- [Corinthia] Hi everyone!
welcome to Disciplined Entrepreneurship
with Professor Bill Aulet.
My name is Corinthia Lewis and I'm part
of the MIT Sloan Executive Education Team.
Thank you so much for joining
us for today's webinar.
I'm pleased to introduce
to you Professor Bill Aulet
who is the managing director
of the Martin Trust Center
for MIT Entrepreneurship,
the Professor of the Practice
and also the faculty director
of the Entrepreneurship
Development Program.
Now, over to you Bill.
- Thank you very much, Corinthia.
And it's wonderful to be with
all of you out there today.
I'm sure there's some
old friends out there
and you're gonna hear some things
that you might have heard before
but I'm gonna kinda go
through to set the foundation
but then I'm also gonna
talk about some new things
and also talk about what
the entrepreneurship development
program is and is not.
So, again I'm gonna overview
disciplined entrepreneurship,
talk about where we are today,
talk about how it's
changed from my first book,
and where it's going and
then we'll talk about
what entrepreneurship development program
offers this upcoming January.
So, let's get going
but first of all Happy
Holidays to everyone out there.
It is so nice at this time of year
to start to be slowing down.
I got all my grades in yesterday
and so I'm relaxed and catching up
and having new thoughts hopefully.
So let's start with, as an engineer,
you always start with define your terms.
So what do we mean by entrepreneurship?
And so this is a term that is being used
more and more often and I think people
believe they know what
they're talking about
but they often get confused.
And I wanna talk about a paper I wrote
called Two Types of Entrepreneurship
because people often
equate entrepreneurship
with Small Medium Enterprise,
they use those terms interchangeably.
And Small Medium Enterprises
are small companies,
they're companies that were started
to focus on local markets like restaurants
and dry cleaners and IT
service companies or the like.
And these are defined by the fact that
there's a need in the local marketplace
and they're going to meet that.
On the other hand,
there's this other type of
entrepreneurship which I'm gonna focus
much more on here, really
exclusively and I call that
Innovation-Driven
Enterprise Entrepreneurship
or IDE Entrepreneurship.
And the difference between
this at the high level
is that while SMEs are
going after a local demand,
IDEs are going after a global demand.
That is a global market.
So if you're going after a global market
more than just the people
in your local community,
you have to have some sort of innovation
that will allow you to sell there
or encourage other people
to sell for you there.
And so that's the type of company
that we're really going
to focus on, the IDE.
Economies need SMEs as well as IDEs
and SMEs play a very
important part of the economy.
First of all, they're jobs
that are spread out geographically,
they're what they call non-tradable jobs
and they're required to make
a standard of living high.
But if you wanna take
that standard of living
and make it to the next level,
IDE companies create
enormous amount of jobs,
disproportionate amount of jobs
and they dramatically increase
the standard of living to a new level.
So what's the difference between these
if you look at a Small Medium
Enterprise, SME, venture,
you tend to get a very rapid response time
when you put money into it.
If I put money in, I will
see increased cash flow
or increased revenues
and that will kind of
grow linearly over time but at
some point it will be capped.
On the other hand, so the bullets here are
the delta t, that means the response time,
is short so that, and this again
why politicians love this,
they're quote shovel-ready,
we can put it to use right away.
When they grow, they
grow in a linear fashion
and they're capped and then there are
some less up front investment required.
The IDE ventures, on the other hand,
when you put money in
initially, or put effort in,
you tend to not see results for a while
and that's why this dips down,
'cause you're investing into
developing the innovation.
But once you get that
innovation and it works,
then you see exponential growth.
So to the same way, the delta t here
is longer than it is, that means
the response time is
longer in these ventures,
when you get them right you can have
exponential growth and
there's more investment
required in these type of ventures.
People would argue that
they are more risky
and I would agree with that.
The IDEs generally are more risky.
But what we'll talk about here today
is how to de-risk your IDE ventures.
So two types of entrepreneurship,
SME IDE, I'm gonna focus on IDE here.
If you are an SME, we can help you learn
how to become an IDE which means
you'll have much more market potential.
So, I said we're going to
define terms as an engineer
and so the next term that I
wanna define is innovation.
And we're talking about
innovation driven
enterprise entrepreneurship.
So innovation is often associated with
the term invention and people say,
innovation equals invention.
Invention is new-to-the-world
type of technology,
new-to-the-world idea,
new-to-the-world process,
something in the invention that
just brings things to a new level
because of a patent or something.
Those are not the same things.
Invention costs money whereas
innovation makes money.
And so they're clearly not the same thing
and what's missing in this equation,
if we're defining innovation,
is the commercialization aspect.
That means how do we bring this to market,
how do we find a customer who
wants to use your new idea,
your patent, your new process
that you've invested in.
How do you bring that to market?
And that's what will create value
and that's what the innovation is.
And this commercialization process
is the entrepreneurial process.
So what we're gonna focus on here
is not the invention itself,
there's lots of inventions
out there in the world,
there's lots of technology,
but there are few people
who can commercialize this very
well and I just want you to,
company like Apple
where they have actually
used inventions that
came from other people
be it Xerox or Fraunhofer
and Steve Jobs is
famously quoted as saying,
"Good artists create,
great artists steal,"
which by the way is a quote from Picasso
which fits very much into
his whole theme there.
So as you think about innovation,
which we will talk about today,
understand that you must have
the commercialization capability in it
and that's what we're gonna build.
