Steve Blank - Startups: Processes

First, there is the idea for the product, then comes the business plan, the team, the development, the test phase, setting up the sales department and creating the 5-year plan and then you are ready to go....that’s kind of how large companies always work. However, things are different for startups…

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Something that always slows us down is the past and habit. We are not open to new paths and everything that was good in the past will be good in the future. And if we can adopt something from other fields then it is simply applied as is - often like a blueprint. Everything is structured and every step follows predefined patterns. Then you start with the alpha phase and, at the same time, gradually train the sales team. During the beta phase, you price your product and the famous five-year plan is written. Based on it, marketing and the necessary customers are planned. Once version 1.0 is ready, you are ready to go. There is no left and there is no right, the business plan, budget planning, the marketing- and sales plan are the measure of all things.

Adapt… those who try to establish these steps in a startup will quickly realize that it is not going to work at all. It already begins with the customers. Whereas a large company has the resources and the network to acquire another large company as a large customer, we as a startup are rather going to be smirked at. While they have all the time in the world to get their product ready for the market and beyond, a startup is already trying to engage customers during the (often early) beta phase. We use the customer as a “tester” and first source of income. And therein lies one of the big differences because a large company would rarely if ever use a product that’s not yet ready for the market. The risk would be too high...So it’s in the nature of things that our customers - like ourselves - are located in the field of startups and know the methodology and philosophy behind it.

The next crucial point is sales. Whereas large companies have the financial means to build large sales and marketing departments, offer extensive product training, establish test customers and create case studies, and possibly poach expensive sales staff from other fields, it’s very different for a startup. A large company often buys resources and know-how. In a startup, the founder has the idea and the proper know-how or maybe there is one (or more) co-founder to help him fill this gap. The CEO is the mind, he is the sales department, he meets the customers. It is very important that we accept that and act like this and not only keep the costs in mind. It’s only through directly engaging with customers that we learn more about our own product and how it is received. Only then can a marketable product develop through the beta phase. It’s of fundamental importance for the eventual sales department that the boss knows what he’s talking about and is able to pass on the knowledge.

That’s how we handle things at alugha. I, the CEO, always visit trade fairs, work in sales and talk to our users, customers and partners daily. All of these experiences are incorporated into the marketing, the support and the development of our products. Only then can I ensure that we don’t develop a product without taking market needs into account. A large company is able to afford to “try” and then simply shut down an entire department. However, in a startup, the “department” is the entire company and so it would spell our doom.

The positive aspect of this startup approach is that we don’t amass immense costs only to recognize that our product, in its current form, is not able to compete on the market. We react daily and also receive feedback as quickly. We are not a ocean liner that takes kilometers to accomplish a turning maneuver. We are a speedboat that can change it’s direction or turn around very quickly. That’s not a disadvantage, no...it’s a crucial strategic advantage over all these BMW AGs, Intel Incs, and BASF SEs. We make virtue of necessity.

All of this also has to do with the waterfall model, which will we cover in our next article.

This article is written by our CEO, Bernd Korz. With his experience as an entrepreneur, he shares his vision about the lessons provided by Steve Blank. Join us every week for a new article on Steve Blank’s lectures.

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