Startups’ success rate is very low worldwide. Per Dr. Goldratt study presented in October 2010 MBA Graduates talk in Tel Aviv University: <4% in Israel, the Startup Nation.
What to change?
Today’s state of the art methodology for Startups is a Lean-based, agile-like methodology, starting from "entrepreneur’s brilliant idea of solution” and advancing in a "trial and error” mode. While most TOC experts are confident that TOC is the holistic approach and has the tools to address startups needs, A TOC Startup process does not exist yet, hence the authors decided to develop one and prove this hypothesis in the field.
What to change to?
TOC Startup – a TOC-based methodology, using focusing lens consisting of Six Questions of Technology, to find a real limitation of real clients. Bringing existing Lean-Canvas business model and Lean Startup learning process into a POOGI-based process applied on the common Startups constraint. This allows Startups to leverage TOC thinking processes, and harness the power of TOC applications.
How to cause the change?
The dynamic entrepreneurship community adopted Lean based methodology less than 5 years ago. The authors’ experience working with entrepreneurs and incubators indicates that this community operates under enormous "do or die” pressure, and possesses autodidactic characteristics, hence motivated and capable of exploring and adopting a superior methodology, with help of TOC experts interested to help this segment of the economy.
The new TOC Startup process enables the entrepreneurs to develop a clear panorama of their personal and technical limitations, and a vision based on strategic thinking along with entrepreneurial problem solving skills.
A Web-based designed platform (portals/site TOCstartup.com – initially in English and Spanish), providing a TOC-based entrepreneurial ecosystem.
This would enable fast and high-scale penetration and propagation, by addressing the development of logical thinking tools and further advanced TOC topics, connecting them to business models and Lean-startup methods. Internet-based penetration reaches largest audience in shorter time and drives fast POOGI.
The authors embarked on a Proof of Concept in Mexico - Entrepreneur Builder and Company Builder focusing on aspiring entrepreneurs and on business deployment respectively, using TOC tools and best practices towards creating a TOC-based entrepreneur ecosystem.SOTSOG Process used
1. The giants
One shoulder is Dr. Goldratt´s who indicated that Startups are responsible for the growth of the world´s economy. The "Six questions of Technology” outline a market- focused innovation path for technology-based companies and Startups. The second shoulder is a top of a human-pyramid of entrepreneurship thinkers – Ash Maurya, Lean Canvas’ author (Business model for Startups), who stands on shoulders of Alexander Osterwalder (Business model Canvas tool author) and Eric Riess (Lean Startup velocity learning process author). Both Riess and Osterwalder are standing on the shoulders of Steve Blank, author of "Customer Development”.
2. Identify the enormity of the area not addressed by the giant.
Dr. Goldratt offered a two week workshop for Startups, first week using thinking processes to identify market limitation (industry segment´s problem) and develop solution that carves a Blue Ocean niche in the Red Ocean, thus constructing a decisive competitive edge, followed by developing a S&T tree as a master plan. This is a compass which startups do not have today. Yet, overcoming inherent uncertainty and transforming hypothesized business model (Lean Canvas) into one that meets reality is like fighting waves and sea currents. Today it is done with an "agile-like” Lean-Startup learning process, which harnesses scientific thinking (experiment/measure-learn cycle to modify hypothesis).Not having a compass results in "trial and error” that exhausts most startups’ resources and time before getting traction.
3. Get on the giant’s shoulders. - Historic perspective – understand giant’s solution better.
Since Dr. Goldratt’s 2010 TAU address, a TOC value-focused Business Innovation Process was proposed by Yishai Ashlag (TOCICO 2014), enabling established companies to search the customer limitation as a starting point for innovation. Innovation process of startups has unique aspects which are not addressed by this method. A process offered by Orion Avidan et al (TOCICO 2015) brings several TOC tools towards startup reality yet not in a holistic and inclusive manner. Neither of these addresses common startups constraint nor speaks startups "innovation language”. Startup-specific root conflicts solutions are lacking towards FRT/ TT.
On the other hand entrepreneurship thinkers have advanced the field by establishing a "common Business Model language” (Canvas). Lean-startup is a scientific thinking based learning process iterating "experiment –measure-learn” to revise business model hypotheses and improve them. These agile-like processes are of local optima, and done "across the board” (like Lean implementations of "waste elimination”) hence a global optima constraint focused improvement process (POOGI) is missing.
The authors foresee the need of an inclusive holistic process for startups with both "North Star navigation” and "Ocean storms sailing tools” (steering wheel, sails, tiller, rudder etc.). They see a need to generalize "Six Technology questions” compass into "Six Innovation questions”, and provide a POOGI for the common constraint of all startups. A translation mechanism between current startups practices and TOC methods, tools and processes would enable both technology based startups AND business model innovation startups to leverage TOC BOK.
4. Identify the conceptual difference between the reality that was improved so dramatically by the giant, and the area untouched.