And by the way, this is not invention.
Plus commercialization
just to be technically,
because that would be a sum of the two.
If invention is zero and
commercialization is zero,
either of them is zero,
you get no innovation.
On the other hand, if
you can see an invention
and you put in commercializing
as we show with Apple or
Google or many other people,
that's how they turn
out so much innovation.
So it's not you have to come
up with the invention yourself,
if you're really good at the
commercialization process,
you can be very successful.
So, what is the essence
of good IDE ventures?
First of all, there's some
technology that's built into it.
And I'm gonna refer to that here
as innovation cause it's
a little less precise here
but everybody refers to innovation.
But these are people
that are doing things,
science, engineering, technology,
new process, something of the like.
And they can develop these
things, they can build them.
On the other side, entrepreneurship
is about business essentials.
We'll call venture engineering at MIT.
It's the knowledge as to how to frame
the decisions to start
or not start a company.
How to then start that company
and how to grow that company.
It's critically important
that these two things work together.
The innovation in your
case for your new idea
might be very low, but you have to be able
to understand what the business requires
and then feed that back
into how your initial idea
will evolve over time, your initial idea,
technology, or process.
And it's not just once,
it's the ongoing way
that these things go back
and forth between each other
and that's what creates
innovation driven enterprise.
So, I've defined these terms now,
entrepreneurship,
innovation, IDE ventures,
lemme just talk about what it is not.
Entrepreneurship which is what
we're really gonna focus on
is not about these three whopping lies
that are often told about entrepreneurs
and sometimes even by
entrepreneurs themselves
which are actually damaging
to all parties involved
and I wanna use this to show knowing
what it's not but why
these things aren't true.
The first thing is entrepreneurs
are mercurial individualists.
That means that I saw Steve
Jobs, Mark Zuckerberg,
do we just have to run over other people.
This is in fact not true.
Entrepreneurship as the
data has clearly shown
is a team sport, the more people you have
on the team, the more likely
you are to be successful,
until a certain point, obviously.
But if I have two co-founders,
I'm more likely to be successful than one.
And three than two and four than three,
now that doesn't mean you go out
and the next person you
meet, make a co-founder
and you've improved your odds.
You have to get good people on your team
and you have to have a common vision,
shared values, and complementary skills.
And we talk a lot about
this in our classes.
But the first point is entrepreneurship
is a team sport not an individual sport.
The second thing is I
can't be an entrepreneur
because I'm not the most
high-achieving person
and I'm not the most successful person
and I'm not the smartest person.
Well this is in fact not true.
Entrepreneurs are people who
are very good at something
and then they're very
passionate about that
and then they're kind
of good at other things
kind of a T like, very good at something,
kind of good at other things
but they are super passionate
about what they're doing.
So much like myself, in
being an entrepreneur,
most entrepreneurs really
are very, very passionate
about something and will
focus less on other things.
They're not trying to please other people.
So this is a key point to make
that entrepreneurship is not an IQ test.
The third thing is that
entrepreneurs are born,
not made, it's nature, not nurture.
Again, the data is very clear here
that if you're born to entrepreneurs
you're no more likely
to be an entrepreneur.
It is a situation where
people tried over the years
to get characteristics that will
make you a successful entrepreneur.
That is not the case, the data shows
that the more time you're an entrepreneur,
the more likely you are to be successful.
So obviously, we're learning something.
Again, at a personal level, my family
was not entrepreneurial
at all when I grew up.
My brothers and sisters not
particularly entrepreneurial
but I was put in a situation at MIT
where there were other
entrepreneurs around
and I was given good
entrepreneurship training
and that's what made all the difference.
And we see that over and over
again with entrepreneurs.
So don't believe that
entrepreneurs are born, not made.
They can very definitely be made.
The fourth one is entrepreneurs love risk,
what makes them successful
is they just love risk
and they get lucky as
we'll talk about next.
This is crazy, again I'm an entrepreneur,
I would never go to a
casino and bet on 64,
that makes no sense at all to me.
I don't control anything about it,
the odds aren't in my favor,
that's just not what entrepreneurs do.
Good entrepreneurs identify
and take informed risk
so that they know that they're
going to win in the long term
and the risk of doing it is
worth the reward at the end.
So this is a really important thing,
it's not just risk, it's figuring out
where you have an unfair advantage
and then you do risk everything else.
The fifth thing is that to be a successful
entrepreneur you have to be charismatic
and I won't spend a lot of time on this,
I'd just invite you to go to the next
entrepreneur get together and sit around
and talk to the people.
They are more likely to be geeks
than they are charismatic.
Entrepreneurship needs to
be sustainable over time,
it's not just manipulating other people
and selling them and getting
them to do something,
if you do that you'll kinda go
up and down like a pet rock.
And that's not what makes
entrepreneurs successful.
Six, entrepreneurs are
lucky and if lucky means
I identified a potential
future opportunity
and I worked very, very hard to get
my quote 10,000 hours as
Malcolm Gladwell talks about
and then that opportunity
met the preparation I did,
and that's luck, then they are lucky.
But this concept of they're just lucky
because they didn't plan
for something to happen,
they didn't work for something
to happen, is not true.
In entrepreneurship, the process
we're gonna talk about is
how do you identify opportunities
and then how do you prepare yourself
for those opportunities that you believe
are going to happen in the future.
The last one is that, my book came out
and it was great, very rewarding
earlier today and someone said,
"Whoa, that's all been
dispelled with your book,"
and I would hope so, but it's still not,
that entrepreneurs are undisciplined.
