I grew up surfing. Even if the closest you’ve ever come to surfing is watching The Endless Summer or Blue Crush with a bag of popcorn, you probably understand that surfing is all about being in the right place at the right time. Of course, you need to know how to swim, have a board, and know a little bit about how tides work. But the real skill is being able to look out into the horizon and see the sets or patterns of waves building, then positioning yourself to make the most of them.
Surfers and entrepreneurs have a lot in common. They’re both constantly searching for the next big wave. Being able to identify patterns and make the most of them is critical when trying to start a company or keep the one you have growing. I think the next wave of innovation and entrepreneurship is building; you can see it on the horizon. However, we all have to be in the right position—as individuals, as well as companies—if we want to catch it. So let’s look to a future where entrepreneurship and design are democratized and available to everyone.
In 1998, my wife and I moved to New York City—the East Coast epicenter of the dotcom boom. Big, established companies wanted to quickly develop e-businesses. At the time, simply adding the prefix e or the suffix .com to any established company could boost its stock price dramatically, and every company wanted in.
A whole raft of entirely new, Internet-based companies was also springing up like mushrooms after a spring rain. They are now infamous for growing very fast, then blowing up. Their fantasy-based business models (there was much talk in that era of monetizing eyeballs, and much spending on Aeron chairs) and an unusually forgiving market created a huge economic bubble that would burst in late 2000 and early 2001.
One of the biggest meltdowns was Boo.com. Boo.com was one of the first companies to adopt a business model based entirely on e-commerce, selling big fashion brands online. It spent $135 million in venture capital in 18 months, before releasing its first product. It became the poster child for dotcom excess. (I remember an email from one of Boo.com’s founders that went viral: “Unless we raise $20 million by midnight, Boo.com is dead.”) Launched in the fall of 1999, it was in bankruptcy by mid-May 2000.
By 2001, the lights were starting to dim. The documentary Startup.com, which was released that very year, captured the era’s crazy, skewed reality perfectly. By 2002, the dotcom/e-business era was dead.
Then something happened: At about that time, Steve Blank began teaching a new approach to entrepreneurship at UC Berkeley. He captured the new approach in his first book, The Four Steps to the Epiphany. Rather than starting big, with huge cash investments, he advocated a new approach for startups. He defined a startup as a “temporary organization searching for a repeatable business model.”
Blank’s approach emphasized mashing up customer development and agile product development while focusing on the business model from day one. Eric Reis went on to iterate on the approach and captured it in his book, The Lean Startup. This method has quickly become the blueprint for how most entrepreneurs build startups around the world.
The first wave was about moving from dotcom to startup. Now, founders are no longer the geeks in the garage, behind the scenes. Mark Zuckerberg, Jack Dorsey, and Elon Musk are global celebrities. TechStars, itself once a startup based in Boulder, Colorado, has its own reality TV show. And there’s more: StartUps, Startup Junkies, Startupland, Dragon’s Den, and Shark Tank all turn the notion of building a business into compelling entertainment so that almost anyone can start to dream about launching his or her own company. Startups are now mainstream. It’s never been easier to start a business. There are new tools available that make the process easier than ever before.
Startup Weekend, a Seattle-based not-for-profit with branches in 100 countries, helps entrepreneurs learn how to go from an idea to a startup. If you don’t know how to begin, you can learn in just 54 hours, for $100, in almost any city in the world. But you don’t have to go to a Startup Weekend; you can download free apps and books on analytics, how to create a business model canvas, or how to make a great pitch. There are thousands of organizations around the world to help connect you with your local startup community.
Nor do you need a rich uncle or a venture capitalist to fund your business. Many large corporations and universities have incubators or accelerator programs to help you find the funding and mentoring you need. Or you can pitch your idea on a crowdfunding site like Kickstarter.
These new tools, communities, and access to capital have all contributed to today’s global startup ecosystem. That’s the second wave—the wave we’ve been riding for the past decade.
The second wave was about building a global startup ecosystem. The ecosystem is working. In fact, it’s estimated that more than 500,000 new businesses are started every month in the U.S. alone—that’s more than 11 million people starting something on the side or quitting their day jobs to start the next high-growth startup like Facebook.
