Steve Blank — The Prophet
How One Man Changed The Entire World Of Entrepreneurship
By 2017, the enormous significance of Steve Blank’s contribution to the advancement of world-class entrepreneurship — prompted me to take action. As I mentioned in my post: Giving Credit Where Credit Is Due — Help Awarding Steve Blank Nobel Prize In Entrepreneurial Economics! — with one single statement, Steve Blank redefined 50 years of Venture Capital (VC) financing aimed at seed-stage startups — and turned it on its head.
For years, VC industry insisted on funding well rounded business plans — even at the earliest seed-stage financing. As Steve Blank frequently explained to all who would listen: “startups were simply viewed as a smaller version of a larger enterprise”. And since large companies knew how to write a detailed business plan — startups had to follow suit. So, Steve made it abundantly clear:
“While existing companies execute a business model, start-ups look for one”
What truly bothered me ever since, was the fact that although Steve saved hundreds of billions to Venture Capital industries — he never received an ULTIMATE recognition for doing so. Yes, he did revolutionize entrepreneurship more than any other contemporary scholar did — and yet, there is not even a suitable Nobel Prize category to recognize Steve’s genius.
So, I immediately recommended to create “The Nobel Prize in Entrepreneurial Economics” and asked for help in seeing it through. To do so, I contacted all the universities actively promoting Steve’s teachings — to no avail. Not a single response. Not even a peep!
And the worst part: I was already planning on adopting Dwayne Johnson’s line from Moana — and tell Steve: “What can I say except you’re welcome” …
Yet in spite the fact that my call to action to world’s academia was not successful — I’m a huge believer in the power of social media. Hence, my renewed “blankesque” attempt to “move the agenda forward”. I say: let’s finally show the man some unrequited love!
Two years passed since 2017 and if anyone was still not convinced to throw her/his support behind me — well, now there is more to it … much more! In one of his latest interviews entitled: The Evolution of Entrepreneurial Education and Corporate Innovation — Steve Blank did it again! He now shows large corporations how not to fall into the innovation trap and save hundreds of billions by shifting from … form to substance.
Steve says: “In a startup, 100% of the company is focused on innovation and entrepreneurship. In a large corporation, 99% of the company is focused on execution of the current business model by building repeatable processes and procedures. And a very small percentage are focused on innovation”
So, given the inherent structural difficulties linked to their ability to innovate — what are the industry giants to do? In a single word: a lot — but not in a form of setting up yet another corporate accelerator/incubator as a point activity. And Steve coins it as “Innovation Theater”:
“These are innovation activities, not deliverables. The hard part in a company is not getting a demo or setting up an internal accelerator, it’s getting something delivered all the way through your existing sales channel.
What does it take to get from that demo into your engineering group, to be delivered as a product into your existing sales channel? And that’s where the difficulties are. You run into, “Well, wait a minute, this isn’t on our budget or schedule.” “Wait a minute, this conflicts with our existing product line.” “This will put our most profitable product out of business,” or “We don’t even have a sales force that knows how to sell this thing.”
“A good number of companies focus on the easy part, which is, “Let’s have an incubator/accelerator.” The hard part is, “How do we deliver something with speed and urgency?” For example, when I teach this for the government, our focus is on innovation that gets deployed and fielded, not demos. (Yes, you might need a demo to convince someone to fund your program, but the demo is not the goal — delivery is.)
Companies have more demos than they’ll ever need. But really the goal of a successful innovation program is figuring out how do you deploy something by getting through the hard political wiring diagram of who owns what, and how does this differ from what we already have, and which budget is it going to come from, and “this is unscheduled” and “wait a minute, it doesn’t meet our quality standards” and “we’re going to screw up our brand”?
But Steve doesn’t stop at putting his finger on a wasteful corporate “pseudo innovation” movements. He also prescribes what should be done instead — and explains how to do it:
“What we came up with last year is called the Innovation Pipeline, a process inside a company or a government agency that says, “Let’s start with innovation sourcing. And then build a process to take that all the way to delivery or deployment. What are the steps internally we need to take that are different than how engineering builds products today?”
