How do you turn a twinkle in your mind's eye into a viable business? Here to cross that chasm is Doug Neal, managing director of the Center for Entrepreneurship at the University of Michigan's College of Engineering. This week he introduces some new terms of art: Velocity and entrepreneurship, and entrepreneurial distractions.
Post 1: Simulate This
Posted By: Doug Neal
Posted: 8/4/2010
When I graduated college and went to work as a software programmer at a large company in Silicon Valley, I remember how excited I was to be working with some of the best engineers in the industry. The creativity, intensity, and precision that everyone brought to their work was inspiring and I was amazed at all the work going on around me.
I remember one day specifically as my team was approaching the launch date of a new product I was working on, an engineer from a different team (team makes it seem small – in reality, his team was a group of about 100 software engineers) and I were having lunch and he turned to me and said "Wow, you sure are lucky. I've been designing and building products for years but none of them have ever shipped… they are always canceled but you are working on a product that actually is shipping! That must feel great."
I was dumbstruck. How can it be that we would be spending all that time and money building products that would never ship? After I made a few inquiries the word I got back from management was that when they had demonstrated the early product release with some key customers, they found it didn't meet their needs so the project was canceled and the team was reassigned to the next one.
The problem this company was having is very similar to what happens to engineering entrepreneurs who dive head first into designing and building a product without first validating that their solution will ultimately deliver strong customer value. For large companies, this can be a costly mistake… for startups, it usually means death.
Over the last decade the pace of innovation has increased significantly and with it the need for a more efficient model for innovation has emerged. This process which is followed by some of the best entrepreneurs is also one that can be used within large organizations – we call it using the entrepreneurial mindset.
The key is to take your idea as quickly as possible to potential customers in a way that will either validate or trash your concept so that you can make adjustments and try again. Entering a lengthy design or build process without any real customer validation is simply not acceptable whether you are a startup or a Fortune 1000 company. Note that real customer validation does not mean market analysis, customer segmentation or focus groups – it means getting in front of potential customers with a simulation of your business model to validate you are creating value for a customer.
Note that I specifically choose the word simulate instead of prototype. The problem with the word prototype is that it implies the only way to get to a customer validation phase is to build some amount of technology and create a scaled down functioning version of the final product. In my experience, this overemphasizes the technology and you can lose site of the goal.
Instead of prototyping your product you should be thinking about simulating your business. Simulate the approximate customer solution and even pricing if possible with any means possible including drawings, human actions, even subcontracting out the work – do anything you can to simulate your business without actually investing in the technological development. The reason for this is to maximize the speed at which you can get in front of customers, and, secondly, to minimize cost.
Jeff Hawkins, co-creator of the Palm Pilot, carried a block of wood around for a week while trying to validate the various aspects of a new handheld device. David Filo and Jerry Yang started Yahoo! as a simple web page of bookmarked websites that they had to edit manually before they ever considered building a dynamic and powerful web indexing site. These entrepreneurs were engaging potential customers with low-tech solutions very early on in the process and gaining tremendous knowledge of what was needed to build a successful solution.
The process of Simulating and then Validating your business before moving on to designing and building the product is the way we work with our student entrepreneurs here at the University of Michigan. At TechArb (our student company business accelerator) we encourage our students to get out of the lab and into the customer environments as quickly as possible and to engage the customers.