3. 75%
By 2020
Of the S&P 500
Will be companies we
have not yet heard of
- Richard Foster (2013)
Yale University Professor
85%Of new products FAIL
- Harvard Business Review
4. What if we could reduce failures by just 10%?
Or innovate at the speed of a startup?
8. Create value for customers
While minimizing or eliminating waste
LEAN THINKING
9. Ford pioneers the
assembly line
Motorola develops
Six Sigma
management based
on mass production
principles
1986
Eric Ries
creates The
Lean Startup
2008
Toyota develops
just-in-time / lean
manufacturing
and TPS
1960s - 1980s
1913
Ford & GM refine
mass production
1920s
“Lean Enterprise”
2010s
10. Lean Startup: Why Products Fail
YOU
CustomerDon’t know what the
customer wants, so you build
the wrong things A lot of the time doesn’t
actually know what they want
18. The purpose of an
experiment is to confirm or
reject a hypothesis
19. In Lean we use Minimum
Viable Products (MVPs) to
experiment
20. An MVP can be anything that
can be used to test a hypothesis
or validate an idea
MVPs should be designed to test
critical leaps of faith first
MVPs reduce uncertainty
31. “Cloud is like a fertilizer that creates Startups”
- Eric Ries
32. In addition to applying lean principles these
startups all have something else in common
33. The cloud reduces waste
By enabling customers to focus resources and time
on product development and innovation
34. 1 2 3
Elasticity PAYG Platform
Expand and contract with
market opportunities
Highly scalable services
Access huge amounts
of resources
Pay for what you use
No upfront costs
Global reach
Breadth of services
(build anything!)
Secure and trusted
by 1 mil+ customers
Richard foster also found that the rate of disruption is increasingly and new businesses need only wait 15 years before being at risk
And that sad fact is that 85% of new products fail. This is actually the HBR number. Many sources go even higher. A recent Wiley report published this week (05 MAR 2015) stated that the figure is closer to 95%. Whatever the case, if you think about your own organization, I’m sure you’ll find that the number is close enough!
Are these two statistics somehow related to one another?
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Disruption cycle is shrinking
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cycle of disruption is quickening
The good news is there are existing proven tools that can help and that’s where lean comes into the picture.
So what is lean and where did it come from?
In 1960s GM had 60% market share and a reputation for large vehicles but pretty unreliable vehicles. Meanwhile Toyota, a small manufactuer at the time, was churning out more reliable, smaller vehicles using just in time manufacturing and what was known as the Toyota Production System . GM was no slouch itself, having developed what is now know as “mass production”. But by 2004, GM’s market share stood at 25% and by 2009 they had filed for chapter 11 bankruptcy. No one wanted to buy big cars anymore.
Toyota on the other hand had become and he largest car manufacturer in the world. And this is still true today in 2015.
The keys to Toyota’s success lay in the manufacturing method they had developed which would later be known as “lean manufacturing”
It was an issue of product-market fit
So what is it?
There is a lot to lean but for simplicities sake you can think of it in this way.
Before we talk about Lean in more detail lets talk about where it came from…. I mentioned before that Lean came from Toyota but it’s roots go further back than that,
JIT improved plant flow times, throughput times, and eventually lead times to customers.
Six Sigma TPS manufacturing concepts and applied them to essentially any business process, such as procurement or change management or contract review. But, this was still about improving quality in order to squeeze a few % out of the cost base.
Lea Startup came along and applied the concepts of Lean to product development and “revenue generation” and
I talked before about how 85% of products fail. Lean introduced the idea of the wall between marketing and engineering.
Lean Startup and took this idea and turned it around. the reason for that is that there is a wall between you and your customer
You don’t know what they want
And in fact, they don’t know what they want….
from Henry Ford. “If I’d built what the customers wanted, we’d just have faster horses.”
So how does Lean do this?
SIX SIGMA nailed the process of building products efficiently and at high levels of quality. But if you are building the wrong things the right way it doesn’t matter.
LEAN focuses on building products that customers want
So how does Lean do this?
Experimentation is science. And science is driven by data. And in Lean we need data to drive decisions on choices we make in product development.
Therefore its critical to have the right data and therefore have the right metrics.
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It's not that innovators love failure
What they love is experimentation. They love to test ideas in the market, and use the results of those tests to make decisions about an innovation.
There is no failure in experimentation.
E.g.
Just read
Start by describing what an MVP is not
An MVP Is not a product with the fewest possible features to launch into a market
An MVP is anything that can be used to test a hypothesis. It might be something like what we see here. By the way, does anyone know what this is? Yes it is the first mouse developed out of Xerox. But, it could also be a fairly feature rich, mature product. Alternatively, as we’ll discuss later, it might not even be a physical thing at all! Just remember, the MVP is all about testing hypotheses.
They test critical leaps of faith first – when a “reject” result invalidates the entire product or idea.
Experimentation is science. And science is driven by data. And when we use Lean we need data to support the business and product development decisions we make
So its critical to have the right data and therefore have the right metrics.
----- Meeting Notes (5/27/15 11:11) -----
experiments are important but measuring metrics are just as important
Website hits – you don’t know how they arrived at your website or anything about what they did when they got there
Split testing provides highly actionable data.
Dave Mclure
Customer lifecycle events for a typical website.. Lifecycle will vary based on your app
This is essentially funnel metrics, which allows you to do cohort analysis
----- Meeting Notes (5/27/15 11:11) -----
Increase in conversion rates at the top flow through to revenue
Does anyone know who odeo was? Odeo was a podcast company
That became Twitter. Again, you can see that there was incredible change from what they thought would be a great idea, to when they discovered one
What made Twitter sucessful was that they were prepared to pivot their business model and functionality around the most commonly use part of their platform
Agile development
Continuous Deployment
BV = At Amazon, 75% reduction in outages related to deployments, 90% reduction in outage minutes
What made Twitter sucessful was that they were prepared to pivot their business model and functionality around the most commonly use part of their platform
Cloud and lean are fundamentally interconnected and I’m going to show you why
They are all customers
Imagine if you could take 20% of your time and resources and re-invest that into
