Steve Blank's Blog, page 13

Rise Up

“Let’s do something to help with the pandemic.” In April, with the economy crashing, and the East Coast in lockdown, I heard this from Stanford instructors Tom Bedecarre and Todd Basche, both on the same day. And my response to them was the same, “I can’t sew masks and I don’t know how to make ventilators.” But after thinking about it, it dawned on to me that we could contribute – by creating a class to help existing businesses recover and new ones to start.

And so, Hacking for Recovery began, starting first at Stanford and next offered by University of Hawaii for the State of Hawaii.

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After teaching 70 teams – 50 at Stanford and 20 in Hawaii – 275+ entrepreneurs – we’ve proven three things: 1) people can take control of what happens to their lives/careers during and after the pandemic, 2) in five days teams can make extraordinary progress in validating a business model and, 3) this process can be replicated in other areas of the country that need to recover and rebuild businesses.

Here’s how it happened.

I realized we had the ability to rapidly launch a large number of companies on the path of validating their business models. We could offer a 5-day version of the Lean LaunchPad / Hacking For Defense / National Science Foundation I-Corps class that’s trained tens of thousands of entrepreneurs. The class already existed. I had been teaching it at Columbia University for the last seven years. Brainstorming with my Stanford co-instructor Steve Weinstein, we streamlined the material for a virtual class, and told Tom and Todd we could do it.

In two months, they recruited 200 students (50 teams) on 6 continents and in more than a dozen countries. What united the students was their belief that while the pandemic had disrupted their lives, here was an opportunity to shape their own future.

To support them we found 31 mentors, and 4 great Teaching Assistants. The entire course – from team recruitment to the actual class sessions – was hosted online through Zoom.

We ran the Stanford class three times, each in 5-day sessions. (The syllabus is here.)

The teams were able to do customer discovery via video conferencing (getting out of the building without physically getting out of the building) averaging 44 interviews in 5 days. In aggregate they interviewed 2,259 customers. But it just wasn’t the aggregate numbers that were impressive it was how much they learned in five days.

The results?

200 students will never be the same. Rather than bemoaning their circumstances, they decided to rise up and take their best shot. Immersed in a rapid-fire hands-on experience, and surrounded by mentors and subject matter experts, every team not only changed the trajectory of their company but left having learned a methodology for high-speed business model validation to help jump-start a business idea in these chaotic times and beyond.

The topics the teams worked on mirrored the opportunities created caused by the pandemic and sequestering. Over 40% were working on telemedicine, 28% in remote education or remote work. Other teams tackled problems in travel, small business, sustainability, etc. The 50 team concepts at Stanford fell into these categories:

21 Health/Telemedicine
9 Education
5 Remote Work
3 Travel
3 Sustainability
3 Small Business
6 others

More than 15 of the teams have already committed to continue to pursue their startup ideas and are applying to accelerators and seeking funding.

When the sessions at Stanford were completed, we helped the University of Hawaii and Maui Economic Development Board STEMworks launch the Hawaii version of Hacking 4 Recovery – to rebuild the State’s economy, which has been uniquely devastated by the coronavirus lockdown. 20 teams just finished their program. With more to come. Other regions can do the same.

Take a look at a selection of the presentations below from Stanford’s cohorts. Considering some of the teams consisted of incoming freshmen, their progress is kind of mind blowing.

While we enabled 70 teams to start companies, what we really generated was hope – and a path to new opportunities.

AntiCovidAI – a novel mobile app to detect COVID-19 symptoms. Team included Stanford undergrad, Stanford alum, DCI Fellow, Stanford staff member and a graduate student taking courses at Stanford. We had 21/50 teams focused on health/telemedicine concepts

Nightingale – a telemedicine platform connecting nurses to caregivers to close the home healthcare gap.

Diffusion – led by a Stanford Ph.D, this team is developing a sensor to prevent head and neck injuries from falls, especially for seniors in nursing homes.

Edusquared– this team of 4 women who just graduated high school and are entering Stanford in September created an educational subscription box for young Special Ed students. 9 of the teams worked on Education concepts.

Work From Anywhere – the team designed a service to help people move to new locations as remote working allows employees to work from anywhere. 5 teams developed concepts related to Remote Work.

Eye-Dentify – was led by a Knight Hennessy Scholar who wants to help bring eyecare to remote underserved areas. Many of the teams focused on social impact.

Escape Homework – team developed an “Escape Room” platform to make remote learning for k-12 students  fun and engaging. (Post class, the team wrote a blog post describing their experience in the class. Worth a read here.  And they shared their page on virtual educational resources here.)

Voyage – was a global travel advisory platform for pandemic information.

Parrot – fun language app – crossing Duolingo with TikTok. Four rising Stanford sophomore women.

All 50 Stanford presentations are here: Session 1, Session 2 and Session 3.

Total Stanford participants: 200 (Men 51%, Women 49%)

Representing a broad cross-section of the Stanford Community:

undergrads  25%
graduate  14%
Summer Session Students  10%
Alumni  30%
Faculty/Staff  2%
DCI Fellows  3%
Other/misc.  16%

Thanks to the instructors who taught the class: Tom Bedecarre, Steve Weinstein and Pete Newell and to the guest lecturers: Mar Hershenson, Tina Seelig, and Heidi Roizen.

In addition to the instructors, each team had mentors who volunteered their time: Jim Anderson, Adi Bittan, Teresa Briggs, Rachel Costello, Phil Dillard, Freddy Dopfel, Mimi Dunne, Dave Epstein, Eleanor Haglund, Joy Fairbanks, Susan Golden, Rafi Holtzman, Pradeep Jotwani, Phillipe Jorge, Vera Kenehan, Robert Locke, Kris McCleary, Radhika Malpani, Stephanie Marrus, Allan May, Rekha Pai,Don Peppers, Alejandro Petschankar, Kevin Ray, Heather Richman, Eric Schrader, Craig Seidel, Kevin Thompson, Wendy Tsu, Lisa Wallace. Plus another 27 subject matter experts as support.

And when a class with a million moving parts appears seamless to the students it’s directly proportional to the amount of work behind the scenes. Without our teaching assistants who volunteered their time none of it would have happened: Head TA’s: Valeria Rincon / Jin Woo Yu and TA’s Nicole Orsak and Diva Sharma.

Lessons learned

While we enabled 70 teams to start companies, what we really generated was hope and a path to new opportunities
With the open source curriculum available here, it’s possible for any school or region to get a version of this class ready in 8-10 weeks

The 5-day format of the class works well
It can stand alone or complement the 10-week or 14-week courses


Having teaching assistants are critical to managing the admin side of marketing, recruiting, team formation, communications and overall support for the teaching team

Team formation requires heavy lifting of emails/team mixers/team – as well as match-making by TA’s and instructors


Having a large pool of mentors and subject matter experts is important in 5-day crash course, to support teams looking for interview subjects and contacts for customer discovery

Remote education in the pandemic has been hard for everyone. Hard for students having to deal with a variety of remote instructional methods. Hard for parents with K through 12 students at home trying to keep up with remote learning, and hard for instructors trying to master new barely functional tools and technology while trying to keep students engaged gazing at them through Hollywood Squares-style boxes.

A subsegment of those instructors – those trying to teach Lean LaunchPad, whether in I-Corps, or Hacking for Defense – have an additional burden of figuring out how to teach a class that depends on students getting out of the building and talking to 10 to 15 customers a week.

400 Lean Educators instructors gathered online for a three-hour session to share what we’ve learned about teaching classes remotely. We got insights from each other about tools, tips, techniques and best practices.

[image error]Here’s what we learned.

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When I designed the Lean LaunchPad/I-Corps/Hacking for Defense class, my goal was to replace the traditional method of teaching case studies and instead immerse the students in a hands-on experiential process that modeled what entrepreneurs really did. It would be guided week-to-week by using the Business Model Canvas and testing hypotheses by getting out of the building and building Minimum Viable Products (MVPs). After trial and error, we found that having eight teams presenting in a three-hour block was the maximum without exhausting the instructors and the students. That format, unwieldy as it is, remained the standard for a decade. Over time we started experimenting with breaking up the three-hour block with breakout rooms and other activities so not all students needed to sit through all the presentations.

