Lean for Main Street

This article by Jane Herndon is about applying lean startup methods to Main Street or traditional small businesses and features McLennan Small Business Development Center's involvement in the SBA’s Lean for Main Street Training Challenge.  McLennan SBDC and its North Texas SBDC Network partners also offered an Introduction to Customer Discovery cohort at the Addison TreeHouse, in Addison, Texas, from January 10 - 31, 2017.  For more information, click here.  A version of this article originally appeared in Act Locally Waco.


Too often, entrepreneurs fall in love with their invention or business idea and assume everyone else will love it, too.  

Full of confidence, they dive immediately into execution with little afterthought.  They make a significant up-front investment in a brick-and-mortar location, buy equipment, hire staff and open their doors.  Ready, set, go!

Some might even approach it more thoughtfully and actually write a traditional business plan.  Legal structure? Check.  Marketing plan? Check.  Financial projections? Check. 

Though very different approaches, both focus on the tactical “can I build this product or business?” versus the strategic “should I build it?”  But what if you build something nobody wants?  More businesses fail from lack of customers than from lack of capital or marketing or product failure.  Only half of all establishments survive five years or longer.[1]

GET OUT OF THE BUILDING

To address uncertainty and improve the odds of business success, Steve Blank, serial entrepreneur and father of the Lean Startup movement, and his protégé, Eric Ries, have pioneered an evidence-based approach to entrepreneurship. What the scientific method did for accelerating scientific breakthroughs, lean startup promises to do for business innovation.

And it does so by turning the decades-old formula for writing a business plan on its head.  Instead of diving in and/or launching one's company with a business plan full of unproven assumptions or hypotheses, it urges entrepreneurs to “get out of the building” and in front of a volume of prospective customers to gain first-hand insight into their problems, needs and motivations.  This customer-centric approach emphasizes rapid experimentation over elaborate planning, stakeholder feedback (facts) over guesswork, and placing “small bets” over big, up-front investment.  It addresses the question: “is this a business worth pursuing?”

Today Blank's Lean LaunchPad® class is the world’s leading pre-accelerator program.  It is also the core curriculum of the National Science Foundation’s (NSF) Innovation Corps, known as I-Corps™, the nation’s premier, federally funded entrepreneurship program. The NSF uses lean to help scientists commercialize or turn their ideas into businesses.

Last year, President Obama announced plans to scale up the National Science Foundation I-Corps program with new and expanded Federal agency partnerships, the U.S. Small Business Administration (SBA) among them.  McLennan Small Business Development Center is honored to participate in the first wave of the SBA’s I-Corp-inspired innovation effort. 

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EVERYBODY HAS A PLAN UNTIL THEY GET PUNCHED IN THE MOUTH

The first piece of advice most would-be entrepreneurs get is to "go write a business plan." And it's true if you need a bank loan.  It's also true that few business plans survive first contact with customers.  Or, as Mike Tyson once said about his opponents' pre-fight strategies: "Everybody has a plan until they get punched in the mouth."

Unlike web startups, brick-and-mortar businesses require considerable up-front investment just to open their doors - a time when uncertainty is highest. Creating business plans and financial models based on secondary research and guesses - without testing these assumptions first - can waste valuable time, lead to over-investing and create a false sense of security.  The better up-front investment is to do some reality checks with stakeholders to find out "you don't know what you don't know" and whether you're even solving a real need.

Finally, small business owners, and the people who love them, have a lot of skin in the game.  The majority bootstraps their companies with their own funds or those of friends and family.  According to the SBA site referenced earlier, the most common source of capital used to finance small business startup and expansion is personal or family savings, followed by business profits and loans.  Simply put, when small businesses succeed, communities thrive. When small businesses "get punched in the mouth" and fail, families, communities and local economies suffer.

LEAN FOR MAIN STREET PILOT

While lean resources and programs are commonly available online and through accelerators, universities and events like Startup Weekend, they've been geared to tech startups.  Small business owners and first-time entrepreneurs may be less aware of lean methods and more importantly, how to effectively apply them.

