborghini without an engine; it’s a simple, sleek scooter. Testing acceptance of the scooter can help you confirm whether people will use a vehicle to get from point to point, and validate core assumptions without investing the time or money to create an entire car.
Once you know customers are willing to pay for an alternative to walking, you can use their scooter feedback to shape your next product.
Uber is an example of a company that started with a lean MVP. Uber is now the highest-valued unicorn startup in the world, and it’s worth as much as Goldman Sachs.
Misconception 2: Venture capital is unnecessary in the lean world.
Lean startup methodology still confuses some venture capitalists. Those VCs reserve their funding for companies that can return 10 times their capital investment within seven to 10 years or for firms with an exit potential of at least nine figures.
Related: Why Overcoming Failure Is the First Step Toward Success
Ries said there has been pushback from a few VC leaders against the lean approach because they believe it eliminates the need for funding to grow a business. He insisted that this isn’t the case, as scaling still requires capital. Just look at Airbnb’s funding rounds, even though the company’s MVP was a simple landing page.
The lean process can drastically reduce capital waste in the early startup stage, but capital is still necessary. Ultimately, the lean process is a win-win for startup founders and VCs alike because it reduces investment risk and burn rates while shortening the path to results.
Misconception 3: Lean startups embrace failure.
Some consider a lean startup as a license to fail. But it’s not about embracing a culture of failure; it’s about understanding that you might stumble and a fall in a race, even as you get back up and make up for lost time.
“I hate the idea of ‘fail fast,’” Ries said. “It’s like I’m trying to run a sprint, and you’re like, ‘OK. Breathe fast.’ The breathing is not the purpose; the sprint is the purpose.”
The scientific method — largely the basis for the lean startup process — encourages practitioners to try a new hypothesis after another is rejected. As long as you’re learning from you’re results, you’re allowed to get the hypothesis wrong.
The goal is to learn as much as possible from any failures and accelerate the entire process, to achieve a more successful outcome. Even Mark Zuckerberg changed his philosophy to ensure that Facebook would remain stable as it evolved. The company nixed the culture of “fail fast,” but it still has a strong grounding in experimentation and iteration.
Misconception 4: Established companies have nothing to gain from a lean approach.
The leaders of established companies often have a faulty perception of lean startup techniques; they assume the approach becomes pointless once a company is mature and established.
“They think startups are all about kids eating ramen noodles and wearing a black turtleneck,” Ries said. These executives think the methodology no longer applies to them because their employees have gained health insurance, and “Everyone wears a suit to work.”
In reality, any project or innovation can benefit from lean startup techniques. GE FastWorks is using lean startup methodologies and has launched more than 100 projects globally, including disruptive healthcare solutions and new gas turbines.
In sum, a lean startup approach might not be right in every context, but it’s clear that the “third wave” — an imminent revolution characterized by machine intelligence, robotics and the internet of things — is dawning. That technological transformation will completely change our economy and society.
So, because that shift won’t be solely about startups, established and emerging companies alike will need to embrace the lean way of thinking, or risk failure.
This is a wonderful article that echoes what we spoke about this week and the prior two weeks.
Entrepreneurship in Colombia: ‘Try Fast, Learn Fast, Fail Cheap’
Entrepreneurship in Colombia: ‘Try Fast, Learn Fast, Fail Cheap’
Jan 02, 2013
Colombia today is considered to be one of the world’s great emerging economies. Its growing political stability, decrease in violence, young working population and overall positive economic trend make it a country with interesting prospects. Robert Ward, a global forecasting director for the Economist Intelligence Unit (EIU), categorizes upcoming developing nations into a group called CIVETS. All the countries included in this group — Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa — share several very important characteristics, including positive trends in political, social and economic aspects.
In 2011, a financially troubled year for the world, Colombia achieved a Gross Domestic Product (GDP) growth rate of 5.9%, becoming the 33rd largest economy in the world, according to the International Monetary Fund (IMF). For 2012, the Colombian government forecasts public debt to reach 25% of GDP, an enviable mark compared with many other indebted nations. In addition, the country is experiencing an investment rate of 28% of GDP, the highest level seen in the country in the last decade. In a world where some of the most powerful nations are facing grave challenges, this is a very good position for a country such as Colombia to be in.
While Colombians are proud of today’s economic status, it was not an easy journey. Issues such as violence and economic inequality long hindered the nation’s economic potential and affected the people’s morale. For many years, Colombia placed great emphasis on overcoming these obstacles. According to the Ministry of Defense, the homicide rate in 2011was the lowest it had been in 26 years, with the country experiencing a 12% drop from the previous year. This positive trend brought great optimism for what Colombia’s future may hold. Where violence — headed by factions such as the Revolutionary Armed Forces of Colombia (FARC) — previously caused major safety issues and distribution challenges and repelled investors, today the improvements are noticeable, and the Colombian government is promoting this change proactively in hopes of attracting international interest.
