Tonight:                         Lean Startup Refresher                         Bernhard Kappe (Pathfinder)               ...
NOTE: Slides borrowed liberally from Steve Blank’s Lean Launchpad. Thanks,Steve!                                          ...
Lean Startup Refresher                   ©2013 Pathfinder Software   3
Agenda1. What we used to believe / What we now know2. Business Models and Customer Development3. Examples4. Questions?    ...
Part 1         What We Used to Believe           What We Now Know                                   ©2013 Pathfinder Softw...
What We Used to Believe                      ©2013 Pathfinder Software
Startups are a Smaller Version     of a Large Company                           ©2013 Pathfinder Software
What We Now Know                   ©2013 Pathfinder Software
Startups SearchCompanies Execute                    ©2013 Pathfinder Software
What We Used to Believe         Strategy                      ©2013 Pathfinder Software
Start With an Operating Plan    and Financial Model                         ©2013 Pathfinder Software
All I Need to Do is Execute the Plan                            ©2013 Pathfinder Software
All I Need to Do is Make the Forecast                            ©2013 Pathfinder Software
What We Now Know      Strategy                   ©2013 Pathfinder Software
Plan MeetsFirst ContactWithCustomers                ©2013 Pathfinder Software
Previous5-Year Plans               ©2013 Pathfinder Software
All I Need to Do is Make the Forecast                            ©2013 Pathfinder Software
No Business Plan survives first   contact with customers                          ©2013 Pathfinder Software
Planning comes before the plan                         ©2013 Pathfinder Software
Business Models                  ©2013 Pathfinder Software
Business Models                  ©2013 Pathfinder Software
Search          Execution           Business Model   Operating Plan +Strategy            Hypotheses      Financial Model  ...
What We Used to Believe         Process                      ©2013 Pathfinder Software
We Built Startups byManaging Processes    Product Management             +    Waterfall Engineering                       ...
Product Introduction Model             Product   Alpha/Beta      Launch/   Concept    Dev.        Test         1st Ship   ...
Tradition – Hire Marketing                 Product             Alpha/Beta           Launch/  Concept         Dev.         ...
Tradition – Hire Sales     Concept/          Product             Alpha/Beta             Launch/    Seed Round          Dev...
Tradition – Hire Bus Development          Concept         Product             Alpha/Beta             Launch/              ...
Tradition – Hire Engineering Concept        Product         Alpha/Beta              Launch/                 Dev.          ...
Product Introduction Model   Concept/    Product   Alpha/Beta      Launch/  Seed Round    Dev.        Test         1st Shi...
Waterfall / Product Management                Execution on Two “Knowns”                                   Requirements    ...
Waterfall / Product Management                Execution on Two “Knowns”                                   Requirements    ...
What We Now Know      Strategy                   ©2013 Pathfinder Software
More startups fail froma lack of customers than from afailure of product development                          ©2013 Pathfi...
Customer Development                       ©2013 Pathfinder Software
Search               ExecutionStrategy   Business Model                                  Operating Plan +             Hypo...
What We Used to Believe        Organization                       ©2013 Pathfinder Software
Hire and Build aFunctional Organization                          ©2013 Pathfinder Software
©2013 Pathfinder Software
©2013 Pathfinder Software
What We Now Know     Organization                    ©2013 Pathfinder Software
Founders run aCustomer Development TeamNo sales, marketing and businessdevelopment                            ©2013 Pathfi...
Search                     Execution Strategy        Business Model                                              Operating...
Putting Search first is a         radical changeIt’s not just one more methodology                             ©2013 Pathf...
What We Used to Believe         Education                      ©2013 Pathfinder Software
Entrepreneurial Education was aboutexecution                              ©2013 Pathfinder Software
Entrepreneurial Education was aboutexecution                              ©2013 Pathfinder Software
What We Now Know     Education                   ©2013 Pathfinder Software
Entrepreneurial Education begins withthe Search for a business model                              ©2013 Pathfinder Software
Search                           ExecutionStrategy       Business Model                                                   ...
Putting Search first is a         radical changeIt’s not just one more methodology                             ©2013 Pathf...
What We Used to Believe     Instructional Strategies                                ©2013 Pathfinder Software
Cases and a Business Plan were goodteaching tools                             ©2013 Pathfinder Software
Cases and a Business Plan were goodteaching tools                             ©2013 Pathfinder Software
What We Now Know   Instructional Strategies                              ©2013 Pathfinder Software
Experiential Immersion                         ~100 GOOTB connections                                       ©2013 Pathfind...
Business Model PatternsReplace Cases                                                  Nespresso                           ...
Search                                 ExecutionStrategy        Business Model                                            ...
Get Out of the BuildingJoin the 14-week Lean Startup program designed to getyour company on the path to success•   Lean St...
Part 2          Business Models and         Customer Development                                ©2013 Pathfinder Software
What’s A Company?                    ©2013 Pathfinder Software
What’s A Company? A business organization which sells a product or service in exchange for                          revenu...
What’s A Startup?                    ©2013 Pathfinder Software
A temporary organizationdesigned to searchfor a repeatable and scalable business model                                    ...