To this end, the U.S. Small Business Administration's (SBA) Office of Entrepreneurial Development created the Lean for Main Street Training Challenge to bring the benefits of lean methodology to traditional "Main Street" businesses.  The purpose of the challenge is to develop and pilot a variety of lean innovation curricula for small businesses and scale these teaching innovations to a wider audience.  In January, they conducted their own lean experiment with the national SBA resource partner network by launching the prize competition on the federal government's open innovation platform, Challenge.gov.

In March, five winners were announced nationwide, including McLennan SBDC. Three weeks after the award announcement, Strategist Chris McGowan and I joined the other prize winners from San Francisco, metropolitan DC, Pittsburgh, and Mississippi to observe a national I-Corps program in Washington, DC for a 6-week train-the-trainer program.

After additional mentorship from Max Green, national I-Corps instructor based in Austin, we launched the Introduction to Customer Discovery short course (aka Customer Discovery Workshop) in August.  We sought to include entrepreneurs and social innovators not typically exposed to lean startup methods and cohort-based learning.  Applicants were encouraged to apply as 2-3 member teams; we selected a group of 8 teams, called a cohort.  In this instance, the majority of teams were women- and minority-led.  

The Introduction to Customer Discovery short course is designed to help pre-venture, startup and early-stage companies establish product-market fit and improve their odds of success.  Ideal candidates are those who either have an idea for an innovative new business or who've recently started a promising business, but aren't getting the customer traction they anticipated  

We use a "flipped classroom" approach, so all coursework is done prior to class to allow for participant-led presentations and feedback from instructors.  On the opening day, teams present their initial business thesis and assumptions about customer segments and value propositions.  They are tasked with interviewing 10 or more potential customers every week to determine whether what they're offering solves a real market need.

While the class runs over a three-week period, participants attend only two days of classes - the opening and closing workshop.  This means, that after the opening workshop, teams "get out of the building" and work on their own schedule, talking to potential customers about their business problems and needs.  Team members record their interview findings online and check in remotely with instructors via web conferencing for another round of instructor feedback at the halfway point.  The group reconvenes on the final day where they present their findings, next steps and "lessons learned." 

Since we have limited time, instructors will push, challenge, and question in order to accelerate insight and learning cycles.  Exchanges are direct, open, and tough.  This approach may seem harsh or abrupt, but teaches how to challenge your own thinking and bias, and appreciate that as a business owner, you will need to learn and evolve faster than ever imagined.

Finding out if your product/service is a business opportunity worthy of pursuit - based on a volume of customer feedback - is considered "success."

A McLennan SBDC client sums up their Lean LaunchPad short course experience this way:

"This was a tectonic shift in our approach and understanding of what we have to do to succeed...The combination of the lean startup content from Steve Blank etc., plus the brutally honest & challenging feedback is really powerful...in a league of its own..."

Takeaways

  • Unanticipated "punches in the mouth" can and will impact your business plan. The lean approach helps manage this uncertainty with small-batch experimentation and a customer-centric approach to entrepreneurship.
  • Small businesses are a creative entrepreneurial force and the backbone of our economy.  Lean methods can catalyze economic growth and innovation by helping ventures launch more quickly, cheaply and with less risk.
  • An entrepreneurial development program is only as good as the number of people it can reach.  Successful ecosystem partnerships are key to taking lean innovation mainstream.

Notes:

[1] U.S. Small Business Administration, Office of Advocacy, Frequently Asked Questionshttps://www.sba.gov/sites/default/files/advocacy/SB-FAQ-2016_WEB.pdf (2016)

 

 

 

 

Maker's Edge Makes the Big Time

Friend of McLennan SBDC, Maker’s Edge, was recently in the news for its involvement in America’s nascent maker’s movement and attendance of a White House Summit.  They also recently announced their acceptance into the global fab lab network in August.  Fab labs are comprised of off-the-shelf, industrial-grade fabrication and electronics tools, wrapped in open source software and programs.  Maker's Edge made the cut because of their breadth of tools, extensive community network, and open access policies for software and innovation.  Suffice it to say, “you’ve come a long, baby!” since meeting with the SBDC in 2014: Maker's Edge also numbers among the first SBA-financed makerspaces in our nation!