A second and related challenge for Colombia today is economic inequality. Colombia still ranks seventh among countries with the highest degree of economic inequality, but it is seeing a change for the better. The government’s recent decisions to increase public savings, reduce the public deficit and invest in social programs have already resulted in improvements. According to Catalina Crane Arango, the Colombian high presidential counselor for public and private management, the purchasing power of minimum-wage workers has increased significantly over the last decade. In 2000, a minimum-wage worker had to work for 125 months to be able to afford a car; in 2012, a minimum-wage worker could afford a car after 57 months.
The lessening violence and reduction in economic inequality are among many developments driving the positive economic trend in Colombia and giving its citizens hope for a better future. As a result, the country is seeing a great expansion in its entrepreneurial environment. According to the most recent survey by GEM (Global Entrepreneurship Monitor), the world’s largest study of entrepreneurship, 20.6% of respondents in Colombia in 2011 reported they had started a company within the last three years. This figure compares to the average result of 11.8% from a selected group of peer countries. Now the Colombian government has the challenge of figuring out how to cultivate and maximize this entrepreneurial potential.
Entrepreneurship, and How the Government Drives It
In the report Politica de desarrollo empresarial: la “politica industrial” de Colombia, published in May 2011, Sergio Diaz-Granados Guida, a former Minister of Commerce, Industry and Tourism, says, “In the past, industrial policy in Colombia was based on artificial protection of selected sectors of the economy using methods such as high customs tariffs, import licensing, monopoly of the government on food product import, price control and others.” This appears to have led to the creation of an arguably artificial and isolated entrepreneurial environment.
In the beginning of the 1990s, the Colombian government’s role in driving entrepreneurship changed as the policy focus shifted toward helping small- and medium-size businesses, which were viewed as the nuclei of economic development for the country. This was the first time the government had used the term política de desarrollo empresarial (entrepreneurship development policy) to describe its new industrial policy.
Today, this policy has evolved into one that concentrates governmental efforts not on protecting businesses and industries, but rather on eliminating barriers for entrepreneurship development and on driving competition.
More recently, the Colombian government has concentrated its efforts on elaborating the appropriate legal framework and financial infrastructure to support new entrepreneurial activity in the country. One of the most important pieces of legislation on entrepreneurship was passed in 2006. Law 1014 aimed to promote entrepreneurship across different sectors of the economy. One of its initiatives was the creation of the national and regional network for entrepreneurship development. In 2009, Law 1286 established the national system of science, technology and innovation, whose goal is to support high-technology high-impact entrepreneurship.
In addition to strategies and laws, the Colombian government has been looking at other methods for growing and supporting entrepreneurship. In 2002, the government launched Fondo Emprender, a seed capital fund that specializes in financing the companies that were formed within SENA (Servicio Nacional de Aprendizaje), an educational entity responsible for promoting entrepreneurship among students. Institutions such as this focus primarily on providing financial and infrastructural support to specific entrepreneurial projects. Together with the national system of creation and incubation, this network has established more than 20 business incubators across the country, which in turn have helped to launch more than 1,500 start-up companies since 2003.
Faced with growing entrepreneurial activity and need, the Colombian government has had to find a more effective and wider-reaching plan. According to Sergio Zuluaga, director of entrepreneurship and innovation in the Ministry of Commerce, Industry and Tourism — responsible for promoting entrepreneurship in the country — the government recently decided to change its approach, choosing one where it takes into account the entrepreneurship ecosystem as a whole, focusing both on the different types of new business and on the institutions that are part of this ecosystem. “Colombia has a lot of types of entrepreneurs and institutions, and we need to develop precise and tailor-made instruments, strategies and policies for each one of them,” Zuluaga stated.
The new approach does not stand alone; it is supported by the national entrepreneurship policy of 2009 and, subsequently, by the national development plan of 2010-2014. According to Política de Emprendimiento 2009, the main goal of the new policies is to resolve what have been identified as today’s key challenges for the Colombian entrepreneurial environment. These challenges include an informality of entrepreneurial ventures, time-consuming and costly registration and liquidation procedures, difficult access to financing, market-entry limits, limited access to high-end technology, intellectual-rights protection, low levels of innovation, a lack of communication and articulation among institutions and a low level of overall entrepreneurial competence — a long and daunting list for the government to work though.