A temporary organizationdesigned to searchfor a repeatable and scalable business model                                    ...
A temporary organizationdesigned to searchfor a repeatable and scalable business model                                    ...
A temporary organizationdesigned to searchfor a repeatable and scalable business model                                    ...
A temporary organizationdesigned to searchfor a repeatable and scalablebusiness model        A Startup aims to become a   ...
How Are Companies Organized?                               ©2013 Pathfinder Software
How Are Companies Organized?       Companies are organized around Business Models                                         ...
What’s a Business Model?                           ©2013 Pathfinder Software
©2013 Pathfinder Software
Value Proposition          What Are You Building and For Who?                                               ©2013 Pathfind...
©2013 Pathfinder Software
Customer Segments              Who Are They?           Why Would They Buy?                                 ©2013 Pathfinde...
©2013 Pathfinder Software
Channels           How does your Product             Get to Customers?                                   ©2013 Pathfinder ...
©2013 Pathfinder Software
Customer Relationships        How do you Get, Keep and Grow Customers?                                                   ©...
©2013 Pathfinder Software
Revenue Streams           How do you Make Money?                                    ©2013 Pathfinder Software
©2013 Pathfinder Software
Key Resources         What are your most important Assets?                                                ©2013 Pathfinder...
©2013 Pathfinder Software
Key Partners          Who are your Partners and Suppliers?                                                 ©2013 Pathfinde...
©2013 Pathfinder Software
Key Activities          What’s Most Important for the Business?                                                    ©2013 P...
©2013 Pathfinder Software
Cost Structure           What are the Costs and Expenses                                             ©2013 Pathfinder Soft...
©2013 Pathfinder Software
But,Realize They’re Hypotheses                       ©2013 Pathfinder Software
9 Guesses                            GuessGuess    Guess                                         Guess                  Gu...
©2013 Pathfinder Software
©2013 Pathfinder Software
Customer Development  Test the Problem, Then the Solution                                        ©2013 Pathfinder Software
©2013 Pathfinder Software
©2013 Pathfinder Software
Customer Development    The Minimum Viable Product                                 ©2013 Pathfinder Software
©2013 Pathfinder Software
Customer Development        The Pivot                       ©2013 Pathfinder Software
©2013 Pathfinder Software
Customer Development         Details                       ©2013 Pathfinder Software
Customer Development ishow you search for the model                               ©2013 Pathfinder Software
©2013 Pathfinder Software
©2013 Pathfinder Software
How to Build A Startup            Idea       Business Model      Size Opportunity    Customer Development                 ...
How to Build A Startup         Business   Size of the   Customer                 Customer Idea    Model(s)   Opportunity  ...
How to Build A Startup         Size of the          Business     Size of the                        Business     Customer ...
How to Build A Startup        Size of the         Business     Size of the                       Business     Customer    ...
How to Build A Startup               Size of the                Business      Size of the                               Bu...
How to Build A Startup        Size of the         Business     Size of the                       Business     Customer    ...
Part 3Does this really work?          12 Weeks From an Idea to a Business                                                ©...
©2013 Pathfinder Software
©2013 Pathfinder Software
©2013 Pathfinder Software
©2013 Pathfinder Software
CONSUMER           OURPAIN POINTS:     SOLUTION:    Lack of                    UNIQUE                   Centralized   VARI...
DESIGNER             OURPAIN POINTS:        SOLUTION:                      Manage     Lack of         BUSINESS    BUSINESS...
LOW-FIDELITY                   MVPHIGH-FIDELITY    MVP                     ©2013 Pathfinder Software
physicalLEAN PRODUCT DEVELOPMENT              1   Generate ideaDiscovery              2   Create renderings              3...
INDUSTRY EXPERTS        +CRAIGSLIST        +CUSTOMER INTERVIEWS        =    INITIAL PRICE POINT                        ©20...
70 Manufacturers Contacted  35 Responded and Bid    4 Offered to Partner            1       Selected                      ...
OUR FIRSTPRODUCT  49%  COSTREDUCTION   ©2013 Pathfinder Software
10 DAYS OF OFFLINE SALES…      $3,200                    ©2013 Pathfinder Software
3 MONTHS   AGO       Idea                                 Design                                          Community       ...
©2013 Pathfinder Software
Menu   Expenses       ©2013 Pathfinder Software
©2013 Pathfinder Software
SEM   Email      ©2013 Pathfinder Software
Not a dire problem      Better   CloserBad                       Good           COMPANY                                   ...
PIVOT        ©2013 Pathfinder Software
©2013 Pathfinder Software
Expenses   Expenses     Expenses                      ©2013 Pathfinder Software
©2013 Pathfinder Software
SEM   Email      ©2013 Pathfinder Software
Top problem      Better   CloserBad                     Good           COMPANY                                 Manual solu...
ITERATE          ©2013 Pathfinder Software
©2013 Pathfinder Software
©2013 Pathfinder Software
SEM   Email      ©2013 Pathfinder Software
Restaurants love it      Better   CloserBad                     Good           COMPANY                                 Ven...
ITERATE          ©2013 Pathfinder Software
Requirements               ©2013 Pathfinder Software
Restaurants like it      Better   CloserBad                     Good           COMPANY                               Vendo...
