Everything You Knew About Startups is Wrong, And How to Make it Right
 

Everything You Knew About Startups is Wrong, And How to Make it Right

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    Everything You Knew About Startups is Wrong, And How to Make it Right Everything You Knew About Startups is Wrong, And How to Make it Right Presentation Transcript

    • Everything you knew about starting a company is wrong.  And how to do it right.
      Steve Blank
      Stanford School of Engineering
      www.steveblank.com
      Twitter: sgblank
    • More startups fail from a lack of customers than from a failure of product development
    • Traditional Product Introduction
      Concept
      Product Dev.
      Alpha/Beta Test
      Launch/
      1st Ship
    • Traditional Product IntroductionHas Two Implicit Assumptions
      Customer Problem: known
      Concept
      Product Dev.
      Alpha/Beta Test
      Launch/
      1st Ship
      Product Features: known
    • Tradition – HireMarketing
      Concept
      Product Dev.
      Alpha/Beta Test
      Launch/
      1st Ship
      - Create Demand
      - Launch Event
      - “Branding”
      - Hire PR Agency
      - Early Buzz
      • Create Marcom
      Materials
      - Create Positioning
      Marketing
    • Tradition – Hire Sales
      Concept
      Product Dev.
      Alpha/Beta Test
      Launch/
      1st Ship
      - Create Demand
      - Launch Event
      - “Branding”
      - Hire PR Agency
      - Early Buzz
      • Create Marcom
      Materials
      - Create Positioning
      Marketing
      • Build Sales Organization
      • Hire Sales VP
      • Hire 1st Sales Staff
      Sales
    • Tradition – HireBusiness Development
      Concept
      Product Dev.
      Alpha/Beta Test
      Launch/
      1st Ship
      - Create Demand
      - Launch Event
      - “Branding”
      - Hire PR Agency
      - Early Buzz
      • Create Marcom
      Materials
      - Create Positioning
      Marketing
      • Build Sales Organization
      • Hire Sales VP
      • Hire 1st Sales Staff
      Sales
      Business
      Development
      • Hire First Bus Dev
      • Do deals for FCS
    • Tradition – HireEngineering/Product Management
      Concept
      Product Dev.
      Alpha/Beta Test
      Launch/
      1st Ship
      - Create Demand
      - Launch Event
      - “Branding”
      - Hire PR Agency
      - Early Buzz
      • Create Marcom
      Materials
      - Create Positioning
      Marketing
      • Build Sales Organization
      • Hire Sales VP
      • Hire 1st Sales Staff
      Sales
      Business
      Development
      • Hire First Bus Dev
      • Do deals for FCS
      Engineering/Product Mgmt
      • Write Requirements
      • Waterfall Development
      • Q/A
      • Tech Pubs
    • Engineering Executes a Waterfall Process
      Concept
      Product Dev.
      Alpha/Beta Test
      Launch/
      1st Ship
      Require-ments
      Design
      Implement
      Verify
      Maintain
    • Waterfall / Product ManagementExecution on Two “Knowns”
      Requirements
      Product Features: known
      Design
      Implementation
      Verification
      Customer Problem: known
      Maintenance
      Source: Eric Rieshttp://startuplessonslearned.blogspot.com
    • This is A Plan For Failure
      Customer Problems and Product Features are hypotheses
      Sales & Marketing costs are front loaded
      focused on execution vs. learning & discovery
      First Customer Ship becomes the goal
      Execution & hiring predicated on business plan hypothesis
      Heavy spending hit if product launch is wrong
      Financial projections assume success
      =
      You don’t know if you’re wrong untilyou’re out of business/money
    • An Inexpensive Fix
      Focus on Customers and Markets from Day One
      How?
    • Traditional Product Introduction
      Concept/Bus. Plan
      Product Dev.
      Alpha/Beta Test
      Launch/1st Ship
      Customer Development
      Company
      Building
      CustomerDiscovery
      CustomerValidation
      Customer Creation
      Customer Development
    • Agile Development
      Waterfall Product Development
      Require-ments
      Design
      Implement
      Verify
      Maintain
      Agile Product Development
    • Lean StartupCustomer Problem + Product Features are Unknown
      Problem: Unknown
      Solution: Unknown
      Source: Eric Rieshttp://startuplessonslearned.blogspot.com
    • Customer Development
      CustomerDiscovery
      Company
      Building
      CustomerValidation
      Customer Creation
      Pivot
      The founders
      Get the heck Out of the Building
      ^
    • Customer Development
      CustomerDiscovery
      Company
      Building
      CustomerValidation
      Customer Creation
      Pivot
      • Discovery
      • Test hypotheses I.e. problem and product concept
      • Validation
      • Build a repeatable and scalable sales process
      • Creation
      • Scale via relentless execution and fill the sales pipeline
      • Building
      • (Re)build company’s organization & management
    • Customer Discovery
      CustomerDiscovery
      CustomerValidation
      Company
      Building
      CustomerCreation
      Stop selling, start listening
      Test your hypotheses
      Continuous Discovery
      Done by founders
    • Customer Validation
      CustomerDiscovery
      CustomerValidation
      Customer Creation
      Company
      Building
      Pivot
      • Repeatable and scalable business model?
      • PassionateEarlyvangelists?
      • Pivot back to Discovery if no customers
    • The Pivot
      • The heart of Customer Development
      • Iteration without crisis
      • Fast, agile and opportunistic
    • Speeding Up Cycle Time
      • Speed of cycle minimizes cash needs
      • Minimum feature set speeds up cycle time
      • Near instantaneous customer feedback drives feature set
    • 22
      Customer Creation
      CustomerDiscovery
      CustomerValidation
      Company
      Building
      CustomerCreation
      • Creation comes after proof of sales
      • $’s for scale
      • Lean Startups are not cheap startups
    • Company Building
      Company
      Building
      Customer Creation
      CustomerValidation
      CustomerDiscovery
      • (Re)build company’s organization & management
      • Re look at your mission