Waco ‘makerspace’ part of national movement for tinkering, innovation

By J.B. Smith for the Waco Tribune Herald

The owners of Maker’s Edge say their do-it-yourself workshop has been successful in its run of nearly two years, enough so that they were recently invited to the White House for a summit on the “makers movement.”  But in their philosophy, failure is just as important as success.

“We have a motto around here: Fail fast, fail often, then get it right,” said Melissa Pardun, executive director of the workshop at 1800 Austin Ave. “The more opportunities you have to try, your project just gets better and better.”

“Makerspaces” — community workshops where anyone can use high-tech tools to invent, tinker and socialize — have been popping up around the country in the past decade. At Maker’s Edge, monthly subscribers have access to more than $100,000 of equipment, including a plasma etcher, CNC routers, 3-D printers and a laser etcher, as well as saws, drill presses, soldering irons and leather-working equipment.

But Pardun said the movement remains amorphous and dimly understood by the public.

“It’s the same concern with other makerspaces. How do we define and separate ourselves from low-entry, small-scale, high school library makerspaces?” she said. “A lot of people when I tell them that, they say, ‘Oh, I’ve heard of that. Our school has a makerspace.’ They don’t get it until they come in here and see.”

Pardun and about 120 other makerspace representatives met Aug. 24 with White House officials, including U.S. Chief Technology Officer Megan Smith, about how to expand the movement without diluting it. Pardun said the attendees are in the process of forming a trade organization to set standards for makerspaces and expand their use in education and industry.

“Honestly, this is the best way to encourage manufacturing in the U.S.,” Pardun said. “If we can encourage nondiscriminatory access to tools and machines, then the little guy who doesn’t have access to these tools has the opportunity to innovate. It’s the democratization of tools and space.”

Since opening at the beginning of 2015, membership has grown to about 90 people, who pay anywhere from $30 a month for youth to $125 a month for businesses.

Pardun and her husband and business partner, Rick Pardun, have seen it become a community where people swap skills and mentor each other and get tool training.
“All of us have a little maker inside waiting to be set free,” Melissa Pardun said. “Most of us just don’t know where to start.”

The Parduns have seen projects ranging from a bicycle-powered pontoon boat to bronze-and-wood iPad holders to theater costumes for McLennan Community College.

Teenagers have learned to design objects on computers, then turn them into three-dimensional plastic prototypes with 3-D printers.

A local hydroponics greenhouse cut thousands of tiny planters out of styrene foam using the CNC router, an 8-foot-wide computer-aided carving machine. An artisan who is starting his own fine furniture business uses it for his main work space.

Brian Ginsburg, owner of W Promotions, uses the makerspace regularly to make custom projects he can’t produce at his downtown merchandise design shop. Those include engraved mugs and precision cutout signs.

“It’s like having a co-op, like having a pool of tools you can use,” Ginsburg said.
On a quiet Thursday afternoon at the shop, members Will Barley and Jordan Blair walked with large boxes and plopped them down on a table. What emerged was a styrene foam model airplane they were modifying with cameras and GPS sensors.

Barley, a mission trainee at Antioch Training School, described the project as an “airplane drone” they were developing to help farmers photograph their fields.
“I didn’t have a work space at home, and I don’t have access to all the tools we need,” he said. “Here we can get ideas from other people who know how to build things I don’t know how to build.”

Barley said he worked for years in high-tech jobs in Silicon Valley and has lived in Dubai and London, but now he is looking for a more simple life. Going to Maker’s Edge means he doesn’t have to buy his own equipment.

“It’s a totally different way of doing it,” he said. “I could be off by myself plugging away in my garage, having no community or support. The thing I’m most excited about is that this could be the thing that awakens a generation to building things and seeing that it’s not that hard.”

Jessica Attas, director of public policy for the Greater Waco Chamber of Commerce, said makerspaces like Maker’s Edge have great promise for the 21st-century economy.

“Providing people the opportunity to develop new products or new processes, that could be transformational not only for individuals but for small to midsized manufacturers,” Attas said. “I think it’s really an exciting entryway.”