Concierge MVPElectronic interfaces forcustomersManual processes behindthe scenesTest hypotheses fastwithout investing inde...
Lean StartupData Driven Process to Find a Scalable BusinessModelReduce Risk Through Rapid Hypothesis TestingGet Out of the...
Build your next great producthttp://pathfindersoftware.comT: 877.548.7248 F: 312.803.1941info@pathf.com                   ...
But can we use it in our enterprise?                              ©2013 Pathfinder Software
Wherever There’s Extreme Uncertainty                            ©2013 Pathfinder Software   149
Uncertainty in Your Product Portfolio              Existing               New           Share of Wallet                   ...
Are any enterprises using Lean Startup?                               ©2013 Pathfinder Software
Who’s Applying Lean Innovation?                                  ©2013 Pathfinder Software   152
©2013 Pathfinder Software
Protect the Startup from the Enterprise …Enterprise                         StartupExecute                            Sear...
… and the Enterprise from the Startup!Enterprise               StartupValuable Brand Must Be   Brand? What Brand?Preserved...
Startups are high risk, high reward.So don’t put all your eggs in one basket!                                 ©2013 Pathfi...
Portfolio Management                                  Example                       $1MM total portfolio                  ...
Lean Innovation Stages    Stage                Activities                         Brainstorming, Business Model           ...
Validated Customer & ProblemGoal: To have a clear understanding of your targetmarket and what problem that you solve for t...
Problem/Solution FitGoal: To have a clear understanding of the minimumsolution to your target customer’s problemMetrics   ...
10 CustomersGoal: To have 10 engaged, paying customersMetrics – each project will be         Exit Criteriadifferent       ...
100 CustomersGoal: To have 100 engaged, paying customersMetrics                         Exit CriteriaAll of the metrics fo...
1,000 CustomersGoal: To have 1,000 engaged, paying customersMetrics                                Exit CriteriaAll of the...
Transfer to ExecutionProducts that have 1,000 engaged, payingcustomers are transferred to Execution                       ...
Lean Innovation Stages    Stage                 Risk              Cost                                                 $  ...
The Four Ps of Lean Portfolio ManagementPivot - change hypotheses, go back andvalidatePersevere - keep optimizing, stay in...
Managing the Funnel with the 4 Ps  Pivot    Persevere           Promote   PuntProjects               Stage  100   50   25 ...
Portfolio ManagementGoals/Metrics          Goals   -   Get projects to move from idea to                      handoff as q...
Process Roles                ©2013 Pathfinder Software   169
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  • Run Pathfinder, Chicago Lean Startup Circle, Lean Startup Challenge, work with a number of companies on innovation and new product development.
  • You need to come up with a plan that works before you can execute that plan
  • So you start with business model (which we’ll talk about a little later -
  • Great book by Alexander Osterwalder that talks about business models.
  • Two phases – a search phase, and an execution phase
  • I’m going to show you a couple of examples of startups that participated in this summer’s lean startup challenge.
  • Here’s a company 8 weeks in from their idea. The first two minutes are their pitch, so you get a sense, and the next 8 minutes describe their hypotheses and the experiments they ran. By the way, this company is profitable, has employees, and is growing nicely.
  • Another company in our competition last summer – Unbranded designs. Think of them as Threadless for furniture.
  • Their low fidelity MVP was just a clickable prototype on an iPad – walking consumers and designers through the process. When they got to the end, people pulled out their credit card, and they had to take the order off line. From that validation, they built a high-fidelity mvp.
  • Gastrohubs
  • GastroHubs was going to be like Mint.com for restaurants. Users enter in their menu items and break them down to the ingredient level. From there, they upload all of their food expenses and see how much each of their menu items cost them. This builds awareness and helps them manage their internal food costs.
  • But we didn’t build this product, we got out of the building and started talking to customers.We talked to restaurant owners, mangers, and executives to understand who are customers were, how much of a problem cost management was, and how they would use a solution like this.
  • In addition to this, we gauged interest by building a marketing site that represented the product, as if it actually existed. This site pitched the value propositions, how the product would work and allowed users to sign up.Then, we ran search-engine-marketing and email campaigns targeting our potential customers.
  • We learned quickly that this wasn’t a viable business. Through interviews, we learned that cost management was a concern, but it wasn’t a dire problemNot to mention that this was a crowded market with a lot of competitionAnd our marketing site only managed to get 1 restaurant to sign upHowever, we learned about their real concerns:Mainly, if they are getting a fair price on their food. This told us that it was time to pivot
  • It was time to pivot (and change our name)
  • So we became Cardoona
  • Cardonna originally was like GlassDoor.com for restaurantsUsers upload their invoices, telling us how much they paid for food.From there, they receive feedback telling them if they were paying too much.This builds awareness and gives them the information they need to better negotiate with their vendors.
  • Once again, we started by getting out of the building and interviewing more restaurant owners, managers, and executives.
  • In addition to this, we gauged interest by building another marketing site.And we kept the experiments the same, so we could measure our progress through cohort analysis.