    • Not All Startups Are Equal
    • Small Business
      Startup
      Small Business Startups
      • Serve known customer with known product
      • Feed the family
    • Small Business
      Startup
      Exit Criteria
      • Business Model found
      - Profitable business
      • Existing team
      < $1M in revenue
      Small Business Startups
      • known customer known product
      • Feed the family
    • Scalable
      Startup
      Large Company
      >$100M/year
      Scalable Startup
      Goal is to solve for:
      unknown customer and unknown features
    • Scalable
      Startup
      Large Company
      >$100M/year
      Exit Criteria
      • Total Available Market > $500m
      • Can grow to $100m/year
      • Business model found
      • Focused on execution and process
      Scalable Startup
    • Scalable
      Startup
      Large Company
      >$100M/year
      • Total Available Market > $500m
      • Can grow to $100m/year
      • Business model found
      • Focused on execution and process
      • Typically requires “risk capital”
      Scalable Startup
      • In contrast a scalable startup is designed to grow big
      • Typically needs risk capital
      • What Silicon Valley means when they say “Startup”
    • Scalable
      Startup
      Large Company
      Search
      • Business Model found
      • i.e. Product/Market fit
      - Repeatable sales model
      - Managers hired
      What’s A Startup?
      A Startup is the organization used to search for a scalable business model
    • What VC’s Don’t Tell You:The Transition – Founders Leave
      Scalable
      Startup
      Transition
      Large Company
      Build
      • Founders depart
      • Professional Mgmt
      • Process
      • Beginning of scale
    • Startup-to-Company Lifecycle
      Scalable
      Startup
      Transition
      Large Company
      Build
      Search
      Grow
    • Why Startups Aren’t Run By Accountants
    • Startups Search and Pivot
      The Search for the Business Model
      Scalable
      Startup
      Transition
      Large Company
      Business Model found
      • customer needs/product features found
      i.e. Product/Market fit
      • Found by founders, not employees
      • Repeatable sales model
      - Managers hired
    • Startups Search, Companies Execute
      The Execution of the Business Model
      The Search for the Business Model
      Scalable
      Startup
      Transition
      Large Company
      - Cash-flow breakeven
      - Profitable
      - Rapid scale
      - New Senior Mgmt
      ~ 150 people
      • Business Model found
      • Product/Market fit
      - Repeatable sales model
      - Managers hired
    • Metrics Versus Accounting
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large
      Company
      Traditional Accounting
      • Balance Sheet
      • Cash Flow Statement
      • Income Statement
    • Metrics Versus Accounting
      The Search for the Business Model
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large
      Company
      Startup Metrics
      • Customer Acquisition Cost
      • Viral coefficient
      • Customer Lifetime Value
      • Average Selling Price/Order Size
      • Monthly burn rate
      • etc.
      Traditional Accounting
      • Balance Sheet
      • Cash Flow Statement
      • Income Statement
    • Customer Validation Versus Sales
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large
      Company
      Sales
      • Sales Organization
      • Scalable
      • Price List/Data Sheets
      • Revenue Plan
    • Customer Validation Versus Sales
      The Search for the Business Model
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large
      Company
      Customer Validation
      • Early Adopters
      • Pricing/Feature unstable
      • Not yet repeatable
      • “One-off’s”
      • Done by founders
      Sales
      • Sales Organization
      • Scalable
      • Price List/Data Sheets
      • Revenue Plan
    • Customer Development VersusProduct Management
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large Company
      Product Management
      • Delivers MRD’s
      • Feature Spec’s
      • Competitive Analysis
      • Prod Mgmt driven
    • Customer Development Versus Product Management
      The Search for the Business Model
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large Company
      Product Management
      • Delivers MRD’s
      • Feature Spec’s
      • Competitive Analysis
      Customer Development
      • Hypothesis Testing
      • Minimum Feature Set
      • Pivots
      • Founder-driven
    • Engineering Versus Agile Development
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large Company
      Engineering
      • Requirements Docs.
      • Waterfall Development
      • QA
      • Tech Pubs
    • Engineering Versus Agile Development
      The Search for the Business Model
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large Company
      Engineering
      • Requirements Docs.
      • Waterfall Development
      • QA
      • Tech Pubs
      Agile Development
      • Continuous Deployment
      • Continuous Learning
      • Self Organizing Teams
      • Minimum Feature Set
      • Pivots
    • Startups Model, Companies Plan
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large Company
      • Plan describes “knowns”
      • Known features for line extensions
      • Known customers/markets
      • Known business model
    • Startups Model, Companies Plan
      The Search for the Business Model
      The Execution of the Business Model
      Scalable
      Startup
      Transition
      Large Company
      • Unknown customer needs
      • Unknown feature set
      • Unknown business model
      • Model found by iteration
      • Plan describes “knowns”
      • Known features for line extensions
      • Known customers/markets
      • Known business model
    • Startups Don’t Last Forever
      Scalable
      Startup
      Transition
      Large Company
      - Cash-flow breakeven
      - Profitable
      - Rapid scale
      - New Senior Mgmt
      ~ 150 people
      • Business Model found
      • Product/Market fit
      - Repeatable sales model
      - Managers hired
      You failif you remain a startup!
    • I Wrote This
    • I Write a Blog
      www.steveblank.com
    • Thanks
      www.steveblank.com