When the pandemic forced us to shift to online teaching, that experimentation turned into a necessity. Three hours staring at a Zoom screen while listening to team after team present is just untenable and unwatchable. Customer discovery is doable remotely but different. Teams are scattered across the world. And the instructor overhead of managing all this is probably 3X what it is in person.

While we were making changes to our classes at Stanford, Jerry Engel was smart enough to point out that hundreds of instructors in every university were having the same problems in adapting the class to the pandemic. He suggested that as follow-up to our Lean Innovation Educators Summit here in Silicon Valley last December, we should create a mid-year on-line Summit so we could all get together and share what we learned and how we’re adapting.  And so it began.

In July, 400 Educators from over 200 universities in 22 countries gathered online for a Lean Innovation Educators Summit to share best practices.

We began the summit with five of us sharing our experience of how we dealt with the online challenges of:

teaching an existing Lean program i.e. Hacking For Defense
creating and teaching new Lean classes i.e. Hacking For Oceans and Hacking For Recovery
creating programs for Diversity, Equity, & Inclusion e. GEM I4 / Black Learners Matter
effectively teaching Business Model Design  during COVID-19

If you can’t see the presentation slides click here

But the core of the summit was gathering the collective wisdom and experience of the 400 attendees as we split into 22 breakout rooms. The one-hour discussion in each of the rooms covered:

What are your biggest challenges under COVID-19?
How is this challenge different now than during “in-person” learning?
What solutions have you tried?
What was most effective?

The output of the breakout sessions provided a firehose of data, a ton of useful suggestions, teaching tips and tools.I’ve summarized the collective notes from the breakout session.

Customer Discovery and Minimal Viable Products

The consensus was, yes you can “get out of the building” when you physically can’t. And it’s almost good enough.

Discovery can be done via Zoom or similar remote platforms and in some ways is more effective – see here
During Covid most people no longer have gatekeepers around them

Sending lots of cold emails works (at least in COVID times)


You could find the best mentors and the best sponsor for a given project
Building and demonstrating hardware MVPs is a challenge

One solution is to send a design file to a fab lab to be printed
If you would normally have your potential customer hold, feel or use the product, make sure you video a demo someone doing that


For software MVPs create video demo snippets of less
It’s critical to offer a “How to do customer discovery remotely” and “how to build remote MVPs” workshop

Class Structure

3-hour long classes are challenging in person and require a redesign to be taught online.

Keep students engaged by having no more than four teams in a presentation room at one time

Have other teams in breakout rooms and/or with other instructors

Breakout rooms must be well thought out and organized
They should have a task and a deliverable




Break up lectures so that they are no longer then 15 minutes

Intersperse them with interactive exercises (Alex Osterwalder is a genius here, providing great suggestions for keeping students engaged)
Work on an exercise in class and then talk more to it in office hours
Avoid canned video lectures


Be more prescriptive on “what is required” in the team presentations
What’s the goal for the class?

Do you want them to test the entire Canvas or …
Do you want them to work on product market fit?

Teams will naturally gravitate to work on product/market fit




Vary the voices at the “front” of the room
Guest speakers – previously extraneous but needed now to break up the monotony

But if you use guests have the student’s whiteboard summaries of what they learned
And have the guests be relevant to the business model topic of the week


Understand that while students attend your class they actually pay attention to their mentors

Recruit mentors whose first passion are helping students, not recruiting or investing in them
Ensure that you train and onboard mentors to the syllabus
Have the mentors sit in on the office hours and classroom


Invite lurkers, advisors, and others “invited” to show up and chime in
Be prepared for the intensity of the preparation required as compared to pre-COVID times

Recruiting students and forming teams is especially hard remotely
Double or triple down on the email and other outreach
Hold on-line info sessions and mixers

Teaching Assistant

Having a Teaching Assistant is critical

If your school won’t pay for one, get some unofficial “co-instructors”

They don’t have to be a teacher–use an admin or a student intern


They are critical to managing the admin side of marketing, recruiting, team formation, communications and overall support for the teaching team.
Team formation requires TA heavy lifting of emails/team mixers/team

as well as match-making by TA’s and instructors


During class TA’S need to be focused on chat, breakout room and presentation logistics
Don’t assume (or let your TA assume) that prior practices will work in a virtual environment.
Be prepared to try different approaches to keep class moving and engaged
Pre-class write up a “How to TA in a Remote Class” handbook

Go through it with your TA’s before class


Use security in advance; avoid open entry (Zoom Bombing)

Student Engagement

Zoom fatigue came up in almost every breakout session. Some of the solutions included:

Play music as students arrive and leave
Recognize that some may be in different time zones – take a poll in the first class session
Start each class session with an activity

Summarize key insights/lessons learned from their office hours and customer discovery
For those using Zoom – use the Whiteboard feature for these summaries

Other platforms for remote collaboration include Miro, Mural, Zoom, Discord, LaunchPad Central and Innovation Within etc.

A list of remote teaching tools suggested in the breakout sessions are here






Have students turn on their camera on to ensure the class they’re engaged

And have their microphone off, their full name visible, and a virtual background with their team ID


Create deeper connection with the students

ask them to anonymously submit a statement or two about what they wish you knew about them
ask the students to bring something to class that tells us something about them

have them bring it to the breakout rooms to share with their teammates and others




Randomly cold call

Don’t be afraid to call out students by name, as Zoom format makes raising hand or asking a question more awkward
Ask their advice on what someone else just presented or what they learned from the other team
After doing this a couple of times, everyone will become active (so not to get called on)


Require additional student feedback on chat – critical to keeping engagement high

Focus on quality of feedback over just quantity.
Have the students and mentors use chat during team presentations to share contacts, insights


Dial back the radical candor– take the edge off as the students are already stressed
Offer longer office hours for teams

(All the breakout session slides are here.)

Summary

When the National Science Foundation stopped holding their annual conference of I-Corps instructors, it offered us the opportunity to embrace a larger community beyond the NSF – now to include the Hacking for Defense, NSIN, and Lean LaunchPad educators.

When we decided to hold the online summit, we had three hypotheses:

Educators would not only want to attend, but to volunteer and help and learn from each other – validated
Instructors would care most about effective communication with students (not tools, or frameworks but quality of the engagement with students) – validated
Our educator community valued ongoing, recurring opportunities to collaborate and open source ideas and tools – validated

The Common Mission Project is coordinating the group’s efforts to create an open forum where these instructors can share best practices and to curate the best content and solutions.

A big thanks to Jerry Engel of U.C. Berkeley, the dean of this program. And thanks to the Common Mission Project which provided all the seamless logistical support, and every one of the breakout room leaders: Tom Bedecarré – Stanford University, John Blaho – City College of New York, Philip Bouchard – TrustedPeer, Dave Chapman – University College London,  James Chung – George Washington University, Bob Dorf – Columbia University,  Jeff Epstein – Stanford University, Paul Fox – LaSalle University Barcelona,  Ali Hawks – Common Mission Project UK, Jim Hornthal – U.C. Berkeley,  Victoria Larke – University of Toronto,  Radhika Malpani – Google,  Michael Marasco – Northwestern University,  Stephanie Marrus – University of California, San Francisco,  Pete Newell – BMNT/ Common Mission Project US, Thomas O’Neal – University of Central Florida,  Alexander Osterwalder – Strategyzer, Kim Polese – U.C. Berkeley,  Jeff Reid – Georgetown University,  Sid Saleh – Colorado School of Mines,  Chris Taylor – Georgetown University,  Grant Warner – Howard University, Todd Warren – Northwestern University,  Phil Weilerstein – VentureWell,  Steve Weinstein – Stanford University, Naeem Zafar – U.C. Berkeley, and the 400 of you who attended.

Looking forward to our next Educator Summit, December 16th online.

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The video of the entire summit can be seen here

With a terrific crew of instructors, TA’s, and mentors, we successfully concluded Session 1 of our Hacking 4 Recovery summer series – with 20 teams sharing their final presentations last night. Slides for these presentations are in this folder, and we will be editing and sharing videos of each presentation shortly.

