Lesson: Customer Discovery Primer with Steve Blank

Step #1 Company Creation: We now know the right way to build startups

Today's lecture is what have we learned in entrepreneurship for the last 40 years. One of the interesting questions is why are you here? I hope you're here to find out what does it take to go from an idea to a business. For the last 20 years if you wanted to know how to go from an idea to a business, the answer from educators and investors was simply, "Well, go research and then write a business plan and you'll know everything possible to actually start and run your business." We now know that advice was simply wrong--not kind of wrong, but very wrong. We now today know something we didn't know before. We now know the right way to build startups and so this class is about that right way, but before we get started, let's see how we took the wrong path and then see what we now know works.

The modern corporation as we know it was first formed in 1602 with the government chartered Dutch East India Company. This is kind of the first modern corporation with shareholders and organizations that kind of if you squinted looked like something close to modern companies today. By the 1850s in the United States with railroads spanning the entire country, corporations needed more sophisticated organizations and in fact the first org chart was drawn in 1856 to just manage corporations and by the beginning of the 20th century, educators started realizing that there was a need for an educated management class to administer and execute these corporations because at least in the United States we were going from local economies to regional economies to a national economy, yet we did not have a trained management class and so in a brilliant insight, Harvard set up the first masters of business administration course called the MBA and the first graduating class in 1910 was the first of a cadre of business administrators that made the 20th century the modern corporate century. The MBA curriculum is designed to provide managers and administrators with the tools they needed to run existing and growing companies. Accounting, strategy, operations, leadership, organizational behavior, human resources management and this stack of tools was just incredibly important for the growth of large companies but what's really interesting what got missed is that they were really no tools provided in this curriculum for starting new businesses. One of the things we did not understand for 100 years is that startups are not smaller versions of large companies. Let me say it again--startups are not smaller versions of large companies and what falls out of that is all the traditional tools taught and learned in an MBA curriculum are irrelevant in the first chaotic year or two of an early stage venture. Eventually, you need that tool set but at first it really gets in the way.

Let's take a look at what we used to believe and then contrast it to what we now know. One of the biggest fallacies was believing that startups are just smaller versions of a large company. That everything you do in a large company, you'll do on day one of a startup. What we now know is something very different. The core difference is that startups do something called search while large companies spend their time, at least their core time, executing. One of the questions we'll answer is search for what and execute what. And so later on in this lecture, you'll see the difference and then in fact will make you a much better entrepreneur.