In an effort to resolve these challenges, Zuluaga indicated that the Colombian government intends to structure its efforts on the basis of four strategic principles: First is to apply a differential approach; as Zuluaga put it, “every type of entrepreneur and support institution needs a specific solution, and we need to work side by side with them to design and implement effective policies.” Second is to create and support instruments and programs that facilitate the “go-to-market” part of the entrepreneurship process. Third is to promote easy access to financing for entrepreneurs and new businesses (such as venture capital funds, a network of investors and micro-financing). Fourth is to establish and help maintain communication among all institutions responsible for entrepreneurship development within the ecosystem.
These principles are inspired by what Zuluaga and others in the Colombian government like to call the “Try Fast, Learn Fast, Fail Cheap” model — a model the government hopes will help Colombia’s existing and aspiring entrepreneurs. The government also plans to carry out a variety of programs that deal with nonfinancial industries, such as a national competition for entrepreneurs; tutorship programs; support for businesses that incorporate science, tech and innovation; a national system of business incubators; techno parks and innovation programs.
Clearly the government has set some bold objectives in hopes of growing the entrepreneurial presence in Colombia. But the long list of plans makes some observers question whether the government will be able to execute these plans effectively and, indeed, whether these plans meet Colombian entrepreneurs’ most pressing needs.
Looking to the Future
By creating a system of special incentives and support for establishing new businesses, the Colombian government has achieved successes in making the country a place where entrepreneurs and their businesses see positive prospects. However, challenges still exist. In order to harness and grow the existing entrepreneurial environment, the government needs to select where it focuses its efforts and determine how to do so carefully and effectively.
In its attempt to drive entrepreneurship, the Colombian government faces the challenge of dealing with large numbers of fundamentally different types of entrepreneurs. Some are driven by necessity, such as the unemployed impoverished people who sell juice on the street corners. Others are driven by opportunity or motivation, typically educated people with access to at least the basic necessities of life. According to the GEM survey, in Colombia, for each entrepreneur driven to launch out of necessity, 1.49 do so because they see an opportunity. This ratio is lower than the average indicator for efficiency-driven economies (including Colombia), where the number of opportunity-driven entrepreneurs is almost double that of necessity-driven entrepreneurs. Government policy must recognize the different needs and goals of these two groups. “The government applies a differential focus and elaborates specific strategies to approach opportunity and necessity entrepreneurs differently,” says Zuluaga.
The initiatives created by the Colombian government are solid first steps toward building an environment conducive to entrepreneurship. However, until now, not all entrepreneurs have felt positive about governmental policies and plans. According to the GEM survey, even though people recognize the government’s recent efforts, they explicitly stated that policies are still not clear or communicated sufficiently. Alejandro Venegas, co-founder of an online financial services company in Colombia, pointed out that although he has heard that government programs exist to support entrepreneurs, he has no information about them or how to access them.
This sentiment seems to be a common theme among entrepreneurs. The GEM survey also indicated that current tax policies and interest rates were not beneficial for starting a company, and that the delay and inefficiency of bureaucratic procedures in government departments is an impediment to the start-up process. Angela Maria Yepes Ruiz, a Colombian business owner, commented that government processes and taxation in general are extremely difficult for starting businesses in Colombia. In addition, none of the dimensions rated by the survey were rated as “outstanding,” demonstrating the need for improvement in a diverse range of areas such as education, financing, intellectual property rights, infrastructure, interest in innovation and support for women in business.
Colombian entrepreneurs continue to face daunting challenges: difficulty in accessing information about specific support programs offered by the government or a lack of such information; the still-high importance of personal contacts required to make things happen, and the underdeveloped financial markets, including the lack of accessible venture capital funds and seed financing and the low activity of international start-up financing funds.
According to the GEM survey, nearly half of Colombian entrepreneurs finance their businesses through family members. All the entrepreneurs interviewed for this article stated that issues of raising capital and financing were among the key challenges they faced in starting a business. As Venegas noted, “in Colombia, you have to be well-connected so that the right doors open. The laws here [in Colombia] are changing a lot for the good, but there are still certain things the government needs to change to make the online start-up process easier.”
Meanwhile, the entrepreneurial desire is alive and well. In the GEM survey, 88.6% of Colombian respondents noted that entrepreneurship is an enviable career, versus 72.8% of those from the peer countries. It is simple: Colombians want to be entrepreneurs. The economic conditions are looking good, and people are feeling positive: 68.1% in Colombia said they believe there will be better conditions for business within the next six months. And the government is making a strong effort to establish the right laws and programs to help entrepreneurs. If the conditions continue to improve, Colombia will transition from being a country once known for its violence, economic disparity and large cocoa industry to one known for a flourishing entrepreneurial environment filled with impressive opportunities.
This article was written by Melissa Blohm, Andre Fernandes and Bulat Khalitov, members of the Lauder Class of 2014.
