Driving Corporate Innovation: Design Thinking vs. Customer Development

Startups are not smaller versions of large companies, but interestingly we also see that companies are not larger versions of startups.

I’ve been spending some time with large companies that are interested in using “Lean Startup” methods. One of the conundrums is why does innovation take so long to happen in corporations? Previously Hank Chesbrough and I have written about some of the strategic issues that impede innovation inside large corporations here and here.

Two methods, Design Thinking and Customer Development (the core of the Lean Startup) provide the tactical day-to-day process of how to turn ideas into products.

While they both emphasize getting out of the building and taking to customers, they’re not the same. Here’s why.

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Urgency Drives Innovation Speed

Startups operate quickly – at a speed driven by the urgency of a proverbial gun-to-their-head called “burn rate.” Any founding CEO can tell you three numbers they live and breathe by:

—the amount of cash left in the bank

—their burn rate (the amount of money they’re spending monthly minus any revenue coming in) and

—the day they run out of money and have to shut the doors (or get a new round of funding.)

If you’re a founder, there’s a constant gnawing fear in the pit of your stomach that it will all end badly; running out of money, having to fire all your employees and failing publicly. (Whoever says, “Failure feels OK in startups has clearly never run a startup.)

A startup CEO adroitly translates this urgency to

Author: Steve Blank

A prolific educator, thought leader and writer on Customer Development for Startups, Steve Blank is a retired serial entrepreneur who teaches, refines, writes and blogs on “Customer Development,” a rigorous methodology he developed to bring the “scientific method” to the typically chaotic, seemingly disorganized startup process. Now teaching entrepreneurship at three major universities, Blank co-founded his first of eight startups after several years repairing fighter plane electronics in Thailand during the Vietnam War, followed by several years of defense electronics work for U.S. intelligence agencies in “undisclosed locations.” Four Steps to the Epiphany, Blank’s fast-selling book, details the Customer Development process and is increasingly a “must read” among entrepreneurs, investors, and established companies alike, when the focus is optimizing a startup’s chances for scalability and success. After 21 years driving 8 high technology startups, today Steve teaches entrepreneurship to both undergraduate and graduate students at U.C. Berkeley’s Haas School of Business, Stanford University’s School of Engineering and the Columbia/Berkeley Joint Executive MBA program. His “Customer Development” teaching and writing coalesce and codify his experiences and observations of entrepreneurs in action, including his own and those he advises. “Once removed from the day-to-day intensity of founding a startup, I was able to observe a pattern that distinguishes successful startups from failures,” Blank says. In 2009, he earned the Stanford University Undergraduate Teaching Award in Management Science and Engineering. The San Jose Mercury News listed him as one of the 10 Influencers in Silicon Valley. In 2010, he was earned the Earl F. Cheit Outstanding Teaching Award at U.C. Berkeley Haas School of Business. Despite these accolades, Steve says he might well have been voted “least likely to succeed” in his New York City high school class. Steve Blank arrived in Silicon Valley in 1978, as boom times began. His early startups include two semiconductor companies, Zilog and MIPS Computers; Convergent Technologies; a consulting stint for Pixar; a supercomputer firm, Ardent; peripheral supplier, SuperMac; a military intelligence systems supplier, ESL; Rocket Science Games. Steve co-founded startup number eight, E.piphany, in his living room in 1996. In sum: two significant implosions, one massive “dot-com bubble” home run, several “base hits,” and immense learning leading to The Four Steps. An avid reader in history, technology, and entrepreneurship who seldom cracks a novel, Steve has followed his curiosity about why entrepreneurship blossomed in Silicon Valley while stillborn elsewhere. It has made him an unofficial expert and frequent speaker on “The Secret History of Silicon Valley.” Steve’s interest in combining conservation with best business practices had Governor Arnold Schwarzenegger appoint him a Commissioner of the California Coastal Commission, the public body which regulates land use and public access on the California coast. He also serves on the Expert Advisory Panel for the California Ocean Protection Council. Steve serves on the board of Audubon California, was its past chair, and spent several years on the Audubon National Board. A board member of Peninsula Open Space Land Trust (POST), Blank recently became a trustee of U.C. Santa Cruz and a Director of the California League of Conservation Voters (CLCV). Steve’s proudest startups are daughters Katie and Sara, co-developed with wife Alison Elliott. The Blanks live in Silicon Valley.