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LEANSTARTUPWORKSHOP
AGENDA1. Intro2. Overview of the bases of Lean Startup   1. Lean Manufacturing   2. Customer Development   3. Agile Develo...
INTRO
WHAT IS A STARTUP?• A startup is a human institution designed to deliver a new  product or service under conditions of ext...
WHY DO STARTUPSFAIL• Rarely fail because the product doesn’t work• Usually fail because there are no customers• Quality of...
THE LEAN STARTUP• Anything we can do to shrink the time between major  iterations will increase the likelihood of success....
LEAN STARTUPS GOFASTER• Commodity technology stack, highly leveraged (free/openSource, user‐generated content, SEM).• Cust...
CUSTOMERDEVELOPMENTBASES OF LEAN STARTUP
WHAT’S WRONG WITH THIS?                                            Product Development      Concept/                      ...
BUILD IT AND THEYWILL COMEOnly true for life and death products  • i.e. Biotech Cancer Cure  • Issues are development risk...
CUSTOMERDISCOVERY: STEP 1     Customer       Customer        Customer          Company     Discovery      Validation      ...
CUSTOMERVALIDATION: STEP 2    Customer    Customer     Customer   Company    Discovery   Validation   Creation   Building•...
CUSTOMERCREATIONSTEP 3  Customer     Customer       Customer    Company  Discovery    Validation     Creation    Building ...
COMPANY BUILDING:STEP 4      Customer      Customer      Customer        Company      Discovery     Validation    Creation...
GENCHIGEMBUTSUGO AND SEE FOR YOURSELF“GET OUT OF THE BUILDING” STEVE BLANK
LEANMANUFACTURINGBASES OF LEAN STARTUP
JUST IN TIME    The right material    At the right time    At the right place    In the exact    amount
STOP THE LINE    “stop and fix    problems as they    occur rather than    pushing them    down the line to be    resolved...
THE ESSENCE OF LEAN IS ENGAGINGEVERYONE IN IDENTIFYING ANDSOLVING PROBLEMS
REDUCE ALL FORMS  OF WASTE                   Waste                                                            Un-EvennessA...
8 WASTESIn LEAN 8 types of waste have been identified                     Waiting        Not using                        ...
AGILEDEVELOPMENTBASES OF LEAN STARTUP
AGILE DEVELOPMENT   Solution: Unknown
COMMODITYTECHNOLOGY STACK• Leverage = for each ounce of effort you invest in your  product, you take advantage of the effo...
ENTREPRENEURSHIP ISMANAGEMENTTHAT SOUNDS BORING
BUSINESS PLAN VS JUSTDO IT SCHOOL OFENTREPRENEURSHIP• Business Plan   • A business plan never survives a client first cont...
STARTUP = EXPERIMENT
VALUE OF A STARTUP =VALIDATED LEARNING• What products do customers really want?• How will the product grow?• Who is our cu...
VALIDATEDLEARNING
VALIDATED LEARNINGFocus energies on validated learning, learning where andwhen to invest energy results in saving time and...
MINIMIZE TOTAL TIMETHROUGH TOTAL J me through the loop     Minimize              THE LOOP                        IDEAS    ...
LEARNINGMILESTONESPlanned the opposite way:• What do we need to learn?• Use Innovation accounting to figure out what needs...
MINIMUM VIABLEPRODUCTIf you say this feature “should” be there, it doesn’t belong inyour MVP• Video MVP – Make a video how...
QUALITY INAN MVPIF WE DON’T KNOW WHO THE CUSTOMERIS, WE DON’T KNOW WHAT QUALITY IS
STARTUP’S JOB• Measure where it right and wrong• Confronting hard truths• Devise Experiments to learn how to move the real...
BUILDMEASURELEARN
BUILD MEASURELEARN
EXPERIMENTS• Do them with early adopters, not average customers• GOAL: Measure what customers did (unlike focus groups)• A...
YOUR TWO MOSTIMPORTANTASSUMPTIONS• Value Hypothesis• Growth Hypothesis
INNOVATIONACCOUNTING
INNOVATIONACCOUNTING1. Baseline - Use MVP to establish real data on where the   company is right now2. Tuning the engine -...
