Everything you knew about starting a company is wrong.  And how to do it right.<br />Steve Blank<br />Stanford School of E...
More startups fail from a lack of customers than from a failure of product development<br />
Traditional Product Introduction<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
Traditional Product IntroductionHas Two Implicit Assumptions<br />Customer Problem: known<br />Concept<br />Product Dev.<b...
Tradition – HireMarketing<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Dem...
Tradition – Hire Sales<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand...
 Hire Sales VP
 Hire 1st  Sales Staff</li></ul>Sales<br />
Tradition – HireBusiness Development<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />-...
 Hire Sales VP
 Hire 1st  Sales Staff</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
 Do deals for FCS</li></li></ul><li>Tradition – HireEngineering/Product Management <br />Concept<br />Product Dev.<br />Al...
 Hire Sales VP
 Hire 1st  Sales Staff</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
 Do deals for FCS</li></ul>Engineering/Product Mgmt<br /><ul><li> Write Requirements
 Waterfall  Development
 Q/A
Tech Pubs</li></li></ul><li>Engineering Executes a Waterfall Process<br />Concept<br />Product Dev.<br />Alpha/Beta Test<b...
Waterfall / Product ManagementExecution on Two “Knowns”<br />Requirements<br />Product Features: known<br />Design<br />Im...
This is A Plan For Failure<br />Customer Problems and Product Features are hypotheses<br />Sales & Marketing costs are fro...
An Inexpensive Fix<br />Focus on Customers and Markets from Day One<br />How?<br />
Traditional Product Introduction<br />Concept/Bus. Plan<br />Product Dev.<br />Alpha/Beta Test<br />Launch/1st Ship<br />C...
Agile Development<br />Waterfall Product Development<br />Require-ments<br />Design<br />Implement<br />Verify<br />Mainta...
Lean StartupCustomer Problem + Product Features are Unknown<br />Problem: Unknown<br />Solution: Unknown<br />Source: Eric...
Customer Development<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer Creation<br...
Customer Development<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer Creation<br...
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</li></li></ul><li>Customer Discovery<br />CustomerDiscovery<br />CustomerVal...
Customer Validation<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Company<br />Building<br />...
PassionateEarlyvangelists?
Pivot back to Discovery if no customers</li></li></ul><li>The Pivot<br /><ul><li> The heart of Customer Development
Iteration without crisis
Fast, agile and opportunistic</li></li></ul><li>Speeding Up Cycle Time<br /><ul><li>Speed of cycle minimizes cash needs
Minimum feature set speeds up cycle time
Near instantaneous customer feedback drives feature set</li></li></ul><li>22<br />Customer Creation<br />CustomerDiscovery...
$’s for scale
Lean Startups are not cheap startups</li></li></ul><li>Company Building<br />Company<br />Building<br />Customer Creation<...
Re look at your mission</li></li></ul><li>Not All Startups Are Equal<br />
Small Business<br />Startup<br />Small Business Startups<br /><ul><li>Serve known customer with known product
Feed the family</li></li></ul><li>Small Business<br />Startup<br />Exit Criteria<br /><ul><li> Business Model found</li></...
Feed the family</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />>$100M/year<br />Scalable Startup<br />Goa...
Scalable<br />Startup<br />Large Company<br />>$100M/year<br />Exit Criteria<br /><ul><li>Total Available Market > $500m
 Can grow to $100m/year
 Business model found
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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

  1. 1. Everything you knew about starting a company is wrong.  And how to do it right.<br />Steve Blank<br />Stanford School of Engineering<br />www.steveblank.com<br />Twitter: sgblank<br />
  2. 2. More startups fail from a lack of customers than from a failure of product development<br />
  3. 3. Traditional Product Introduction<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
  4. 4. Traditional Product IntroductionHas Two Implicit Assumptions<br />Customer Problem: known<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />Product Features: known<br />
  5. 5. Tradition – HireMarketing<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br />
  6. 6. Tradition – Hire Sales<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Organization
  7. 7. Hire Sales VP
  8. 8. Hire 1st Sales Staff</li></ul>Sales<br />
  9. 9. Tradition – HireBusiness Development<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Organization
  10. 10. Hire Sales VP
  11. 11. Hire 1st Sales Staff</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  12. 12. Do deals for FCS</li></li></ul><li>Tradition – HireEngineering/Product Management <br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Organization
  13. 13. Hire Sales VP
