In another 2 weeks I will be presenting my webinar How the lean start-up accelerates innovation’ at the Global Women’s Leadership Summit (GWALS). Immediately after that I will be in Brussels to present my paper on Re-inventing entrepreneurship education at the European Innovation Conference. Writing all of these papers, presentations and articles has caused me to focus on, research and define the links between Entrepreneurship, the Lean Start-Up and how Israeli Start-Ups successfully integrate these concepts, principles and techniques into game changing high-tech companies, such as Waze, that recently sold to Google for over a US $1 billion dollars, to accelerate innovation.
There are currently more than 4,500 “lean start-ups” being developed at this very moment, around the tiny nation (as big as New Jersey) of Israel. entrepreneur.com recently awarded Tel Aviv, also known as “Silicon Wadi”, the #2 entrepreneurial global hot spot. Whilst start-ups emerged from Silicon Valley, still the #1 entrepreneurial global hot spot, the “Silicon Valley Effect” is enabling other countries and cities to outshine its success. Citing differentiation, government support and art-entrepreneurialism as the keys to overall start-up success within an innovative ecosystem, Israeli start-ups have evolved their own uniquely iterative and collaborative approach to accelerate innovation.
What is a lean start-up?
Considering that a start-up a temporary organization designed to search for a repeatable and scalable business model, and that a lean start-up typically goes through the following three steps as described by Steve Blank:
- Build a business model canvas or hypothesis.
- Test and develop the business model via customer feedback; guides the discovery, validation, creation & building phases.
- Develop products iteratively and incrementally.
How Israeli start-ups typically evolve!
- The intrinsic motivation is developed at home, in high school and is an essential part of the Israeli entrepreneurial culture, and almost every child aspires to be a start-up entrepreneur.
- Ideas or hypotheses get incubated, in high school, in the Israel Defense Forces (IDF), at university (in Israel or aboard), or in the many start-up hubs and hackathons that operate in the major cities.
- A “start-up gang” will informally develop and get together to seed the start-up solution by creating their unique collaborative DNA. They will be willing to work together, to co-operate, and collaborate as a loose team.
- They will maximize their differences and diversity by arguing and debating, until they generate higher levels of meta thinking. Most often they will then create a workable structure to ensure that they work effectively, with speed and agility and may seek initial crowd funding to finance their initial development.
- The outcome is the development of a business model, or “paradigm shifter” which is then prototyped, through rapid experimentation and improvisation. The intent is to give the market something innovative, of value that is accessible and has NOT previously existed.
- The team may now join an incubator to seek business mentoring, planning and/or financial support. They may also decide to self fund through bootstrapping or by making initial customer sales, even if they do not have a finished product or service. They may also, at this point, seek initial Venture Capitalist (VC) investment on the basis of uniqueness of their innovative business model, which may, not yet, exist in concrete terms.
- They will share and take advice from other start-ups and will think of their competitors as colleagues or resources for improving their own business model or start-up.
- The gang constantly tests their ideas through customer and market feedback to continually iterate and prototype their business model, whilst developing their business plan, often a power point slide pack, on the run.
- They will pivot their successes & failures, using every experience as a way to improve what they are developing.
- They may remain in stealth mode, until they have finally validated their proof of concept.
- They may now join an accelerator to seek business mentoring, planning and/or financial support or to obtain Venture Capitalist (VC) investment.
The start-up gang continues to accelerate their business model until they enter the dragons den. It is finally realized via a sale to an external third party or VC Investor or their own market success and remain independent operators, valuing their freedom to manage and develop their start-up their own way. They may merge with another start-up, or drop their current start-up if it fails and start all over again with a new hypothesis or solution, using what they have learnt to improve their chance of success in their new start-up venture and accelerate innovation.
Are lean start-ups providing us with an emerging and generic business model?
I have discovered that there is a distinct start-up cult here in Israel, and whilst its been an incredible and exciting learning experience to be part of this cult, I agree with Tim O’Reilly, of O’Reilly Media that the lean start-up provides us with clues as the new business model that is emerging to accelerate innovation:
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