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HBS vs. MIT business plan competitions - Current RunRate

Very Interesting to note the different approaches taken by HBS & MIT to Entrepreneurship.

HBS -> Identify a Pain Point -> Generate a Solution -> Monetize the solution

MIT -> Develop a technology -> Identify Applications -> Select a Go-To-Market Strategy

Where does the Business Model Generation fit into these two paths?

Source: http://blog.hbs.edu/hbsinov8/?p=399

Tags: Business, Models

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Permalink Reply by Mike Lachapelle on April 21, 2011 at 2:05pm

Praveen

Given the nature of these two schools it is not hard to contemplate why their 'seed' approaches would be different; one on the traditional business school driver of customer pain, the other building around technology innovation. But they have a point of convergence in the need to make a sustainable business out of the idea, and that requires a workable business model.

What is potentially more interesting is the affect of external influencers on both of these schools. As you read through the article you see the shift happening in their approach to entrepreneurship from the 'old school' of a business plan with lots of numbers and projections, all of which are no more that wild guesses, to the launch fast, be flexible startup culture. This change reflects the growing influence from California of the customer development model of Steve Blank and the world wide movement of the lean startup camps and machines whose guru is Eric Ries. The rise of Startup Tribe and IdeaStorm are a reflection of what is happening elsewhere in the world of entrepreneurship and not a innovation of these schools. Concepts like 'pitch'. 'minimum viable product' and 'incubation' are these schools catching up, not leading.

For those who may not be familiar with Alex's work with Steve Blank, the canvas is an important part of the customer development model (CDM). A key element of Blank's CDM is the development of a viable business model. When he wrote the book he didn't have a good way to express the concept of a business model. Thus enter Osterwalder and Business Model Generation. In a recent correspondence with a professor at HBS, Blank referred to Osterwalder as "the guy who made business models accessible to students." In the CDM the canvas comes in at two critical junctions

First, at the stage of discovering if there is a viable business possible and the solution-market fit:

And second when the business has to be validated with the customers that often will result in 'pivoting' or rethinking the business model and maybe even the solution. This is necessary to complete before moving on to the execution and scaling of the business.

Steve Blank has taken to referring to the combination of Customer Development Model + Business Model Canvas + Lean Startup practices as the entrepreneur stack.

So where does BMG come into play in HBS and MIT, it should be at the point of conversion of taking a good idea and making it into a viable business. And these two schools are playing catch up to two very energetic, world-wide movements.

But that's just my opinion, I may be wrong.

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Permalink Reply by Rod on April 21, 2011 at 4:51pm

@ Praveen, @Mike: Thanks for sharing.

The only thing that I might add is that HBS approach can also be described as an "Outside-In Approach" to business innovation while MIT uses an "Inside-Out Approach" that is driven by defensible intellectual property. As is documented in the business literature, the Outside-In Approach is less risky since it starts with a known problem or pain point in the market. Consequently, the market risk is lower; there may be people already looking for 'pain relievers.' Once the size and value of the market have been validated for the identified customer pain, the elements of the startup can be refined. In the language of the Business Model Canvas, the HBS approach involves traveling from the Demand Infrastructure (Right Side) of the Business Model Canvas to the Supply Infrastructure (Left Side). In short, the HBS approach basically involves a "Right-Left" movement on the Business Model Canvas. The majority of startups from the HBS would be market-oriented companies.

In contrast, MIT would use a "Left-Right" approach on the Business Model Canvas, that is, from the Supply Infrastructure (which includes defensible technology) to the Demand Infrastructure. It would come as no surprise that the majority of MIT companies are technologically driven and rely on disruptive technology as a core competence. In a technologically driven environment, the emphasis is on developing disruptive, defensive, and scalable technology. However, there is a large market risk; the market for the technology and product may be largely unknown. Consequently, the technological solution may not find a financially viable problem to solve in the market. Also, the average technologically driven startup from MIT would require larger investment than HBS's typical market-oriented startups. In a technologically driven company, patenting - a very expensive process - is a must. Due to the high risk-high reward approach of technologically driven companies, they experience a very high rate of failure. Business lore in the Silicon Valley says that about 90% of venture funded-startups (mostly technologically driven companies) fail or are expected to fail!

So, which approach is better: a market-driven approach to startups or a technologically driven approach? Actually, this is a non-question. My short answer is: it depends on how much risk the entrepreneur and investors can afford and how long investors can wait before achieving their desired Return On Investment (ROI). The Customer Development/Lean Startup movement appears to be offering a best-of-both worlds or value innovation approach. By focusing on very quickly developing and iterating on prototypes of business models while using short product-to-market cycles of Minimum Viable Products (MVPs), the market risk especially of disruptive technology can be seriously lessened. There are currently many startups using the Customer Development/Lean Startup approach. If new IPO events are the yardsticks for measuring the success of businesses using the Customer Development/Lean Startup methodology, we'll have to be patient.

I'm a patient man. So, let the experiments continue. With the 'fail fast' philosophy especially of the Lean Startup movement and the increasing desire of entrepreneurs to rapidly iterate and pivot business models, knowledge about the art and science of entrepreneurship is increasing exponentially. History may record this period as the turning point in the development of entrepreneurs and scalable startups. Actually, we may be experiencing a Renaissance in entrepreneurship. It's exciting to be part of history in the making.

Rod.