Is that to be an entrepreneur
I'm gonna talk about
the importance of the
spirit of entrepreneurship
but they're undisciplined.
This is just not true, to be successful
in entrepreneurship, you
must be very disciplined
because you don't have a
lot of room for failure,
you don't have a lot of resources.
You have to martial and use
those resources extremely effectively.
When I worked at IBM, there could be
the quintessential symbol
of discipline every day,
but when I was entrepreneur,
I had to be extraordinarily
self-disciplined
because if we didn't ship product,
if that product wasn't successful,
the customer didn't pay
us, all those things
had to go right, otherwise
we wouldn't necessarily
make payroll the next week.
So the level of self-discipline
that had to be executed
by myself and our team
was way, way higher than it was at IBM
where we never worried
about payroll being made.
So those are seven myths
that I just wanna dispel
and that we'll deal with as we go forward
in our books and the courses
we do and online materials.
There's two other misperceptions
I just wanna deal with quickly here
and again Malcolm
Gladwell talks about this
in his book David & Goliath,
and that is if you're an entrepreneur,
you're odds are you're
not gonna be successful.
Well it turns out, if
you're a good entrepreneur,
your odds of success are
actually pretty high.
If you're really a
disciplined entrepreneur,
and in David & Goliath
they talk about military operations,
how David beats Goliath even though
it seemed like such a fluke,
this happens much more
than people anticipate.
That if you're David and
you play your hand right,
even though Goliath is much bigger,
you can use his very
height, his very strengths
against him to be successful.
So don't believe that
you can't be successful
if you're the entrepreneur,
if you're the David
going up against Goliath,
it happens all the time
but if you don't believe me,
just go out and watch the
TED Talk by Malcolm Gladwell.
The last one I wanna bring up is
people vastly overrate the
importance of the original idea.
The original idea, as
I said in an article,
is the most overrated
thing in entrepreneurship.
The original idea is your starting point
and then you go back and forth
as Professor Matt Mark talked about
doing switchbacks until you find
the right idea to settle in on.
And that idea, that original
idea is the starting point
and you need it, that's how
you coalesce things together
but then you focus secondarily,
as I show in this chart here
on the market, that's
focusing on the customer,
then start building everything back
and that will change your idea.
And then you have to have a process
by which you work with
that customer market
and that's what I call the execution here.
And those are much more
important than the original idea.
And the last thing that,
as you go through this,
you'll learn is the team,
building up a strong team,
is probably the single most important
but you can't do that until
you have that original idea,
you know who the customer is and you have
and understanding as to how to execute it.
So what we focus on is
really that execution process
as to how to take that original idea
and then focus on the customer
and simultaneously build your team.
So the last one I wanna
just talk about briefly
about entrepreneurship
that is really helpful,
and I wrote a piece for Sloan
Management Review called
Entrepreneurship as a Craft
and Why That's Important.
So if people look at entrepreneurship
and say is it a science?
And the answer to that is no,
entrepreneurship is not a science.
That means that if I
have A and then I have B
that I will definitely get C.
This is not the case,
if I have A and I have B
and I do those things right
and those are the right first principle,
then I'm more likely to get C
but it is not deterministic
and so people then say,
"Well, if it's not a
science, then it's an art."
And art is inaccessible to people,
that it's some sort of magical thing
but I've just gone through
these misperceptions
and talked to you about
how that's not true.
And so what I talk about
it something between
science and art, and this is a craft,
like pottery, you might not be able to
turn everyone on this call into a painter,
but you know what, we can
turn people into doing pottery
and I consider that a
craft, if we show you
how you take a hunk of clay,
how you use a potter's wheel,
how you spin that with your
feet, how you use your thumbs,
we can teach you how to do pottery
and why is that significant?
Because a craft is
accessible to everybody.
You can be an entrepreneur,
it is not something that
is impossible to do,
that you have to have
some sort of special gene,
some creativity to do it.
Yeah there's an element of creativity,
you can get that on your team
but it's mostly about,
like a craft, execution.
So it's accessible.
Like in a craft, we as entrepreneurs
build a unique new product to the world
that's never existed before.
This is one of the reasons
why it can't be a science,
because we're doing something
that's never been done before.
If it's already been
done, there's an algorithm
to optimize between the as is state
and the future state that
we're trying to get to.
But we don't know that future state,
we're exploring the solution
space as we go to get there.
And we're gonna talk about
the first principles.
So it's accessible, we're
builders of unique products,
and it's something that we can learn
as I talk about, the more
time you're an entrepreneur,
the more likely your
odds of being successful.
So clearly something can be learned,
the question is can we teach it?
And the answer to that
comes as there are first
principles that exist,
but they don't assure success much like
if I teach you how to throw a pot,
use your thumbs, spin the
wheel, do other things,
those are just first principles
and you have to kind of master that
through last thing is apprenticeship,
working out how to do that.
But there is some theory
and there's practice
and we go from theory to practice,
theory to practice, back and forth,
just like if I played basketball.
I play, I look at videos,
I make corrections,
because there are
certain first principles,
certain fundamental things that are true,
and then I go back, try it
out, then I go back and forth.
So this idea, and I want everyone
to have the mental
model that it's a craft,
it's not a science and it's not an art,
it's accessible, you
build unique products,
they're learnable,
they're first principles
that are the theory, and
then we also have practice.
One second.