BASELINE• Test riskiest assumptions first• Careful with vanity metrics (up and to the right)• Use Learning milestones   • ...
TUNING THE ENGINE• Work towards second learning milestones• Every prod. Dev, marketing should be targeted at  improving on...
PIVOT OR PERSEVERESchedule a regular meeting (every 6 weeks, for instance)Startups that fails to converge to something lik...
FUNNEL METRICSBehaviors critical to engine of Growth (specific to eachbusiness)• Customer registration• Downloads• Trials•...
COHORT ANALYSIS• One of the most important tools of Startup Analysis• Don’t look at cumulative totals or gross numbers lik...
VANITY METRICS• Gross Metrics• Total Registered User• Total Paying customers,• etc
INSTEAD OFVANITYMETRICSUSE COHORT ANALYSIS AND SPLIT TESTS
THE 3 AAA OFMETRICS• Actionable – Must demonstrate clear cause and effect• Accessible – Make reports as simple as possible...
PIVOTStructured Course Correction designed to test a newfundamental hypothesis about a product, strategy andengine of grow...
CATALOG OF PIVOTS• Zoom-in – refocus on what was before a feature• Zoom-out – what was once the product becomes a feature•...
BATCHA CAUTIONARY TALE ABOUT LETTERS
SINGLE PIECE FLOWFASTER THAN BATCH• No sorting/stack/move around• Batch more efficient per step but less as a system• Fast...
ENGINE OFGROWTH
HOW CUSTOMERSDRIVE GROWTH1. Word of Mouth2. Side effect of product usage3. Funded Advertising4. Repeat purchase or use
STICKY ENGINE OFGROWTH• Designed to attract and retain customers for the long term• Relies on having a high customer reten...
VIRAL ENGINE OFGROWTH• Quantified by viral loop• Speed determined by viral coefficient• Viral Coefficient = how many new c...
PAID ENGINE OFGROWTH• Revenue from customers fuels cost of acquiring new  customers• Customer lifetime value determines ho...
FIVE WHYS ROOTCAUSE ANALYSISA technique for continuous Improvement of companyProcess.• Ask “why” five times when Something...
AN EXERCISE – BMCOF TASK RABBIT
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Transcript of "Lean startupworkshop"

  1. 1. LEANSTARTUPWORKSHOP
  2. 2. AGENDA1. Intro2. Overview of the bases of Lean Startup 1. Lean Manufacturing 2. Customer Development 3. Agile Development3. Entrepreneurship is Management4. Validated Learning5. Build - Measure – Learn6. Innovation Accounting
  3. 3. INTRO
  4. 4. WHAT IS A STARTUP?• A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.• Nothing to do with size of company, sector of the economy or industry
  5. 5. WHY DO STARTUPSFAIL• Rarely fail because the product doesn’t work• Usually fail because there are no customers• Quality of the initial idea is not correlated with success• Startups that succeed are those that manage to iterate enough times before they run out of resources• Time between these iterations is fundamental
  6. 6. THE LEAN STARTUP• Anything we can do to shrink the time between major iterations will increase the likelihood of success.• Speed is the Startup competitive advantage.
  7. 7. LEAN STARTUPS GOFASTER• Commodity technology stack, highly leveraged (free/openSource, user‐generated content, SEM).• Customer development – find out what customers want before you build it.• Agile software development – but tuned to the startup condition.