 

Alivia – Telemedicine service bringing healthcare to middle income people in Peru
AllAboard – Remote onboarding services to help organizations establish a sense of belonging
AntiCovidAI – Mobile app for testing COVID-19
BBOM Preschool – Teaching social and emotional learning (SEL) to preschoolers
Collegiate Cost Busters – Delivering innovation to make college education more affordable to all
COVered – Crowdsourcing app to monitor risk for visiting public spaces
CoworkingSpace – Redefining coworking spaces in the post-pandemic world
Cratiso – Sourcing diverse patients for clinical trials
Florence Health – Telemedicine app to prevent hospitalization of congestive heart failure patients
HomeDoc – Central hub for connecting telemedicine platforms for nursing homes
Mango Lango – Mobile app that allows small businesses to reopen safely
MatchBook – Hiring platform structured similarly to dating apps
MemLove – Helping people grieve for lost loved ones
MUSTA – Telemedicine platform for patients in the Philippines
Remote Daily – Simplified employee feedback for small businesses
Resilience Gym – Online education and virtual reality to enhance mental health
Safe.ly – Mobile app for making reservations to visit your local stores safely
Sani-Team – Consulting service to help local restaurants reopen safely
Screen360.tv – Cross-cultural education platform using international films
Voyage – Global travel advisory platform for pandemic information

 

With a terrific crew of instructors, TA’s, and mentors, we successfully concluded Session 1 of our Hacking 4 Recovery summer series – with 20 teams sharing their final presentations last night. Slides for these presentations are in this folder, and we will be editing and sharing videos of each presentation shortly.

 

Alivia – Telemedicine service bringing healthcare to middle income people in Peru
AllAboard – Remote onboarding services to help organizations establish a sense of belonging
AntiCovidAI – Mobile app for testing COVID-19
BBOM Preschool – Teaching social and emotional learning (SEL) to preschoolers
Collegiate Cost Busters – Delivering innovation to make college education more affordable to all
COVered – Crowdsourcing app to monitor risk for visiting public spaces
CoworkingSpace – Redefining coworking spaces in the post-pandemic world
Cratiso – Sourcing diverse patients for clinical trials
Florence Health – Telemedicine app to prevent hospitalization of congestive heart failure patients
HomeDoc – Central hub for connecting telemedicine platforms for nursing homes
Mango Lango – Mobile app that allows small businesses to reopen safely
MatchBook – Hiring platform structured similarly to dating apps
MemLove – Helping people grieve for lost loved ones
MUSTA – Telemedicine platform for patients in the Philippines
Remote Daily – Simplified employee feedback for small businesses
Resilience Gym – Online education and virtual reality to enhance mental health
Safe.ly – Mobile app for making reservations to visit your local stores safely
Sani-Team – Consulting service to help local restaurants reopen safely
Screen360.tv – Cross-cultural education platform using international films
Voyage – Global travel advisory platform for pandemic information

 

SAVE THE DATE for the Lean Innovation Educators Summit:

Lessons from Teaching in the Pandemic

July 24, 10-noon Pacific, 1-3pm Eastern, 6-8pm London

[image error]As educators the COVID-19 pandemic has challenged us all.

We’ve faced the challenges of teaching remotely, while virtually managing students scattered across the world, keeping students enthusiastic and engaged via video, helping them conduct customer discovery when they can’t get out of the building, and rolling with uncertain teaching schedules now and in the future. We’ve all been making it up as we go and have begun to see a glimmer of patterns of what’s worked and what hasn’t. 

Since the Pandemic we’ve taught three classes remotely – Hacking for Defense, Hacking for Oceans and our first of three Hacking for Recovery classes. I know I’ve learned a ton – some surprisingly good and some just surprisingly.

But more importantly there are hundreds of educators who have also learned valuable lessons. If you’ve learned something you’d like to share, or would like to hear how others are modifying their pedagogical approaches for the pandemic, you’re invited to join us virtually and collectively in this two-hour on-line session (with an additional one hour of breakout sessions for follow-up discussions on topics of interest.)

Some of the topics we’ll cover include:

Converting and scaling existing programs and classes
Standing up new programs from scratch
Improving diversity and inclusion in tech innovation education
Addressing K-12 opportunities

We invite you to submit your own instructional innovations for a virtual poster session. We will also be having subgroup discussions to engage in active give and take.

So save the date for the Lean Innovation Educators Summit on July 24th, 2020.

This session is free to all, but limited to Innovation educators. You can register for the event here and/or learn more on our website. We look forward to gathering as a community of educators to shape the future of Lean Innovation Education in the COVID-19 era. 

The pandemic has upended the business models of most startups and existing companies. As the economy reopens companies are finding that customers may have disappeared or that their spending behavior has changed. Suppliers are going out of business or requiring cash-up-front terms. Accounts receivables are stretching way out. Revenue models and forecasts are no longer valid.

In sum, whatever business model you had at the beginning of the year may be obsolete.

While there’s agreement that companies need to adapt to changing markets, rapidly find new markets, new customers and new revenue models, the question is how? What tools and methods can a C-suite team use to do so?

While the Lean Startup was built with Business Model Canvas, Customer Development and Agile Engineering, there’s an additional tool — the Market Opportunity Navigator — that can help entrepreneurs discover new opportunities.

Here’s how.

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Companies have rapidly responded to Pandemic Needs

When COVID-19 first emerged established companies rapidly pivoted. Some focused on remote work, others offered new ways to learn online. Swiss smart flooring startup Technis now helps supermarkets regulate the flow of shoppers. Large companies like GM, Ford and Rolls-Royce began to produce ventilators. Companies in cosmetics and perfume production pivoted their production lines as well. With ethanol and glycerin on hand and equipment required to fill bottles, French luxury giant LVMH has started to produce sanitizer – just like gin and whiskey distilleries across the US and UK have done.

Although the large firms made the headlines, startups also pivoted. For instance, Italian additive manufacturing startup Isinnova used its 3D-printing equipment to produce a crucial valve for oxygen masks. New York-based startup Katena Oncology discovered that a cancer detection tool under development could be adapted to test for coronavirus..

Capture opportunities by building on or repurposing your start-up’s abilities

In these examples CEOs instinctually figured out, 1)  their core , and 2)  market needs where their competencies/abilities could be used.

Rather than running on instinct, the Market Opportunity Navigator can help CEOs figure out their next moves in this confusing recovery. It can provide a big-picture perspective to find different potential markets for your company’s competencies/abilities. This is the first step before you zoom in and design the business model, engage in focused customer development or test your minimal viable products.

Take the example of Abionic, a nanotech startup.

Abionic: pivoting a sepsis test to fight COVID-19

Abionic’s tests can detect allergies, cardiovascular diseases, sepsis and other diseases in 5 minutes. As the pandemic hit, the company’s leaders wondered how their tests could be used in the fight against COVID-19. Using the Market Opportunity Navigator, Abionic realized that their test could diagnose sepsis up to 72 hours before a septic shock would occur in COVID-19 patients.

One of the worksheets below from the Market Opportunity Navigator provides a systematic view of Abionic’s market discovery process: The upper part of the worksheet shows Abionic’s technological assets and the lower part shows how these abilities can be used different market opportunities.

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You can download the Market Opportunity Navigator and its free worksheets here.

By looking at their technological abilities, especially in the early detection of sepsis, and clinical data showing that septic shock is one of the key complications of a coronavirus infection, Abionic identified a new market opportunity to help patients suffering from COVID-19. Their CEO Nicolas Durand explains: “If doctors are able to diagnose sepsis up to 72 hours before a septic shock would occur in COVID-19 patients they can prescribe an antibiotic therapy much earlier, thereby potentially saving the lives of millions. In order to test this application of our technology, we deployed our machines at the Hospital at the University of Geneva and see promising results!”

Beyond medical needs: Discovering new opportunities with the Market Opportunity Navigator

Abionic and other companies were able to act fast, as they already possessed technological abilities that, with limited adjustments, could be pivoted or repurposed to the newly identified COVID-19 opportunities.