Thank you.
So how do we teach entrepreneurship?
First of all, we know know
that we can teach you.
We can do it together and I wanna show you
how we do it at MIT.
How do we do entrepreneurship education?
We have four pillars to our program,
what we call the four H's,
the first H is the heart,
you have to have the spirit,
you have to have the mindset
to be an entrepreneur.
And that's where it all starts,
the bird sings from within.
If you don't wanna be an entrepreneur,
if you don't believe you
can be an entrepreneur,
then we can't make you an entrepreneur,
just not gonna happen,
it's too hard, there are
too many ups and downs.
So I'll talk more about that.
The second thing after the heart
we're gonna talk about is
the head, the knowledge
this is the theory, this
is the first principles.
If you wanna be an entrepreneur,
if you wanna be a basketball player,
I can teach you how to
be a basketball player.
If you wanna be an entrepreneur,
I can teach you how the first
principles to be a successful.
But just having the heart
and the head is not enough.
We need to put that into action.
The hands is the third one.
This takes the knowledge
and translates that into capability.
So this is the apprenticeship
model we were talking about.
The last H was not as obvious to me
and this is what's
really hit me on the head
over the past two or three years,
and this the home, the
power of a community
for entrepreneurs and how important it is
when you're an entrepreneur
and you're getting going
to have other people who
have that same mindset,
whose knowledge you can share,
whose capabilities may be useful to you
or good mentorship for you.
So building communities
is incredibly important.
So these are the four H's
that I'm gonna talk about here briefly.
The mind step, the
importance of the spirit.
This is the willingness to be different.
If all the fish are swimming this way,
are you willing to swim that way?
And not only are you
willing to swim that way,
do you get excited
about swimming that way?
As you can see here, the little fish
is swimming the other way, it's excited,
there're endorphins
racing through their body.
And this is what we call
creative irreverence
and if you ever get a chance
to come to our center,
you'll see that the constant theme is
it's more fun to be a pirate
than to join the navy.
And we have the pirate flags there.
But that is just the
spirit of an entrepreneur
and remember, with the
spirit without the skills
is not a formula for success.
What is a formula for
success is if you have
the spirit of a pirate,
and then you add to that
the skills of a Navy Seal to execute,
this is where the magic happens,
this is where great
entrepreneurship happens.
The spirit part, I'm not
gonna focus as much on now
but I'm gonna focus on
the skills of a Navy Seal
but don't forget it's
these two thing together.
So, if we are going to develop a program,
a class, a course, what we need
to do is use our own process
and what we do in the
24 step process would be
who is our customer first?
So when we first started, we started with
the ready-to-go entrepreneur,
the second one here,
Chris Nolte, who wanted
to start a new venture.
And this is what you probably recognize
from Silicon Valley the
TV show, which is crazy,
but I wanna go start a new company.
This was the dominant
person when I first started
in class but now if that's
our pre-check market,
it's now expanded dramatically.
People who are interested
in entrepreneurship
not only fall to ready-to-go,
I'm gonna start a company,
but the biggest chunk of our classes now
at MIT is the curious entrepreneur.
It's the person who wants to
learn about entrepreneurship
but they don't know
enough to make a decision
whether they wanna do it or not
and do they wanna be a
ready-to-go entrepreneur
and what are other options are there.
And there are more options
than just ready-to-go entrepreneur.
These are people like Esteban,
he's an entrepreneurship amplifier,
his company already existed,
his parents started it
and now he's taking over that company
and he wants to invigorate that company
with new entrepreneurship
skillset, mindset,
and results in the bottom line.
And so what he is is not starting
a new company, like Chris,
but he would do is he would try
to harness the power of people like Chris
and funnel that into his own organization
to take that company GMS
to a whole nother level.
The third one is the
corporate entrepreneur
and this is someone who's
not starting a new venture,
like the ready-to-go,
but then it's someone
like Lucia who wanted to be
in an existing organization
but create new product,
create a new organization.
All of these are entrepreneurial personas
that you probably think about
yourself in one of these
and these are all ones that we have
successfully addressed it at this point.
I wanna say that we're also
addressing in the EDP program,
academic instructional entrepreneurship,
people who want to teach entrepreneurship.
They may have been an entrepreneur before
and now they'll look at how
do I become a better teacher.
And that's hard, I've
been at this 10 years,
I'm an entrepreneur for 20 plus years,
and that's one thing, but how do you
structure that information and get it into
what are the first principles
and how do you teach people that.
There are other people that
will be interested in EDP
such as academic entrepreneurs,
people who are going to stay in academia
but they wanna understand how can they
make their research more impactful.
There are other people who say,
well I'm not ready to go yet,
I'm what they call a
ready-to-go minus one.
That means I think I wanna
start a company in the future
but right now I don't have an idea,
I don't have a team and I
wanna go into a start-up,
be it a hotspot, be it
pill pack, another company
and after that, then I
would start my own company.
We also have a lot of people who take
entrepreneurship development program
who are entrepreneurship investors.
These are people who go how do I analyze
companies in a more structured fashion?
And then we'll have people
who are social entrepreneurs
who are not about creating profit,
but about impacting many,
many people in a positive way.
And I would argue that
social entrepreneurship
and disciplined
entrepreneurship really overlap
and it's the same process
to use for both of those
and we have plenty of examples of that via
San Agean African, Shop Soku,
Bilicus and Legos Nigeria,
lots of them you're much better off.
