Lean Startup Essentials

Lean Startup
Essentials
Lukas Fittl
lukas@fittl.com

STARTup Live Hagenberg
14th May 2011
Lean Startup Essentials

Agenda
Today’s focus: The early stage

• 10 - 20min blocks, quick Q&A after each
• 1: Why? & The ...
Lean Startup Essentials

Part 1:
Why? & Lean Canvas

#1
Lean Startup Essentials

#1: Introduction

About Me
• 2nd time entrepreneur
• 2007-2010: Soup.io
• The Efficient Cloud

“He...
Lean Startup Essentials

#1: Introduction

Whats the Lean Startup?
• A methodology on how to create order in
the (unavoida...
Lean Startup Essentials

#1: Introduction

Where this all comes from
• Steve Blank - Customer Development
• Alex Osterwald...
Lean Startup Essentials

#1: Lean Startup

Most startups fail from a lack of
(paying) customers.
Lean Startup Essentials

#1: Lean Startup

Startups are not just a small
version of a big company.
Lean Startup Essentials

#1: Lean Startup

Startup:
Temporary organization used to
search for a repeatable and scalable
bu...
Lean Startup Essentials

#1: Lean Startup

Your initial goal:
Improve likely success rate of your venture,
and reduce risk...
Lean Startup Essentials

#1: Lean Startup

Your Process:
Likely entirely chaotic.
No one implements the lean startup
as a ...
Lean Startup Essentials

#1: The BM Canvas

So, we need a language
in order to talk about your
startup.
Lean Startup Essentials

#1: The BM Canvas

Product is only one of the
critical aspects that make your
company work.
Lean Startup Essentials

#1: The BM Canvas

The Business Model
Canvas
Lean Startup Essentials

#1: The BM Canvas

Alex Osterwalder - Business Model Generation
Lean Startup Essentials

#1: The BM Canvas
Day

Month

No.

Who are our Key Partners?
Who are our key suppliers?
Which Key...
Lean Startup Essentials

Key Partners

#1: The BM Canvas

Customer
Customer
Relationships Segments

Key
Resources

Cost St...
Lean Startup Essentials

#1: The BM Canvas

Customer Segments
• Narrowly chosen group of
people that buy/use your
product
...
Lean Startup Essentials

#1: The BM Canvas

Channels
• How does the customer learn

Key Partners

about your product?

• B...
Lean Startup Essentials

#1: The BM Canvas

Value Proposition
• What’s the problem you’re

Key Partners

solving for the c...
Lean Startup Essentials

#1: The BM Canvas

Revenue Streams
• How much is the problem

Key Partners

worth to the customer...
Lean Startup Essentials

#1: The BM Canvas

Customer Relationships
• How do you want to interact

Key Partners

with your ...
Lean Startup Essentials

#1: The BM Canvas

Key Activities
• What are the people in your

Key Partners

company doing day ...
Lean Startup Essentials

#1: The BM Canvas

Key Resources
• Which physical assets do you

need for your company to work?
(...
Lean Startup Essentials

#1: The BM Canvas

Cost Structure
• What are your HR costs?

Key Partners

(rough estimate)

• Ma...
Lean Startup Essentials

#1: The BM Canvas

Key Partners
• Channel Partners
• Strategic Partners/Alliances
• Suppliers
• E...
Lean Startup Essentials

#1: The BM Canvas

Example: Tupalo
Key Partners
Herold /
European
Directories

Key Activities Val...
Lean Startup Essentials

#1: The BM Canvas

Example: Freckle
Key Partners

Key Activities Value
Proposition
Software Dev
M...
Lean Startup Essentials

#1: The BM Canvas

Example: Garmz
Key Partners
Marketing
Partners!

