This is the class that changed the way entrepreneurship is taught.
Two decades ago, I never intended to start a revolution in entrepreneurship, but the Lean Startup did just that. For the first time it offered founders a method – different from those used by large companies — for how to build new ventures.
A decade later, it never crossed my mind to upend entrepreneurial education. But I realized that teaching entrepreneurs case studies and business plans was just “education theater” — they allowed educators to believe they were teaching something of value when they weren’t. In their defense, there wasn’t an alternative. So I created the Lean LaunchPad classes and moved entrepreneurship education into the 21st century.
Revolutions start by overturning the status quo. By the end of the 20th century, case studies and business plans had reached an evolutionary dead-end for entrepreneurs.
Here’s why, and what we did about it.
THE RISE OF BUSINESS SCHOOLS — MANAGEMENT AS AN OCCUPATION
The business school was invented in the first decade of the 20th century in response to a massive economic transformation in the U.S. that took place in the last quarter of the 19th century. The country exited the Civil War as a nation of small businesses and ended the century with large national corporations (railroads, steel, oil, food, insurance, etc.). These explosions in company size and scale created a demand for professional managers. In 1908, Harvard Business School filled that need by creating a graduate degree — the Master of Business Administration. Its purpose was to educate management on best practices to run existing companies.
When Harvard started the MBA program, there were no graduate-level business textbooks. The school used the “problem-method” which emphasized fieldwork — getting out of the classroom and visiting real companies — as an important part of the curriculum. Students observed how executives worked, interviewed them, and wrote up how real managers solved problems. Students then discussed these problems and solutions in class.
By the early 1920s, concurrent with a dramatic increase in the number of students, a new dean radically overhauled the curriculum. He shifted the courses from general overviews (Economic Resources of the United States, Railroad Organization and Finance) and industry orientation (steel, railroads, etc.) to a functional one (accounting, statistics, marketing, production, finance, etc.). More importantly, the curriculum moved from individualized lectures to standardization based on the case method.
Originally developed in 1870, the case method was first introduced at Harvard in the Law School to train students to analyze court cases. The case method assumes that students learn when they participate in a discussion of a theoretical situation they may face rather than a real one they experience in the field. All the facts were given to the students in the case; it required no discovery by themselves. The goal was to determine the correct policies for a business, department, or individuals. By 1923, two-thirds of HBS classes were teaching with cases, and 106 colleges and universities had adopted Harvard case books.
The pattern was now set for business education for the rest of the 20th century.
ENTREPRENEURSHIP BECOMES A SUBJECT IN BUSINESS SCHOOLS
While MBA programs proliferated during the first half of the 20th century, they focused on teaching management of existing companies. There were no classes on how to start a business. That is, until 1947, when Myles Mace taught the first entrepreneurship course, Management of New Enterprises, at Harvard Business School. Soon others were created. In 1953, Peter Drucker offered an Entrepreneurship and Innovation class at New York University, and in 1954, Stanford’s business school offered Small Business Management, its first small business course.
In 1967, the first contemporary MBA entrepreneurship courses were introduced at Stanford and NYU, and a year later, Babson offered the first undergraduate entrepreneurship program. By 1970, 16 schools were offering entrepreneurship courses, and in 1971, UCLA offered the first MBA in entrepreneurship. Entrepreneurship textbooks such as Small Business Management: Essentials of Entrepreneurship and Entrepreneurship: Playing to Win started to appear. In 1985, the University of Miami held the first national business plan competition. By 1991 there were 57 undergraduate and 22 MBA programs. Textbooks, papers, and journal articles proliferated.
By the end of the 20th century, entrepreneurship education fell into two categories: starting small businesses and starting high-growth, high-risk scalable startups. But both types of entrepreneurship courses were taught using case studies and taught students how to write and execute a business plan. The curricula of both types of courses were simply adaptations of what business schools were using to train managers for the administration and execution of existing organizations.
THE CASE METHOD & BUSINESS PLANS ARE THE ANTITHESIS OF HOW ENTREPRENEURS CREATE STARTUPS
The case method assumes that students learn when they participate in a discussion of a situation they may some day face as a decision-maker. But the case method is the antithesis of how entrepreneurs create startups. Cases teaches pattern recognition tools for static patterns and known problems — and has limited value as a tool for teaching entrepreneurship. Analyzing a case in the classroom, removed from the realities of a new venture, and with no capacity of gathering additional information, adds little to an entrepreneur’s preparation for the chaos, uncertainty, and conflicting customer responses that all entrepreneurs face.
Business plans presume that building a startup is a series of predictable steps requiring execution of a plan which assumes a series of known facts: known customers, known features, known pricing, known distribution channel. As a serial entrepreneur turned educator, this didn’t make sense to me. In a new venture, none of these things is truly known. The reality is that most business plans don’t survive first contact with customers.
Neither cases nor business plans replicate the actual startup experience. Cases and plans are useful for teaching managers of process, not founders. Founders of startups (and new ventures inside existing companies) are searching for product/market fit and a repeatable and scalable business model. Searching, unlike execution, is not a predictable pattern. An entrepreneur must start with the belief that all their assumptions are simply hypotheses that will undoubtedly be challenged by what they learn from customers.
Yet up until 10 years ago, schools were still teaching entrepreneurs how to build startups on the premise that they were simply smaller versions of large companies. Entrepreneurial education was trapped in the 20th century.