Yet, because the crisis and recovery will create a “new normal,” additional opportunities will emerge that wait to be discovered by startups and existing companies. Think about looking beyond the immediate opportunities of existing customers and markets, and take a mid- to long-term view on how you can proactively identify new and emerging market opportunities. The three worksheets of the Market Opportunity Navigator help you to:

Identify new market opportunities stemming from your technology or abilities
Reveal the most attractive domain(s) by evaluating the potential and challenges of each option
Prioritize market opportunities smartly to set the boundaries for your lean experimentations

Lessons Learned

The COVID-19 crisis and recovery creates fundamental shifts in our economies and societies, and a “new normal” is emerging
Winners in this new normal will be able to quickly understand

what are their company’s core competencies/abilities, and
the new market needs where their competencies/abilities could be used


The Market Opportunity Navigator is a framework for this identification process

Worksheets and supporting material can be downloaded at wheretoplay.co

[image error]A version of this article appeared in War on the Rocks.

 

Controlling advanced chip manufacturing in the 21st century may well prove to be like controlling the oil supply in the 20th. The country that controls this manufacturing can throttle the military and economic power of others.

The United States just did this to China by limiting Huawei’s ability to outsource its in-house chip designs for manufacture by Taiwan Semiconductor Manufacturing Company (TSMC), a Taiwanese chip foundry. If negotiations fail, China may respond and escalate, via one of many agile strategic responses short of war, perhaps succeeding in coercing the foundry to stop making chips for American companies – turning the tables on the United States.[image error]

Short of war, there would be no obvious way to get those foundries back. Without them, the U.S. defense and consumer electronics industries will be set back at least five years — and because China has its own advanced chip foundries, it could become the world leader in technology for the next decade or more.

Here’s why.  And how they may do it.

And why the world just got a lot more dangerous.

There are two types of companies in the chip industry.

Companies like Intel, Samsung, SK Hynix and Micron design and make their own products (microprocessors and memory chips) in factories that they own
There are also foundries, which fabricate chips designed by consumer and military customers; TSMC in Taiwan is the largest of these in the world

The chips that TSMC makes are found in almost everything: smartphones (i.e. Apple iPhones), high-performance computing platforms, PC’s, tablets, servers, base stations and game consoles, Internet-connected devices like smart wearables, digital consumer electronics, cars, and almost every weapon system built in the 21st century. Around 60% of the chips TSMC makes are for American companies.

Background

In 2012, a bipartisan committee of the U.S. House of Representatives investigated whether the Chinese company Huawei had put backdoors into its equipment that enabled it to spy on data therein. The committee found that Huawei could not or would not explain its relationship with the Chinese government and did not comply with U.S. laws, The report recommended that no government or contractor systems include Huawei systems. In 2019, the U.S. Department of Commerce’s Bureau of Industry and Security added Huawei to its Entity List, effectively limiting the sale or transfer of American technology to the company, (though a series of licenses have been granted to waive the restrictions in some cases.)

This month, the Commerce Department required overseas semiconductor firms that use American technology and equipment to apply for a license before selling to Huawei. The order was targeted at TSMC, which is Huawei’s main supplier of advanced chips; without these, Huawei will be at a competitive disadvantage against Apple or Samsung in the smartphone industry, and against Cisco and others in the market for network equipment. (Some analysts have pointed out the order has potential loopholes.) Next up, it’s likely Washington will prohibit sales to China of the equipment used to make chips, which comes from companies like Applied Materials, KLA and Lam.

TSMC was forced to choose sides and picked the U.S. – For Now

In May 2020 TSMC announced it was going to build a $12 billion foundry in Arizona to make some of its most advanced chips. Foundries take at least three years to build and the most expensive factories on earth. Construction on TSMC’s facility is planned to start in 2021, but actual chip production will not start until 2024.

But while the TSMC announcement is welcome, if and when the Arizona foundry is built, it will only be able to make about a quarter of the chip production of TMSC’s largest semiconductor fabrication plants and would amount to just 3 percent of the manufacturing capability that TSMC currently operates in Taiwan. There they have four major manufacturing sites, called GigaFabs, each of which have 6 or 7 fabs producing thirteen million wafers a year. Compare that to the quarter million wafers they intend to produce in the U.S. in 2024. So if the United State lost TSMC in China, one new American plant would not make up the difference in capacity.

China’s Semiconductor Industry

A decade ago, China recognized that its initial success as the world’s low-cost factory was going to run its course. As the cost of Chinese labor increased, other countries like Vietnam could fill that role. As a result, China needed to build more advanced and sophisticated products on par with the United States. However, most of these products required custom chips — and China lacked the domestic manufacturing capability to make them. China uses 61 percent of the world’s chips in products for both its domestic and export markets, importing around $310 billion worth in 2018. China recognized that its inability to manufacture the most advanced chips was a strategic Achilles Heel.

[image error]China devised two plans to solve these problems. The first, the Made in China 2025 plan, is the country’s roadmap and financing vehicle to update China’s manufacturing base from making low-tech products to rapidly developing ten high-tech industries including electric cars, next-generation computing, telecommunications, robotics, artificial intelligence, and advanced chips. The goal is to reduce China’s dependence on foreign technology and promote Chinese high-tech companies globally. In addition, to encourage Chinese high-tech companies to go public in China rather than the United States, the Chinese government set up its own version of the Nasdaq called the STAR market (Shanghai Stock Exchange Science and Technology Innovation Board).

China’s second plan is the National Integrated Circuit Plan, China’s roadmap for building an indigenous semiconductor industry and accelerating chip manufacturing. The goal is to meet its local chip demand by 2030.

Make no mistake, these are not government pronouncements that don’t end up going anywhere. This is a massive national effort. China is spending over a hundred billion dollars to become a world leader in developing their semiconductor industry. The China Integrated Circuit Industry Investment Fund or Big Fundhas raised $51 billion – $22 billion in 2014 and another $29 billion in 2019. China has used the capital to start 70+ projects in the semiconductor industry (such as building fabs and foundries, acquiring foreign companies, and starting joint ventures) and have gone from zero to making 16% of the world’s chips, though today their quality is low. Going forward, China plans to start investing in chip design software, advanced materials, and semiconductor manufacturing equipment.

How Do the Chinese View Our Actions?

China believes that this is their century and sees American actions as designed to hold China back from its proper place in the world. Given the importance of controlling the supply of advanced chip manufacturing, China would be forced to respond if the United States cut off their access to this supply.

The question is whether China will view the action against Huawei as sanctions against a single company or a portent of further action against China’s access to advanced chips.

What Has China Learned From Our Prior Actions?

In the 21st century the U.S. has blinked even when its own interests were at stake. From the perspective of some China policymakers, America is exhausted from endless wars in Iraq and Afghanistan and will not fight again. They see that the United States is divided politically, distracted by the COVID-19 pandemic and unlikely to risk American lives for something as abstract as a chip factory.

Paper protests

When China has acted aggressively over the past couple of decades, it has seen that the American response has largely been paper protests. In 2012 China occupied the Scarborough Shoal and took control of it from the Philippines. As China was not ready to militarily confront the U.S. at the time, in hindsight the U.S. could have parked a carrier strike group over those shoals and likely prevented their plans for military construction. Instead, Washington blinked and did nothing but send a nasty note.

[image error]Today, the Spratly Islands have new Chinese bases bristling with surface-to-air missiles, cruise missiles and fighter jets, which has changed the calculus for a war in the western Pacific. Any attempt by the United States to control the air space in the area will face serious opposition and heavy losses. What was previously an uncontested American “lake” is now contested by China.

Up until this week Hong Kong, while part of China, was a democracy with guarantees of freedom of speech, assembly and the press. China recently tore up that agreement and is preparing to impose the same draconian limits on speech, assembly and press that muzzle the rest of China. There’s not much the U.S. can do other than express concerns and perhaps remove Hong Kong’s special trade status. But China doesn’t care. They’ve already factored the American response into their move and decided it was worth it, with the cynical calculation that any U.S. response will make Hong Kong poorer, and that any business Hong Kong loses will mostly end up in other parts of China. And a poorer Hong Kong will be punishment to its citizens for standing up for the rights they had been promised.

The day after China’s move on Hong Kong, Chinese Premier Li Keqiang left out the word “peaceful” in referring to Beijing’s desire to “reunify” with Chinese-claimed Taiwan, an apparent policy change.

The lack of an effective American response to these events has shown Chinese leadership the unwillingness of America to forcefully engage in Asian affairs. This will embolden China’s next move.

China’s Goals and Options

To respond to the United States cutting off Huawei’s access to Taiwan’s most advanced chip foundries, the Chinese government is likely thinking through their next moves. Their planning starts with they want to accomplish. It may look something like this in the preferred order.