Key Activities Value
Proposit...
Lean Startup Essentials

Live Example
Someone from the audience:
Pitch us your business
4 other people:
What’s the custome...
Lean Startup Essentials

#1

Q&A
Lean Startup Essentials

#2: Customer Discovery

Part 2:
Customer Discovery
You probably already
had a product idea
Lean Startup Essentials

#2: Customer Discovery

And an implict
assumption about your
market
And now you’ve
mapped out a rough
biz model
Lean Startup Essentials

#2: Customer Discovery

Now it’s time to focus on
qualitative feedback
from the market
Lean Startup Essentials

#2: Customer Discovery

Listen to what customers
have to say - don’t execute
a fabricated value p...
Lean Startup Essentials

#2: Customer Discovery

Customer Discovery
Methods
Lean Startup Essentials

#2: Customer Discovery

Customer Interviews
30 min in-person with
your prototypical customer
Peop...
Lean Startup Essentials

#2: Customer Discovery

How to conduct an interview
1. Set context & tell your story
2. Tell your...
Lean Startup Essentials

#2: Customer Discovery

Online Market Tests:
Google Adwords
Fake Landing Page with
“Signup to be ...
#2: Customer Discovery

Lean Startup Essentials

User Groups & Conferences:
Hand out cards with invite codes landing page ...
#2: Customer Discovery

Lean Startup Essentials

Amy Hoy’s
Sales Safari:
Lurk in online forums of your
customer segment, l...
Lean Startup Essentials

#2

Q&A
Lean Startup Essentials

#3: Case Study

Part 3:
Case Study
Recap: What’s PaaS?
• The role model: Heroku
• Fully-integrated hosting for
Rails/Java/Django/etc.

• Many US clones poppi...
Rewind to Summer 2010
The idea back then:
Heroku for Europe
Efficiency!
Market Testing
• Invite codes at conferences & user meetups
• Google Adwords testing, e.g. RailsHosting.in
• Interviews wi...
Pivot
• Marketing channels hard to build up
• Hosting is a local market
• Product & engineering-driven company
much easier...
Pivot:
License technology to
hosting companies
Positioning
PaaS

?

Cloud Foundry

IaaS

OpenStack

OnApp

Mass-Market
Hosting Providers

Agencies

SMBs

Eucalyptus

“Cl...
Positioning
PaaS

Efficient Cloud

Cloud Foundry

IaaS

OpenStack

OnApp

Mass-Market
Hosting Providers

Agencies

SMBs

Eu...
Lean Startup Essentials

#1: The BM Canvas

Example: Efficient Cloud
Key Partners
System
Integrators

Key Activities Value
...
Lean Startup Essentials

Literature

Literature
Lean Startup Essentials

Literature

Steve Blank - The Four Steps to the Epiphany
steveblank.com
Lean Startup Essentials

Alex Osterwalder - Business Model Generation
businessmodelgeneration.com

Literature
Lean Startup Essentials

Literature

Eric Ries - The Lean Startup
lean.st
Lean Startup Essentials

Literature

Ash Maurya - Running Lean
book.runningleanhq.com
Lean Startup Essentials

Neil Davidson - Don’t Just Roll the Dice

Literature
Lean Startup Essentials

Thanks!
Lukas Fittl
lukas@fittl.com
Lean Startup Essentials - May 2011
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Lean Startup Essentials - May 2011

