Ep. 216 - Steve Blank, Father of Modern Entrepreneurship & Author of the Startup Owner's Manual on Lean Startup, Work, Education, & Government

Inside Outside

On this week's episode of Inside Outside Innovation, we sit down with the legendary Steve Blank. Steve is the author of the Startup Owner's Manual and is also known as father of modern entrepreneurship. Steve and I had a chance to talk about the evolution and changes since the inception of the lean startup movement, as well as some of the coming changes we see in the world of work, education, government, and more. Let's get started.

Inside Outside Innovation is the podcast that brings you the best and the brightest in the world of startups and innovation. I'm your host Brian Ardinger, founder of insideoutside.io, a provider of research events and consulting services that help innovators and entrepreneurs build better products, launch new ideas, and compete in a world of change and disruption. Each week we'll give you a front row seat to the latest thinking, tools, tactics, and trends in collaborative innovation. Let's get started.

Brian Ardinger: Welcome to another episode of Inside Outside Innovation. I'm your host, Brian Ardinger. And as always, we have another amazing guest. Today with me we have Steve Blank. Welcome to the show, Steve.

Steve Blank: Thanks for having me, Brian.

Brian Ardinger: Steve. I'm so excited to have you on board because you have led the way when it comes to lean startup and all the methodologies around that. For the two people in my audience who haven't heard of you, I'm going to give a quick bio. You're a serial entrepreneur turned educator. You're known as the father of modern entrepreneurship. You've helped create the lean startup movement, which has really changed the way startups are built, how entrepreneurship is taught, how science is commercialized, how companies and governments are looking at this whole space. You're author of a couple of books called The Four Steps to the Epiphany and the Startup Owner's Manual.

Both of which I recommend highly to my clients and startups. You also teach at Stanford and Columbia and the list goes on and on. So, I'm super excited to have you on the show. But I thought we'd start off going back to 2013. You wrote an article in the Harvard Business Review titled why the Lean Startup Changes Everything. And it was one of those quintessential articles that I think kicked off a movement and kicked off a lot of conversation around innovation. What surprised you the most since you wrote that article and what surprised you during that journey?

Steve Blank: That's a great question. You know, the lean startup big insight was that the startups weren't the smaller versions of large companies. For the seven years, since the HBR article, we've discovered that companies aren't larger versions of startups. Meaning that corporations started adopting startup methodologies because they were being disrupted by startups and globalization and China, and then new technology and said, Hey, we can run incubators and accelerators and we could just operate just like that.

But in fact, what I think we've created in the last seven years is mostly innovation theater, rather than innovation in large companies. And not because anybody is being stupid, but because we're learning, what people have been talking about for 20 years, is that 99% of your company is actually doing execution. That is executing that known business model. And all the processes and procedures and OKR and KPIs are designed for execution. But those things tend to strangle innovation in its crib.

And unless you're going to fix all those processes. And that is specifically create what was labeled in the 20th century, the ambidextrous organization, that is one that could innovate and execute. You're going to end up having great posters and coffee cups about innovation, but not much innovation because what'll happen is, you'll create these islands of innovations as innovation activities, but they really won't be connected to the rest of the corporate infrastructure. The output of those incubators will die. And it's again, not due to malice, but due to the fact that you really need to make some more fundamental changes, if you want that to happen. Or you just need to acquire companies rather than try to do it internally.

Brian Ardinger: It speaks to an interesting point. So, for years, we've seen major shifts coming on the horizon, whether it's the rise of startups, accelerating technologies. Now we have a pandemic. Why do you think companies are still getting caught flat footed when it comes to disruption and being better able to handle the new next?

Steve Blank: If you really think about who runs large companies, if you're great at managing hundreds or thousands or tens of thousands of people, you're a world-class executer. There are very few companies that are still run by their innovators or by innovators. You know, the ones that are, we see both the good and the bad. The canonical poster child right now is the Elon Musk. Created industries from scratch and as certifiably insane. There's good news about working at Tesla and there's bad news in directly reporting to Elon. And before him, the poster child was Steve Jobs. Created industries from scratch and probably, you know, a horrible human being to work for.

Versus working in a stable corporation where there are processes and procedures and things unfold in a regular basis, and you can know what to expect when you show up in the work. That works great when your competitors are operating the same way, and it's a steady state world outside. That's in fact exactly who you need is an executer. Well, when things are chaotic and disruptive or technology has changed or something else, those world-class executor's have a real hard time figuring out what innovation looks like.

And in fact, the worst case that I see, and I don't mean it as a dis, but you sometimes will even get the innovation head nod from those leaders. Is that you'll try to describe to them what they need to do inside their corporation, and they'll nod and "Oh yes, you know," in fact, sometimes they'll even say, "Oh, innovation is third pillar of our agency and whatever."

And then, okay, well where's the exec staff table. "Oh, it's three layers down in our org." Well, have you changed any of your HR or security or policy or anything else or "no." Or do you have a 10% contingency for unplanned innovation? "Oh no innovation stands in line for next year at the budget table." And then you realize it's gotten nice words, but it's really not baked into the DNA.

You know, I'm not a believer that everyone in the company needs to be an innovator. I believe that we need to understand that the people who do world-class innovation and world-class execution come to work for very different reasons. And we can build innovation processes into existing P & Ls in divisions for what McKinsey used to call horizon one and two. We also need horizon three people who are working on disruptive stuff.

And as I said, some companies just can't change their culture to do that. So they need a process to acquire innovation, whether it's people or product line, or P & L, etc. But again, as some of those companies run into problems, when they try to integrate those acquisitions, they tend to kill innovation. Google, and all the robotics acquisitions or Google and Nest are great case studies of what happens to innovation companies when they meet execution organizations.

Brian Ardinger: So now we're living in this pandemic and I think you've called this a mass extinction event for a lot of comp...