Professor/Entrepreneur Talks about New Method of Company Creation at Princeton Tech Meetup
If lean startup methodology doesn’t work for you, then maybe you’re a candidate for the alternative method of company creation espoused by Joshua Spodek, entrepreneur, professor and coach at Columbia and NYU.
Spodek explained his process to an enthusiastic and receptive audience at the Princeton Tech Meetup at the Princeton Public Library on July 16, in a talk titled “8 Steps from No Idea to Funding.”
Most tech companies start with an idea and then use that idea as a way to go through all the steps of getting a business started. They have to find customers and convince people to use that product or service. And they must pitch in front of investors or mentors, who poke holes in their concepts, he said.
However, “the idea of a lifetime comes about once a month,” he told the group. It’s better to have an okay idea, and then listen to the market to iterate.
Spodek’s method begins with new entrepreneurs identifying unmet customer needs, and it works because they continuously seek advice to improve their ideas through a pyramid of friends and family, peers, accessible individuals in the business, executives in the business and, finally, thought leaders.
They are not selling anything. They are seeking advice and, along the way, crafting a business that people will actually want. By the time they get to the point where they can write a business plan, they will already have a network of individuals, specialists in the field, who are there to help them make their business a success; and they will have already formulated a business plan, using the best ideas from leaders in the business.
Spodek said that the first step is for each student is to write a personal essay about the kind of business he or she might want to start. As part of the essay, the student entrepreneur must write down nine names. Three of the names should be of people who are completely approachable in that business, three should be of executives in that field, and three should be of role models.
He then tells the students to come up with five unmet needs in their chosen business and a rudimentary solution for each. “I have to work with lots of students who already have ideas to find the unmet need. They try to take their idea and stretch it to that, but I work through it over and over again until it” addresses an unmet need, said Spodek.
Students then present these unmet needs and solutions to each other and to the whole class. By the end of the class, each student will have several unmet needs, solutions for each need, and input from the professor and fellow students on which idea they like and how to make it better.
The students then talk to friends and family, giving them one sentence for each unmet need, and one sentence for the solution. They ask their friends and family to give them three pieces of advice to improve the solution.
“By the time they come back, the ideas start sounding really good; they’ve developed the skill of presenting and listening for advice back,” Spodek said. “ They’ve started taking ownership of the project and start liking it more.”
The next step is to talk to people who are successful in the business. The first three will be people that each student has named in the essay, but the rest will come from research and suggestions from friends and family.
Spodek says that he gives students scripts for the discussions and explains how to start the conversation with people in the business so that they are more likely to give useful feedback.
The students are instructed to ask at the end of each call, “Is there anything that I didn’t think to ask that’s relevant and important here?” and “Is there anyone you can think of who would be interesting to talk to about this?” Both questions are helpful for soliciting ideas and for directing the students to connections of connections.
“At this point, you’ve gotten dozens of pieces of ideas, have improved your idea a lot, and have a big sense of ownership. The questions you are getting, you’ve heard before. When you talk to people in the business, it’s a bit more comfortable. …The third or fourth person you talked to may give you a warm introduction to other people in the field because you are not asking for a job or for someone to buy something, but you are saying, ‘I have this idea to improve your world,’ and they may want you to succeed,” he said.
The next step is for each student to start listening to the relevant parties in his or her business: suppliers, buyers and partners. “This stage can take ten minutes, but if you skip it you may miss important players,” Spodek said. Then the student must create a kind of diagram, drawing circles around the stakeholders and lines connecting them to other stakeholders. There should be no one who is giving without getting.
“At the end of this stage, you have a good idea of who interacts with whom and why and how,” he said. One of those circles represents the student’s new business, and the arrows usually turn out to be cash flows.
After that, each student has to create a basic income statement, including the costs and revenues for however many months would be appropriate for his or her business. “You have to get to the details” to see if the business is viable, he said. If the business is shown to be sustainable, the student can move on to the next step.
That next step entails going to a top person in the field. The student will usually have a warm recommendation from someone contacted earlier in this process, Spodek said. “You mention that they recommended you. You aren’t ‘name dropping’ because you have had a substantive conversation about making your business better.” The person who recommended that a student talk to the top person in the field has now contributed to the student’s business.
Spodek concluded by noting that his method works by getting advice, applying advice and building a community. It counters the myth that one needs a great idea, instead changing the focus to the unmet needs of the customer. “With that shift, you are a helper, leader and problem solver,” not just someone trying to sell an idea, he said.
He plans to offer his method in an online course soon.
[You can find the audio of Spodek’s talk in a podcast by Mathew Passy here.]