“ We believe that the next big step is to get teams and leaders to think about the innovation process from end-to-end — that is to visualize the entire flow of how and from where an idea is generated (the source) all the way to deployment (how it gets into users’ hands). So, we’ve drawn a canonical innovation pipeline”
If you overly rely on incubators — the output flow of deliverables from your innovation pipeline will start resembling a mighty Colorado river — in mid-summer. It trickles down through a Horseshoe Bend outside Page, AZ — without much fanfare. And if you never visited Page before — think about it as a dribbling stream of BPH patient with enlarged prostate …
So, allow me to reinforce Steve’s message once more, by saying: “You can’t be just a little bit innovative — the same way you can’t be just a little bit pregnant”
And in addition to a 1% challenge linked to corporate attention-span deficit, Steve Blank also points to another challenge: “In a startup, if you win, it’s a payout of billions of dollars. In a large company, for the individual, there is no such payout”.
This is precisely why, I called repeatedly on using Corporate Venture Capital (CVC) more intelligently — in order to overcome such hurdles.
IMHO, as part of an enhanced business development strategy, CVC’s fund manager can be much more than a “passive” reviewer of a business plan that lands on one’s desks.
After all, if an experienced CVC manager is smart enough to reject all the “losers” — her/him should also be able to propose a strategic venture and build such startup organically, or through acquisitions. What a great fit with Innovation Pipeline!
The untapped uniqueness of CVC should be linked to addressing the needs of industries that its corporate parent understands and serves. Long-term, CVCs are more successful if the focus of their portfolio’s start-up and their corporate parent — overlap.
Embedding CVC within Innovation Pipeline framework, allows corporate parent for a quicker access to new business models and new technology. In addition, it also allows the parent company to learn about emerging competitive threats and quickly respond to market disruptions.
CVC market is growing, but unless it stops imitating VCs and begins to realize how huge its Factor Endowment really is — no radical improvement is going to happen. I’ve said it many times before: imitation works great for karaoke bars, not so much for CVCs!
So, my message to CVCs is quite simple: stop tagging-along with other VCs and think about how to deliver and deploy innovative products — solving real problems of customers you already have! After all, good companies already know customers’ pains and gains — so start acting on such knowledge …
No matter how you look at it, the impact of Steve Blank’s contributions is measured in billions. Firstly, he correctly redefined the purpose of VC investments in startups — for all the world to see. No ifs, ands, or buts. And while doing so, he saved VC industry billions — that would have been wasted.
Now, Steve saves corporate entities even bigger expenses — and delivers a sound recipe for doing corporate innovation right. Am I surprised that the world hasn’t yet recognized his genius? Not really …
After all, Van Gogh — never managed to sell even one of his paintings. Today, each of his works fetches hundreds of millions to a lucky few who can afford such. Similarly, Einstein’s Theory of Relativity was considered “totally impractical and absurd”, and Mozart’s music was often described as having “too many notes”. Steve Blank is not alone …
Below are the two most common definitions of the word: “Prophet”. As far as I’m concerned, whatever definition you chose, Steve Blank fits it …
· “A prophet is a person who is believed to be chosen by God to say the things that God wants to tell people”
· “A prophet is someone who predicts that something will happen in the future”
So, let’s bring Nobel Prize to Steve, The Prophet. And let’s do it by 2020! Join my efforts and feel free to send me a note with your comments/recommendations. I look forward to hearing from you. Thank you.
Oleg Feldgajer is President & CEO of Canada Green ESCO Inc. Oleg is positioning the company to become a leader in financing AI enhanced green energy projects and ventures. CGE’s mission is to guide DISRUPTIVE businesses in ENERGY & TRANSPORTATION toward profitable business models. Oleg is passionate about such mission, and firmly believes that without AI based innovation, we will all prematurely choke on polluted air and dirty water. CGE delivers 100% financing (levered and unlevered) to its clients — and utilizes large equity pools, and non-recourse debt. Oleg offers creative, fresh ideas to open-minded businesses — that embrace both: logic AND opportunistic intuition. CGE stands against mediocrity & its modus operandi is quite simple: If CGE is not invited to join your BOD, or Advisory Board — we failed!