Return to the Status Quo – Restore Huawei’s Access to TSMC fabs to secure a steady supply of chips
Don’t let the restrictions escalate
Turn the Tables – Convince TSMC/Taiwan to allow China to have sole access to TSMC
Kick Over the Table – Ensure that the TSMC fabs can’t be used by anyone

China’s Options

So how would China achieve these goals?

China may wish to avoid any escalation perhaps by accepting the American restrictions as they currently are with a promise that they will go no further.  This return to the status quo, with a restoration of Huawei’s access to TSMC’s foundry, may simply require negotiating some form of trade deal or agreeing to restrictions on the sale of Huawei networking gear (34% of their revenue). This kind of deal would let the Huawei consumer and enterprise businesses (66% of their revenue) survive and thrive. However, it requires the Chinese to back down. And they may have decided that the Rubicon has been crossed.

If China doesn’t negotiate but retaliates, the danger is that the United States ups the ante further by prohibiting TSMC from working with more Chinese firms, and/or bans the sale of the equipment used to build chips to any company in China. Such escalation may lead China to perceive that the U.S. actions are not a dispute about Huawei, but a salvo in a wider economic war.

If it gets to that point, China’s plans no longer are how to negotiate with the U.S. but how to force TSMC to do its bidding. And as TSMC is in Taiwan, in what China claims is a province of China, things can get interesting.

The most obvious option is to simply carry out the threat the Chinese government has made since 1949: that there is only one China, and Taiwan is a rebellious province, and that they will reunify China, by force if necessary. An invasion or blockade of Taiwan would give Chinese hardliners a reason to try out all their new military equipment, while distracting the masses from the pandemic economic downturn. This option has the highest risk of provoking an American military response, and while possible it’s extremely unlikely. While these more aggressive scenarios might seem implausible, China’s behavior has become more aggressive and more risk-tolerant as the COVID-19 pandemic, which began in Wuhan, roils the world.

China can achieve their immediate goals of 3 and 4 above and weaken Taiwan without an outright invasion.

One option is a major disinformation campaign against TSMC and the United States that would make current influence campaigns emanating from China pale in comparison. This would emphasize that the U.S. is the aggressor, illegally waging economic war against China. It would announce that since Taiwan is a province of China, China has the right to restrict TSMC sales to the U.S. and that China ill enforce an embargo of any TSMC sales to American-affiliated companies.

This could be coupled with an equally massive disinformation campaign to the Taiwanese people, pointing out to them that the United States won’t go to war over a semiconductor company, and that China’s requestsare fair and reasonable. (How effective a disinformation campaign would be is up for debate, given that Chinese campaigns in Taiwan’s January elections did not result in the election of China’s preferred candidate.) China could offer a no-invasion pledge in exchange, while reminding the Taiwanese government what they already know: regardless of promises the United States can’t defend them. Even if the United States attempted to intervene, there is a serious debate unfolding about how useful legacy American platforms – especially carriers – would be in a shooting war with China.

There’s a high probability Taiwan will still refuse despite all of this, so China would then ratchet up the pressure.

China might then start some type of trade war with Taiwan to ensure access, following the playbook Beijing used to coerce Korea over Terminal High Altitude Area Defense (THAAD) or Australia over its recent decision to lead a call for investigating the origins of the novel coronavirus. On the more extreme end, these Taiwanese chip foundries might be subject to an aggressive campaign of sabotage.

Finally, they could nationalize TSMC’s two less advanced fabs in mainland China. Next, if there’s no agreement, China could launch a precision guided missile strike against one of the older, less advanced TMSC fabs in Taiwan to send a message they’re serious.  They could announce they’ll destroy one foundry each week until TMSC agrees to sell only to China. Even if they destroy all the TSMC foundries in Taiwan it will still be a net win for China. It’s highly unlikely Taiwan would go to war with China over this. The end result would be that U.S. military and consumer technology would have no advanced foundries, but China would.

What Would the United States Do?

Would the United States go to war with China over chips? The loss of TSMC would mean we’d be rapidly scrambling to find alternate sources. We could turn to Intel to restart their foundry business or turn to Samsung or even Global Foundries. But the transition and recovery would take at least three to five years if not more and tens of billions of dollars.  In the meantime, we’d have second-tier status in technology.

The outcome could depend on the timing of Chinese actions.

When Might China Take Action?

An October Surprise – Before the 2020 election

The current U.S  administration may not want to start a war over a chip factory before the 2020 presidential election, but it is unpredictable enough that a campaign season focused on China policy could change the calculus.

After the 2020 election

If the presidency changes hands, the incoming administration might de-escalate and reverse original restrictions, but a lot can happen between now and January 2021.

A Trump administration in its second term and no longer worrying about reelection might reverse the ruling in exchange for a better trade deal.

Downside: Lots of economic uncertainty for the next seven months exacerbating China’s pandemic recovery. More immediate action might be required.

Lessons Learned

The dispute over Huawei’s access to TSMC has highlighted how vulnerable American industry is to the loss of its sole supply of advanced chips.
If the matter cannot be solved by negotiation, China may perceive the restrictions as economic warfare and rapidly escalate, potentially threatening Taiwan
It is not at all clear that Washington has thought through the consequences of its actions here, or that the current administration has considered chip supply as part of a wider supply chain security and national industrial policy.

It was encouraging to see Republicans and Democrats in the House and Senate propose $25 billion to help America’s semiconductor industry.The bill hasn’t yet passed, and hopefully this is only the start


Given that China has more positive options than the United States, it is surely time for those in charge to consider where this might lead

We just finished our 5th annual Hacking for Defense class at Stanford.

What a year.

At the end of the quarter each of the eight teams give a final “Lessons Learned” presentation. Unlike traditional demo days or Shark Tanks which are, “here’s how smart I am, please give me money,” a Lessons Learned presentation tells the teams’ stories of a 10-week journey of hard-won learning and discovery. For all the teams in a normal year it’s a roller coaster narrative of what happens when you discover that everything you thought you knew on day one was wrong and how they eventually got it right.

But this year? This year was something different. 32 students were scattered across the globe and given a seemingly impossible assignment-  they had 10 weeks to understand and then solve a real Dept of Defense problem – by interviewing 100 beneficiaries, stakeholders, requirements writers, et al while simultaneously building a series of minimal viable products – all while never leaving their room.

Watching each of the teams present I was left with wonder and awe about what they accomplished

Here’s how they did it and what they delivered.

Our keynote speaker for this last class was ex Secretary of Defense General Jim Mattis who gave an inspiring talk about service to the nation.

Part 1

Part 2

Part 3

Part 4

If you can’t see the four videos of General Mattis click here for the entire talk.

How Do You Get Out of the Building When You Can’t Get Out of the Building?

This year the teams had to overcome two extraordinary pandemic-created hurdles. First, most of the students were sequestering off campus and were scattered across 24 time zones. Each team of four students who would have spent the quarter working collaboratively in-person, instead were never once physically in the same room or location. Second, this class – which is built on the idea of interviewing customers/beneficiaries and stakeholders in person – now had to do all their customer discovery via a computer screen. At first this seemed to be a fatal stake through the heart of the class. How on earth would customer interviews work via video?

But we were in for two surprises. First, the students rose to the occasion, and in spite of time and physical distance, every one of them came together and acted as a unified team. Second, doing customer discovery via video actually increased the number of interviews the students were able to do each week. The eight teams spoke to over 945 beneficiaries, stakeholders, requirements writers, program managers, warfighters, legal, security, customers, etc.

A good number of the people the students needed to talk to were sheltering at home, and they weren’t surrounded by gatekeepers. While the students missed the context of standing on a navy ship or visiting a drone control station, or watching someone try their app or hardware, the teaching teams’ assessment was that remote interviews were more than an adequate substitute.

We Changed The Class Format

Going remotely we made two major changes to the class. Previously, each of the eight teams presented a weekly ten-minute summary of; here’s what we thought, here’s what we did, here’s what we found, here’s what we’re going to do next week.  While we kept that cadence it was too exhausting for all the other teams to stare at their screen watching every other team present. So we split the class in half – four teams went into Zoom breakout rooms where they met with a peer-team to discuss common issues. The remaining four were in the main Zoom classroom; one presenting as three watched and listened to the instructor comments, critiques and suggestions. We rotated the teams through the main room and breakout sessions.

