The Lean Start Up
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The Lean Start Up

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Introduction to the concept of the lean start-up at the University of Kent

Introduction to the concept of the lean start-up at the University of Kent

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The Lean Start Up The Lean Start Up Presentation Transcript

  • THE LEAN START-UP G.T. Viki (2011)
  • The Lean Thinkers
    • Steve Blank
    • ( http://steveblank.com / )
    • Eric Ries
    • ( http:// www.startuplessonslearned.com )
    • Ash Maurya
    • http://www.ashmaurya.com/
    • Brant Copper
    • (http ://market-by-numbers.com / )
    • Alexander Osterwalder
    • ( http://www.businessmodelgeneration.com / )
  • Your Business Idea Sucks!
    • LET ME SAVE YOU FUTURE PAIN AND JUST TELL YOU NOW….
    • Your Business Idea SUCKS
    • Your Start-Up Will Probably Fail
  • Your Business Idea Sucks!
    • Most start-ups fail.
      • Over 90% of start-ups fail early (1-5 years).
      • Of the successful ones, over two thirds report changing their initial idea to another one.
    • Why do start-ups fail?
      • Most people cite things like, bad leadership, bad teamwork, poor marketing.
      • While this might be true, the answer to this question can come as surprise to some.
  • Your Business Idea Sucks!
    • Most start-up actually fail because they built something nobody wants!!!
      • There is no amount of leadership, team work and marketing that can save a start-up selling stuff that nobody wants!
      • Not because of bad technology (only 10%), but because there in no sustainable business model (over 90%).
    • Most entrepreneurs have great vision.
      • Most of us get sucked into this reality distortion field.
      • This is great, and is responsible for a lot of innovation.
  • Start-up Vs. Established Company
    • But there is a difference between a start-up and an established business
      • A Start-up is:
        • Unknown problem, Unknown Solution, Unknown Customer.
      • An Established Business is:
        • Know Problem, Known Customer, Known/Unknown Solution.
    • Also important to distinguish between start-ups going into established markets.
    • Versus those creating a new market or selling a radical innovation.
  • A Start-up Is An Experiment
    • The effectively means a start-up is an experiment:
      • The founders’ vision is the hypothesis.
      • Validating this hypothesis is the task for a start-up.
        • i.e. Is what we are proposing to build/sell what people want?
      • Only when this hypothesis is validated, should money be invested in scaling the start-up.
  • A Start-up Is An Experiment
    • This means that start-ups need different management principles from established businesses.
    • Interestingly, most start-ups follow the canonical model:
      • Build in stealth, alpha test, beta test, launch party!
  • A Start-up Is An Experiment
    • If the start-up has VC money, they hire staff (marketing, sales, managers, etc etc… ).
      • May be even move into new premises!
    • Everybody wants to be Facebook or Google…
      • The ratio of companies like FB and Google to other start-ups is 1/1000.
  • A Start-up Is An Experiment
    • The business plan, in its conventional form is not a good idea for start-ups.
      • Remember, A Start-up is:
        • Unknown problem, Unknown Solution, Unknown Customer.
      • So lets just call it what it is… A Business Guess!
  • A Start-up Is An Experiment
    • Heresy: Business plan competitions (LOL!!)
    • Heresy: Business idea competitions (LOL!!)
      • Why would you give money to people on the basis of their guesses?
      • Winner of these competitions are people who are best at selling their sucky ideas!
        • In year one, I will make £300K. In year two, I will make £1 million (LOL!!!!!!!!!!!!)
  • Is there a better way?
    • What if we made explicit it that your business idea is a guess.
      • Then developed a rigorous methodology for testing this.
    • This is what a Lean Start-up is.
    • It is a method for iterating from Plan A , to a plan that works .
      • The speed with which a company can do this is critical for success.
  • Customer Development
    • Document your Plan A
      • This is NOT a Business Plan.
      • It is a way to capture your businesses hypotheses.
        • Who are the customers, what problems do they have, what solution are you proposing.
        • What is the path to your customers, marketing channels, what is your revenue model and cost structure.
        • What key metrics are you going to use to measure success.
      • All these are hypotheses that will need to be tested and validated.
  • The Lean Canvas
  • Customer Development
    • Then systematically test this plan…
    • You have to leave the building.
      • The founders have to do this!
      • 1) Problem/Solution Fit
      • Do you have a problem worth solving?
        • Before you build, first find out if there is sufficient pain in your customer base to make your business viable.
        • This is where you find out if people are going to want what you are proposing to build.
        • It is also a chance to discover a minimal feature set.
  • Customer Development
      • 2) Product/Market Fit
      • Have you built something people want?
        • Once you have a problem worth solving, you can start building a minimum viable product (MVP).
        • You have to take this product, as you are building it , to customers for their feedback.
        • This is the time to also test whether your path to customers is scalable.
        • This is also the point to test pricing, and actually ask customer to pay for the product.
  • Problems
    • Remember that at any point in customer development you might run into problems.
      • People don’t have the problem you were hypothesising.
      • People don’t like the solution you built.
      • People don’t want to pay for the solution you develop.
      • People use the product once and don’t come back.
  • The Pivot
    • If you run into any of these problems you don’t quit!
    • You also don’t just persevere “the plane into the ground”.
    • You have to do a PIVOT.
      • Keep one foot in what you have learnt and then change one other thing and test again!
      • This is why the companies that can run these tests quickly and get to a plan that works quickly, are more likely to succeed.
  • After Customer Development
    • After you have problem/solution fit and product/market fit, you are ready to scale.
    • This is the point at which the typical business plan makes sense.
    • It is also the point when companies should now put in money to hire sales people, marketing people, hr managers, etc etc.
    • This is also the best time to seek press attention.
  • After Customer Development
  • What About Vision?
    • So are we saying vision is unnecessary?
    • Vision in actually critical… customer often don’t know what they what.
      • They will ask for a faster horse.
      • This is the reason I don’t like focus groups so much.
    • Entrepreneurship should be based on vision.
    • But this vision has to be validate, before vast resources are poured into the enterprise.
  • What About Vision?
    • Methods of validation should be business relevant.
      • Find out what problems customers have and then use vision to develop solutions.
      • Get customers to use the product and see what they struggle with.
      • The number one test is get customers to start paying you for the solution.
        • This is when you find out if you really have a business!
  • An Incubator Idea
    • We are already giving students money when they win business plan competitions .
    • But imagine a different approach.
      • Students win a business model competition instead.
      • They attend one or two seminars on the lean method.
      • They then go out there and apply these methods as much as they can in two weeks.
      • They come back and present their business models to a panel of judges who then pick the winners.
  • An Incubator Idea
    • These winners then get the initial funding (£2-£3K).
    • We then incubate these three or four start-ups here at Kent over the summer.
    • In those three months they have to spend all their time on the start-ups.
    • They get mentoring and support from various people (we also already do some of this).
      • Investors, business support, lecturers, invited guests.
  • An Incubator Idea
    • At the end of the summer, they have to be ready for launch at the scale/company building phase.
    • They then do a demo day for investors.
    • The university gets a small non-dilutable share holding in all these companies.
    • Currently, the university is giving money for free.
    • This makes sense if the companies are going to fail anyway.
  • An Incubator Idea
    • But the lean method increases chances of success.
    • So this might be more viable…
    • Check out Y-Combinator for a similar model… http://ycombinator.com/
    • Check out also FBFund for a similar model… http://fbfund.com/
  • THANK YOU! twitter: @gtviki