Five Pillars of Technology Entrepreneurship

Abstract

This chapter highlights what we refer to as the “Five Pillars of Technology Entrepreneurship.” These “pillars” are the fundamental tools and techniques that technology entrepreneurs should use and enact to improve the chance of success. The five pillars are: 1) Value Creation; 2) The Lean Startup; 3) Customer Discovery and Validation; 4) The Business Model Canvas; and 5) The Entrepreneurial Method. Each of these is discussed in detail in this chapter, providing readers with a thorough understanding of how to use these pillars for venture success.

Keywords

Deliberate practice

Entrepreneurial expertise

Expert technology entrepreneurs

Value proposition,

Value creation

Lean startup

Customer validation

Business model canvas

Entrepreneurial method

iWanamaker Explores Its Market Opportunity

iWanamaker is a live-scoring golf app that is designed to allow golfers to keep track of their scores on their smartphones. When founder Doyle Heisler first came up with the idea for the app, he envisioned that golfers and golf clubs would be as excited about the app as he was. When he took the app to clubs for them to use in their tournaments, he learned that club pros were reluctant to purchase it because of the low margins in the golf industry and their general aversion to innovation and change. Doyle next decided to market his product directly to the charities that run golf tournaments as fundraisers. He thought they would be interested in the product as it makes golf more fun for players and offers sponsor opportunities within the app itself. Again, however, he learned that charities are also averse to spending additional money on their golf tournaments and are indifferent to the new technology.

As a result of these two initial failures to penetrate the lucrative golf market, Doyle decided to pivot to a new business model. Realizing that the more golfers that use the product the more he can charge for advertising, he decided to experiment with a “freemium” business model where he would virtually give the app to golf clubs and charities, and sell advertising to local and national brands that wanted exposure to golfers. As this book is going to press, iWanamaker 2.0 is about to be released under this revised business model. Time will tell if this is the model that leads to venture growth. The important thing is that Doyle was willing to change his business model based on what the market was telling him about his product and its features.

Author Duening was an investor in and board member to iWanamaker at the time this book was going to press.

2.1 Introduction

Chapter 1 examined the focus and purpose of this book and some of the leading trends and challenges for technology entrepreneurs in the modern global economy. We hope that your appetite is now whetted for a lifetime of technology entrepreneurship and that you are ready to begin learning some of the practical tools of entrepreneurial expertise. Before we begin, we must warn those of you who are novices that developing entrepreneurial expertise takes time and practice. In fact, research into what is required to become expert in anything suggests that it can take 10 years or more of what is called deliberate practice to achieve expert-level competence.1 We address the process of deliberate practice in detail later in this chapter and provide you with some suggestions about how you can develop your own entrepreneurial expertise.

The central theme of this chapter is that expert technology entrepreneurs have become adept at certain specific skills and ways of thinking about products and new ventures. These skill sets are referred to as the “five pillars of entrepreneurial expertise.” These five pillars are:

1. Value Creation

2. The Lean Startup

3. Customer Discovery and Validation

4. The Business Model Canvas

5. The Entrepreneurial Method

Below we discuss each of these pillars in detail, beginning with the fundamental skill that all technology entrepreneurs must possess: The ability to create value for customers.

2.2 Pillar #1: Value Creation

Expert technology entrepreneurs know intuitively that value creation is the purpose of business. In fact, it doesn’t matter if you are a technology entrepreneur or a fast-food entrepreneur (or any other kind of entrepreneur). Your products and services must create value for customers. There are probably as many ways to create value as there are people on the planet.

Consider the case of three individuals in Menlo Park, California, who set out to create a new type of Internet company in 2005. Menlo Park is located in the heart of Silicon Valley, which has been the birthplace of some of the most rapidly growing technology companies in history. These three individuals were veterans of technology companies, having previously been principals at PayPal. From their garage in Menlo Park, the entrepreneurs created YouTube, one of the fastest growing companies of all time. By July 2006, YouTube reported that more than 100 million videos were being watched and as many as 50,000 videos were being added to the site each day. In October 2006, a mere 10 months after it was launched, YouTube was acquired by Google for $1.65 billion.2

The concept of “value” has myriad definitions. Value is defined as whatever customers believe it to be. Technology entrepreneurs can develop successful ventures based on widely different value propositions. A value proposition is what a venture tells its customers about the value it intends to provide to them. For example, the value proposition for YouTube is: “Broadcast yourself.” That simple statement, while not necessarily appealing to everyone, is the foundation of the online video-sharing revolution.

Creating value requires vision, passion, and an ability to adjust to customer needs and constantly evolving economic, social, and technological trends and conditions. Successful technology entrepreneurs realize that steadily advancing technologies and technological form factors must be taken into consideration in their product development and design processes. For example, Rovio was a developer of games for mobile phones which were sold at retail. It had developed 50 such products, but none of them became a big hit with users. Nearing the end of its cash flow, Rovio realized that the advent of smartphones, touch-screen technologies, and Apple’s new App Store would enable a new breed of games and distribution opportunities. Rovio decided to pivot from its retail-based business model to developing apps for the smart devices that were becoming increasingly ubiquitous. Their breakout product, sold through Apple’s App Store, was the popular game “Angry Birds.” Rovio reported that the game has been downloaded over two billion times.3

Value propositions are important to a venture. They help to communicate the value the venture provides to customers. Value propositions also help guide the venture’s internal decision making. For example, the value proposition for well-known consumer products company Procter & Gamble is “Touching lives, improving life.”4 This value proposition tells P&G scientists and product developers how to structure their investment of research and development resources. P&G introduces hundreds of new products to markets around the world each year. The firm’s value proposition guides internal decision making about which new products to pursue through multiyear development cycles.5

Fundamentally, creating value for customers seems too obvious to mention. Yet, a review of why new ventures fail indicates that the most common reason is because they fail to create appropriate value for customers. Instead, the failed ventures were guided by the founders’ vision of the product and its features, with no guidance from customers. Products were designed, built, and released without regard to what customers really want. Of course you know by now that customers, not entrepreneurs, determine what is valuable. Customers don’t always know what they want, but they always know what they don’t want. Technology entrepreneurs are well-advised always to remember that customers are the ultimate judges of value and determiners of the venture’s success.

2.3 Pillar #2: The Lean Startup

The Lean Startup was conceived and developed by serial entrepreneur Eric Ries.6 After a failed technology venture, Ries and his partners launched another technology venture called IMVU. IMVU is an instant-messaging platform that includes a novel feature that no other platform at the time was offering—3D avatars. The founders of IMVU were all technologically savvy—Ries himself is an expert programmer—so there was no question about whether they could build and deliver a working product. The question that perplexed Ries and that he wanted to solve in this new venture was “How do we get customers to buy our product?”

In his previous venture, Ries was convinced that he and his team had built a world-class technology that provided benefits to customers, but not enough...