The second change was the addition of guest speakers. In the past, I viewed guest speakers as time filler/entertainment that detracted from the limited in-class time we needed to listen to and coach our students. But this year we realized that our students had been staring at their screens all day and it was going to fry their heads. They deserved some entertainment/distraction. But in true Hacking for Defense practice we were going to deliver it in the form of edification and inspiration. Joe Felter and I got out our rolodex’s and invited ten distinguished guest speakers. Their talks to this year’s Hacking for Defense class can be seen here.

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Lessons Learned Presentation Format

Each of the eight teams presented a 2-minute video to provide context about their problem. This was followed by an 8-minute slide presentation describing their customer discovery journey over the 10-weeks. All the teams used the Mission Model Canvas, (videos here) Customer Development and Agile Engineering to build Minimal Viable Products, but all of their journeys were unique.

By the end the class all of the teams realized that the problem as given by the sponsor had morphed into something bigger, deeper and much more interesting.

All the presentations are worth a watch.

Team Omniscient – An Unclassified Imaging Analyst Workbench

If you can’t see the Omniscient 2-minute video click here

If you can’t see the video of the Omniscient team presenting click here

If you can’t see the Omniscient slides click here

 Mission-Driven Entrepreneurship

This class is part of a bigger idea – Mission-Driven Entrepreneurship. Instead of students or faculty coming in with their own ideas — we now have them working on societal problems, whether they’re problems for the State Department or the Department of Defense, or non-profits/NGOs, or for the City of Oakland or for energy or the environment, or for anything they’re passionate about. And the trick is we use the same Lean LaunchPad / I-Corps curriculum — and kept the same class structure – experiential, hands-on, driven this time by a mission-model not a business model. (The National Science Foundation, National Security Agency and the Common Mission Project have helped promote the expansion of the methodology worldwide.)

Mission-driven entrepreneurship is the answer to students who say, “I want to give back. I want to make my community, country or world a better place, while solving some of the toughest problems.”

Team Protocol One – Ensuring JTAC to Pilot Communication

If you can’t see the Protocol One 2-minute video click here

If you can’t see the video of the Protocol One team presenting click here

If you can’t see the Protocol One slides click here

It Started with an Idea

Hacking for Defense has its origins in the Lean LaunchPad class I first taught at Stanford in 2011. I observed that teaching case studies and/or how to write a business plan as a capstone entrepreneurship class didn’t match the hands-on chaos of a startup. And that there was no entrepreneurship class that combined experiential learning with the Lean methodology. Our goal was to teach both theory and practice.

The same year we started the class, it was adopted by the National Science Foundation to train Principal Investigators who wanted to get a federal grant for commercializing their science (an SBIR grant.) The NSF observed, “The class is the scientific method for entrepreneurship. Scientists understand hypothesis testing” and relabeled the class as the NSF I-Corps (Innovation Corps). The class is now taught in 9 regional locations supporting 98 universities and has trained over 1500 science teams. It was adopted by the National Institutes of Health as I-Corps at NIH in 2014 and at the National Security Agency in 2015.

Team SeaWatch – Maritime Security in the South China Sea

If you can’t see the SeaWatch 2-minute video click here

If you can’t see the video of the SeaWatch team presenting click here

If you can’t see the SeaWatch slides click here

Origins of Hacking For Defense

In 2016, brainstorming with Pete Newell of BMNT and Joe Felter at Stanford we observed that students in our research universities had little connection to the problems their government was trying to solve or the larger issues civil society were grappling with. Wondering how we could get students engaged, we realized the same Lean LaunchPad/I-Corps class would provide a framework to do so. That year we launched both Hacking for Defense and Hacking for Diplomacy (with Professor Jeremy Weinstein and the State Department) at Stanford.

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Team TimeFlies – Automating Air Force aircrew scheduling

If you can’t see the TimeFlies 2-minute video click here

If you can’t see the video of the TimeFlies team presenting click here

If you can’t see the TimeFlies slides click here

Goals for the Hacking for Defense Class

Our primary goal was to teach students Lean Innovation while they engaged in a national public service. Today if college students want to give back to their country they think of Teach for America, the Peace Corps, or Americorps or perhaps the US Digital Service or the GSA’s 18F. Few consider opportunities to make the world safer with the Department of Defense, Intelligence Community or other government agencies.

Next, we wanted the students to learn about the nation’s threats and security challenges while working with innovators inside the DoD and Intelligence Community. And while doing so, teach our sponsors (the innovators inside the Department of Defense (DOD) and Intelligence Community (IC)) that there is a methodology that can help them understand and better respond to rapidly evolving asymmetric threats. That if we could get teams to rapidly discover the real problems in the field using Lean methods, and only then articulate the requirements to solve them, could defense acquisition programs operate at speed and urgency and deliver timely and needed solutions.

Finally, we wanted to familiarize students about the military as a profession, its expertise, and its proper role in society. And conversely show our sponsors in the Department of Defense and Intelligence community that civilian students can make a meaningful contribution to problem understanding and rapid prototyping of solutions to real-world problems.

Team AV Combinator –  Autonomous Vehicle Safety Standards

If you can’t see the AV Combinator 2-minute video click here

If you can’t see the video of the AV Combinator team presenting click here

If you can’t see the AV Combinator slides click here

Mission-driven in 35 Universities

What started as a class is now a movement.

Hacking for Defense is offered in over 35 universities, but quickly following, Orin Herskowitz started Hacking for Energy at Columbia, Steve Weinstein started Hacking for Impact (Non-Profits) and Hacking for Local (Oakland) at Berkeley. Hacking for Conservation and Development at Duke followed. Steve Weinstein subsequently spun out versions of Hacking for Oceans at both Scripps and UC Santa Cruz.

And to help businesses recover from the pandemic the teaching team will be offering a Hacking For Recovery class this summer.

Team Anthro Energy – next generation lightweight flexible batteries

If you can’t see the Anthro Energy 2-minute video click here

If you can’t see the video of the Anthro Energy team presenting click here

If you can’t see the Anthro Energy slides click here

Team Helmsman – Navigating in GPS denied areas

If you can’t see the Helmsman 2-minute video click her

 

If you can’t see the video of the Helmsman team presenting click here

If you can’t see the Helmsman slides click here

Team Election Watch – Open Source Tool to Track Political Influence Campaigns

If you can’t see the Election Watch 2-minute video click here

If you can’t see the Election Watch video of the team presenting click here

If you can’t see the Election Watch slides click here

What’s Next for These Teams?

When they graduate, the Stanford students on these teams have the pick of jobs in startups, companies and consulting firms. Recognizing the ability of these teams to produce real results, 38 members of the venture and private equity community dialed in to these presentations. Every year they fund several teams as they launch companies. This year a record 6 of the 8 teams (Anthro Energy, AV Combinator, Election Watch, Helmsman, Omniscient and Seawatch) have decided to continue with their projects to build them into dual-use companies – selling both to the Dept of Defense and commercial businesses.) Most are applying to H4X Labs, an accelerator focused on building dual-use companies.

Student Feedback

While Stanford does a formal survey of student reviews of the class, this year we wanted more granular data on how remote learning affected their class experience.

While we had heard anecdotal stories about how the class affected the students perceptions of the Department of Defense we now had first hand evidence. The same was true for the life-changing experience of actually doing customer discovery with 100 people. The results reinforced our belief that the class, scaling across the county was helping to bridge the civilian/military divide while teaching students a set of skills that will last a lifetime.

Student feedback on the class is here

It Takes a Village

While I authored this blog post, this class is a team project. The teaching team consisted of myself and:

Pete Newell retired Army Colonel and ex Director of the Army’s Rapid Equipping Force and CEO of BMNT.
Joe Felter retired Army Colonel and former deputy assistant secretary of defense for South Asia, Southeast Asia, and Oceania
Steve Weinstein 30-year veteran of Silicon Valley technology companies and Hollywood media companies.  Steve was CEO of MovieLabs the joint R&D lab of all the major motion picture studios. He runs H4X Labs.
Tom Bedecarré the founder and CEO of AKQA, the leading digital advertising agency.
Jeff Decker a Stanford social science researcher. Jeff served in the U.S. Army as a special operations light infantry squad leader in Iraq and Afghanistan.

