‘Lean Startup’ Revolution Sweeps Through Business Schools

The powers that be sit on high in Steve Blank’s Lean LaunchPad class at the U.C. Berkeley Haas School of Business, lobbing questions, offering expert advice, and occasionally hurling thunderbolts. Below, at the front of the small auditorium, teams of students take turns presenting updates to their peers and instructors about the startups they’re developing. Whether these ventures ever launch is, for the purposes of the course, irrelevant – but Lean LaunchPad successes include a company sold earlier this year for more than $200 million.

Tonight, most teams will leave the podium buoyed by the feedback they’ve received, the criticisms and suggestions that push their projects closer to viability. One team, however, will leave ashen-faced and humiliated, their presentation cut short in a takedown that, it turns out, was a carefully calculated kick in the pants.

Blank’s eight-week class at Haas embodies a theory of entrepreneurship rooted in the belief that the traditional model of business development fails to capture the needs of a startup. According to the “lean startup” method, traditional business plans are inappropriate for most new ventures. “The only thing you don’t have is any real customer data,” Blank says. “You have no . . . idea whether you’re a visionary, or hallucinating.

“Unlike a large company that can write a plan because they have facts, all we have are untested hypotheses.”

Startup investors, Blank asserts, don’t even look at business plans – they’re not expecting a five-year forecast, they want to know if the product will sell, and how a company creates value for investors and customers.

So students and practitioners of the lean startup methodology hit the streets with a constantly evolving prototype in hand, and talk to dozens and dozens of people – possible partners, prospective investors, and especially potential customers – and they must be ready to pivot on a dime.

LEAN STARTUP DIGS IN AT HARVARD BUSINESS SCHOOL

Out in the business world, it’s well-recognized that starting a new company is much different from operating an established one, and the “lean startup” model has spread widely since it began to take root in the ’90s. Now, it’s rushing through B-school curricula at the pace of a revolution – and sweeping aside old formulas for entrepreneurship education.

“It’s now just permeated everything we do around entrepreneurship at HBS,” says Harvard Business School entrepreneurial management professor Thomas Eisenmann, faculty co-chair of the school’s Rock Center for Entrepreneurship. Eisenmann emphasizes that at HBS, “entrepreneurship” covers innovation that ranges from startups to creation of new products and services in established companies. And he says all business school students need to learn the lean startup methodology.

“No matter what they do in their careers, go off to a private equity firm, to consulting, go work for a big company, be in the marketing unit at Merck, they’re almost certain to be involved in launching new businesses or new products, or working with people who are,” Eisenmann says. “If they understand these concepts they’ll be able to ensure the right product gets built.”

At NYU’s Entrepreneurial Institute, lean startup methodology “underpins a lot of what we do,” says executive director Frank Rimalovski. “When you have a good idea you go out and talk to customers, you don’t just build it and hope the world will beat a path to your door.”

Even at schools where the lean startup methodology isn’t explicitly taught, its principles have become central to entrepreneurship education. “We do not teach lean startup per se, but the spirit of it is very much incorporated in the Disciplined Entrepreneurship framework we use to teach our (Entrepreneurship & Innovation Track) classes,” says Elaine Chen, a senior lecturer at the MIT Sloan School of Management, and a serial hardware and software entrepreneur.

‘LIKE GETTING SEX EDUCATION ADVICE FROM YOUR PRIEST’

But many business schools are struggling to emerge from old dogma, says Blank, an eight-time tech entrepreneur. Part of the problem is educators’ ego-driven adherence to traditional theories and teachings, plus schools’ reliance on pedants rather than innovators for delivering entrepreneurship education, Blank says. “Some entrepreneurship departments are staffed with people who have never practiced,” Blank says. “It’s kind of like getting sex education advice from your priest.

“Even after we had this theory and this theory was being adopted quite rapidly, (schools) were still teaching how to write business plans. We needed a radical break, not just a better version of how to write a business plan. We needed a class that actually taught this method.”

Four years ago, at Stanford’s Graduate School of Business, Blank began teaching his lean startup-based Lean LaunchPad course – which he’s open-sourced online, and describes as “hands-on, deeply experiential.”