Sunday, September 6, 2009

Business as Science

The Scientist, originally uploaded by Nika Fadul.

Is the process of business the same as the scientific method? My contention is that especially for high tech start-ups, it just might be analogous in more ways than we tend to think.

When I used to work at a venture capital firm we used to think in terms of testing hypotheses. This appealed to me very much as a former scientist in genetics and neuroscience labs. However, I wondered how accurate the analogy really was. The view of business as science has grown on me over time however.

I think especially for start-ups they begin, like good science with an idea. It's an idea that the scientist, or entrepreneur holds great conviction in and wants to show the world is right. We often hear entrepreneurs speaking in these terms. "I wanted to prove a point," they say when referring to their business. The start-up process may well be one of testing and disproving or proving a hypothesis about a market.

In the venture capital world we were often trying to do as much work as possible to narrow down where the risk was in a new venture. What bet exactly are we making was what the partners would always want to know. In more precise terms, we were trying to figure out exactly what the bet or the hypothesis was that this venture was going to test and how likely that hypothesis appeared to be true. Like in science it is possible to have a good hypothesis but fail in the execution of the experiment. Similarly, you want a good scientist doing the research, you also want a founding team that is likely to be able to execute on the experiment so that if it is true then you are able to successfully show it.

In business, like in science, if you are successful and show that your hypothesis is right then others begin to follow you down that path. Also like in science, in doing a start-up you want to generate the correct data that will show your hypothesis is right as quickly and efficiently as possible. I think this is the thrust behind the trends for releasing early and the minimum viable product.

I'm interested in exploring this idea further that business is akin to the scientific method in many dimensions.