Our teaching assistants this year were Nate Simon and Sam Lisbonne both past graduates of Hacking for Defense, and Valeria Rincon. A special thanks to the National Security Innovation Network (NSIN) and Rich Carlin and the Office of Naval Research for supporting the program at Stanford and across the country as well Lockheed Martin and Northrop Grumman. And our course advisor – Tom Byers, Professor of Engineering and Faculty Director, STVP.

We were lucky to get a team of mentors (VC’s and entrepreneurs) who selflessly volunteered their time to help coach the teams. Thanks to Todd Basche, Teresa Briggs, Rachel Costello, Gus Hernandez, Rafi Holtzman, Katie Tobin, Robert Locke, Kevin Ray, Eric Schrader, Mark Rosekind, Don Peppers, Nini Moorhead, Daniel Bardenstein.

We were privileged to have the support of an extraordinary all volunteer team of professional senior military officers representing all branches of service attending fellowship programs at Stanford’s Hoover Institution, and Center for International Security and Cooperation (CISAC) and Asia Pacific Research Center (APARC) at the Freeman Spogli Institute (FSI) as well as from the Defense Innovation Unit. These included COL Smith-Heys, COL Liebreich and LTC Campbell – Army, CAPT Sharman, CAPT Romani – Navy, CDR Malzone – Coast Guard, LT COL Lawson, LT COL Hasseltine and LT COL Cook – USMC, LT COL Waters and LT COL Tuzel – Air Force and Mr. Smyth -State Dept.

[image error]And of course a big shout-out to our problem sponsors. At In-Q-Tel – Mark Breier/Zig Hampel, U.S. Army – LTC Leo Liebreich, U.S. Air Force – LTC Doug Snead/ MAJ Mike Rose, Joint Artificial Intelligence Center – Joe Murray/MAJ Dan Tadross, Special Operations Command Pacific – MAJ Paul Morton, United States Africa Command – Matt Moore, and from the Office of Chairman of the Joint Chief of Staff – MAJ Jeff Budis.

Be sure to check out the other Hacking For Defense classes in universities in the U.S. and the U.K.

Thanks to everyone!

The Covid-19 virus is not politically correct. It discriminates against the old and the unhealthy. The biggest risk factor in dying from the virus is age. If you’re 60 to 70 years old, you’re 30 times more likely to die from Covid-19 than if you’re under 40. And if you’re over 80, you’re 180 times more likely. It’s not that the young don’t get sick or die, but the odds are dramatically different.

In the early days of the virus epidemiologists, who believed that the virus would equally kill the young and old, predicting a million or more deaths in the U.S., wanted everyone to shelter. The result has crashed our economy. Meanwhile, economists view 15% unemployment as an unacceptable and unsustainable cost of protecting everyone and want the economy to rapidly reopen, accepting that some additional deaths are inevitable.

They both may be missing the obvious. We’ve created an equal opportunity recession when in fact, the pandemic is not equal at all.

If the data about the demographics is correct, it may be possible to dramatically reduce cases and deaths if we shelter those at greatest risk and pay them to stay sheltered until a vaccine is available. This would allow those with dramatically lower risk to get back to work and bring a faster economic recovery.

Here’s how.

We’ve spent the last 50 years working to not discriminate for age or disabilities so it’s hard to acknowledge what, if these number are correct, or even in the ballpark, the data seems to say that people over 60 are 30-180 times more likely to die of Covid-19. And ~1/3rd of those U.S. deaths have been in nursing homes.

  Age           Relative Death Rate

18

40

50

60

70

80+                  12.64

Compounding the age risk factor are chronic health problems (i.e. heart disease, high blood pressure, asthma and other respiratory diseases, obesity and diabetes.) In addition, racial and ethnic minorities seem to have been at greater risk.

A good visualization of the fatality rates by age is below. It takes data from South Korea, Spain, Italy and China. The relative fatality rates by age in the U.S. seem to track these.

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For COVID-19, data suggests that 80% or more of infections are mild or asymptomatic, 15% are severe infection, requiring oxygen and 5% are critical, requiring ventilation.  If you’re under 40, the data says you’re five times more likely to die from Covid-19 than the seasonal flu.[image error]

Today, federal and state plans to reopen the economy focus on reducing the density and duration of exposure to the virus equally, across all ages. But little emphasis has been on focusing resources to keep safe the actual people who get sick and die.

We Got it Backwards – Protect the Old Versus Everyone

The consequences of mixing young, largely asymptomatic and much lower risk, with the old who are at significantly higher risk seems like a deadly game of whack-a-mole.

As states loosen shelter-in-place restrictions, mixing young versus old as we reopen restaurants, live entertainment (theaters, concerts, sports venues,) crowded office buildings etc. guarantees unnecessary deaths.

20% of those over 60 work. 12.5% of workforce is over 60

What if we acknowledged that the virus (much like the flu) discriminates against the old. As a thought experiment, how would we design a recovery that protected the old but required minimal restricting of our economy and a rapid return to normal?  Here are some ideas.

Continue sheltering in place adults over 60 (or some other age that the data shows most elevated risk), plus those with chronic health risks as well as other affected populations
Open up the economy to everyone else
Offer everyone over 60 (and those with chronic health problems) whose job can be done remotely the option to work at home. Pay for their computer, network, etc. Offer their employer an incentive to compensate for lost productivity – until a vaccine is available
Provide Americans over 60 and those with chronic health problems whose job cannot be done remotely with a “personal payroll protection program” –pay to have them not show up at work – until a vaccine is available.
Focus our scarce testing tools first on nursing homes and their employees and front line medical workers, next to everyone over 60, then those whose illness puts them at risk and then to the general population
Provide this protected population with full health care
Provide resources ($’s for separate housing via empty hotel/airbnb rooms etc) to protect the elderly who live in multi-generational housing
Where possible continue wearing masks and distancing to reduce the risks to those under 60
Broadcast the comparative risk of getting sick/dying from Covid-19 to typical risks we lived with pre-pandemic. This would allow everyone to make comparative informed decisions.

For example, car accidents ~39,000 deaths in 2019 and over three-fourths of a million dead since 2000, ~70,000 drug overdose deaths in 2019 and over three-fourths of a million dead since 2000. All of these are avoidable, but as a society we decided that we are not shutting down our economy to solve these problems.
Understanding deaths from seasonal flu in 2018/2019 ~34,000 deaths (~25,000 deaths >65, ~8,000 100,000 died in the 1968 flu pandemic, and the 116,000 dead in 1957/58. We made different decisions in those pandemics. We may want to think about why.


Remove all business restrictions for workers and customers under a certain age. As a thought experiment, imagine restaurants serving only those under 40 (carding at the door). They would have no distancing requirements. Or that business rate themselves based on how age appropriate their virus safety is. Imagine movie theaters with special distancing showings for those over 60, nightclubs for under 30 or over 60. Same for sports and entertainment venues. Those who do attend will understand that the risks are not zero, but within the range of those they live with today.  Same with offices.
Create special hours and venues (stores, restaurants, workplaces, etc.) for those who need to shelter. Offer businesses who cater to them large financial incentives.
Create special mass transit options with over 60 subways cars, buses, etc.

This would do six things:

We’d protect the most vulnerable at-risk population
With those over 60 sheltering, jobs are now opened up for unemployed younger people
Businesses can return to normal without the burden of significant additional overhead costs
Businesses can make additional revenue catering to those who remain sheltered
The potential burden on the healthcare system would be lowered by removing the vulnerable from risk
And this plan would dramatically reduce the overall economic cost of sheltering and accelerate the recovery

We’ve spent the last 50 years fighting age discrimination, but the virus is the ultimate discriminator against the elderly. It’s unequal and unfair. But it exists. Let’s look for ways to move beyond the choice between exploding death rates and economic disaster by acknowledging what the data is showing. Shape a plan to protect the most vulnerable and let everyone else get back to work.

Note: the author is over 65 and willing to abide by these restrictions

Lessons Learned

We need to run some thought experiments about different ways we can protect the most vulnerable and restore our economy
We need to put the risks in context with other risks we’ve taken and accepted as a society versus the damage that sustained 15% unemployment would bring

What doesn’t kill me makes me stronger.