  1. 1. Lean Startup Essentials Lean Startup Essentials Lukas Fittl lukas@fittl.com STARTup Live Hagenberg 14th May 2011
  2. 2. Lean Startup Essentials Agenda Today’s focus: The early stage • 10 - 20min blocks, quick Q&A after each • 1: Why? & The Canvas • 2: Customer Discovery • 3: Case Study
  3. 3. Lean Startup Essentials Part 1: Why? & Lean Canvas #1
  4. 4. Lean Startup Essentials #1: Introduction About Me • 2nd time entrepreneur • 2007-2010: Soup.io • The Efficient Cloud “Heroku for Europe” to “PaaS technology for hosting providers” (Seedcamp 2011 company) • Collaborated with Ash Maurya on the Lean Canvas
  5. 5. Lean Startup Essentials #1: Introduction Whats the Lean Startup? • A methodology on how to create order in the (unavoidable) chaos of a startup. • Iterative approach to learning & building (as in: agile vs. waterfall) • Summarization of entrepreneurial learnings.
  6. 6. Lean Startup Essentials #1: Introduction Where this all comes from • Steve Blank - Customer Development • Alex Osterwalder - Business Model Canvas • Eric Ries - The Lean Startup • Ash Maurya - Lean Canvas
  7. 7. Lean Startup Essentials #1: Lean Startup Most startups fail from a lack of (paying) customers.
  8. 8. Lean Startup Essentials #1: Lean Startup Startups are not just a small version of a big company.
  9. 9. Lean Startup Essentials #1: Lean Startup Startup: Temporary organization used to search for a repeatable and scalable business model. As defined by Steve Blank.
  10. 10. Lean Startup Essentials #1: Lean Startup Your initial goal: Improve likely success rate of your venture, and reduce risk of failure. Enable yourself to actually make the jump into a full-time entrepreneur.
  11. 11. Lean Startup Essentials #1: Lean Startup Your Process: Likely entirely chaotic. No one implements the lean startup as a strict process. Similar to agile adoption (e.g. Kan-ban) you need to make a slow transition into more structured thinking.
  12. 12. Lean Startup Essentials #1: The BM Canvas So, we need a language in order to talk about your startup.
  13. 13. Lean Startup Essentials #1: The BM Canvas Product is only one of the critical aspects that make your company work.
  14. 14. Lean Startup Essentials #1: The BM Canvas The Business Model Canvas
  15. 15. Lean Startup Essentials #1: The BM Canvas Alex Osterwalder - Business Model Generation
  16. 16. Lean Startup Essentials #1: The BM Canvas Day Month No. Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform? What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying? What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Which ones have we established? How are they integrated with the rest of our business model? How costly are they? For whom are we creating value? Who are our most important customers? Through which Channels do our Customer Segments want to be reached? How are we reaching them now? How are our Channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines? For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues? This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit http:/ /creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. Year
  17. 17. Lean Startup Essentials Key Partners #1: The BM Canvas Customer Customer Relationships Segments Key Resources Cost Structure Key Activities Value Proposition Channels Revenue Streams
  18. 18. Lean Startup Essentials #1: The BM Canvas Customer Segments • Narrowly chosen group of people that buy/use your product • Marketplace biz models = 2 cust segmens (or more) • Matching Value Proposition, Channels, Revenue Streams and Customer Relationships Key Partners Key Activities Key Resources Cost Structure Value Proposition Customer Relationships Channels Revenue Streams Customer Segments
  19. 19. Lean Startup Essentials #1: The BM Canvas Channels • How does the customer learn Key Partners about your product? • B2B and B2C vastly different! • SEM, SEO, Friend Invites, Social Media, Direct Sales, Tradeshows, PR, Content Marketing, etc. Key Activities Key Resources Cost Structure Value Proposition Customer Relationships Channels Revenue Streams Customer Segments
  20. 20. Lean Startup Essentials #1: The BM Canvas Value Proposition • What’s the problem you’re Key Partners solving for the customer? • These might be things they’ve already started building in house, because there is an active need Key Activities Key Resources Cost Structure Value Proposition Customer Relationships Channels Revenue Streams Customer Segments