And there are people like Amanda Von Goetz
who just love the entrepreneurship
and she uses it for her piano recital.
So it can just make you
a better person as well
and help achieve your personal goals.
I wrote an article for
the Wall Street Journal
op-ed piece that talked about
entrepreneurship education
and this was a while
ago now about the crisis
and why it was so important that we take
this new approach because the demand
for entrepreneurship education is spiking
but we have not been
able to lift the curve
of supply of quality on entrepreneurship
because it's really hard,
it's really hard to do this,
there has not been a big body of knowledge
there's still to this date exists
an insufficient body of
those first principles
and research and evidence
base that's out there.
It is also something
that it's easy to fake it
and so people have been
out there telling stories
because there hasn't been a benchmark.
The third one is is that it's different.
It's not a science and if it was a science
we could scale it much faster.
So today what's filled
this gap is storytelling,
there's a lot of
entrepreneurship education
that is just really storytelling
and that's not what
we're going to do at MIT.
We need to have rigor in what we do
and I think that the world needs that.
We need to think of entrepreneurship
as a respected field where
there's a body of knowledge,
it's a discipline and
you can't just get by
by telling stories.
So this drove us to put together
the 24 step methodology that we lean on
and lemme just give you
an analogy for this,
if I was to build a house, which is
a very unsophisticated non-dynamic system,
you would not build it with one tool
be it a hammer, a saw, a screwdriver.
Of course you would have a tool box
with many different tools in it.
And so that's a very simple system
but when we look at
entrepreneurship over the years,
people love to focus on one tool,
whatever the shiny new tool is and say,
that's the thing that will
make you a successful entrepreneur.
And that's just not true.
You have to have many
different tools in your toolbox
because building an
entrepreneurial venture
is something that is a
much more complicated
dynamic system and no one
tool will be sufficient.
So we need to think about what
are the tools that are already out there
ones that have been validated
by kind of academic rigor and say,
what tool will we put in your toolbox?
and then when should you use
it at the appropriate time.
And that's exactly what the 24 steps is.
It is not trying to reinvent
the world of entrepreneurship,
it's trying to identify
what are the pieces
that bringing them together
in a systematic manner
and telling you when is
this tool good to use
and then when is this tool good to use.
So it gives you order, it
give you kind of prescription
and it gives you an understanding
of the strengths and
weaknesses of each tool.
So what does the 24 steps actually do?
This is the entire kind of field
of entrepreneurship education as we see it
with different modules.
And it starts with nucleation
and then phase two is product definition
and phase three is venture development.
What the 24 steps is, just to be clear,
is not what is entrepreneurship,
is not how do you come up with ideas,
it's not how you build your initial team,
there's lot of great work out there
that's been done at Harvard,
Tina Seelig has done great
work on ideation at Stanford,
Steve Eppinger has done it here,
and Matt Kressy team building,
Noah Watson has done great work.
What we're gonna focus
on is how do you get
that product market fit right,
how do you do that
primary market research,
and how do you make a scalable product
and then the back end,
how do you build out
the venture you have
to have a good product,
I'm really not gonna focus on that
in the 24 steps but we're
gonna focus on one thing
and we're gonna do that very, very well
and if you do that well,
you have the foundation
for a very successful new venture.
So this is our map, this is our roadmap.
People go, wow, that wasn't
what I expected from MIT,
this looks like a game
of Chutes and Ladders.
Well we wanna make it
accessible to everyone
and I'll talk a little
bit more about that later.
But this basically is a iterative process
that you're gonna go through
but there's a beginning
and there's an end.
There are 24 steps, people
say that's too many steps,
it's actually just an approximation.
We can't boil it down
to the three key things
as much as we'd like to
and you would like to.
It needs to integrate
many different things
and the first part of it
is who is your customer.
And this is basically a
lot of the design thinking,
a lot of work that's put in
places like Proctor & Gamble,
you start with the customer
and build your way back.
And in this we do that in
a very systematic fashion
with each step is defined
and it tell you what are the units,
how do you do it, examples, the like.
But that's where you start,
you don't start with the product,
you don't start by
building a minimum bylaw.
You start by who is the customer,
what is the problem we're solving,
why does it need to be solved
and then we're gonna start
building our way back.
The second thing you would focus on
after who's the customer,
what's the problem we're gonna solve,
how do we create value for them,
this is the value creation stage.
So we're looking at things like
what's a full life cycle,
use case building approach,
sure for the product, quantifying
the value proposition in the dimension
that's most important to the customer
that we've just studied and
then what makes us unique
and then why do people care about
what we have that's
unique and how do you grow
what's unique to you to
make it more difficult
for other people not to come in
and just steal your idea
and take the market away
that you've created.
And we will go after that
as to how's your customer
make the decision because
even if you show him
you can create value,
there is no value created
unless the customer requires the process.
And then the last thing is
how do you make money off it,
what are the unit economics,
what's the cost of customer acquisition,
which is always underestimated
and what's the lifetime
value of a customer
and how do those two
work against each other
if we get the unit economics right.
And then the next part is
now we build the product,
we don't build the product too early
and I can give you lots
of reasons for that,
you can read my TechCrunch article about
our dangerous obsession with the MVP
but after we've kinda laid out
what a plan for success is,
then we step back, we're
about to build the product,
we say what are the key assumptions now
that we can look at
this whole big picture.
We've been testing assumptions
all the way through
but what are the key assumptions
and how do we test those?