Friedrich Nietzsche

The world is a different place than it was 90 days ago. Countries traded saving lives by shutting down most of their economy. Tens of millions who had jobs are now unemployed worrying about their future. Business owners large and small are struggling to find their footing, wondering what will be the new normal when the recovery happens. For the majority of companies, the business models of the past will not return.

Hit hardest were most small business service providers. Each day as they sheltered in place watching their bank accounts dwindle, they wondered: If I can’t perform my services, what will happen to my business? The reactions ping-ponged between uncertainty, fear, panic, anger and distress. But over the last month the reaction from a growing percentage has been resolve. Resolve to leave behind elements or services in their business that no longer work in the current environment, and determination to create new ones that do.

A company that has its finger on the pulse of tens of thousands of small businesses is Honeybook. They provide the software for freelancers and small businesses to manage clients and their business – proposals, billing, contracts, payments, project tracking, etc.

Honeybook CEO Oz Alon has had a front-row seat to how their members have pivoted, providing their services in new and creative ways, and are sharing these in a special Rising Tide feature on their website. Here are a few examples:

Pivot from In-person to Online

Jill Johnson, owner of The Paint Mixer, used to offer painting parties and creative adventures in her Salt Lake City studio. She started offering paint-from-home kits and hosting private parties via Zoom for team building, social hours, and birthday parties. “Our clients are loving the experience and are very grateful. I receive emails and texts, as well as social media posts daily, and it is inspiring,” Jill says.
Regina, owner of Silly Sparkles, is a children’s entertainer offering magic/puppet shows, face painting and balloon twisting at events. Since she can’t perform in person anymore, she’s switched to virtual party packages with customized entertainment for each client. “People still have birthdays, and they still want to make them special!” Regina says. “Virtual parties are a great way to serve those clients, and they’re willing to pay for it.”
Jordan Edelson, co-founder of Chic Sketch, reimagined his events business as a virtual events business. His goal was to create a similar experience to their in-person events where guests are sketched live by their team of talented illustrators. Their team now does live sketching during virtual events over a video conferencing platform.
Melissa Rasmussen of Catering By Chef Melissa normally offers custom catering with a farm-to-table approach, but in this current business climate, she’s pivoted to offer dinner meal kits. The menu is posted on social media and on their website; customers pay their invoice online; and the meal kits are available to be picked up at their commercial kitchen or delivered for a small fee.
Florist Robin Smith of  Rhapsody in Blooms started offering virtual floral design classes. She either ships class supplies (including the flowers and a vessel) directly to participants or arranges no-contact pickups. All students have exactly the same products to work with and join a Zoom call to attend the class.

The Seven-Step Small Business Pivot Process

Honeybook CEO Oz Alon observed that there was a pattern to these pivots. Regardless of the type of service they were offering or the kind of businesses they had, they took the same seven steps:

Create an MVP, Minimal Viable Product or MVS, Minimum Viable Service—Assess your current business model. What capabilities and current services do you have? Then think about what the market needs right now and how you can adjust your services to meet those needs. What is it that people will grab out of your hands? Create an MVP or MVS to start.

Alexander Osterwalder co-creator of the business model canvas, suggests a playbook of business model moves you can make:

Shelter in place as a market opportunity

What new value propositions (products/services) can you offer to those stuck at home or to those who need to operate with new social distancing rules?

Resource pivots

How can you use/repurpose your existing resources for new offerings?

Delivery/Distribution Channel innovation

Can you move to digital/online, extending your reach and potential customers?

Opportunity to buy/acquire

Are there resources (people/physical assets) that others are abandoning that you can now get?

Jill Johnson, The Paint Mixer owner, suggests taking a look at the assets you already have. “Our pivot happened pretty quickly,” she says. “I knew as soon as our surrounding counties started to mandate closure that the business would be in trouble if I didn’t try something. After a good cry (and a glass of whiskey), I met with my team to talk ideas and short-term solutions. I looked around the studio and decided to use what we had. We offer painting parties and creative adventures. With the stock in our studios I took photos of what could be a potential ‘create-at-home kit.’”

Regina, owner of Silly Sparkles, seconds working with what you have as a starting point for a Minimum Viable Service. She says before you invest money in new equipment, it’s important to be resourceful. “When you use what you have, you’ll quickly learn what works for you and what doesn’t,” she says. “For my first virtual show, I only had magic props, green fabric for a green screen and a laptop. I didn’t need to invest a lot of money in a green screen because what I had worked just fine. I did, however, need to invest in a better mic.”

2. Customer discovery— While you might have come up with a great Minimum Viable Service, it’s just a series of guesses and assumptions. The next step is to validate the problem/need with customer discovery, by asking your existing customer base if they would be interested in your new service. You can do a poll on social media or send out an email blast to get a sense, then use video conferencing to do deep dives on real interest and intent to buy. Jill says, “We did a soft rollout with our mailing list to see if there was any interest, and there was!”

3. Rapid testing—Don’t spin your wheels trying to perfect your new service. Get it in the hands of your customers as soon as you can to test product/market fit. “Don’t spend energy building it. Create one, take a photo and try it with your current list. Then, when demand is apparent, build like crazy,” Jill says.

If you want to get started testing your idea quickly, consider giving it away for free at first. “It’s easy to get overwhelmed,” Regina says. “Instead of complicating the process, just jump in and try something! Start by offering a free, live magic show to family and friends. You’ll learn so much from this test run and it will give you momentum.”

4. Refine your offering—Another key part of rapid pivoting is a fast feedback loop. Constantly ask for feedback and act on it—improve on what’s working and tweak what’s not. Jill says, “The first 6 weeks I hand-delivered every package in the neighboring areas. I would text to let [customers] know it was outside and that I would love feedback. This touch allowed direct contact with every consumer.”

While customer feedback is great, also consider getting feedback from your peers. “Once you’ve started simple and tried a test run, it’s time to learn about how to improve your process,” Regina says. “Send out a recording of your first rough performances to other performers who have already been doing virtual parties. You’ll most likely receive insightful feedback. With some minor tweaks, you can upgrade your show significantly.”

5. Market on all your channels—Share about your new offering everywhere your audience is, whether that’s your website, email list, or on social media. Jordan Edelson of Chic Sketch shares about his new business offering on Instagram, driving customers to a specific landing page to learn more. The landing page also includes a YouTube video of an actual live event to help potential clients see how the service works.

Don’t forget to keep both your offering and your messaging simple. “Make it fun, make it accessible and make it easy for your clients to buy,” Jill advises.

6. Rely on tried-and-true tools—While some parts of your business may need to be altered, others may still work just fine, including tools, processes and frameworks that help you run and scale your business. Continue to rely on these to make pivoting business easier.

7. Share with the community—If your new service works, be sure to share this knowledge with your community, whether that’s on Facebook groups or in virtual meet-ups. In case anyone else has tried something similar, you can get feedback to refine your service. If it didn’t work, sharing with your community is still valuable as you may swap stories that may inspire you to go a different direction entirely.

What doesn’t kill me makes me stronger

Shelter in place is a mass extinction event for many industries. Not every business will survive. But what will emerge are businesses that diversified their offerings better positioned to withstand future volatility by providing complementary channels and offerings. And they’re opening up new ways service providers can scale to more customers.

“I think our Paint Mixer business is changed forever,” Jill Johnson says. “For the first time we now have a service that allows us to reach a national audience way beyond our local area. It will also allow us to create more classes that people can join virtually. I don’t think this is a short-term solution at all, but an entirely new direction that we have to take.”

Jordan Edelson of Chic Sketch observes, “There has been a paradigm shift in consumer behaviors, especially in their adoption and emotional acceptance of virtual video conferencing. The world changed overnight, and it has opened a door for our new service.”

Lessons Learned

The Seven-Step Small Business Pivot Process

Create an MVP or MVS, Minimum Viable Service
Do Customer Discovery
Rapidly test your idea
Refine your offering
Market on all your channels
Rely on tried-and-true tools
Share with the community


Carpe Diem – seize the day

We’re going to be holding a series of 5-day Hacking for the Recovery classes for businesses searching for the new normal at Stanford this summer. If you’re affiliated with Stanford, find out more or sign up at https://h4r.stanford.edu