  21. 21. Lean Startup Essentials #1: The BM Canvas Revenue Streams • How much is the problem Key Partners worth to the customer? • Not how much it costs you to implement the value proposition • Avoid Free and Freemium! (marketing tactic, not rev model) Key Activities Key Resources Cost Structure Value Proposition Customer Relationships Channels Revenue Streams Customer Segments
  22. 22. Lean Startup Essentials #1: The BM Canvas Customer Relationships • How do you want to interact Key Partners with your customers? • Automated self-service vs. many in-person meetings • Determines the scalability of your business model Key Activities Key Resources Cost Structure Value Proposition Customer Relationships Channels Revenue Streams Customer Segments
  23. 23. Lean Startup Essentials #1: The BM Canvas Key Activities • What are the people in your Key Partners company doing day by day? • Create the product: Software Development, DevOps, etc. • Market the product • Integrate the product, run webinars, create whitepapers, ... Key Activities Key Resources Cost Structure Value Proposition Customer Relationships Channels Revenue Streams Customer Segments
  24. 24. Lean Startup Essentials #1: The BM Canvas Key Resources • Which physical assets do you need for your company to work? (set of test hardware, etc.) • Which other assets? (online platform, patents, etc.) • Include/exclude HR, doesn’t really matter (duplicate info) Key Partners Key Activities Key Resources Cost Structure Value Proposition Customer Relationships Channels Revenue Streams Customer Segments
  25. 25. Lean Startup Essentials #1: The BM Canvas Cost Structure • What are your HR costs? Key Partners (rough estimate) • Marketing channel costs • Infrastructure costs • It’s about Unit Economics, not your made-up 5 year plan Key Activities Key Resources Cost Structure Value Proposition Customer Relationships Channels Revenue Streams Customer Segments
  26. 26. Lean Startup Essentials #1: The BM Canvas Key Partners • Channel Partners • Strategic Partners/Alliances • Suppliers • Especially Important for direct sales biz models Key Partners Key Activities Key Resources Cost Structure Value Proposition Customer Relationships Channels Revenue Streams Customer Segments
  27. 27. Lean Startup Essentials #1: The BM Canvas Example: Tupalo Key Partners Herold / European Directories Key Activities Value Proposition Software Dev SEO Key Resources Data about businesses Customer Customer Relationships Segments #1 Finding #1: Community information, quality & location #2: Clear B2B of a business Product #1 9-to-5 folks looking for lunch options, etc. #1 Long-tail mainstream Channels #2 Promoting a business, providing correct #1 Long-tail SEO #2 Business information to owners #2 Direct Sales customers (restaurants, etc.) Cost Structure Revenue Streams HR (15 people) Infrastructure (4 servers) #1 Free Business Data #2 Hundreds/Thousands of EUR (recurring)
  28. 28. Lean Startup Essentials #1: The BM Canvas Example: Freckle Key Partners Key Activities Value Proposition Software Dev Marketing/ Copywriting Key Resources Existing audience: Mailinglists, Twitter, etc. Customer Customer Relationships Segments Tracking time Tribe-like precisely without interaction effort Freelancers Agencies Easily invoice clients with good Channels report on performed work - Word of mouth - Cross-sales - Freebies - Existing audience Cost Structure Revenue Streams HR (2 people) Hosting (1 server) 12-50 USD / month (dep. on company size)
  29. 29. Lean Startup Essentials #1: The BM Canvas Example: Garmz Key Partners Marketing Partners! Key Activities Value Proposition Marketing Biz Dev Fashion schools Software Dev Key Resources Production Factory #1 Massproducing a fashion garment Customer Customer Relationships Segments #2 Buy trendy clothes #1 Fashion designers #2 Online Shop #1 Build up your fashion brand #1 Structured work together #2 Trend-chasing hipsters Channels Fashion blogs Partnerships #1 Fashion schools #1 Fashion events #2 Word of mouth / strong brand Cost Structure Revenue Streams Production! (super expensive) Prototyping Payout to designer #2 100 EUR / piece
  30. 30. Lean Startup Essentials Live Example Someone from the audience: Pitch us your business 4 other people: What’s the customer segment? What are the channels? What’s the value proposition? What’s the revenue model? #1: The BM Canvas