This is not just about the private sector. Government and not-for-profits are part of the ecosystem. New York City wants to be a startup city. Colorado wants to be a startup state, in order to create the kind of innovation ecosystem we associate with Silicon Valley but on a much bigger scale. It seems to be working: In 2013, a study indicated that, in Colorado, a new startup launches every 72 hours.
Is that it? Have we reached our goal? Was all of this only about launching startups? You’d think that with all the tools and a thriving global ecosystem, there would be a lot more Evernotes, Dropboxes, and WhatsApps. The Billion-Dollar Startup Club should be exploding, but it’s not; building a startup into a billion-dollar company is still a dream for most. The numbers are grim: Ninety percent of all startups still fail.
Why? There’s one thing that’s most to blame: scale. It’s easier than ever to start a business, but harder than ever to scale one.
The world is constantly becoming more complex. And this creates a lot more friction and hurdles for scale.
Big, established companies know how to scale but don’t know how to start. Why? Because starting is quite different from scaling: Agility is not the opposite of scale; it has a different purpose and process, and it creates different results. And while there has been a lot of emphasis on starting lean, there has been a surprising dearth of tools and information as to how to cross the chasm between starting and scaling. Here’s the difference between the two:
- Starting is all about agility. When you’re starting, you’re developing assets (your IP, your product, your brand, your retail relationships).
- Scaling is all about leveraging your assets to get the most value out of them.
- Starting requires lots of exploration and rapid iteration to get to your business model.
- Scaling is all about standardizing and executing your business model so that you can take advantage of network effects.
- Starting is all about being ready to pivot when you need to—the whole team must be ready to rethink everything if things aren’t working.
- Scaling is all about planning—developing a core competency in planning is critical.
- Finally, starting is all about staying lean: moving very fast while doing the most with the least amount of resources. All startups start with constrained resources, so this is almost intuitive. But big companies think big—they think in millions and years and functions, not in hundreds and weeks and individuals.
The next wave will be all about building scale-ups. What if we could help founders reach scale more consistently? Imagine if we could get even 10% more startups to scale. Even better, what if we could cut the 90% failure rate in half? What would that look like?
On the big-company side, what if we could help a lot more managers avoid a Kodak moment? Not just in the United States, but in every country. Think about the impact that could have on our economies.
Franck Nouyrigat, cofounder of Startup Weekend, introduced the general concept of a scale-up in 2013. He defined a scale-up as “a business in search of its maximum scalability.” He suggested that we need to put as much focus on creating scale-ups as we have in the past around creating startups. I agree.
I think we have only begun to see what can happen when startups and big companies, especially multinationals, mash up to create new types of ventures. I’m not talking about big companies funding or mentoring startups. I mean when both startups and big companies understand what each brings to the table and actually codesign, building new things that couldn’t happen any other way.
What would it look like if big companies opened up their assets—their brands, relationships, and distribution channels—and partnered with founders to monetize them in new ways? This could open a whole new level of diversity and economic activity within the ecosystem. Imagine more women, more seniors, more kids, more industries, more developing countries, all benefiting from a new kind of collaboration and partnership.
This kind of thinking starts to challenge the conventional notion of what it means to be an entrepreneur. Entrepreneurship is really all about doing. When everyone says something can’t be done, entrepreneurs figure out a way to make it happen. They create the team, they find the financing, and they do the deal.
I believe you don’t actually have to start your own business to be an entrepreneur. We all start new things every day: new projects, new plans, new teams, new routines. We all want them to be successful, to scale, and to be the best they can be. So while you may never start your own business, you can at least think and act like an entrepreneur, no matter what you do.
I think that’s what people mean when they say they want to create a culture of innovation. Typically, when a company says it needs a stronger culture of innovation, it has too many checkers and not enough doers—with way more emphasis on managing than doing.
Imagine if you, your company, your organization, or your community could create a culture of doing. Now imagine if we could create that kind of culture everywhere. What if we could empower people—anyone, everyone—to do more? We could create more jobs, healthier economies, more opportunity, more diversity—maybe even more well-being in the world.
Editor’s Note: An earlier version of this story erroneously named Bob Dorf as coauthor of the book The Four Steps to the Epiphany.