‘Lean Startup’ Revolution Sweeps Through Business Schools

Jon Sebastiani, with the Krave jerky he developed

A PIVOT AWAY FROM DISASTER

Indeed, that Safeway check soon became a hanging guillotine: the grocery firm had made the highly unusual decision to make an advance payment on a brand-new retail product that wasn’t actually in production yet, and the jerky team’s manufacturing plan had just melted down. “That left us literally without a company that was going to make our product and we had 90 days to solve it,” Sebastiani, 44, recalls. “Do I fold my cards or basically work 24 hours a day to figure this shit out?”

Because the meltdown occurred while Sebastiani was still taking Lean LaunchPad, resources were at hand. “It really gave me the creativity to think through it, the ecosystem of people to reach out to,” he says. The team made a major manufacturing pivot, buying their own jerky-making equipment and hiring food chemists to train a new company to make the product.

The process worked. Krave’s popularity shot up so fast that sales skyrocketed to $36 million in 2014 over $17 million the year before. Early this year, chocolate maker Hershey bought Krave for more than $200 million. Lean LaunchPad was instrumental to Sebastiani’s meat-snack success – which brought 20-fold returns for Krave’s angel investors, he says. “It was friggin’ magical,” Sebastiani says. “It was incredible.”

ENTER THE CARROTBOT – NO, IT’S A LETTUCEBOT

Blank’s first Lean LaunchPad class at Stanford Graduate School of Business – where he still teaches the class and the school’s Startup Garage courses are built around lean methodology – gave birth to another major success, and one that showcases the customer development work and pivoting that are elemental to the process.

A slide from the business model canvas in Lean LaunchPad at Stanford that led to LettuceBot

For the 2011 Stanford class, roboticist Lee Redden and agriculture engineer Jorge Heraud first proposed a robotic lawnmower. But through “out of the building” consultation with potential customers, including owners of commercial green spaces, landscaping-service providers, and farmers, the students discovered their product had no appeal in those markets. However, the students’ talks with people in agriculture revealed to them that farmers faced huge labor costs for weeding. Redden and Heraud pivoted – to a machine for weeding organic carrot fields. They enthusiastically presented the results in Blank’s class. Blank told them in front of everyone they were headed for a B grade, because in spite of their excellent work, they lacked a key lean startup element: a prototype, known as a “minimum viable product” or “MVP.”

Over the next week, Redden and Heraud slept little, worked much, and made a prototype, the laser- and camera-equipped “CarrotBot.” It was a start, but they continued to explore markets as part of the discovery process – tomatoes, lettuce, broccoli – and ultimately determined that the current organic carrot market was too small, while the lettuce sector was massive, and dominated by five companies – a tidy pool of potentially huge customers. CarrotBot was transformed into LettuceBot, a machine, hauled behind a tractor, for thinning lettuce fields.

Lean LaunchPad-created product the LettuceBot – Blue River Technology photo

Redden and Heraud tested a hypothesis that LettuceBot sales should be done via a value-added reseller, but feedback from prospective customers pointed them in the direction of providing the thinning as a service. The lean methodology, Redden tells Poets&Quants, “was vital to getting through the bad ideas and finding a scalable business during the search process.”