Starting a business

Im am starting to better understand how to actually go about starting a business successfully. Steve Blank and Eric Ries advocate the Lean Startup method. This basically boils down to several key elements. First, do not create a full business plan, get funding for it, and then start executing the plan. You will most likely be wrong or off-base enough in your assumptions that the business will not go as planned. By the time you figure that out, many thousands of dollars and hours of time are wasted for something that might have actually worked if you had taken this advice. Start with a business idea which solves some customer problem and which you have a passion for. Then, get out of the building at various stages of the development of this idea to actually talk with customers thus testing the idea, and more importantly, getting feedback with which to re-work/iterate your business model. Blank and Ries advocate doing this multiple times. 

Two, figure out what your minimum viable product is, and start making/selling it. This stage is still part of the search for a business model however. The point of a minimum viable product is to have something beyond the idea to literally sell to customers to see if anyone actually buys it, if it is solving their problem, and to again learn more about how you can better accomplish doing that. Then you will know wheter you just need to iterate multiple more times to hone in the model, or if you need to pivot and change directions. This is possible because you have not yet invested so much time and money into the business infrastructure without knowing if you have found the successful model yet. Your organization is more nimble and able to iterate, innovate and pivot at this early stage. 

I understood all of this in my mind when I read Blank and Ries's books. However, I don't know that it had really sunk in yet. This quarter when we created a full business plan for our team projects, it became very clear to me. We put a substantial amount of time into researching and writing this business plan, yet we still had to make assumptions. These assumptions are a big deal and could lead to wildly more success than we calculated, or wild failure. I actually want to make this particular business that we worked on a reality, which makes this learning so very important to me. If we got some folks to invest in this business plan (really business idea), then I would want to start very small (minimum viable product) in order to successfully do more research and testing with actuall customers and suppliers. This would get us the information that we really need to get to the scale necessary to make a real impact in Spokane. I want to test all of our assumptions, and I want to do it while slowly scaling the business as we discover the real business model that will be viable, acheive the purpose we set out to acheive with the business, and solve the customer/community problems we identified when we started this project. 

Of course, I feel like all of this learning will still be very difficult and stressful when there is more at stake than our grade. However, perhaps it will also be much more exciting and rewarding! Here's to successfully changing business for good!

Business with a purpose

I have been thinking very hard about the "purpose" of business lately. This is because my team has been thinking and working through what we want our business model to look like for a food hub in Spokane. We keep getting intrigued by some of the contemporary business ideas such as, technological solutions, creating the leanest business you can which still solves the problem identified, and efficiency. We are trying to solve the problem of missing infrastructure in the Spokane food system which makes connecting small and medium sized local farmers to large food service institutions very difficult. This is a problem faced by most cities and towns around the country as our food system has been built into one of very large corporate farms which mostly export commodity crops while local towns and cities then import most of their food. 

Our struggle then, has to do with finding solutions to this problem which are still in line with our core values and stated purpose of this particular business; which is to maximize happiness. First, we thought that maybe we could just create a virtual food hub which is basically just an online platform for connecting farmers with those who wish to purchase their products. This seemed attractive for our technological age, but does it achieve our purpose? No, it does not. Part of maximizing happiness for us is creating good paying jobs in Spokane, which needs them. Another aspect of our purpose is ensuring that farmers receive the value that their products deserve. Yet another is building the market for local food which is healthier, has a lower carbon footprint and adds to the economic multiplier effect in our area by keeping dollars and wealth local. 

Then we started thinking that our business could just facilitate the distribution of local produce to local buyers without actually owning the produce (inventory) and with a minimal need for a facility. This was also combined with our notion that to be a competitive contemporary business you need to be ultra efficient. So, we would have the minimum services necessary to solve our problem, and therefore the minimum amount of employees necessary. We again asked if this model would achieve our core purpose and again the answer was no. 

It turns out that achieving our purpose necessitates a more complex business model. We need a building so that we can aggregate the local produce, grade it, pack it to meet the large volume orders from food service customers (B2B), and ensure high quality products. We also want to create jobs, build the local food system and maximize value for farmers. This necessitates not just aggregation and distribution, but also value-added processing equipment and perhaps a commercial kitchen where farmers and food entrepreneurs can turn raw produce into non-seasonal value-added products. 

We also determined early on that in order for us to achieve our purpose we need to choose the right business structure. As my friend and colleague Lauren Fruge noted in a recent post about private vs. publicly held companies, ownership and structure really matter and can strengthen or inhibit the ability of your business to live its values. We are building our model as a worker and farmer owned cooperative. This way the key stakeholders are in ownership and governance positions instead of those who simply contribute large sums of money to the venture. 

So, keeping the deep purpose of your business in the forefront of business model generation is of the utmost importance as your team iterates the model to solve the problem you have identified as a business opportunity. Sometimes the quickest, leanest, most efficient and technologically sexy model will not be that which most effectively achieves your purpose. We are a community of humans embedded in a natural system after all, so if we don't set and live out a purpose deeper than that of a machine, we will not create very desirable systems let alone maximize happiness.