See original article at Waco Tribune Herald: http://goo.gl/672cIi

Restaurant Reality 2.0 with Chris Tripoli

McLennan SBDC is pleased to announce that foodservice guru, Chris Tripoli, will be returning to our area to offer hands-on tools and practical tips for evolving and thriving as an independent restaurant.   Last time Chris was here, he spoke to a packed house.  For a sampling of what this 40-year restaurant veteran brings to the table, see the article below where Chris provides advice for making the most of the trends, challenges and opportunities affecting restaurants today.  The article below was originally featured in Food Service Equipment and Supply Magazine. You won't want to miss this! Be sure to sign up to secure your space for the Tripoli event in Temple (Monday, October 18th, 9 am - 12 pm).  You may register for the Temple event here.


Restaurant Reality 2.0

By Amelia Levin for Food Service Equipment and Supply Magazine

A 40-year veteran of the restaurant industry, Chris Tripoli, principal of A’La Carte Foodservice Consulting Group based in Houston, has provided management advisory consulting to foodservice operators in all sectors of the industry. Here Tripoli shares his thoughts on the top issues and trends facing primarily multiunit and independent restaurants this year.

FE&S: In your view, what is the top challenge facing operators today?
CT: There are some significant operational concerns facing all restaurants, whether they are the small, independently owned concept or the well-established, multiunit chain operator. We all have to be smarter, and operate on a smaller, faster level. All operators seem to be focused on one major mission: how to get more production out of a smaller space. But I don’t mean just cooking food faster. There are more concerns, like, how can we train managers smarter? How can we operate more efficiently? How are we managing our brand and marketing? How do we get our messages out to consumers faster?

FE&S: We’re hearing more about value these days, and that consumers find value in better quality food and beverage. How are you helping operators reengineer their menus to serve better food and perhaps draw in more revenue?
CT: Restaurants are realizing there is always room to be better, and they must be better because competition is fierce. We are having great success working with people to restudy their market niche and offer better quality. In the past, developing the menu was all about how we can lower food costs. But now it’s about keeping the customer happy and how we can build revenues and increase profits through more sales because we can’t constantly save our way to profitability. Both fast-casual and full-service restaurants are looking for ways to be more inventive and create more flavor. They’re using local foods, fresh-baked breads and sourcing hormone- and antibiotic-free meats. Even with coffee — if you’re not using a really good local roaster and don’t put their name on the menu, you’re leaving money on the table. These things are slightly pricier, but customers want this value. It’s all about capturing your customers’ wants and needs and making them love you.

FE&S: What’s your view on social media and online technology?
CT: The National Restaurant Association came out with some stats in 2015 that showed 41 percent of consumers between the ages of 18 and 34 years old choose limited-service restaurants (and 33 percent choose table-service restaurants) based on their use and the availability of technology. That’s a pretty wide age group that crosses a lot of buying patterns, from young, single diners dining alone to a couple in their thirties out for a date night or others dining in groups or their with families, including children. That means, to grab a bigger piece of the pie, operators are more and more challenged with having to manage technology in their concept. They often have to balance tech advances with customers who are using technology but are also looking for face-to-face service. Social media is not just about having a Facebook or Twitter page or great website. That’s the price of admission. If we’re not improving our phone apps and experimenting with technology in the kitchen, or considering online ordering or iPads at the table to review wine lists or to pay, we’re not doing enough. Diners — especially younger diners — value and expect to see more technology in and around restaurants, whether it’s being able to decide where to go ahead of time and how to get there or being able to order and/or pay online.

FE&S: What are some technological advances operators might be able to take advantage of to improve their efficiencies and production like you mentioned earlier?
CT: Some types of technology advancements that are very helpful for restaurants are actually not in front of the guest. Nowadays, we can use the cloud to learn about our labor, costs and consumer behaviors. We can use apps on our phone to read registers or send a text to the manager with regards to concerns about staff performance or even dishes.

