‘Lean Startup’ Revolution Sweeps Through Business Schools

Later in the class, the “TrueCare24” team stands up in front to discuss their work on their “personalized health care to your doorstep” service. The team has already put their presentation slides up on the class dashboard, according to standard procedure. They don’t know that the instructors have discussed the slides, are unimpressed, and have decided to hang Team TrueCare24 out to dry.  When a team member asks if anyone in the classroom knows administration staff in urgent care clinics, Hornthal tells them to go find people themselves, as their peers and instructors have “limited head space” to give to each student project. “There’s no obstacle to walking into an urgent care, and spending some time, maybe bring some candy or flowers. Charm them,” Hornthal says.

THE ENTREPRENEUR HAS LEFT THE BUILDING

His instructions derive from a central tenet of the lean startup method: “get out of the building.” The “customer development” approach requires entrepreneurs to step out into the world and get feedback on all elements of their business model from potential customers, users, and partners, with a heavy emphasis on future buyers.

Team TrueCare24 runs into heavier weather when they evade instructors’ attempts to get them to state a clear value proposition for their product. The instructors want to know what it is the team intends to make, and for whom. Jerry Engel, founding faculty director of the U.C. Berkeley Lester Center for Entrepreneurship, asks why the team keeps switching their consumer focus back and forth between filling an institutional need for health care providers and providing convenience to health care patients. “You could use this course to come up with one compelling value proposition,” Engel says. When a team member responds stubbornly that the business-to-business market and patient market are “still connected,” instructor Oren Jacob – co-founder and CEO of ToyTalk and a former long-time director of studio tools for Pixar – gives a quiet yelp – “what?” – and Blank hurls a thunderbolt.

“How many people from your team showed up this week for office hours?” he demands of the team. “One? Did anyone ask to reschedule? I’m about to throw you out of the class and you’re going to fail. Your body language and your interaction is not conducive to learning. Why don’t you sit down and then we’re going to decide what we’re going to do next.”

The students pale, stricken at the sudden smackdown. After class, they meet with Blank, standing nervously in front of him as he explains what they have to do to salvage their project and save themselves from failing.

Hornthal tells Poets&Quants that the instructors typically have to come down hard on a struggling team once every term. But tough love can be very helpful, Hornthal adds. “One year we did it, three years ago, they went from the worst team to an amazing team,” Hornthal says. “They found God. It was magic.”

WATCH OUT FOR THAT NOOSE

Adds Blank: “We don’t know if this one’s going to be magic but we don’t put up with crap. Rule 1 is always hang one team publicly. Rule 2 is you never want to be that team.”

Students are graded on their ability to come up with a viable product, whether it’s ever going to launch or not.

“I’m not running an incubator. I’m teaching a methodology,” Blank says. “The minute you start talking about investments and ROI in your classroom, you become a trade school. I honestly don’t care if they stick with their ideas but whether the education will stick with them for the rest of their lives.”

That said, about a quarter to a third of Lean LaunchPad teams at Haas actually launch a startup, Blank says. And a number of successful products have been developed in Blank’s Lean LaunchPad class at Haas, including Krave, a wildly popular natural jerky brought to supermarkets across America by Haas MBA graduate Jon Sebastiani. About eight weeks into Blank’s Lean LaunchPad course in 2011, Sebastiani’s team introduced their weekly presentation by saying they had talked to only one customer that week and had only one slide to show. The instructors began reaching for thunderbolts. The students put the slide up. It was a check from Safeway for $435,000. “We said, ‘OK, this counts,’” Blank recalls. “But we kept beating him up like he’d never gotten the check: ‘What about supply chain? What are you going to do next week?’”