Lean Startup Talk for Code Academy

Rocket Fuel For Your Product Growth Lean Startup Strategy User Experience Design Agile Software Development Customer Acquisition and Retention http://pathfindersoftware.comhttp://pathfindersoftware.com Copyright © 2011 Pathfinder Software

Lean Startup 101Rocket FuelFor Your ProductGrowth Bernhard Kappe Founder and CEOLean Startup Strategy bkappe@pathf.comUser Experience Design 312.372.1058 x 6002Agile Software Development @bernhardkappeCustomer Acquisition and Retention pathfindersoftware.com/blog http://pathfindersoftware.com http://pathfindersoftware.com Copyright © 2011 Pathfinder Software

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Agenda• A Business Model, Not a Business Plan• Fast Learning Loops: Build-Measure-Learn• Learning Japanese: Genchi Genbutsu• MVP - It’s Not What You Think• The Lean Startup Path Copyright © 2011 Stratealign LLC

Your Job as an Entrepreneur: Discover a Business Model that works before you run out of Money and Time. (Then scale it.)

Questions• Is this problem worth solving?• Who’s problem are you solving?• How are they solving it now?• Does anyone care about your solution?• Will they buy it?• How do you create value for your customers?• How will you grow?• What’s your unfair advantage?• What channels will you use to get to your customers?• What are your acquisition costs per customer?• What is the lifetime value of your customer?• What’s your unit cost model? Unit revenue model?

Business Model Problem Solution Unique Value Unfair Customer Proposition Advantage Segments Top 3 Problems Top 3 features that address the problem Single, clear, Can’t be easily Target Customers compelling message copied or bought why you are different and worth buying Key Activities Channel Activity that drives Path to customers acquisition/revenue for marketing and sales Cost Structure* Revenue Model*• Customer acquisition costs (Unit, per customer) • Revenue Model• Distribution costs • Lifetime Value (Unit- per customer)• Hosting • Revenue• People, etc. • Gross Margin

Fast Learning Loops

Customer/Problem Hypotheses Problem Solution Unique Value Unfair Customer Proposition Advantage Segments Top 3 Problems Top 3 features that address the problem Single, clear, Can’t be easily Target Customers compelling message copied or bought ? why you are different and worth buying ? ? Key Activities Channel ? Activity that drives acquisition/revenue ? Path to customers for marketing and sales ? ? Cost Structure Revenue Model• Customer acquisition costs • Revenue Model• Distribution costs • Lifetime Value• Hosting• People, etc. ? • Revenue • Gross Margin ?

Problem Interviews• Customer Demographics 1 4 (Discover Subsegments)• Validate Their Top Three Problems• Discover New Problems 2 5• Rank the Problems• How Do They Solve Them Now? 3

Solution Hypotheses Problem Solution Unique Value Unfair Customer Proposition Advantage Segments Top 3 Problems Top 3 features that address the problem Single, clear, Can’t be easily Target Customers compelling message copied or bought ? why you are different and worth buying ? ? Key Activities Channel ? Activity that drives acquisition/revenue ? Path to customers for marketing and sales ? ? Cost Structure Revenue Model• Customer acquisition costs • Revenue Model• Distribution costs • Lifetime Value• Hosting• People, etc. ? • Revenue • Gross Margin ?

Solution Design

Solution Interviews• Recap Demographics and Problem• Describe and Show Solution (don’t 1 4 sell it!)• Does it Resonate? 2• What’s most important, what’s missing, what can you take away? 5• How do they ﬁnd out about solutions to this problem? 3 6• Will they pay $X?

Drill down toMinimum Viable Product (MVP) 1 4 2 5 X 3 X 6

More on MVP• Not one snapshot, but a progression of experiments• At some point, you need to start development. That’s where Agile comes in

Example MVPsDropbox: Smoke TestEgyptian Democracy Movement: Mini DemonstrationsGLIF: Kickstarter Campaign, 3D Print + VideoeSpark: Paper Instructions and Tests (Concierge MVP)Groupon: Wordpress Blog, Widget from The Point, PDFCoupons via email.

Lean Startup: Two Fast Feedback Loops

Launch!

Product/Market Fit Path to Product Market Fit9000 Customer Acquisition Cost Customer Lifetime Value/3 You Are Here67504500 You Need to Get Here! Product/Market Fit:2250 LTV/3 >= CAC 0 Month 1 Month 2 Month 3 Month 6 Month 5 Month 6 Month ? Month 8 Month 9 Month 16 Month 11 Month 12

Post Launch Goal:Increase LTV and Decrease CACDecrease CAC Increase LTV• Changes to messaging • Improve value to customer• Changes to marketing • Add features channels • Improve Features• Does the Experience Match the Marketing? • Remove features• Changes to Optimize • Find and foster loyalty Customer Acquisition Funnel/ behaviors Experience for New Users

Post Launch Fast Feedback Loops• You have real users and precise usage data on individuals - analyze it!• Make small changes fast (hours, not weeks to get into production)• When you make changes - A/B test (or do multivariate if you have big enough volumes.)

Common Mistakes• Too Broad a Segment• Not a Big Enough Problem• Surveys Instead of Interviews• Conﬂate Problems and Solutions• Confuse Users and Customers• Build Too Much (Fat Experiments)• Don’t Test Revenue Model Early Enough• Stop Experimenting When You Have Customers (No Metrics)• No UX and No Agile Copyright © 2011 Stratealign LLC

Summary• A Business Model, Not a Business Plan• Fast Learning Loops: Build-Measure-Learn• Learning Japanese: Genchi Gembutsu• MVP - It’s Not What You Think• The Lean Startup Path Copyright © 2011 Stratealign LLC

Lean Startup 101Rocket FuelFor Your ProductGrowth Bernhard Kappe Founder and CEOLean Startup Strategy bkappe@pathf.comUser Experience Design 312.372.1058 x 6002Agile Software Development @bernhardkappeCustomer Acquisition and Retention pathfindersoftware.com/blog http://pathfindersoftware.com http://pathfindersoftware.com Copyright © 2011 Pathfinder Software

Startup Scoreboard How do investors, employees, advisors and partners evaluate a startup?Prioritized Criteria Risk Traction Metrics Value Low Proﬁt High1.Traction Revenues2.Team Pilot Customers3.Social Proof Non-Paying Customers4.Model High Validated Hypothesis Low Idea/Non-Validated Too Hypothesis High Copyright © 2011 Stratealign LLC

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