And then we're gonna build the minimum
viable business product
and we're gonna prove
that the dogs will eat the dog food.
Then lastly since this is an IDE,
we wanna talk about how do you scale it.
After you've taken that pre-check market,
how do you grow it?
So I know I've gone through this,
this entire semester worth of stuff,
but stuff we'll be covering in detail
in the EBP program and you
can take a look at the book.
But I also wanna position this
now in the bigger spectrum.
The benefits of this
approach is that it's open,
we're not trying to invent everything,
we're trying to incorporate
in a toolbox way
what the best things
out there that'll work.
By this framework, it's very
comprehensive when you go from
idea to kind of products,
sustainable products.
But it's something that's very practical,
it's integrated, it's
sequential, it's prescriptive
but it stood the test of time
in that it's very useful.
One of the things that's really nice
is it creates a common language.
Remember we talked about a community.
How many people are there that
when you wanna speak to them
you can communicate quickly?
But when our world when
you talk to someone, say,
hey, I don't understand, I
think your total decimal market
isn't big enough,
they know right away what that means.
I worry about whether your
core, what is your core?
I understand all that looks good,
you have a great value but who's gonna be
your champion of decision making here?
What's your cost of customer acquisition?
What's your lifetime value?
All these things will be,
people will know right away
and that's what creates a strong community
that can help each other.
So, I jumped over this,
why you should care
about being an entrepreneur
but I just wanna say this
before I start moving forward.
Look, this is where the
jobs are being created,
on a study by the Kauffman Foundation,
Bob Litan and Dane Stangler showed that
essentially all the jobs that were created
in U.S. economy between 1980 and 2005
were not created by SME type of companies,
they were created by companies
that were five years old or less.
IDE companies that create the jobs,
they're not created by
big companies, government,
they're created by IDEs, so this is where
the jobs are being created,
even people at big companies,
they want people that
have the skills of an IDE.
If you wanna have an impact
as well in the world,
this is how you're going to do it.
You can create your own job that fits
the mission that you're passionate about
and you can have a lot of fun doing it.
So, our goal at MIT, and
I just was writing this
this morning to someone who told me
their favorite book was
Antifragile by Nassim Taleb,
is our goal is to create people
who can thrive in a world of randomness
and disorder and kind of unpredictability.
That is not just
surviving, it's the people
who can deal with this and when
you look at the world today,
there's more and more disruption,
there's more and more unpredictability,
there's more and more crises.
And we want our students and we want you
to be able to thrive in that
world, not just survive,
but thrive and that's
the goal of what we do.
It's not about building companies,
yes, that is a byproduct of what we do,
but it's really about creating
antifragile human beings.
And it works.
So there's lots of examples out here,
Okta today went public,
there's about three million
market cap at HubSpot,
so lots of examples
there and you'll see them
when you come to EDP.
The basis for our course is
the Discipline
Entrepreneurship original book,
the white cover here, and in the past year
we've had a new book come out called
the Disciplined Entrepreneurship
Workbook, in red here.
And I'm gonna talk a little bit about that
is what did I learn from the
original book that came out,
there are 32 different editions
in every country in the world,
online courses, what
more needed to be said
to write another book 'cause I was looking
to write another book.
There's also, by the way online tools
that can help you as well such as
the Disciplined Entrepreneurship Toolbox
made by my good friend Marius Ursache
whose Romanian and
travels around the world
but will be useful to any of you.
What is the EDB Program?
The EDB Program essentially
is our course at MIT
and it's just condensed into one week.
It is like a Marine bootcamp
that takes you through
and says, we're gonna build a company
from scratch in 5 1/2 days.
And that is highly unreasonable
but what we're trying to
do is not to catch a fish
but teach you how to fish.
So students come in, they
wanna work on their company,
we say no no, you're
gonna start all over again
with a blank slate and you're gonna start
with six or seven other people
who you never met before
and you are going to start a new company
and you're going to
notice you're gonna learn
a whole lot about that process
'cause if we use your company,
you bring a whole bunch of biases to it.
So on Sunday, you come in
and then we immediately
start giving you, here's
how this week's gonna work,
here's your process, now
we're gonna do speed dating,
come up with new ideas, sell
your ideas to other people,
if it doesn't work you gotta join the team
with an idea that you like,
this kind of Darwinator process.
And then once you have
your team on Sunday night,
these are people you're gonna live with
for the next four or
five days, or five days,
and you're gonna become
very, very good friends.
You're gonna come from all over the world.
And then on Monday, you start
marching through the 24 steps.
We define that target
customer, we have a value,
you have to come up with what
your value proposition is.
On Tuesday, then we
have product development
and competitive advantage.
You might say, well I'm not
done with my value proposition.
Well you've got to, the
training has to keep moving,
you can't make excuses
here, we gotta keep moving.
And you'll say, but this is too fast.
And that's the whole point,
just like with software,
you have to write it once, go through,
then you learn so much, throw
it out and start over again.
This ability to kind of go through
the whole entrepreneurial process
is not just defining target
customer value products,
product development, head of advantage,
how do you extract
money from the customer,
what is the pricing,
what's the lifetime value,
how do you code a market,
what's your cost of customer acquisition,
how do you build the finances for this,
how do you fund it, how do you exit that,
and then how do you pitch
this thing to other people?
All that we do in one week
and you can look at it
and it seems insane that we could do this,
but trust me, it works, it works.