  8. 8. CUSTOMERDEVELOPMENTBASES OF LEAN STARTUP
  9. 9. WHAT’S WRONG WITH THIS? Product Development Concept/ Product Dev. Alpha/Beta Launch/ Seed Round Test 1st Ship - Create Marcom - Hire PR Agency - Create DemandMarketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” Customer Development in the High-Tech Enterprise September 2008 9
  10. 10. BUILD IT AND THEYWILL COMEOnly true for life and death products • i.e. Biotech Cancer Cure • Issues are development risks and distribution, not customer acceptanceNot true for most other products • Software, Consumer, Web • Issues are customer acceptance and market adoption
  11. 11. CUSTOMERDISCOVERY: STEP 1 Customer Customer Customer Company Discovery Validation Creation BuildingStop selling, start listening • There are no facts inside your building, so get outsideTest your hypotheses • Two are fundamental: problem and product concept
  12. 12. CUSTOMERVALIDATION: STEP 2 Customer Customer Customer Company Discovery Validation Creation Building• Develop a repeatable sales process• Only earlyvangelists are crazy enough to buy
  13. 13. CUSTOMERCREATIONSTEP 3 Customer Customer Customer Company Discovery Validation Creation Building • Creation comes after proof of sales • Creation is where you “cross the chasm” • It is a strategy not a tactic
  14. 14. COMPANY BUILDING:STEP 4 Customer Customer Customer Company Discovery Validation Creation Building • (Re)build your company’s organization & management • Re look at your mission
  15. 15. GENCHIGEMBUTSUGO AND SEE FOR YOURSELF“GET OUT OF THE BUILDING” STEVE BLANK
  16. 16. LEANMANUFACTURINGBASES OF LEAN STARTUP
  17. 17. JUST IN TIME The right material At the right time At the right place In the exact amount
  18. 18. STOP THE LINE “stop and fix problems as they occur rather than pushing them down the line to be resolved later” Jeffrey Liker and David Meier, Toyota Way Fieldbook
  19. 19. THE ESSENCE OF LEAN IS ENGAGINGEVERYONE IN IDENTIFYING ANDSOLVING PROBLEMS
  20. 20. REDUCE ALL FORMS OF WASTE Waste Un-EvennessActivities that do workload that is not not balanced add value Overburden work that creates burden for thePicture Source – Toyota Motor Company team members or processes Australia
  21. 21. 8 WASTESIn LEAN 8 types of waste have been identified Waiting Not using All of these 8 can be either Over- People production Resource “Necessary Waste” or “Un-necessary Waste” Transport or Motion Conveyance Depending on circumstance Stock & Over- Materials processing Rework
  22. 22. AGILEDEVELOPMENTBASES OF LEAN STARTUP
  23. 23. AGILE DEVELOPMENT Solution: Unknown
  24. 24. COMMODITYTECHNOLOGY STACK• Leverage = for each ounce of effort you invest in your product, you take advantage of the efforts of thousands or millions of others.• It’s easy to see how high‐leverage technology is driving costs down.• More important is its impact on speed.• Time to bring a new product to market is falling rapidly.

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  25. 25. ENTREPRENEURSHIP ISMANAGEMENTTHAT SOUNDS BORING
  26. 26. BUSINESS PLAN VS JUSTDO IT SCHOOL OFENTREPRENEURSHIP• Business Plan • A business plan never survives a client first contact • A bad plan greatly executed = dead company• Just do it • Have you ever cut a chicken’s head? (you got the picture)
  27. 27. STARTUP = EXPERIMENT
  28. 28. VALUE OF A STARTUP =VALIDATED LEARNING• What products do customers really want?• How will the product grow?• Who is our customer?• Which customer should we listen to and which should we ignore?
  29. 29. VALIDATEDLEARNING
  30. 30. VALIDATED LEARNINGFocus energies on validated learning, learning where andwhen to invest energy results in saving time and moneyTo apply scientific method, we need to identify whichhypotheses to test.
  31. 31. MINIMIZE TOTAL TIMETHROUGH TOTAL J me through the loop Minimize THE LOOP IDEAS LEARN BUILD DATA CODE MEASURE
  32. 32. LEARNINGMILESTONESPlanned the opposite way:• What do we need to learn?• Use Innovation accounting to figure out what needs to be measured to know if we are gaining validated learningWhat product needs to be built to run the experiment andmeasure?
