‘Bend, but do not break’ – lean startup tips from author of ‘Fail Fast or Win Big’ Bernhard Schroeder

Bernhard Schroeder is the author of Fail Fast or Win Big: The Startup Plan for Starting Now (see my book review here). He is Director of Programs at the Lavin Entrepreneurship Centre at San Diego State University. He was earlier with integrated marketing communications agency CKS Partners, and has been a brand expert for Apple, Nike, GM, Amex, Yahoo, ESPN and Amazon.

Bernhard joins us in this exclusive interview on the power of the lean framework, investor approaches, customer focus, innovation challenges in large companies, and the spirit of creativity.

YS: What are the typical challenges entrepreneurs face as they scale up their company from small startup to large company?

Bernhard: I am working with about 20 small startups today. They range in revenue from USD 400,000 to USD 12 million. They all have the same issues at one point: how to implement systems and processes in their young companies. Most times, their early success comes from moving quickly to drive sales or market share.

But once they are growing, they cannot continue to function in a haphazard manner. They need repeatable processes to ensure quality, training new employees efficiently and so on.

YS: How are investors and angels using the lean framework in their assessment of startups?

Bernhard: Investors reward rapid prototype testing and getting traction in either users or revenue. They believe in moving fast. So they are no longer looking for business plans. They are looking for working prototypes or some market adoption; they are looking for business model canvases and short ten-slide presentations. What has not changed is what they look for in founders: intelligence, team, ability to adapt and passion.

YS: How should innovators strike that delicate balance between ‘Stick to your vision’ and ‘Adapt to a changed world’?

Bernhard: Listen to the marketplace and the customers - they will guide you. Most entrepreneurs listen to too many ‘experts’ when seeking advice on their startup. The experts are well-intentioned but are not their customers. The world does not need another shoe, hat or sunglass company - if you asked experts, they would agree.

Yet, entrepreneurs are creating amazing new companies that sell a new type of shoe, hat or sunglasses that the marketplace loves. So, who is always right? The customer.

YS: Is there such a thing as the ‘ideal age’ for an entrepreneur, or can the startup bug strike you at any time?

Bernhard: Becoming an entrepreneur can strike at any time if you are looking or are curious. Age is not an issue. I meet 19 year olds and 50 year olds starting companies. The key is always seeing the opportunity and the level of curiosity in solving a problem or taking advantage of that opportunity.

YS: In your book you explain that entrepreneurs should develop deep expertise in their field before launching. But sometimes doesn’t it help to be completely fresh so you can contribute new out-of-the-box thinking, like AirBnB in the hotel industry?

Bernhard: It's not that you have to know the hotel industry to create AirBnB, but people on the team need to have expertise in marketing, sales, operations etc. It does help if you have industry expertise but that does not guarantee you come up with an innovative idea.

However, if someone on the team does have the expertise, their industry insights might help accelerate the startup due to a level of ‘connectedness’ in the value chain of that industry. I may have experience in running a Mexican restaurant and I see the opportunity to create a new type of fast causal food that is healthy like Chipotle. I then reach out to suppliers in that industry to help me get started.

YS: Who are some of the entrepreneurs you admire the most today?

Bernhard: I admire ordinary people with little-to-no money who just charge forward and make a company happen when it has no right to exist. Their determination, perseverance, and ability to bend but not break are what I admire.

YS: How well are big companies responding to the startup wave by launching their own ‘intrapreneurship’ programmes?

Bernhard: For the most part, they are not. The new research or innovation in quite a few companies just seems to be mergers and acquisitions. It’s almost as if they cannot create the next innovation in their industry so they wait to see ‘it’ and then they just purchase the company.

Or they wait and do nothing and are like Blockbuster. A company, in my opinion on this death watch is McDonald’s. They cannot seem to figure out how to create a great product millennials want to buy.

YS: How should founders identify trends while staying away from ‘me too’ low-hanging fruits? What makes some trends ‘bubbles’?

Bernhard: Trends have deep roots that have ‘dots’ going backwards to showcase their evolution. As Steve Jobs said, by connecting the dots going backward we can see the future. If you see something appear and it has no roots going backward to a former innovation, then you have to carefully assess if what you see is really just a fad. If you see the dots then you might know what’s coming next: Zipcar, Car2go, Uber.

YS: What is your current field of research in entrepreneurship?

Bernhard: I am doing research currently on incubators (do they work or not) and creativity. Incubators, because I really want to know if they are successful or if they are money pits. Creativity and innovation, because I want to better understand the creative process and how someone moves from being creative (is it curiosity, problem solving) to being innovative and actually launching a product or service. Since most people do not define themselves as being creative, I want to learn more about this area.

YS: How big a role does academics play in entrepreneurship today? How much of entrepreneurship can be formally taught?

Bernhard: I believe you can teach someone about entrepreneurship, how to see trends and simple steps to take to test ideas. But you need to get out of the classroom to truly see if you have what it takes to be an entrepreneur. You need to create prototypes and test them with your target customers, learn from the feedback, pivot and move on.

YS: What is your next book about?

Bernhard: It’s about creativity and innovation; how it is inside all of us and how to awaken it. I did extensive research about three years ago to determine why some people feel they are creative and others do not. Based on published research, there is creativity in all of us, especially those people with a growth mindset. So, why are some people creative and not others? My book addresses that question and basically shows people how they can re-awaken their creativity.

My current book, Fail Fast or Win Big, has done well, with aspiring or current entrepreneurs and with professors on university campuses. There seem to be two camps as far as responses go: those people who understand the notion of moving quickly, and those people who do not like me talking about failing as a path to success.

YS: What is your parting message to the startups and aspiring entrepreneurs in our audience?

Being an entrepreneur is not rocket science. Don’t overthink how creative or innovative you have to be to achieve success. Pick a growing marketplace or target segment you like, examine it, look for the gaps and trends, and give customers what they need; not what they want.