Upon reading about the U-Haul example in Sarasvathy’s article, I googled U-Haul to find out more about it. Being from Ireland, I only recognised the brand name from watching american movies. This forbes article incorporates a good few subtle examples of effectual reasoning and casual reasoning.
Firstly, this model of effectual reasoning could not have been created through causal reasoning but now needs causal reasoning to reach new heights. Once there’s enough information then causal reasoning starts to play a role. Saroki, an experienced analyst and investor, finds investment opportunities through causal reasoning. Looking for ways to allow Amerco’s U-Haul reach new heights in 2017, Saroki contemplates the question “What is the market missing?” – This question is key in causal reasoning.
In contrast, effectual reasoners will not do market research. They create a market predicated on the people they are able to bring together. This brings me onto my second point which is to emphasise U-Hauls continued success due to its substantially impenetrable network. This highlights the importance of the crazy quilt principle inherent in effectual reasoning.
Lastly, tying in our discussion about the Walker article, the lawyers working for U-Haul early on should have been better equipped to handle the management of the company. It has a tumultuous management history due to family infighting for control of the business following the founders suicide, and this has eventually led to it being undervalued in the market.
What I found most interesting about the article is that, on top of its brand recognition and strong network, the fact that U-Haul can thrive in a good and bad market essentially leaves it untouched by the effects of recession. Also as it is the only/lowest cost option for one way moves it seems to be immortal to the effects of new competition.
We talked briefly about the founder of Zappos briefly in class today, and this is a really interesting interview with him. He doesn’t really see himself fitting into the typical entrepreneur mold. At the end of the interview, they mention that he lives in an Airstream mobile home and has a mohawk, but he also talks a bit more extensively about his vision of Zappos as a top quality service provider.
(links to an article with a short video that is very interesting!)
This article perfectly addresses the connection between understanding the cultural habits and trends in the international community and the social-economic projects in these countries. Specifically, in this case, Arch Wongchindawest, a social entrepreneur in Thailand, had found a creative method to introduce funding to social initiatives and projects in developing areas all around Thailand. Shopping and e-commerce have been a rapidly increasing trend for Thai society. With the rise of the Internet and technological growth, Thailand’s economic market hinges on the growth of commerce and merchandising of the Thai and foreign people within the country and online. Wongchindawest created Social Giver, a social enterprise, that partners with the top 100 brands in Thailand that uses their spending power to help others by giving a portion of the transaction’s proceeds to community projects. Furthermore, these partner organizations agree to donate their profits to Social Giver’s good causes and the site is funding social initiatives across Thailand and other nearby countries like the Philippines, Nepal, and Burma.
In comparison to how several websites in the United States ask “Donate $1 to etc”, this Thai model allows consumers to directly see the impact of their donations and choose which projects that they want to contribute to. In this sense, consumers can choose projects that they feel are of value to them so that it creates an empathetic approach to improving social problems in different regions. This simple legal design is so simple enough that integrates with the typical consumerism trend in Thailand that can directly improve social initiatives and promotes social entrepreneurship in the world.
I’ve met Arthur Brooks, and he is an interesting character, indeed. This essay appeared in America magazine, published by the Jesuits. Plenty of food for thought.
http://www.americamagazine.org/politics-society/2017/02/06/confessions-catholic-convert-capitalism
This article from USA Today gives a brief description to one of the most important issues facing entrepreneurs, particularly those who continue to run a successful enterprise. A quick and informational read for those of us who are interested in starting (or already have) our own businesses.
Interesting read on a Canadian start-up that was essentially born out of the uncertainty surrounding President Trump’s recent executive order on immigration. The start-up, named “True North”, walks any U.S. company with a workforce of H-1B visa holders through the process of setting up a subsidiary in Canada. For a flat fee, it gives these visa holders the ability to perform their job functions in Canada and free from any uncertain immigration restrictions.
I found the article interesting because it highlights just how quickly some entrepreneurs respond to changes in policy. I wonder whether entrepreneurs will continue to respond to uncertainty through business creation or whether clearer policy proposals going forward will make start-ups like “True North” the exception rather than the rule.
The article From Big Law to Lean Law by William Henderson evaluates the death of big law. It talks about how firms are set up for partners to care about what happens while they are partners, and not what happens to the firm once they retire. It points out the big law tends to grow from mergers instead of innovation. Meanwhile new legal vendors are beginning to pop up and build relationships with clients. Big firms are reluctant to hire on more associates, and are cutting attorneys who cannot bring in clients. This is moving towards lean law. This article connects to the problem from the readings where lawyers are thought of as being very expensive, and they over solve problems that could be solved cheaper and quicker by companies like Legal Zoom.