Alexander Osterwalder is a world-famous author, speaker, and entrepreneur, known for his work on business modeling, in particular, the development of the Business Model Canvas. After co-founding his first startup in 1999, he wrote “Business Model Generation”, with Yves Pigneur, changing the way startups across the world design and develop their products. Next year he’s launching a new book: “The Invincible Company”, so it was a good timing to interview him during Web Summit and to discuss his views on the current state of startups and entrepreneurship.
Almost everyone in the startup world has read your books, and many of them have used the Business Model Canvas/Customer Development tools. How do you feel when you see it’s widespread and adoption all across the world?
It’s great, in the sense that it shows that it has an impact. When we started this whole work during my PhD and we had one goal: to help entrepreneurs at the very beginning. Today is fun to see that it has an impact on small companies as well established companies and It’s really transforming them. So that is great, because at the end of the day, it’s all about impact.
I assume you see a lot of mistakes being done when people use BMC. How do you feel about it?
I think it’s great that they find value in using it in whatever way they do. So that’s a good start, but at the same time it’s almost frustrating because I know they could get more. It’s just about what can we do so they can do a better job. Because at the end of the day, it’s about making other people, other companies successful. And if they’re not using it right it’s not their fault, it’s our fault! Because then we did something wrong: we’re not spreading it well enough, we’re not giving enough away, we’re not making people aware of how they could use this. So really I almost feel responsible…
I’m just trying to do my best to get everything out there and that’s the drive also to create new tools, to create new books. Because every time I see something not working, I try to put something new out there, so our books are always a layer on top. For instance I see entrepreneurs still struggling with interviews and idea validation. That’s why we wrote a new book together with David Bland (Testing Business Ideas), because we want to help people who start new businesses, we want to make them successful. I think we’ll go on until everybody knows how to do it!
Universities are changing as well as entrepreneurship teaching, but how do you think universities are providing the right skill sets to succeed in the digital world?
I think some are changing some or not. It always depends on the quality of the faculty/univ. Now the good news is, that the tools are getting so good (Lean Startup /business model canvas, …) that it’s getting easier to teach these skills. You don’t have to go search for it, you can find it: the books are there! In particular Steve Blank’s work has changed entrepreneurship education.
You can’t learn entrepreneurship just by reading books but here’s the important thing: you still have to read the book. Because you don’t become a doctor without reading the medical books, just by practicing… you need both.
You need the theory, the concepts, the tools, the processes, but you also need to do it. I think the people who teach this best have this flipped classroom: they give you the material, sometimes online, but also the practice. The role of the educators is changing, the educator is becoming more of a coach. This means the educator doesn’t just teach the tools anymore, but the educator is now the coach helping them with the projects.
There has been a lot of discussion about security and the amount of data generated recently by AI, do you feel startups are going to be affected by this wave?
It depends what type of startup you are, you might need to look at this or you don’t. I do think that if you take machine learning and A.I. it will become a topic for many many organizations. The way you want to look at it is when the web started out: is going to be important for everybody/every business, but it wasn’t very clear how.
And today while infrastructures, distribution and a lot of things have been the same in ages, AI is still the wild west. It’s becoming a bit clearer where it’s going to have an impact: probably a portion of companies that will keep a one-to-one relation with customer, it won’t impact; but it is very likely that a big portion of companies will have to be able to master data and will be able to do something with their data with machine learning.
But again I don’t believe in this whole thing of dogma: Oh you need to do this you need to do that! There’s always a good business model and great business model for any specific situation, specific industry, specific objective: some want to build a small business some want to build a scalable business, so it really depends.
There’s an ongoing debate about EU Startups vs US Startups. Do you feel European startups are in a weaker position when it comes to global competition?
I would say it depends on the phase: When you start/first time entrepreneur, the only thing that really matters is A) understanding how do these tools work and B) learning from those who’ve screwed up 100 times, because if you don’t learn from those who’ve made the mistakes you’re gonna make all of them again.
So that’s the great thing of ecosystems and we have some in Europe that are pretty good like Berlin, London but also in Sweden and other countries. But learning from others is number one and it is true that if you go to the Bay Area (SF) you can hang out with a lot of people and they’re very willing to share everything that they’ve done wrong. You can learn a lot from that not just from the success of those CEOs you look up, but I guess what you learn most from what people did wrong so you don’t have to do it.