The authors propose a TOC-based practical process: Dr. Goldratt compass of Six Technology questions for technology-based startups was generalized into Six Innovation questions for both technology and business model innovation based startups. They developed "Sailing aids” – startups conflicts clouds and POOGI-based process dealing with the common constraint of all Startups, identified by the authors. A "mapping and translation mechanism” between current startups practices and TOC methods, tools and processes is aimed to enable startups to transition to "TOC-based Startup management” CCPM-like – moving from current local optima to a global optima of the "construct” phase and towards capitalize and sustain. Along with soft-skills TOC-based tools for entrepreneurs’ competency development, this method would accelerate their work and increase their probability of success putting them on solid path towards simultaneous red curve/green curve and ever flourishing company.
5. Identify the wrong assumption - Valid in the area it worked – not valid in area where it doesn’t.
There are several conflicts which "trap” startups which use agile-based process, and a logic flaw at the base of their work. Most of the conflicts stem from the wrong assumption that innovation work of startups is similar to innovation work of established organizations. Yishai Ashlag Business Innovation process is based on Tony Ulwick’s method (2007) for established companies. Established companies execute their proven business model and innovate towards a known market and established customers base, hence mainly exercise "incremental changes” with limited and controlled uncertainty (changing one or very few elements of their business model). Startups start from a complete uncertainty represented in entire set of initial hypotheses comprising their "business model”. Their process is a search of a valid and functional business model. The learning process corroborates or refutes hypotheses reducing uncertainties towards market reality. This "project management” is of hypotheses revising tasks more resembles scientific research which requires well controlled experiments. The constraint of such a management process lies at the risk reduction of hypotheses. A random order execution with local buffers limits the success rate. The logical flaw of most startups is that "starting from the entrepreneur’s solution idea” with a vague notion of the problem and the customers who has this problem is "good enough start”. Steve Blank identified the importance of "customer side” for the process ("customer relations”) but the practices for this rely on social science tools ("needs” interviews etc.) as opposed to "real limitation analysis” robust logical approach, as Dr. Goldratt "Six technology questions” require. Since customer is already used to live with limitation he/she is mostly blind to it and can’t describe it.
6. Conduct a full analysis to determine the core problem, solution, etc.
The details of this analysis will be included in the paper.
The authors believe that TOC-Startup is an emerging new paradigm of "innovation management” for startups. The authors do not consider their exploratory work as complete (ex. it lacks development of S&T trees for startups), yet, they create a "path to TOC” for startups, to harness TOC BOK, include S&T Standard Solutions, and to enable startups to reach success at higher probability. Through their recent years’ work with startups in central America and Mexico, the authors test and improve the new paradigm to bring it from theory to practice. They wish to open and share their process with TOC community as they march on high scale deployment, web platform supported, starting in Mexico and propagating to the rest of the world.
3 Learning objectives
- Learn a new Startup process using TOC tools
- Learn how to synchronize the lean startup process with TOC
- Learn how to change the traditional approach of the startups from local optima to global optima
Salvador Pena Salvador is a Mechanical Engineer and has a MBA in Arizona, US. He is a consultant since 2008 in Mexico. Right now he is an entrepreneur with two important projects. As a consultant he ran some projects in manufacturing, retail, microfinance and startups. Before working for Leversens, Salvador worked for Goldratt Consulting for 6 years and he also had experience working for several multinational companies like ABB, GE, 3M and SKF. He has more than 22 years of experience. In 2005 he obtained the Black Belt certification in Six Sigma in Europe working with SKF (an automotive company), he ran several projects with the Six Sigma methodology since 2000 when he was working for GE. Right now Salvador is responsible for the TOC deployment in Mexico for Leversens and he is running two important projects in Mexico: Deployment of a Company Builder and an Entrepreneurship builder with TOC tools.
is an Israeli Systematic Innovation leader,
focused on innovation and problem solving methods across areas of industry and
entrepreneurship. In his last role of his 28 years’ career at Intel, as a
Principal Engineer, he was in charge of global proliferation of Systematic
Innovation methods and co-chaired Intel’s committee of "improvement methods”
chartered to synergize them. Amir managed multidisciplinary engineering teams
at Israel and US Intel factories and Technology Development center at Silicon
Valley. He led Intel’s TRIZ
proliferation (Inventive problem solving method) at factories and product
design centers worldwide. An inventor -
author of four Intel patents (all implemented) and some trade secrets. The
Problem Solving program he developed for Intel global College of Engineering
incorporated TOC-thinking processes as key problem solving tools. He
represented all industries in International TRIZ Association board. Since he retired from Intel in 2010, he is
coaching and mentoring entrepreneurs and impulse incubators in Latin America,
where he adapts and tests TOC tools for entrepreneurs. Amir presented his works
in numerous innovation and technology congresses world-wide.