  14. 14. Hire 1st Sales Staff</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  15. 15. Do deals for FCS</li></ul>Engineering/Product Mgmt<br /><ul><li> Write Requirements
  16. 16. Waterfall Development
  17. 17. Q/A
  18. 18. Tech Pubs</li></li></ul><li>Engineering Executes a Waterfall Process<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />Require-ments<br />Design<br />Implement<br />Verify<br />Maintain<br />
  19. 19. Waterfall / Product ManagementExecution on Two “Knowns”<br />Requirements<br />Product Features: known<br />Design<br />Implementation<br />Verification<br />Customer Problem: known<br />Maintenance<br />Source: Eric Rieshttp://startuplessonslearned.blogspot.com<br />
  20. 20. This is A Plan For Failure<br />Customer Problems and Product Features are hypotheses<br />Sales & Marketing costs are front loaded<br />focused on execution vs. learning & discovery<br />First Customer Ship becomes the goal<br />Execution & hiring predicated on business plan hypothesis<br />Heavy spending hit if product launch is wrong<br />Financial projections assume success<br />=<br />You don’t know if you’re wrong untilyou’re out of business/money<br />
  21. 21. An Inexpensive Fix<br />Focus on Customers and Markets from Day One<br />How?<br />
  22. 22. Traditional Product Introduction<br />Concept/Bus. Plan<br />Product Dev.<br />Alpha/Beta Test<br />Launch/1st Ship<br />Customer Development<br />Company<br />Building<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Customer Development<br />
  23. 23. Agile Development<br />Waterfall Product Development<br />Require-ments<br />Design<br />Implement<br />Verify<br />Maintain<br />Agile Product Development<br />
  24. 24. Lean StartupCustomer Problem + Product Features are Unknown<br />Problem: Unknown<br />Solution: Unknown<br />Source: Eric Rieshttp://startuplessonslearned.blogspot.com<br />
  25. 25. Customer Development<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer Creation<br />Pivot<br />The founders<br />Get the heck Out of the Building<br />^<br />
  26. 26. Customer Development<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer Creation<br />Pivot<br /><ul><li>Discovery
  27. 27. Test hypotheses I.e. problem and product concept
  28. 28. Validation
  29. 29. Build a repeatable and scalable sales process
  30. 30. Creation
  31. 31. Scale via relentless execution and fill the sales pipeline
  32. 32. Building
  33. 33. (Re)build company’s organization & management</li></li></ul><li>Customer Discovery<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br />Stop selling, start listening<br />Test your hypotheses<br />Continuous Discovery<br />Done by founders<br />
  34. 34. Customer Validation<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Company<br />Building<br />Pivot<br /><ul><li>Repeatable and scalable business model?
  35. 35. PassionateEarlyvangelists?
  36. 36. Pivot back to Discovery if no customers</li></li></ul><li>The Pivot<br /><ul><li> The heart of Customer Development
  37. 37. Iteration without crisis
  38. 38. Fast, agile and opportunistic</li></li></ul><li>Speeding Up Cycle Time<br /><ul><li>Speed of cycle minimizes cash needs
  39. 39. Minimum feature set speeds up cycle time
  40. 40. Near instantaneous customer feedback drives feature set</li></li></ul><li>22<br />Customer Creation<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br /><ul><li>Creation comes after proof of sales
  41. 41. $’s for scale
  42. 42. Lean Startups are not cheap startups</li></li></ul><li>Company Building<br />Company<br />Building<br />Customer Creation<br />CustomerValidation<br />CustomerDiscovery<br /><ul><li>(Re)build company’s organization & management
  43. 43. Re look at your mission</li></li></ul><li>Not All Startups Are Equal<br />
  44. 44. Small Business<br />Startup<br />Small Business Startups<br /><ul><li>Serve known customer with known product
  45. 45. Feed the family</li></li></ul><li>Small Business<br />Startup<br />Exit Criteria<br /><ul><li> Business Model found</li></ul>- Profitable business<br /><ul><li> Existing team</li></ul>< $1M in revenue<br />Small Business Startups<br /><ul><li>known customer known product
  46. 46. Feed the family</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />>$100M/year<br />Scalable Startup<br />Goal is to solve for:<br /> unknown customer and unknown features <br />
  47. 47. Scalable<br />Startup<br />Large Company<br />>$100M/year<br />Exit Criteria<br /><ul><li>Total Available Market > $500m
  48. 48. Can grow to $100m/year
  49. 49. Business model found
  50. 50. Focused on execution and process</li></ul>Scalable Startup<br />
  51. 51. Scalable<br />Startup<br />Large Company<br />>$100M/year<br /><ul><li>Total Available Market > $500m
  52. 52. Can grow to $100m/year
  53. 53. Business model found
  54. 54. Focused on execution and process
  55. 55. Typically requires “risk capital”</li></ul>Scalable Startup<br /><ul><li> In contrast a scalable startup is designed to grow big
  56. 56. Typically needs risk capital