  33. 33. MINIMUM VIABLEPRODUCTIf you say this feature “should” be there, it doesn’t belong inyour MVP• Video MVP – Make a video how it works as if it’s already done• The Concierge MVP – Do it by hand, customer by customer• Wizard of Oz MVP – 8 people behind a curtain
  34. 34. QUALITY INAN MVPIF WE DON’T KNOW WHO THE CUSTOMERIS, WE DON’T KNOW WHAT QUALITY IS
  35. 35. STARTUP’S JOB• Measure where it right and wrong• Confronting hard truths• Devise Experiments to learn how to move the real numbers closer to the ideal reflected in the business plan
  36. 36. BUILDMEASURELEARN
  37. 37. BUILD MEASURELEARN
  38. 38. EXPERIMENTS• Do them with early adopters, not average customers• GOAL: Measure what customers did (unlike focus groups)• An experiment is a PRODUCT
  39. 39. YOUR TWO MOSTIMPORTANTASSUMPTIONS• Value Hypothesis• Growth Hypothesis
  40. 40. INNOVATIONACCOUNTING
  41. 41. INNOVATIONACCOUNTING1. Baseline - Use MVP to establish real data on where the company is right now2. Tuning the engine - Fine tune from baseline towards ideal3. Pivot or persevere
  42. 42. BASELINE• Test riskiest assumptions first• Careful with vanity metrics (up and to the right)• Use Learning milestones • P.e. conversion rates • Sign up and trial rates • Customer lifetime value
  43. 43. TUNING THE ENGINE• Work towards second learning milestones• Every prod. Dev, marketing should be targeted at improving one of the drivers of it’s growth model
  44. 44. PIVOT OR PERSEVERESchedule a regular meeting (every 6 weeks, for instance)Startups that fails to converge to something like the ideal:time to pivot
  45. 45. FUNNEL METRICSBehaviors critical to engine of Growth (specific to eachbusiness)• Customer registration• Downloads• Trials• Repeat Usage• Purchase
  46. 46. COHORT ANALYSIS• One of the most important tools of Startup Analysis• Don’t look at cumulative totals or gross numbers like total revenue and total number of customers• Look at performance of each group of customers• Each group is called a Cohort
  47. 47. VANITY METRICS• Gross Metrics• Total Registered User• Total Paying customers,• etc
  48. 48. INSTEAD OFVANITYMETRICSUSE COHORT ANALYSIS AND SPLIT TESTS
  49. 49. THE 3 AAA OFMETRICS• Actionable – Must demonstrate clear cause and effect• Accessible – Make reports as simple as possible so that everyone understands them• Auditable – Ensure data is credible
  50. 50. PIVOTStructured Course Correction designed to test a newfundamental hypothesis about a product, strategy andengine of growth.A pivot requires that we keep one foot rooted in what we’velearned so far, while making a fundamental change instrategy
  51. 51. CATALOG OF PIVOTS• Zoom-in – refocus on what was before a feature• Zoom-out – what was once the product becomes a feature• Customer Segment – changing the target audience• Customer need – change to a higher customer need• Platform – from product to platform and viceversa• Business Architecture – From high margin, low volume to low margin high volume or vice versa• Value Capture – Change the way company captures value• Engine of Growth – change Viral, sticky or paid• Channel – change sales channel• Technology – deliver the same in different technology
  52. 52. BATCHA CAUTIONARY TALE ABOUT LETTERS
  53. 53. SINGLE PIECE FLOWFASTER THAN BATCH• No sorting/stack/move around• Batch more efficient per step but less as a system• Faster to catch mistakes with little to no impact• Overall performance of system more important than individual performance
  54. 54. ENGINE OFGROWTH
  55. 55. HOW CUSTOMERSDRIVE GROWTH1. Word of Mouth2. Side effect of product usage3. Funded Advertising4. Repeat purchase or use
  56. 56. STICKY ENGINE OFGROWTH• Designed to attract and retain customers for the long term• Relies on having a high customer retention rate• Tracks churn rates very carefully
  57. 57. VIRAL ENGINE OFGROWTH• Quantified by viral loop• Speed determined by viral coefficient• Viral Coefficient = how many new customers will use the product as a consequence of each new customer that signs up• Viral coefficient higher than 1 = exponential growth
  58. 58. PAID ENGINE OFGROWTH• Revenue from customers fuels cost of acquiring new customers• Customer lifetime value determines how much to spend per new customer• Cost of Acquisition (CPA) – Money spent versus new customers that signed up
  59. 59. FIVE WHYS ROOTCAUSE ANALYSISA technique for continuous Improvement of companyProcess.• Ask “why” five times when Somethingunexpected happens.• Make proportional investments in prevention at all fivelevels of the hierarchy.• Behind every supposed technical problem is usually ahuman problem. Fix the cause, not just the symptom.
  60. 60. AN EXERCISE – BMCOF TASK RABBIT
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