So here's detail on the program,
I'm just gonna jump over this,
all the slides are available to you,
lemme just highlight a few things.
We bring the best of the best to you here
in this program at EDP.
Not only am I there, pretty
much for the whole week,
but we have Trish Cotter
who's entrepreneur residence
and the socio advantaging director
of the Martin Trust Center
for MIT entrepreneurship
whom I work extremely closely with,
she's taken two companies
from garage to public.
We have Donna Levin, who is another EIR
at the Martin Trust Center
and she also is a founder
of care.com which is a
publicly traded company now
and she's had a number of other companies
that weren't as successful
and she is just a great mentor to students
and really, very familiar
with this whole process.
Matt Marx, a renowned scholar in the field
of entrepreneurship, I was talking about
how the original idea doesn't matter,
he did the work on switchback,
he did it on knock competes,
he's gonna talk about
what are those decisions
you make when you found a
company that are so important,
founders' equity splits,
all those types of things.
The next one is Christian Catalini,
says my name there, I'll have
to change that in the slides,
but that's Christian Catalini,
another renowned scholar here at MIT
who's done work on bitcoins,
involved with creative
destruction lab in Toronto,
he'll be there, he was
involved by the way,
in the program at MIT where
they gave every student
$100 and then watched what happened.
$100 in bitcoin and watch what happened.
So he's very familiar,
not only with blockchain,
but all kinds of new technology
that comes to market.
Catherine Tucker is an
award-winning professor
here at MIT in the area
of marketing and pricing
and you will not wanna
miss what she has to say
really about the lifetime value
and cost of customer acquisition
and really how to think deeply about that.
Scott Stern is another renowned scholar,
he won the first medal from
the Kauffman Foundation
for entrepreneurial research
and he's coming out with a book
on entrepreneurial strategy,
how do you build company,
what are the choices you make.
And then Ed Roberts was my
mentor way back when at MIT
and is the chairman of
the Martin Trust Center
at MIT entrepreneurship and
literally wrote the first book
on entrepreneurship and he will be there.
I'm also excited for our lineup this year
of people we're bringing in
who are real practitioners.
Brian Halligan was
named the number two CEO
in the United States by USA Today.
He's a co-founder of HubSpot
and an extraordinarily dynamic speaker.
Paul English, there's also a book
written about him recently about
his entrepreneurial endeavors
and he founded Kayak
and has now founded Lola
and is really a renowned
entrepreneur mentor,
thought leader, and just friend, globally.
David Cancel is a new addition,
he is a multiple time entrepreneur,
done a number of companies,
one sold by HubSpot
and now he's doing Drift
and that's a product
that everyone here probably uses,
it's chatting about websites.
And then one of the hottest investors
in the Boston area and in the world today
is Jeff Fagnan and he'll be joining us
to talk about trends in venture capital
and he's at Accomplice.
And then there will be
dozens of other interactions
that you will have through company visits,
through mentors, through coaches we have
in our simulation
session to move you along
and then the judges at
the end of the week.
So you'll get fully
immersed, you will know
the MIT ecosystem when you leave here
and you'll have lots of personal contacts.
So, lemme just say, what are the things
I've learned since I
published my first book
and why did I have to
publish a second one?
Because I realized after the first book
that I didn't do justice to the field
of primary market research
and sometimes people say
customer development and
this is a very important area
is how do you talk to customers.
And there's a whole bunch of academic work
that's been done on this
and corporations have been doing it
and this is something
that we really highlight
and you'll see a special
section in the book,
in the workbook about this.
And this is something
that the whole process
doesn't work if you don't know how
to do effective primary market research.
And I touch lightly on
that in the first book,
but in the second book
we really dive into it.
And it underlies all the 24 steps.
It is the fuel that drives you through.
So the second thing I learned was
how do you get those first customers?
I have this beautiful
process, we create value,
extract value, we understand
the decision making process
but there's a whole body
of knowledge out there
that I incorporate that can be summarized
in Newton's first law of motion.
That an object at rest will
remain at rest until it's moved.
So basically, there's tremendous amount
of inertia in business and we're trying
to change that inertia when
we come in with a new product.
And how do we take that body
at rest and get it moving?
'Cause once it's moving,
it will continue moving
in a constant motion in the
same direction, velocity,
until it's stopped so
how do we change habits?
How do we get customers coming our way?
And there's a whole field
of behavioral economics
in this that's terrifically interesting
but you can spend an entire
lifetime going through that
but why is this important
to an entrepreneur
and how do we make this into something
that we can boil down to make useful?
And this is what I call
step 13b in the new book.
The decision making process
depends on when you start that.
When are the windows of
opportunity to do that?
And once you know there's
a window of opportunity,
how do you set a trigger
up to take advantage
of that window of opportunity?
And we really dive into this in the class,
let me just give you an example
that probably everyone's here,
if you're on Expedia and
you're looking up flights
between Boston and San Francisco,
that's a window of opportunity
'cause I'm thinking of
going to San Francisco
and they now know that.
And then what does Expedia do?
They recognize that window of opportunity.
They then set something up there,
a trigger that says two
seats remaining at the price.
Is that effective?
You might say it might
not be effective to you
but studies have shown it's
extraordinarily effective
and how do you understand
these windows of opportunity
and take advantage of them with triggers.
And we're really gonna get into this
and this is a really important skill
for entrepreneurs to have
and there are many
different techniques here
that I talk about them,
at IBM, I experienced
when you wanna get to
stowage you need to get them
at the beginning of the year,
if you're selling Enterprise software
and your competitor is bought by Oracle,
what should you do?