FE&S: How does cloud-based technology help with labor and customer feedback?
CT: Years ago, managers had to wait until the daily sales report was completed and log books were filled out, and then you talked to your staff after the fact, or during specific shift meetings later in the week. Now, if we have issues during shift we can see, learn about and correct the problem as it happens. For example, some check minders allow customers to log instantaneous surveys when signing a credit card receipt. Before you leave the table, if there was a problem with the food or service that would inhibit you from coming back to the restaurant, you can share that information. And when you hit send, that could be a text that goes directly to the manager or owner or other supervisor. The manager will then know at 8:15 p.m. that there seems to be a trend among customers that they waited too long to be seated. This will alert the manager to a problem at the host desk, or with pagers, or if customers were given the wrong wait times. And the problem can be corrected in the middle of a shift. This all goes back to the challenge operators face about having to react faster. We can’t afford to wait a few days to learn about a cold fish dish, poor service or slowing sales.

FE&S: We’re hearing more about minimum wage battles, changing tipping policies and more. What are your views regarding labor issues in the industry?
CT: We’re in a time now where everything about staff is being rethought, such as how many staff members to hire, how to better cross-train staff, how much to pay them. One significant labor issue has to do with salary exemption and overtime pay. With the federal government debating whether or not to raise the minimum weekly working hours for overtime pay exemption, restaurants with lower labor budgets might be in trouble because they might have assistant managers or kitchen managers whose salaries will need to be redefined, or could be faced with raises or have to reward overtime pay. So consultants are watching that issue very closely.

FE&S: On the heels of restaurateur Danny Meyer’s no-tipping policy, what is your view on the current debate over whether to include tipping or not in restaurants?
CT: Many are stressing that there should be greater equality between the front and back of the house — how can we make earnings more equal and create a better team culture by taking away tipping? The answers are not clear. In some cases, the customer might appreciate not having to do the math and worry about tipping. But many customers like tipping because it gives them a sense of control and the option to reward good service. They know they can compliment the server — or not — through the tip. For the operator, there is another mathematic issue — if you want to set an average wage for servers you need to determine how much percentage of the revenue they are earning through tips and give that to them as a wage, but still have enough money left over to raise wages for back-of-the-house staff. So then restaurants are faced with having to raise menu prices but still feel like they’re giving guests a sense of value since they don’t have to tip.

FE&S: How do you see restaurants responding to the minimum wage debate?
CT: Many restaurants are still grappling with this issue. They always ask me, ‘What are we going to do about rising minimum wages?’” My answer to them is we can’t control what legislature is going to do in the next few years regarding minimum wages. So let’s do a better job with the things we can control, such as improving efficiencies and labor, marketing better and faster, leveraging technology and improving the quality of our food.

FE&S: Amidst all this, are there things restaurants can do to improve their company culture?
CT: Restaurants have to develop a much better culture of service so employees feel like there is a sense of belonging, as it’s especially difficult for them to be able to find great people and then keep them. The challenge becomes, how do we get them to choose to stay with us rather than leave the industry? How do we allow them to have input in company conversations and decisions and make them feel like they belong, like their views are valued? As a result, we’re changing the way we think about training — it’s less about one-time training and more about establishing a continuing education program where the longer staff members stay with the company, the more they learn and the more valuable their experience becomes.

FE&S: How do these labor and technology issues relate to equipment?
CT: The fact that most restaurants these days would like to keep people longer and pay them more means we have to determine how we can operate more efficiently with less space and fewer people. Equipment choices should and are being made not just for utility or energy savings, which are important, but also to help improve labor efficiencies so operators can do more with less and afford to pay staff more. Maybe we don’t need seven people to run a kitchen; with state-of-the-art kitchen equipment, maybe we can run a kitchen with five people instead. The other factor in this is design: we are rethinking the way we set up and design kitchens in order to improve efficiencies and save space and labor. For example, why do we need separate pantry and dessert stations or separate grill and broiler stations? Why can’t we cross-train staff to do both? How can we leverage technology to help staff do both? We’re at a point now where we’re rethinking how we design cook lines.

Source: http://www.fesmag.com/features/foodservice-perspectives/13455-restaurant-reality-2-0