  57. 57. What Silicon Valley means when they say “Startup”</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />Search <br /><ul><li>Business Model found
  58. 58. i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />What’s A Startup?<br />A Startup is the organization used to search for a scalable business model <br />
  59. 59. What VC’s Don’t Tell You:The Transition – Founders Leave<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Build<br /><ul><li>Founders depart
  60. 60. Professional Mgmt
  61. 61. Process
  62. 62. Beginning of scale</li></li></ul><li>Startup-to-Company Lifecycle<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Build<br />Search<br />Grow<br />
  63. 63. Why Startups Aren’t Run By Accountants<br />
  64. 64. Startups Search and Pivot<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Business Model found<br /><ul><li> customer needs/product features found</li></ul> i.e. Product/Market fit<br /><ul><li> Found by founders, not employees
  65. 65. Repeatable sales model</li></ul>- Managers hired<br />
  66. 66. Startups Search, Companies Execute<br />The Execution of the Business Model<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />- Cash-flow breakeven<br />- Profitable<br />- Rapid scale<br />- New Senior Mgmt<br />~ 150 people<br /><ul><li>Business Model found
  67. 67. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
  68. 68. Metrics Versus Accounting<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Traditional Accounting<br /><ul><li>Balance Sheet
  69. 69. Cash Flow Statement
  70. 70. Income Statement</li></li></ul><li>Metrics Versus Accounting<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Startup Metrics<br /><ul><li> Customer Acquisition Cost
  71. 71. Viral coefficient
  72. 72. Customer Lifetime Value
  73. 73. Average Selling Price/Order Size
  74. 74. Monthly burn rate
  75. 75. etc. </li></ul>Traditional Accounting<br /><ul><li> Balance Sheet
  76. 76. Cash Flow Statement
  77. 77. Income Statement</li></li></ul><li>Customer Validation Versus Sales<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Sales<br /><ul><li>Sales Organization
  78. 78. Scalable
  79. 79. Price List/Data Sheets
  80. 80. Revenue Plan</li></li></ul><li>Customer Validation Versus Sales<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Customer Validation<br /><ul><li> Early Adopters
  81. 81. Pricing/Feature unstable
  82. 82. Not yet repeatable
  83. 83. “One-off’s”
  84. 84. Done by founders</li></ul>Sales<br /><ul><li> Sales Organization
  85. 85. Scalable
  86. 86. Price List/Data Sheets
  87. 87. Revenue Plan</li></li></ul><li>Customer Development VersusProduct Management<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Product Management<br /><ul><li> Delivers MRD’s
  88. 88. Feature Spec’s
  89. 89. Competitive Analysis
  90. 90. Prod Mgmt driven</li></li></ul><li>Customer Development Versus Product Management<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Product Management<br /><ul><li> Delivers MRD’s
  91. 91. Feature Spec’s
  92. 92. Competitive Analysis</li></ul>Customer Development<br /><ul><li> Hypothesis Testing
  93. 93. Minimum Feature Set
  94. 94. Pivots
  95. 95. Founder-driven</li></li></ul><li>Engineering Versus Agile Development<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Engineering<br /><ul><li> Requirements Docs.
  96. 96. Waterfall Development
  97. 97. QA
  98. 98. Tech Pubs</li></li></ul><li>Engineering Versus Agile Development<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Engineering<br /><ul><li> Requirements Docs.
  99. 99. Waterfall Development
  100. 100. QA
  101. 101. Tech Pubs</li></ul>Agile Development<br /><ul><li> Continuous Deployment
  102. 102. Continuous Learning
  103. 103. Self Organizing Teams
  104. 104. Minimum Feature Set
  105. 105. Pivots</li></li></ul><li>Startups Model, Companies Plan<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li> Plan describes “knowns”
  106. 106. Known features for line extensions
  107. 107. Known customers/markets
  108. 108. Known business model</li></li></ul><li>Startups Model, Companies Plan<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li>Unknown customer needs
  109. 109. Unknown feature set
  110. 110. Unknown business model
  111. 111. Model found by iteration
  112. 112. Plan describes “knowns”
  113. 113. Known features for line extensions
  114. 114. Known customers/markets
  115. 115. Known business model</li></li></ul><li>Startups Don’t Last Forever<br />Scalable<br />Startup<br />Transition<br />Large Company<br />- Cash-flow breakeven<br />- Profitable<br />- Rapid scale<br />- New Senior Mgmt<br />~ 150 people<br /><ul><li> Business Model found
  116. 116. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />You failif you remain a startup!<br />
  117. 117. I Wrote This<br />
  118. 118. I Write a Blog <br />www.steveblank.com<br />
  119. 119. Thanks<br />www.steveblank.com<br />
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