  • And we were onto something. We learned that food costs were not only a dire problem, to some it was their top problem. We also learned that many restaurants wasted time determining the true cost of food themselves.AND, our marketing site was able to sign up 12 restaurants in one week!However, even though we gave them the information they wanted, they still needed to do negotiationsSo we would just be another step in what we learned was an arduous processSo we were on the right track, but…
  • It was time to iterate!
  • So we shifted our model to be likeOrbitz for restaurantsWith this model, we would partner with vendors and gather prices and product information.So, restaurants could discover new vendors, compare prices, and place orders from our site.Saving them from further negotiations and getting them the best price.
  • So we tested this idea by not only interviewing restaurants, but also vendors, to understand if they would be willing to partner with us.
  • In addition to this, we gauged interest by building another marketing site.But this time we were pitching our value propositions to vendors to see if they were interested in this idea.
  • In short, restaurants loved this idea, but vendors did not. They were notcomfortable giving out prices to just anybody. Our marketing verified this by not signing up a single vendor. And that’s because they needed to know more about the restaurant and wanted to quote them specifically.So we were getting closer, but once again…
  • It was time to iterate!
  • Which brought us to our current solution, which is a marketplace where restaurants specify what they want, how much they need, and when they want it. From there, they begin to receive quotes from multiple food vendors and can compare prices, make a choice, and place an order directly online.
  • And we have begun pitching this solution and so far the results look promisingRestaurants still likeVendors like itBoth sides are willing to pay for itAnd we are very excited about this…. Why?
  • You can apply the basic build-measure-learn loop anywhere you have uncertainty – where you have hypotheses and want to validate or invalidate them. Think about a technical spike – throwaway code …
  • Lots of ways of looking at innovation. We like to look at it this way. Opportunities for innovation and growth in all of these areas. But the biggest reward and biggest risks are in the top quadrant.
  • Collaborate and advise a couple of these. Largest scale process we’re involved with is at United Healthcare, where we’re implementing the model we’ve developed.
  • Using this approach inside the enterprise can be dangerous.
  • Startups are inherently high risk
  • Think about this as management of a portfolio. You invest some of your portfolio in new projects, and some for follow on.
  • Funnel with 10X custdev buckets
  • Lean startup refresher

    1. 1. Tonight: Lean Startup Refresher Bernhard Kappe (Pathfinder) 6:00 Pizza and Beer 6:45 Introductions 7:00 Lean Startup Refresher 8:00 Questions Upcoming Meetups: April 18th – TBD May 16th – Mark Achler (Redbox) Members: 3101 June 20th – Chuck Templeton (OpenTable and Impact Engine)chicagoleanstartup.com ©2013 Pathfinder Software
    2. 2. NOTE: Slides borrowed liberally from Steve Blank’s Lean Launchpad. Thanks,Steve! ©2013 Pathfinder Software
    3. 3. Lean Startup Refresher ©2013 Pathfinder Software 3
    4. 4. Agenda1. What we used to believe / What we now know2. Business Models and Customer Development3. Examples4. Questions? ©2013 Pathfinder Software
    5. 5. Part 1 What We Used to Believe What We Now Know ©2013 Pathfinder Software
    6. 6. What We Used to Believe ©2013 Pathfinder Software
    7. 7. Startups are a Smaller Version of a Large Company ©2013 Pathfinder Software
    8. 8. What We Now Know ©2013 Pathfinder Software
    9. 9. Startups SearchCompanies Execute ©2013 Pathfinder Software
    10. 10. What We Used to Believe Strategy ©2013 Pathfinder Software
    11. 11. Start With an Operating Plan and Financial Model ©2013 Pathfinder Software
    12. 12. All I Need to Do is Execute the Plan ©2013 Pathfinder Software
    13. 13. All I Need to Do is Make the Forecast ©2013 Pathfinder Software
    14. 14. What We Now Know Strategy ©2013 Pathfinder Software
    15. 15. Plan MeetsFirst ContactWithCustomers ©2013 Pathfinder Software
    16. 16. Previous5-Year Plans ©2013 Pathfinder Software
    17. 17. All I Need to Do is Make the Forecast ©2013 Pathfinder Software
    18. 18. No Business Plan survives first contact with customers ©2013 Pathfinder Software
    19. 19. Planning comes before the plan ©2013 Pathfinder Software
    20. 20. Business Models ©2013 Pathfinder Software
    21. 21. Business Models ©2013 Pathfinder Software
    22. 22. Search Execution Business Model Operating Plan +Strategy Hypotheses Financial Model ©2013 Pathfinder Software
    23. 23. What We Used to Believe Process ©2013 Pathfinder Software
