Idea Discovery and Lean Innovation


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Chris Burry, Co-Ceo USMAC
Presentation @ European Innovation Academy Summer 2013 Edition

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  • 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

    1. 1. Idea Discovery and Lean Innovation A Systemic Approach to Business Models that Work Chris Burry Co-CEO US Market Access Center
    2. 2. Stay engaged and focused Ask lot’s of questions Learn from everyone © USMAC 2013 - 2 - Chris’s Simple Rules
    3. 3. © USMAC 2013 - 3 - So… where are you going to end up?
    4. 4. Our task is to increase the odds of success… © USMAC 2013 - 4 - Failure rate for new products and ideas is high…
    5. 5. Let’s brainstorm for a minute. What do you think are typical causes of failure? Research shows 3 key reasons: Technical – Product fails Execution – Team fails Market – No one wants to buy it © USMAC 2013 - 5 - What Causes Failure (and it’s not bad luck)?
    6. 6. And the winner is…. More startups fail from a lack of customers than from a failure of product development © USMAC 2013 - 6 -
    7. 7. Business Model vs. Cash Runway You are using up money…. until Business Model Changes Over Time Plan A Plan B Plan C Plan D Plan E Wall © USMAC 2013 - 7 -
    8. 8. The “Burn-Before-You-Learn” Death Spiral Build a tech team Recruit VP’s Scale Sales Staff Big “Buzz”Launch Miss numbers Replace VP Sales Miss numbers Replace VP Marketing © USMAC and StartWings LLC 2012 - 8 - Lower price Raise “down round” Replace founder CEO Join the walking dead
    9. 9. Old Thinking: How long until you have burned all your cash? © USMAC 2013 - 9 - How long does your company have to live?
    10. 10. Lean Thinking: How many pivots do you have left until you have burned all your cash? Or in other words, this is your startup….. © USMAC 2013 - 10 - How long does your company have to live?
    11. 11. So what can we do differently? Stand the model on its head and learn before you burn… By putting customers at the center of product development … and accelerating learning © USMAC 2013 - 11 -
    12. 12. Lean Startup in 3 Minutes Follow-on to “Customer Development” introduced by Steve Blank in 2005 Based personal experiences of startup failure and success Inspired by Lean Manufacturing &Agile Methods Focus on eliminating of waste and reducing risk Learn early and learn often Pivot’s are the application of learning © USMAC and StartWings LLC 2012 - 12 -
    13. 13. We begin with the customer and some simple questions: 1. What is the customer’s problem you trying to solve? 2. How do you know they have this problem? 3. How big is their pain associated with this problem 4. How much money are they willing to pay? © USMAC 2013 - 13 - So where do we begin?
    14. 14. The problem and solution are UNKNOWN and must be tested You are in search of a business model that lets you scale Multiple models will fail before you succeed (pivot) Money is scarce and time is short You need a systematic path to a business model that works! © USMAC 2013 - 14 - Lean Startup Assumptions
    15. 15. © USMAC 2013 - 15 - Figuring out your business model.... customer segments key partners cost structure revenue streams channels customer relationships key activities key resources value proposition Business Model Canvas, Source, Osterwalder: Business Model Generation
    16. 16. Build - Test – Learn Loop Customer Development Product Development © USMAC 2013 - 16 -
    17. 17. Business Model Canvas and Test Source: How #bmgen and #custdev fit perfectly « Business Model Alchemist © USMAC 2013 - 17 -
    18. 18. … In A Systematic Discovery Process Illustration source: Running Lean, Ash Maurya © USMAC 013 - 18 -
    19. 19. We begin with you and your team 1. Successful is the result of a team, not an individual. 2. One person can’t know it all 3. You must effectively communicate with each other (and your customers). 4. The best teams are coachable. 5. The best teams know that they won’t get it right the first time and change and adapt. © USMAC 2013 - 19 - So where do we begin?
    20. 20. You want: A wide variety of skills. People who are focused on winning, not on personally scoring points. People who take the time and make the effort to communicate. You don’t want: ‘Yes Men” People who argue because they can. © USMAC 2013 - 20 - What makes the right team?
    21. 21. “Balanced teams with one technical founder and one business founder raise more money, have more user growth and are less likely to scale prematurely than technical or business- heavy founding teams.” © USMAC 2013 - 21 - Does the team really matter?
    22. 22. Let’s Connect US Market Access Center 10 South Third Street, 3rd Floor San Jose, CA 95113 Our Headquarters @usmarketaccess Groups – US Market Access Center San Francisco Palo Alto San Jose +1 (214) 673-5187 Phone Email Chris Burry Co-CEO Contact © USMAC 2013 - 22 -