Erhan Erkut:Steve I would like to start with a fairly classical question, We have been teaching MBAs for over 100 years.We think we teach them management, finance, marketing, operation, strategy but it seems to me that there is something missing in the classical MBA Program. What is missing in a typical MBA program for somebody who wants to be an entrepreneur?
Steve Blank:You know uhh How many of you have MBAs? So everything you learned if you got your degree in the last earlier than 3 years ago is obsolete.Congratulations! At least for entrepreneurship. Not if you wanna run a large company.I wanna remind those of you who don’t have an MBA what it actually stands for, MBA is the Master of Business Administration. BIG IDEA. Administration.The notion of the MBA, the first MBA graduating class in the UNited States was in 1908 and the notion was to create a management class to run this new corporations that were actually forming in the United States.Steel Companies,Oil companies, food companies, that were actually growing and scaling in size and there wasn’t a professional management class.
And so we decided to actually have a curriculum to educate administrators.People who could execute an existing company.So the curriculum for the MBA was how to run an existing company.BIG IDEA.How to run one.And it’s not that we never understood that there were this things called startups because in 1940 George …at Harvard offered essentially the first entrepreneurship class.Stanford in the 1950s offered small business entrepreneurship classes.
But here is the big idea, and this big idea is actually what kicked off the Lean Startup Movement; Is that a startup is not a smaller version of a large company;This is a huge idea.Nowdays is like we kinda understand that but when I was an entrepreneur that was not the case. Our investors taught us to do everything a large company did.A large company wrote a business plan, we wrote a business plan, a large company did a five year forecast, they made us do a five year forecast.A large company hired sales, marketing you know business development VPs on day one they told us to do that and more importantly our investors assumed that all we needed to do was execute the business plan just like a large company yet they were surprised when 90% of us would fail and they blamed it on us as the entrepreneurs.
The big Idea that kicked off the Lean Startup Movement was not only that startups aren’t smaller versions of large companies is that large companies execute known business models. What’s a business model? Who is my customer? How do I price the product? Who are my competitors? What are my distribution channels? How do I get keep and grow customers? In a large company you are large because you know that. And therefore you hire people to execute.
But in a startup the thing that you are all doing is you are actually searching for a business model.And that’s the core distinction in the Lean Startup Movement.We built tools for a 100 years for execution but we had no tools, we didn’t even have a language to describe that what we were actually doing was searching for a business model.