    24. 24. We Built Startups byManaging Processes Product Management + Waterfall Engineering ©2013 Pathfinder Software
    25. 25. Product Introduction Model Product Alpha/Beta Launch/ Concept Dev. Test 1st Ship ©2013 Pathfinder Software
    26. 26. Tradition – Hire Marketing Product Alpha/Beta Launch/ Concept Dev. Test 1st Ship - Create Marcom - Hire PR Agency - Create Demand Marketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” ©2013 Pathfinder Software
    27. 27. Tradition – Hire Sales Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship - Create Marcom - Hire PR Agency - Create DemandMarketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” • Hire Sales VP • Build Sales Sales Organization • Hire 1st Sales Staff ©2013 Pathfinder Software
    28. 28. Tradition – Hire Bus Development Concept Product Alpha/Beta Launch/ Dev. Test 1st Ship - Create Marcom - Hire PR Agency - Create Demand Marketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” • Hire Sales VP • Build Sales Channel / Sales • Pick distribution Distribution Channel Business • Hire First • Do dealsDevelopment Bus Dev ©2013 Pathfinder Software
    29. 29. Tradition – Hire Engineering Concept Product Alpha/Beta Launch/ Dev. Test 1st Ship - Create Marcom - Hire PR Agency - Create DemandMarketing Materials - Early Buzz - Launch Event - Create - “Branding” Positioning • Hire Sales VP • Build Sales Channel /Sales • Pick distribution Distribution Channel Business • Hire First • Do deals for FCSDevelopment Bus DevEngineering • Write MRD • Q/A •Tech Pubs • Waterfall ©2013 Pathfinder Software
    30. 30. Product Introduction Model Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship ©2013 Pathfinder Software
    31. 31. Waterfall / Product Management Execution on Two “Knowns” Requirements Product Features: known Design Implementation Verification Customer Problem: known MaintenanceSource: Eric Ries ©2013 Pathfinder Softwarehttp://startuplessonslearned.blogspot.com
    32. 32. Waterfall / Product Management Execution on Two “Knowns” Requirements Product Features: known Design Implementation Verification Customer Problem: known MaintenanceSource: Eric Ries ©2013 Pathfinder Softwarehttp://startuplessonslearned.blogspot.com
    33. 33. What We Now Know Strategy ©2013 Pathfinder Software
    34. 34. More startups fail froma lack of customers than from afailure of product development ©2013 Pathfinder Software
    35. 35. Customer Development ©2013 Pathfinder Software
    36. 36. Search ExecutionStrategy Business Model Operating Plan + Hypotheses Financial ModelProcess Customer & Product Management & Waterfall Development Agile Development ©2013 Pathfinder Software
    37. 37. What We Used to Believe Organization ©2013 Pathfinder Software
    38. 38. Hire and Build aFunctional Organization ©2013 Pathfinder Software
    39. 39. ©2013 Pathfinder Software
    40. 40. ©2013 Pathfinder Software
    41. 41. What We Now Know Organization ©2013 Pathfinder Software
    42. 42. Founders run aCustomer Development TeamNo sales, marketing and businessdevelopment ©2013 Pathfinder Software
    43. 43. Search Execution Strategy Business Model Operating Plan + Hypotheses Financial Model Customer Development, Product Management Process Agile Development Agile or Waterfall Development Customer Functional OrganizationOrganization Development Team, by Department Founder-driven ©2013 Pathfinder Software
    44. 44. Putting Search first is a radical changeIt’s not just one more methodology ©2013 Pathfinder Software
    45. 45. What We Used to Believe Education ©2013 Pathfinder Software
    46. 46. Entrepreneurial Education was aboutexecution ©2013 Pathfinder Software
    47. 47. Entrepreneurial Education was aboutexecution ©2013 Pathfinder Software
    48. 48. What We Now Know Education ©2013 Pathfinder Software
    49. 49. Entrepreneurial Education begins withthe Search for a business model ©2013 Pathfinder Software
    50. 50. Search ExecutionStrategy Business Model Operating Plan + Hypotheses Financial ModelProcess Customer Development, Product Management Agile Development Agile or Waterfall DevelopmentOrganization Customer Development Functional Organization Team, Founder-driven by DepartmentEducation Business Model Organizational Behavior, HR Design, Customer Mgmt, Accounting, Modeling, Development, Startup team Strategy, Operations, Leadership, Marketing, building, Entrepreneurial Manufacturing Finance, Agile Development, Customer Funnel: Get/Keep/Grow Market ©2013 Pathfinder Software
    51. 51. Putting Search first is a radical changeIt’s not just one more methodology ©2013 Pathfinder Software
    52. 52. What We Used to Believe Instructional Strategies ©2013 Pathfinder Software
    53. 53. Cases and a Business Plan were goodteaching tools ©2013 Pathfinder Software
    54. 54. Cases and a Business Plan were goodteaching tools ©2013 Pathfinder Software
    55. 55. What We Now Know Instructional Strategies ©2013 Pathfinder Software
    56. 56. Experiential Immersion ~100 GOOTB connections ©2013 Pathfinder Software
