Blank - The four steps to the epiphany: Successful strategies for products that win

Second Edition Copyright 2013 Steve Blank

All rights reserved. No part of this book may be reproduced in any form whatsoever without permission, except in case of brief quotations embodied in critical articles or reviews.

Published 2013

ISBN: 0 989200 5 07 (print)

ISBN: 978-0-9892005-2-3 (ePub)

A legendary hero is usually the founder of somethingthe founder of a new age, the founder of a new religion, the founder of a new city, the founder of a new way of life. In order to found something new, one has to leave the old and go on a quest of the seed idea, a germinal idea that will have the potential of bringing forth that new thing.

Joseph Campbell, Hero with a Thousand Faces

Joseph Campbell popularized the notion of an archetypal journey that recurs in the mythologies and religions of cultures around the world. From Moses and the burning bush to Luke Skywalker meeting Obi wan Kenobi, the journey always begins with a hero who hears a calling to a quest. At the outset of the voyage, the path is unclear, and the end is not in sight. Each hero meets a unique set of obstacles, yet Campbells keen insight was that the outline of these stories was always the same. There were not a thousand different heroes, but one hero with a thousand faces.

The heros journey is an apt way to think of startups. All new companies and new products begin with an almost mythological visiona hope of what could be, with a goal few others can see. Its this bright and burning vision that differentiates the entrepreneur from big company CEOs and startups from existing businesses. Founding entrepreneurs are out to prove their vision and business are real and not some hallucination; to succeed they must abandon the status quo and strike out on what appears to be a new path, often shrouded in uncertainty. Obstacles, hardships and disaster lie ahead, and their journey to success tests more than financial resources. It tests their stamina, agility, and the limits of courage.

Most entrepreneurs feel their journey is unique. Yet what Campbell perceived about the mythological heros journey is true of startups as well: However dissimilar the stories may be in detail, their outline is always the same. Most entrepreneurs travel down the startup path without a roadmap and believe no model or template could apply to their new venture. They are wrong. For the path of a startup is well worn, and well understood. The secret is that no one has written it down.

Those of us who are serial entrepreneurs have followed our own heros journey and taken employees and investors with us. Along the way weve done things our own way, taking good advice, bad advice, and no advice. On about the fifth or sixth startup, at least some of us began to recognize there was an emerging pattern between our successes and failures. Namely, there is a true and repeatable path to success, a path that eliminates or mitigates the most egregious risks and allows the company to grow into a large, successful enterprise. One of us decided to chart this path in the following pages.

Customer Development was born during my time spent consulting for the two venture capital firms that between them put $12 million into my last failed startup. (My mother kept asking if they were going to make me pay the money back. When I told her they not only didnt want it back, but were trying to see if they could give me more for my next company, she paused for a long while and then said in a very Russian accent, Only in America are the streets paved with gold.) Both venture firms sought my advice for their portfolio companies. Surprisingly, I enjoyed seeing other startups from an outsiders perspective. To everyones delight, I could quickly see what needed to be fixed. At about the same time, two newer companies asked me to join their boards. Between the board work and the consulting, I enjoyed my first-ever corporate out-of-body experience.

No longer personally involved, I became a dispassionate observer. From this new vantage point I began to detect something deeper than I had seen before: There seemed to be a pattern in the midst of the chaos. Arguments I had heard at my own startups seem to be repeated at others. The same issues arose time and again: big company managers versus entrepreneurs, founders versus professional managers, engineering versus marketing, marketing versus sales, missed schedule issues, sales missing the plan, running out of money, raising new money. I began to gain an appreciation of how world-class venture capitalists develop pattern recognition for these common types of problems. Oh yes, company X, theyre having problem 343. Here are the six likely ways that it will resolve, with these probabilities. No one was actually quite that good, but some VCs had golden guts for these kinds of operating issues.

Yet something in the back of my mind bothered me. If great venture capitalists could recognize and sometimes predict the types of problems that were occurring, didnt that mean the problems were structural rather than endemic? Wasnt something fundamentally wrong with the way everyone organizes and manages startups? Wasnt it possible the problems in every startup were somehow self-inflicted and could be ameliorated with a different structure? Yet when I talked to my venture capital friends, they said, Well, thats just how startups work. Weve managed startups like this forever; there is no other way to manage them.

After my eighth and likely final startup, E.piphany, it became clear there is a better way to manage startups. Joseph Campbells insight of the repeatable patterns in mythology is equally applicable to building a successful startup. All startups (whether a new division inside a larger corporation or in the canonical garage) follow similar patternsa series of steps which, when followed, can eliminate a lot of the early wandering in the dark. Startups that have thrived reflect this pattern again and again and again.

So what is it that makes some startups successful and leaves others selling off their furniture? Simply this: Startups that survive the first few tough years do not follow the traditional product-centric launch model espoused by product managers or the venture capital community. Through trial and error, hiring and firing, successful startups all invent a parallel process to Product Development. In particular, the winners invent and live by a process of customer learning and discovery. I call this process Customer Development, a sibling to Product Development, and each and every startup that succeeds recapitulates it, knowingly or not.

This book describes the Customer Development model in detail. The model is a paradox because it is followed by successful startups, yet articulated by no one. Its basic propositions are the antithesis of common wisdom, yet they are followed by those who succeed.

It is the path that is hidden in plain sight.

Think Different

Steve Jobs

When I wrote The Four Steps to the Epiphany over a decade ago, I had no idea I would be starting the Lean Startup revolution. Newly retired, with time to reflect on what I had learned from my 21 years as an entrepreneur, I was struggling to reconcile the reality of my experience with the then-common advice about how to start a company. Investors, VCs and educators all taught entrepreneurs to use the same process used in an established company. To be successful, you wrote a plan, raised money and then executed to the plan, all in a very linear direction.