Hubspot had this free website grader,
unbelievably successful for them.
If you're a security company and there's
a high visibility breach,
how do you respond to that?
And the politicians know
exactly how to do this.
And they made it an
absolute science for them
that if something happens they
could capitalize off of it.
Again, we'll go through
this process in EDP
of when there's a window of opportunity,
how do you design that
trigger to create new leads
that will get you access
to the influencers
that will then start driving you down
through the sales process.
The next thing is, it's related to this
and feeds right into it
is you know we talk about
the decision making unit,
you have to know that.
The decision making process,
you have to know that.
Today, to operationalize
that company so that
to understand where your problems are,
and are the dogs eating the dog food
and if they're not, why not
is a value and discipline
of a sales funnel.
How do you build a sales funnel?
So we get into this in kind
of multiple iterations,
the first draft of a
sales funnel is in step 13
with the decision making process.
And you start to understand
that and drive through it
sales funnel does not end at step five
where the customer purchased it,
step six and seven are
incredibly important
because once you have a customer,
you need to have what's often
called customer success now.
How do you take care of that customer
because that customer might
be the most important asset
you have to create new customers
to funnel you back to
create leads that go back
into the top of the funnel.
There's a best sales person for you.
He's not a new salesperson you hire,
but your existing customers.
So this more fulsome sales
funnel is where we start,
and then over the course of
the 24 steps, we refine this.
Not only where we generate leads,
but what are the watering holes, and who
is going to do that?
How do we convert leads into suspects,
and what are the windows of
opportunity to create it.
So very systematic way to go through this.
And that's for the short
lead in the long term.
So the next thing is is the
framing of entrepreneurship.
And this whole idea of it being a craft
and not a science and an
art has helped me enormously
in getting students to
understand this is not something
I can give you the answer, or
we can give you the answer.
You have to find that yourself.
What we're giving you is
these first principles.
Initially, it leads to
frustration because they want
someone to have the answer for them.
But if you're creating
new, unique products,
you can't give people the answer.
They have to find it themselves.
And there may be many paths to success,
and they have to choose one.
So this idea of framing
entrepreneurship as a craft
and not a science, nor an art,
has been really, really helpful.
And the last thing I'll
just say, and this is so
we can spend, again, all week on this
or all month, is the
importance of entrepreneurship
at a societal level.
We see society kind of fracturing
and we didn't create an entrepreneurship
that's inclusive, that's
accessible to everybody.
And this is one of my missions
now is how do we do that?
How do we not just train people at MIT?
How do we create the thousands of people?
How do we create millions
of people around the world?
Because when we give
them entrepreneurship,
it gives them three very important things.
Hope, hope that there's something better
in the future that they can do.
It's a pride in something
that they identify with,
they may even own.
And the third thing, it gives
them rigor in their life.
And all these things are
terrifically important
to having a stable world
where people get along
with each other and we
don't do crazy things.
So I'm sorry to go off
that, but let me just say
what we're about at MIT is about,
entrepreneurship isn't just
one that can be trained,
that we can train people.
It is something where there is a process,
but it's not a predictable
process, but it's an algorithm.
It will go up and down, but
if you stick with the process,
we're seeing terrific results
as a byproduct of that.
And so we also say, during week of EVP,
everyone's excited on Monday,
I'm sorry, excited on Sunday.
They like their team, they like the idea.
On Monday they go through
and they still like it,
but then it starts to go down.
And on Tuesday, this is getting hard.
So guess what?
When they stay with the
process, it comes back up,
and by Friday, the confidence that you see
in the students.
Yes, they can do this,
and now they do have a useful framework
to help them through this.
This difficult process is
just so rewarding to see.
And when you're able to find your way
through that confidence,
you have that framework
to find it through, you
are willing to go out
into this world, this ambiguous world,
where there's randomness,
there's unpredictability,
there seems to be crisis, and you're able
to thrive in that world.
And that's anti-fragile human beings
that we ought to be.
So the MIT entrepreneurship
education process
and through EDP.
So with that, I thank
all of you for listening.
I see there's many of you out there
and I wish we could do questions now,
but they tell me that
it's not in the cards.
But let me say, if you have
any questions or comments,
please just tweet me.
I'm @BillAulet on Twitter.
And we have not only 140 characters,
we have 280 characters for
you to ask questions now,
and 280 characters for me to respond.
So even though this is a holiday season,
I will get to and respond
to all your questions
and it will be my honor.
And let me just say in closing,
look, we have a lot of
fun in entrepreneurship.
You see the interface and the characters
that we have here.
And it's important, 'cause
entrepreneurship is hard.
It's like having a kid, it's more work
than anyone could ever imagine.
But on the other side of
that, when you get through,
it's just a wonderful feeling.
When you get to be an entrepreneur,
how you control your own destiny.
So the journey is harder than you think.
The ultimate reward is much better
than what we could explain to you,
and so I would encourage all of you
to at least try that journey
and we'll be there to help you.
So with that, I think I am signing off
and I wish all of you
a very happy and joyous
holiday season and hopefully
I'll see you in January.
In Boston, it's a lovely
time to be here in Boston.
The sun everyday and it's so nice
that we put white stuff on the ground
to make it even more beautiful,
but hopefully we'll see you.
Have a great holiday
season and we'll see you
for hopefully what will
be a productive 2018.