    57. 57. Business Model PatternsReplace Cases Nespresso club production Nespresso machines Nespresso pods distribution channels Nespresso .com production coffee facilites B2C 1 x machine distribution sales 57 ©2013 Pathfinder Software
    58. 58. Search ExecutionStrategy Business Model Operating Plan + Hypotheses Financial ModelProcess Customer Development, Product Management Agile Development Agile or Waterfall DevelopmentOrganization Customer Development Functional Organization Team, Founder-driven by Department Education Business Model Design, Organizational Behavior, HR Customer Development, Mgmt, Accounting, Modeling, Startup team building, Strategy, Operations, Leadersh Entrepreneurial Finance, Agile ip, Marketing, Manufacturing Development, MarketingInstructional Experiential, constructivist, learn Case, Lecture, Small Group,Strategies er-centered, Mentorship inquiry-based ©2013 Pathfinder Software
    59. 59. Get Out of the BuildingJoin the 14-week Lean Startup program designed to getyour company on the path to success• Lean Startup Classes• Great Mentors• Essential Startup Tools• $75,000 Cash and PrizesJune 17th: Entry Deadline | June 29th: BootcampOctober 3rd: Finalists Pitch http://chicagoleanchallenge.com ©2013 Pathfinder Software
    60. 60. Part 2 Business Models and Customer Development ©2013 Pathfinder Software
    61. 61. What’s A Company? ©2013 Pathfinder Software
    62. 62. What’s A Company? A business organization which sells a product or service in exchange for revenue and profit ©2013 Pathfinder Software
    63. 63. What’s A Startup? ©2013 Pathfinder Software
    64. 64. A temporary organizationdesigned to searchfor a repeatable and scalable business model ©2013 Pathfinder Software
    65. 65. A temporary organizationdesigned to searchfor a repeatable and scalable business model ©2013 Pathfinder Software
    66. 66. A temporary organizationdesigned to searchfor a repeatable and scalable business model ©2013 Pathfinder Software
    67. 67. A temporary organizationdesigned to searchfor a repeatable and scalable business model ©2013 Pathfinder Software
    68. 68. A temporary organizationdesigned to searchfor a repeatable and scalablebusiness model A Startup aims to become a company ©2013 Pathfinder Software
    69. 69. How Are Companies Organized? ©2013 Pathfinder Software
    70. 70. How Are Companies Organized? Companies are organized around Business Models ©2013 Pathfinder Software
    71. 71. What’s a Business Model? ©2013 Pathfinder Software
    72. 72. ©2013 Pathfinder Software
    73. 73. Value Proposition What Are You Building and For Who? ©2013 Pathfinder Software
    74. 74. ©2013 Pathfinder Software
    75. 75. Customer Segments Who Are They? Why Would They Buy? ©2013 Pathfinder Software
    76. 76. ©2013 Pathfinder Software
    77. 77. Channels How does your Product Get to Customers? ©2013 Pathfinder Software
    78. 78. ©2013 Pathfinder Software
    79. 79. Customer Relationships How do you Get, Keep and Grow Customers? ©2013 Pathfinder Software
    80. 80. ©2013 Pathfinder Software
    81. 81. Revenue Streams How do you Make Money? ©2013 Pathfinder Software
    82. 82. ©2013 Pathfinder Software
    83. 83. Key Resources What are your most important Assets? ©2013 Pathfinder Software
    84. 84. ©2013 Pathfinder Software
    85. 85. Key Partners Who are your Partners and Suppliers? ©2013 Pathfinder Software
    86. 86. ©2013 Pathfinder Software
    87. 87. Key Activities What’s Most Important for the Business? ©2013 Pathfinder Software
    88. 88. ©2013 Pathfinder Software
    89. 89. Cost Structure What are the Costs and Expenses ©2013 Pathfinder Software
    90. 90. ©2013 Pathfinder Software
    91. 91. But,Realize They’re Hypotheses ©2013 Pathfinder Software
    92. 92. 9 Guesses GuessGuess Guess Guess Guess Guess Guess Guess Guess ©2013 Pathfinder Software
    93. 93. ©2013 Pathfinder Software
    94. 94. ©2013 Pathfinder Software
    95. 95. Customer Development Test the Problem, Then the Solution ©2013 Pathfinder Software
    96. 96. ©2013 Pathfinder Software
    97. 97. ©2013 Pathfinder Software
    98. 98. Customer Development The Minimum Viable Product ©2013 Pathfinder Software
    99. 99. ©2013 Pathfinder Software
    100. 100. Customer Development The Pivot ©2013 Pathfinder Software
    101. 101. ©2013 Pathfinder Software
    102. 102. Customer Development Details ©2013 Pathfinder Software
    103. 103. Customer Development ishow you search for the model ©2013 Pathfinder Software
    104. 104. ©2013 Pathfinder Software
    105. 105. ©2013 Pathfinder Software
    106. 106. How to Build A Startup Idea Business Model Size Opportunity Customer Development ©2013 Pathfinder Software
    107. 107. How to Build A Startup Business Size of the Customer Customer Idea Model(s) Opportunity Discovery Validation ©2013 Pathfinder Software
    108. 108. How to Build A Startup Size of the Business Size of the Business Customer Customer Idea Opportunity Model(s) Opportunity Model(s) Discovery Validation Theory Practice ©2013 Pathfinder Software
