How and When to Pivot - Lean Startup Principles Applied

The Sacred, the Profane, and the Pivot Case Study in Lean Principles David BinettiPresented at SXSW Lean Conference 2011

Approach• Steve Blank’s CDM • Sacred: I follow it religiously• Dave McClure AARRR • Profane: Dave swears. No, really.• Pivot - Eric Ries’s Pivot • [Insert Pithy Witticism Here]

CDM in Two Bullets• State business model assumptions, and iterate until validated; then• Sell before you scale; otherwise go back to step one.

AARRR Model• Acquisition• Activation• Retention• Referral• Revenue

Pivot• Shift of your business model, grounded in learning.• Implementation of “back to the start” of the CDM• Not synonymous with “change”.

How they Complement• CDM forces you to test assumptions, but assumes no metrics on its own.• AARRR can tell you when something’s wrong, but not exactly how to ﬁx it.• The Pivot brings them together in a uniﬁed framework.

Case: Votizen• Backs your online identity with your real-world voter identity.• The authentic way to write your ofﬁcials.• Disrupting the $10B political market.

1.0 1.1 2.0 3.0 4.0 CDM Hypothesis Product Facebook for politics Problem People want a stronger voice Channel Social networks Demand Viral (self-perpetuating demand) Market Resegmented (donations engine)Competitive Hyper-fragmented

1.0 1.1 2.0 3.0 4.0 Metric DescriptionAcquisition Creates accountActivation Certiﬁed authenticity Referrals Forwards to friendsRetention Uses system thrice or greater Revenue Supports causes

1.0 1.1 2.0 3.0 4.0• Just enough to get started• Six weeks, $1206 Metric v.1 v.1.1 v.2 v.3 v.4 Acquisition 5% Activation 17% Referrals - Retention - Revenue -

Improve A&A• Tried a bunch of A/B testing• If you want something done, make it part of registration ﬂow and make beneﬁt clear.

1.0 1.1 2.0 3.0 4.0• Signiﬁcant, immediate jump in conversion• Three months, ~$10K Metric v.1 v.1.1 v.2 v.3 v.4 Acquisition 5% 17% Activation 17% 90% Referrals - 4% Retention - 5% Revenue - -

Improve R&R• Same process • A/B, calls, KISSmetrics/insights• Different results • Incremental improvement• Time for a pivot!

Practical Pivots• You earned what you learned; don’t ﬂail.• Look beyond the product to the problem • “I always wanted to be more involved, this makes it so much easier.”• How to make it easier to get involved?

1.0 1.1 2.0 3.0 4.0 CDM Hypothesis Product Simple involvement tool Problem People want to be good citizens Channel Social networks Demand Viral (self-perpetuating demand) Market Resegmented (donations engine)Competitive Hyper-fragmented

Special Note:• v1.0 -> 1.1 not a pivot: incremental improvement to ﬁnd local maximum• When results proved asymptotic, need to make a change based on vision, not metrics.• There is no deterministic path to success: vision is a requirement.

1.0 1.1 2.0 3.0 4.0• @2gov on Twitter: all ofﬁcials, one address• Much better R&R• Still no revenue Metric v.1 v.1.1 v.2 v.3 v.4 Acquisition 5% 17% 42% Activation 17% 90% 83% Referrals - 4% 54% Retention - 5% 21% Revenue - - 1%

Improve Revenue• Donations Model • Conversions difﬁcult • Low Margin• Too Low to make business

1.0 1.1 2.0 3.0 4.0 CDM Hypothesis Product Simple involvement tool Problem People want to be good citizens Channel Social networks Demand Viral (self-perpetuating demand) Market Resegmented (campaign management)Competitive Hyper-fragmented

1.0 1.1 2.0 3.0 4.0• Website, analytics, dashboards.• Custom work speciﬁc to your issue.• Just one little problem... Metric v.1 v.1.1 v.2 v.3 v.4 Acquisition 5% 17% 42% 43% Activation 17% 90% 83% 85% Referrals - 4% 54% 52% Retention - 5% 21% 24% Revenue - - 1% 0%

Improve Revenue• Poor Sales Cycle (contract, cost, channel) • “I’m just not sure about this Twitter thing”• Lesson: No Signature Means No Sale

Special Note: False Positive• Easy to fool yourself • “Show Yourself the Money”• Your enthusiasm will kill you• This is why PR is so dangerous...

1.0 1.1 2.0 3.0 4.0 CDM Hypothesis Product Simple involvement tool Problem People want to be good citizens Channel Social networks Demand Viral (self-perpetuating demand) Market Resegmented (targeting direct mail)Competitive Hyper-fragmented

Freemium• Special Delivery on a per-message basis • Only pay for added value• Initial sale: $200 ﬁrst day.• Much smaller, but will expand

1.0 1.1 2.0 3.0 4.0• Model has promise; raise some funds• Next step: Customer Creation Metric v.1 v.1.1 v.2 v.3 v.4 Acquisition 5% 17% 42% 43% 51% Activation 17% 90% 83% 85% 92% Referrals - 4% 54% 52% 64% Retention - 5% 21% 24% 28% Revenue - - 1% 0% 11%

Important Notes• No PR. Period. • Contacted by Time, WSJ, Fast Company• Iteration loops got smaller, faster, fewer • Learning per dollar spent• Only went for funding after v4 18 months.

Summary• Set CDM so you know what you are trying to accomplish and when you’re ﬁnished.• AARRR is an awesome dashboard; numbers don’t lie (if you don’t lie to yourself.)• Pivot, don’t ﬂail. Want high learning/$$

Final ThoughtYou are building a business,not a product.

Feedback Wantedhttp://dbinetti.wufoo.com

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How and When to Pivot - Lean Startup Principles Applied

by David Binetti on Mar 13, 2011

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How and When to Pivot - Lean Startup Principles Applied — Presentation Transcript