  31. 31. Lean Startup Essentials #1 Q&A
  32. 32. Lean Startup Essentials #2: Customer Discovery Part 2: Customer Discovery
  33. 33. You probably already had a product idea
  34. 34. Lean Startup Essentials #2: Customer Discovery And an implict assumption about your market
  35. 35. And now you’ve mapped out a rough biz model
  36. 36. Lean Startup Essentials #2: Customer Discovery Now it’s time to focus on qualitative feedback from the market
  37. 37. Lean Startup Essentials #2: Customer Discovery Listen to what customers have to say - don’t execute a fabricated value proposition
  38. 38. Lean Startup Essentials #2: Customer Discovery Customer Discovery Methods
  39. 39. Lean Startup Essentials #2: Customer Discovery Customer Interviews 30 min in-person with your prototypical customer People like talking about their field explore their worldview.
  40. 40. Lean Startup Essentials #2: Customer Discovery How to conduct an interview 1. Set context & tell your story 2. Tell your problem hypothesis 3. Listen to their worldview 4. Ask for follow up / references
  41. 41. Lean Startup Essentials #2: Customer Discovery Online Market Tests: Google Adwords Fake Landing Page with “Signup to be notified when we launch” “Can we call you to ask a couple of Qs?”
  42. 42. #2: Customer Discovery Lean Startup Essentials User Groups & Conferences: Hand out cards with invite codes landing page with “join our soon-tolaunch beta programme” SolidRails European VPS cloud. Fully-integrated Rails hosting. Your private beta access code: OEWO8C
  43. 43. #2: Customer Discovery Lean Startup Essentials Amy Hoy’s Sales Safari: Lurk in online forums of your customer segment, learn how they talk about products & benefits
  44. 44. Lean Startup Essentials #2 Q&A
  45. 45. Lean Startup Essentials #3: Case Study Part 3: Case Study
  46. 46. Recap: What’s PaaS? • The role model: Heroku • Fully-integrated hosting for Rails/Java/Django/etc. • Many US clones popping up • VMware’s Cloud Foundry - OSS PaaS
  47. 47. Rewind to Summer 2010 The idea back then: Heroku for Europe
  48. 48. Efficiency!
  49. 49. Market Testing • Invite codes at conferences & user meetups • Google Adwords testing, e.g. RailsHosting.in • Interviews with hosting providers • Open ears to what the end-users want, and what the industry currently sells (“cloud hosting”)
  50. 50. Pivot • Marketing channels hard to build up • Hosting is a local market • Product & engineering-driven company much easier with B2B model
  51. 51. Pivot: License technology to hosting companies
  52. 52. Positioning PaaS ? Cloud Foundry IaaS OpenStack OnApp Mass-Market Hosting Providers Agencies SMBs Eucalyptus “Cloud” Providers Devs Startups Enterprises
  53. 53. Positioning PaaS Efficient Cloud Cloud Foundry IaaS OpenStack OnApp Mass-Market Hosting Providers Agencies SMBs Eucalyptus “Cloud” Providers Devs Startups Enterprises
  54. 54. Lean Startup Essentials #1: The BM Canvas Example: Efficient Cloud Key Partners System Integrators Key Activities Value Proposition Software Dev Sales Key Resources Efficiency Trade Secret Customer Customer Relationships Segments Offer PlatformSelf-service #1 Mass-market as-a-Service Linux distribution hosting providers hosting products (less than 50 ppl) for Rails, Java, .. #1 Mass-market Channels Have high hosting providers margins for (50+ ppl) Direct Sales, mass-market Tradeshows, customers #1 Enterprises Conferences #2 Developers Open-Source Cost Structure Revenue Streams HR (5 people) Test Infrastructure (6 servers) Initial Iicense fee + monthly fee for updates Var. 1: Per end-user, tiered by retail price Var. 2: Per server / CPU cores OSS “community edition” - Free
  55. 55. Lean Startup Essentials Literature Literature
  56. 56. Lean Startup Essentials Literature Steve Blank - The Four Steps to the Epiphany steveblank.com
  57. 57. Lean Startup Essentials Alex Osterwalder - Business Model Generation businessmodelgeneration.com Literature
  58. 58. Lean Startup Essentials Literature Eric Ries - The Lean Startup lean.st
  59. 59. Lean Startup Essentials Literature Ash Maurya - Running Lean book.runningleanhq.com
  60. 60. Lean Startup Essentials Neil Davidson - Don’t Just Roll the Dice Literature
  61. 61. Lean Startup Essentials Thanks! Lukas Fittl lukas@fittl.com
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