MM: the failure rate for tech startups is very high. This is the “hammer in the head” message to get their attention. This workshop is all about lowering the risk and improving the odds.You can facilitate this message as follows using the slide transition:When they see the tombstone/RIP ask them:F1: What do you think is the failure rate for new products launched into the market by new or established companies?F2: Why do you think it is so high?You all have fantastic innovative ideasYou are full of passion and energyYou work long days and make tremendous sacrificesSO WHAT IS WRONG?Collect their ideas on whiteboard (WB) as they go through the risks they perceive.
MM: There are 3 fundamental categories of risk that startups must deal withTechnology risk: “we can’t build it”Market risk: “no one needs it”Execution risk: “failure to perform by team or individuals due to own shortcomings”F1:Which do you think is the most deadly risk for most techstartups?Collect ideas and their reasons.
MM: Dealing with high levels of uncertainty most startups don’t get the business model right the first time aroundExample PayPal who almost closed its doors before getting it right (or some other example you like)F1:Whiteboard exercise- what are the things we need to change in order for that not to happen? What we want to get to is:Accelerate business model testing and iterationTest earlierTest faster2) Spend less moneydon’t build a full product if you can test with a landing page or a flash demo or a video (e.g. Dropbox)Eliminate activities with unproven value
MM: The term “Death Spiral” in this context comes Steve Blank, a retired Valley entrepreneur with ops roles in 8 startups. It’s what you don’t want to fall into. Learning before burning is one way to help avoid it.Transition from one bullet to the next – for each bullet, ask them what they think happens nextAnecdote: So I won’t just tell you some case story around this.I will tell you my personal story from my own venture funded startup.<use your own>
MM: Steve Blank’s work at Stanford based on experience with 8 startups paved the way for this –main goal is to eliminate waste and reduce riskPattern recognition from startup to startup – similar things went wrongEric Ries was a student of Steve’s and Steve was an advisor to one of Eric’s companiesDiscuss similarities between Lean Manufacturing and Lean Innovation/Lean StartupThe Lean methodology developed in Silicon Valley can be applied in Czech Republic, Estonia, Pakistan,
MM: Lean Approach Assumes UNCERTAINTY and the NEED TO EXPLORE AND LEARNFacilitate: let’s look at the principles of lean startup. How is each one different from the Waterfall approach we just looked at.For each bullet: Understand the Lean principle and compare to Waterfall for further clarity/distinctiveness
MM: In Traditional Waterfall Product Development Happens and THEN at launch the moment of truth occurs where the product hits the market. In Lean Practice there is an ongoing yin and yang between Customer Development (= discovering the business model) and Product Development (building the solution).Facilitate: How would you organize your team to promote thise.g. two teams that work in parallelCustomer Dev. TeamProduct Dev. TeamNo traditional “departments” until business model is proven and we are ready to execute
MM: The business model canvas allows you to describe the business model, set up some testable hypotheses, and define some real life tests to verify these hypotheses.Example for our Lean Market EntryBusiness Model Layer: Target customer for our SaaS enterprise carpooling solution is companies in metropolitan areas with 500 – 5000 employeesHypothesis Layer: 10% of the companies in this target segment will engage with us and 20% of those will buyTest Layer:We will do outreach to 200 companies and 20 or more will meet with usOf those 4 or more will buy our solutionLook for fast, easy ways to test using MVPsExtrapolate from small tests to bigger assumptions
MM: in the beginnning you may have multiple alternative business models. Put these in separate canvases and then do a sanity check.You may be able to rule out some canvases “out of the gate”, e.g.Market size too smallCustomers too hard to reach or sales cycle too longProfitability (price/margin) issuesToo many entrenched competitors, etc.Etc.(* you probably have personal examples for the above *)- With remaining two or three canvases prioritize the riskiest assumptions highestValidate qualitatively through meetings with customers to get to best canvasValidate quantitatively through survey, “soft launch” of MVP, etc.
Idea Discovery and Lean Innovation
Idea Discovery and Lean Innovation
A Systemic Approach to
Business Models that Work
Co-CEO US Market Access Center