    109. 109. How to Build A Startup Size of the Business Size of the Business Customer Customer Idea Opportunity Model(s) Opportunity Model(s) Discovery Validation ©2013 Pathfinder Software
    110. 110. How to Build A Startup Size of the Business Size of the Business Customer Customer Idea Opportunity Model(s) Opportunity Model(s) Discovery Validation • First test the problem • Next test the solution ©2013 Pathfinder Software
    111. 111. How to Build A Startup Size of the Business Size of the Business Customer Customer Idea Opportunity Model(s) Opportunity Model(s) Discovery Validation ©2013 Pathfinder Software
    112. 112. Part 3Does this really work? 12 Weeks From an Idea to a Business ©2013 Pathfinder Software
    113. 113. ©2013 Pathfinder Software
    114. 114. ©2013 Pathfinder Software
    115. 115. ©2013 Pathfinder Software
    116. 116. ©2013 Pathfinder Software
    117. 117. CONSUMER OURPAIN POINTS: SOLUTION: Lack of UNIQUE Centralized VARIETY Collection Low ACCESS to COMMUNITY Independent of Independent Design Designers Low AFFORDABLE VALUE Pieces ©2013 Pathfinder Software
    118. 118. DESIGNER OURPAIN POINTS: SOLUTION: Manage Lack of BUSINESS BUSINESS SKILLS OPERATIONS NETWORKING Online in a fragmented COMMUNITY community Regular VOTING & FEEDBACK COMMENT ©2013 Pathfinder Software
    119. 119. LOW-FIDELITY MVPHIGH-FIDELITY MVP ©2013 Pathfinder Software
    120. 120. physicalLEAN PRODUCT DEVELOPMENT 1 Generate ideaDiscovery 2 Create renderings 3 Obtain customer validation Iterate 4 Identify product value 5 Build CAD drawingsDevelopment 6 Value engineer design Iterate 7 Select manufacturing partners 8 Evaluate manufacturing processes 9 Source materialsExecution 10 Optimize packaging 11 Select delivery methods 12 Develop overall fulfillment strategy ©2013 Pathfinder Software
    121. 121. INDUSTRY EXPERTS +CRAIGSLIST +CUSTOMER INTERVIEWS = INITIAL PRICE POINT ©2013 Pathfinder Software
    122. 122. 70 Manufacturers Contacted 35 Responded and Bid 4 Offered to Partner 1 Selected ©2013 Pathfinder Software
    123. 123. OUR FIRSTPRODUCT 49% COSTREDUCTION ©2013 Pathfinder Software
    124. 124. 10 DAYS OF OFFLINE SALES… $3,200 ©2013 Pathfinder Software
    125. 125. 3 MONTHS AGO Idea Design Community Network of Physical Manufacturers Product Paying Active Website TODAY Customers ©2013 Pathfinder Software
    126. 126. ©2013 Pathfinder Software
    127. 127. Menu Expenses ©2013 Pathfinder Software
    128. 128. ©2013 Pathfinder Software
    129. 129. SEM Email ©2013 Pathfinder Software
    130. 130. Not a dire problem Better CloserBad Good COMPANY Lots of competition Only 1 signup Getting a fair price ©2013 Pathfinder Software
    131. 131. PIVOT ©2013 Pathfinder Software
    132. 132. ©2013 Pathfinder Software
    133. 133. Expenses Expenses Expenses ©2013 Pathfinder Software
    134. 134. ©2013 Pathfinder Software
    135. 135. SEM Email ©2013 Pathfinder Software
    136. 136. Top problem Better CloserBad Good COMPANY Manual solution 12 signups They still need to do negotiations ©2013 Pathfinder Software
    137. 137. ITERATE ©2013 Pathfinder Software
    138. 138. ©2013 Pathfinder Software
    139. 139. ©2013 Pathfinder Software
    140. 140. SEM Email ©2013 Pathfinder Software
    141. 141. Restaurants love it Better CloserBad Good COMPANY Vendors hesitant No signups Quote restaurants specifically ©2013 Pathfinder Software
    142. 142. ITERATE ©2013 Pathfinder Software
    143. 143. Requirements ©2013 Pathfinder Software
    144. 144. Restaurants like it Better CloserBad Good COMPANY Vendors like it Both willing to pay ©2013 Pathfinder Software
    145. 145. Concierge MVPElectronic interfaces forcustomersManual processes behindthe scenesTest hypotheses fastwithout investing indevelopmentAlso known as“flintstoning” ©2013 Pathfinder Software
    146. 146. Lean StartupData Driven Process to Find a Scalable BusinessModelReduce Risk Through Rapid Hypothesis TestingGet Out of the Building (Genchi Genbutsu)Eliminate Waste through Minimal Experiments(Build-Measure-Learn Loops)Growing Body of Knowledge, Lots ofTechniques ©2013 Pathfinder Software
    147. 147. Build your next great producthttp://pathfindersoftware.comT: 877.548.7248 F: 312.803.1941info@pathf.com ©2013 Pathfinder Software 147
    148. 148. But can we use it in our enterprise? ©2013 Pathfinder Software
    149. 149. Wherever There’s Extreme Uncertainty ©2013 Pathfinder Software 149
    150. 150. Uncertainty in Your Product Portfolio Existing New Share of Wallet New Product Development New Rev/CustomerProducts High Uncertainty Low Uncertainty New Customers Loyalty New Customer Existing Churn LTV Revenue Customers ©2013 Pathfinder Software
    151. 151. Are any enterprises using Lean Startup? ©2013 Pathfinder Software
    152. 152. Who’s Applying Lean Innovation? ©2013 Pathfinder Software 152
    153. 153. ©2013 Pathfinder Software
