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3 things Houston entrepreneurs need to keep in mind to run a lean startup and reduce risk

Lean methodology aims to help startups reduce risk and helps entrepreneurs make better, more efficient decisions. Miguel Tovar/University of Houston

There are few things riskier than launching a new business. You could run through a mine field and have a better chance at living than launching a successful, long-lasting business. In fact, the Harvard Business School even reported that three out of every four startups fail. Fortunately, a new process has come to light that was designed precisely to reduce the risk of starting a business. Lean startups champion trial and error over detailed planning. Customer feedback over "gut feeling." Cyclic processes of design over traditional development.

Some lean startup ideas have already gone mainstream because they've proven to be so effective. The principles of "minimum viable product" and "startup pivot" have become so engrained in modern business that even university business colleges have begun to teach them.

There are three key aspects of the lean methodology.

Educated guesses

Number one: Instead of spending a year conducting research and planning long-term, lean startup entrepreneurs go with the idea that all they have on the first day is a bunch of unproven ideas. Guesses, really. These entrepreneurs forego the traditional business plan and opt instead to give a Cliff Notes version of their big idea using a template dubbed "business model canvas." It's pretty much a diagram that shows how a business generates value not just for its consumers, but for itself.

Field work

Number two: Lean startups use an "out and about" method for testing their ideas. It's a kind of customer development. They go "out and about" and basically interview potential customers, interested people, and people on the fence about all aspects of their business. How's our pricing compared to others you've seen? Do you like our product features? What do you think of our strategy? Lean startup entrepreneurs amend their ideas based on the feedback they get from customers. That's the beauty of the lean method: it's based on your willingness to change directions based on new information. Sound familiar? Well, it should. I just described pivoting. A lean startup concept now adopted by major corporations.

Agility means stability not fragility

Number three: The software industry bore a method called agile development. Agile development cuts down on wasted time because it emphasizes the ability and willingness to change directions and adapt fast. That's what agile means. To move quickly. There's a company named RoofProtect Pro that created a chemical they thought would appeal to homeowners looking to reduce shingle rot. Turns out there wasn't really a demand for reducing shingle rot. It wasn't as big a deal as the RoofProtect Pro founders had hypothesized. However, after speaking with business owners they discovered there was a demand for something to help reduce rust and deterioration of signage. RoofProtect Pro went back to the drawing board to build and test a prototype for a chemical that reduces rust and staining on different material like concrete and metal. A year later RoofProtect Pro became SurfaceSustain and obtained over $2 million in venture capital funding.

Now that's agility!

It's no surprise, then, that in the high-stakes world of business, a methodology designed specifically to reduce risk would prove successful. Lean methods don't guarantee success, of course, but the principles it holds dear do help strip away a lot of wasted time and energy and have proven to be highly efficient. Now, if there's an antidote to riskiness, it's got to be efficiency. Efficiency tightens a business to bare bones so there is little room for big risks to hurt your venture.

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This article originally appeared on the University of Houston's The Big Idea.

Rene Cantu is the writer and editor at UH Division of Research.

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Building Houston

 
 

Here's what not to miss at the first all-virtual CERAWeek by IHS Markit. Screenshot via virtual.ceraweek.com

While usually hundreds of energy experts, C-level executives, diplomats, members of royal families, and more descend upon Houston for the the annual CERAWeek by IHS Markit conference, this year will be a little different. Canceled last year due to COVID-19, CERAWeek is returning — completely virtually.

The Agora track is back and focused on innovation within the energy sector. The Agora track's events — thought-provoking panels, intimate pods, and corporate-hosted "houses" — can be accessed through a virtual atrium.

Undoubtedly, many of the panels will have Houston representatives considering Houston's dominance in the industry, but here are five innovation-focused events you can't miss during CERAWeek that feature Houstonians.

Monday — New Horizons for Energy & Climate Research

The COVID-19 pandemic has made vivid and real the risks of an uncontrolled virus. Risks posed by climate change are also becoming more palpable every day. At the forefront of understanding these risks, universities are developing solutions by connecting science, engineering, business, and public policy disciplines. Along with industry and governments, universities are critical to developing affordable and sustainable solutions to meet the world's energy needs and achieve net-zero emission goals. Can the dual challenge of more energy and lower emissions be met? What is some of the most promising energy and climate research at universities? Beyond research, what are the roles and responsibilities of universities in the energy transition?

Featuring: Kenneth B. Medlock, III, James A. Baker, III, and Susan G. Baker Fellow In Energy And Resource Economics, Baker Institute and Senior Director, Center For Energy Studies at Rice University

Catch the panel at 1 pm on Monday, March 1. Learn more.

Tuesday — Conversations in Cleantech: Powering the energy transition

With renewables investment outperforming oil and gas investment for the first time ever in the middle of a pandemic, 2020 was a tipping point in the Energy Transition. Low oil prices intensified energy majors' attention on diversification and expansion into mature and emerging clean technologies such as battery storage, low-carbon hydrogen, and carbon removal technologies. Yet, the magnitude of the Energy Transition challenge requires an acceleration of strategic decisions on the technologies needed to make it happen, policy frameworks to promote public-private partnerships, and innovative investment schemes.

Three Cleantech leaders share their challenges, successes, and lessons learned at the forefront of the Energy Transition. What is their vision and strategy to accelerate lowering emissions and confronting climate change? Can companies develop clear strategies for cleantech investments that balance sustainability goals and corporate returns? What is the value of increasing leadership diversity for energy corporations? Can the Energy Transition be truly transformational without an inclusive workforce and a diverse leadership?

Featuring: Emily Reichert, CEO of Greentown Labs, which is opening a location in Houston this year.

The event takes place at 11:30 am on Tuesday, March 2. Learn more.

Wednesday — Rice Alliance Venture Day at CERAWeek

The Rice Alliance for Technology and Entrepreneurship pitch event will showcase 20 technology companies with new solutions for the energy industry. Each presentation will be followed by questions from a panel of industry experts.

Presenting Companies: Acoustic Wells, ALLY ENERGY, Bluefield Technologies, Cemvita Factory, Connectus Global, Damorphe, Ovopod Ltd., DrillDocs, GreenFire Energy, inerG, Locus Bio-Energy Solutions, Nesh, Pythias Analytics, REVOLUTION Turbine Technologies, Revterra, ROCSOLE, Senslytics, Subsea Micropiles, Syzygy Plasmonics, Transitional Energy, and Universal Subsea.

The event takes place at 9 am on Wednesday, March 3. Learn more.

Thursday — How Will the Energy Innovation Ecosystem Evolve?

Although the cleantech innovation ecosystem—research institutions, entrepreneurs, financiers, and support institutions—is diverse and productive, converting cleantech discoveries and research breakthroughs into commercially viable, transformative energy systems has proven difficult. With incumbent energy systems economically efficient and deeply entrenched, cleantech innovation faces a fundamental dilemma—the scale economies necessary to compete require a large customer base that does not yet exist. How is our clean energy innovation ecosystem equipped to be transformative? What needs to be strengthened? Is it profitable to focus on individual elements, or should we consider the system holistically, and reframe our expectations?

Featuring: Barbara Burger, vice president of innovation at Chevron and president at Chevron Technology Ventures

The event takes place at 7:30 am on Thursday, March 4. Learn more.

Friday — Cities: Managing crises & the future of energy

Houston is the capital of global energy and for the past four decades the home of CERAWeek. Mayor Sylvester Turner will share lessons from the city's experience with the pandemic, discuss leadership strategies during times of crisis, and explore Houston's evolving role in the new map of energy.

The event takes place at 8 am on Friday, March 5. Learn more.

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