And then, let’s imagine you’re starting to be successful and you do need funding – the scenarios are different. Although there are now some signals going against VC funding, against the crazy scaling because look what happens if you’re forced to scale at an extreme: that’s the problem that Silicon Valley has rightnow: super scaling, like Uber and WeWork.
So you know I think what disturbs me with this US versus EU is there’s not just the billion dollar company. Maybe you don’t want to go to the US if you make ten or fifteen million in revenues. But that’s still pretty good, right? So, what’s wrong with that? And there’s plenty of those very good companies in Europe, that don’t need to be forced into a super-scaling dogma.
But if you want to be in the billion dollar category, if you aspire to that and you have some of the energy, the drive, the right ideas… Then of course you should consider moving to Silicon Valley because what is very clear, is when you scale when you’re in that phase of scaling you need a lot of experienced people who’ve done the scaling. You will not find that in Zurich. But if you’re in the valley in the Bay Area you will find a lot of people who’ve done that before. But again that’s only if you’re that type of startup and you want to do that.
I think Europe has a lot of positive aspects and especially a great quality of life. So I don’t think the Bay Area is the best place on the planet to live. It’s expensive and the differences between rich and poor are huge. So you know I don’t want to live there, although I love the energy there but the quality of life… I wouldn’t change it for the Bay Area, no way.
So there’s a lot of good things in Europe and it always depends how you define success: If you just want to build a billion dollar company, maybe you should go to Silicon Valley or probably today you need to go to China, because that’s where the most interesting things are going on. But it depends on what’s your objective.
How do you see the startup scene in Portugal?
I know in Portugal the quality of life is very good and it can be a great country for certain projects. If you’re in technology and you have a decent earning as a global startup it can be a very good option for living, but it also means that there’s a risk of disconnect for those who don’t have access to globalized incomes and will fall behind. So what I wouldn’t want to see, is that you’ll see the same consequences in Europe that we’ve seen in the U.S. that the rich and poor gap gets bigger and bigger. And we can see some signs that that’s also happening in Europe.
So I think the advantage we have so far in Portugal, and in Europe as a whole, is that social unity. We should keep those and actually be proud of those rights.
Where do you get your inspiration from, when you’re thinking of new books/topics?
The inspiration always comes from the field, seeing what people are dealing with, what business people are dealing with and what they’re struggling with. I talk to a lot of people that want to test ideas and look to the lean startup approach but are doing interviews and feel something’s not right. So we see these things in the field or by working a lot with established companies.
For instance established companies can’t innovate, so the question is why. What are we doing wrong? What can we do to help them? Because is easy to blame them and say they’re stupid, they’re not thinking long term, but there’s always a reason for that. So the question is, what can we do to get them to the next level. The inspiration always comes from there first and then second just from what we’ve done so far: we know how to make tools and we build on that.
After you design a new tool, you just got to disconnect for a bit, let them grow but then immediately go back and test them. It is hard work and we also screw up a lot, but then we re-test and re-think.
My new book is called: Testing Business Ideas. It is a very practical book for doers and was written together with David Bland. We really believe that we need to get a little bit more professional in how we test ideas. So that’s why we wrote that book, in a very practical way. But we’re finalizing another book which is going to come out next year, and it’s called The Invincible Company, and its goal is to get leaders to change their attitude about innovation. How do we get them to change the way they manage their company: a big audacious goal.
Now if we were sitting in our corner and just wrote, the result would probably not be so good. So when we create ideas and we put it in front of executives and get them to read it and see their feedback; do they understand, what are they struggling with, what are they missing? What we tell others to do, is basically what we do for the creation of our books.
Remember: You need to look stupid every day a hundred times, until you look smart. And if you always look smart you’re probably not experimenting with new ideas.
Would you say that it’s a common mistake, not exposing your ideas enough?
I think it’s a fear, as nobody wants look stupid but you actually need to want to get that feedback, and that’s humbling… Because when you’re trying something really new, 90% of people are going to say that’s stupid. But then you figure out what’s “stupid”, what’s not working, and have another go. That’s the biggest quality a good entrepreneur has – to get up after being told you’re an idiot a hundred times.