    154. 154. Protect the Startup from the Enterprise …Enterprise StartupExecute SearchFinancial Accounting Innovation AccountingShort Term Results Long Term Results - MaybeRisk Intolerant – Failure is not Risk Tolerant – Fail Early andTolerated Often ©2013 Pathfinder Software
    155. 155. … and the Enterprise from the Startup!Enterprise StartupValuable Brand Must Be Brand? What Brand?Preserved! ©2013 Pathfinder Software
    156. 156. Startups are high risk, high reward.So don’t put all your eggs in one basket! ©2013 Pathfinder Software
    157. 157. Portfolio Management Example $1MM total portfolio $300K for initial funding ($75K/quarter) If an EIR costs $100K, you could fund 3 new projects/quarter. This ratio would be adjusted based on failure rate. ©2013 Pathfinder Software 157
    158. 158. Lean Innovation Stages Stage Activities Brainstorming, Business Model Generation, Hypotheses Problem Interviews, Landing Pages Solution Interviews, Wireframing, Proto typing, MVP, Channel Testing, First Sales Improve product - make it indispensable Validate UVP, Full User Lifecycle Funnel (AAARR), test channels, messaging, scaling Test pricing plans, optimize/reduce customer acquisition costs, increase LTV, improve NPS Scale sales and marketing, build organization ©2013 Pathfinder Software
    159. 159. Validated Customer & ProblemGoal: To have a clear understanding of your targetmarket and what problem that you solve for themMetrics Exit Criteria• Total # of customer interviews • Have validated customer archetypes• Weekly # of customer interviews • Can depict a day in the life of a (trend graph) customer• # validated hypotheses • Have organizational and customer• # invalidated hypotheses influence maps • Understand how customers solve this problem today • Are solving a “must have” problem ©2013 Pathfinder Software 159
    160. 160. Problem/Solution FitGoal: To have a clear understanding of the minimumsolution to your target customer’s problemMetrics Exit Criteria• Total # of customer interviews • Identified the demographics of an early adopter• Weekly # of customer interviews (trend graph) • Defined the minimum features to solve this problem• # validated hypotheses • Understand the value the product provides• # invalidated hypotheses the customer • Understand the price a customer is willing to pay • Back of the napkin financial model looks promising • For indirect sales, show each channel partner’s business model ©2013 Pathfinder Software 160
    161. 161. 10 CustomersGoal: To have 10 engaged, paying customersMetrics – each project will be Exit Criteriadifferent • Identified what an engaged• # of engaged customers customer means• Funnel Metrics (example) • Determined the actions of an • Acquisition engaged customer • Unique visitors • 10 engaged, paying customers • Time on site • Activation • Average # of visits • Average conversion time • Conversion by channel• Engagement Metrics ©2013 Pathfinder Software 161
    162. 162. 100 CustomersGoal: To have 100 engaged, paying customersMetrics Exit CriteriaAll of the metrics for 10 • Identified best channelsCustomers plus: for customer acquisition• Cohort analysis for churn • Recognize the highest and engagement events risks for the project and what to do to mitigate• Customer acquisition them cost & cycle time • 100 engaged, paying• Lifetime value customers• Referral rate ©2013 Pathfinder Software 162
    163. 163. 1,000 CustomersGoal: To have 1,000 engaged, paying customersMetrics Exit CriteriaAll of the metrics for 100 Customers • Identified best channels forplus: customer acquisition• P&L • Recognize the highest risks for the project and what to do to• Breakeven projection mitigate them• Time to recover CAC • The Business Canvas is completely validated• Net promoter score (quarterly) • The product has a repeatable,• Product issue rate scalable sales and marketing model • 1,000 engaged, paying customers ©2013 Pathfinder Software 163
    164. 164. Transfer to ExecutionProducts that have 1,000 engaged, payingcustomers are transferred to Execution ©2013 Pathfinder Software 164
    165. 165. Lean Innovation Stages Stage Risk Cost $ ******* ****** $$ ***** $$$ **** $$$$ *** $$$$$ ** $$$$$$ * $$$$$$$ ©2013 Pathfinder Software
    166. 166. The Four Ps of Lean Portfolio ManagementPivot - change hypotheses, go back andvalidatePersevere - keep optimizing, stay in stagePunt - Kill the projectPromote - Move up a stage/investment level ©2013 Pathfinder Software
    167. 167. Managing the Funnel with the 4 Ps Pivot Persevere Promote PuntProjects Stage 100 50 25 12 8 6 3 ©2013 Pathfinder Software
    168. 168. Portfolio ManagementGoals/Metrics Goals - Get projects to move from idea to handoff as quickly and inexpensively as possible - When they fail, fail fastMetrics - Ultimately, IRR  But that takes 3-5 years - Average throughout by stage and overall  Use cohort analysis for this - Mean time to failure - Mean cost of failure ©2013 Pathfinder Software 168
    169. 169. Process Roles ©2013 Pathfinder Software 169
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