387 Million Ways For a Startup to Fail…and How to Avoid Them<br />Steve Blank<br />www.steveblank.com<br />Twitter: sgblan...
I Write a Blog  <br />www.steveblank.com<br />
Startups Fail Because They Confuse Search with Execute<br />
Scalable<br />Startup<br />Large Company<br />>$100M/year<br />What’s A Startup<br />Search<br />Execute<br />Goal is to s...
Scalable<br />Startup<br />Large Company<br />Search <br /><ul><li>Business Model found
 i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />What’s A Startup?<br />A Startup is ...
Startups Fail Because They Execute When They Should Search<br />
Startups Search and Pivot<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Com...
 Repeatable sales model</li></ul>- Managers hired<br />
Startups Search, Companies Execute<br />The Execution of the Business Model<br />The Search for the Business Model<br />Sc...
 Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
Metrics Versus Accounting<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<b...
 Cash Flow Statement
 Income Statement</li></li></ul><li>Metrics Versus Accounting<br />The Search for the Business Model<br />The Execution of...
 Viral coefficient
 Customer Lifetime Value
 Average Selling Price/Order Size
 Monthly burn rate
 etc.  </li></ul>Traditional Accounting<br /><ul><li> Balance Sheet
 Cash Flow Statement
 Income Statement</li></li></ul><li>Customer Validation Versus Sales<br />The Execution of the Business Model<br />Scalabl...
 Scalable
 Price List/Data Sheets
 Revenue Plan</li></li></ul><li>Customer Validation Versus Sales<br />The Search for the Business Model<br />The Execution...
 Pricing/Feature unstable
 Not yet repeatable
“One-off’s”
 Done by founders</li></ul>Sales<br /><ul><li> Sales Organization
 Scalable
 Price List/Data Sheets
 Revenue Plan</li></li></ul><li>Customer Development VersusProduct Management<br />The Execution of the Business Model<br ...
 Feature Spec’s
 Competitive Analysis
 Prod Mgmt driven</li></li></ul><li>Customer Development Versus Product Management<br />The Search for the Business Model<...
 Feature Spec’s
 Competitive Analysis</li></ul>Customer Development<br /><ul><li> Hypothesis Testing
 Minimum Feature Set
Pivots
Founder-driven</li></li></ul><li>Engineering Versus Agile Development<br />The Execution of the Business Model<br />Scalab...
 Waterfall Development
 QA
 Tech Pubs</li></li></ul><li>Engineering Versus Agile Development<br />The Search for the Business Model<br />The Executio...
 Waterfall Development
 QA
 Tech Pubs</li></ul>Agile Development<br /><ul><li> Continuous Deployment
Continuous
 Minimum Feature Set
 Pivots</li></li></ul><li>387 Million Ways to FailAnd the 5 Key Reasons Why<br />
Business Model Universe<br />387 Million Choices (9x9x9x9x9x9x9x9x9) choices<br />
More startups fail from a lack of customers than from a failure of product development<br />
Failure 1No Business Plan survives first contact with customers<br />
You Need a Scientific Method to Search this Space<br />
So,Structure the Searchwith a Business Model<br />
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Failcon10 387 million ways to fail

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Failcon10 387 million ways to fail

  1. 1. 387 Million Ways For a Startup to Fail…and How to Avoid Them<br />Steve Blank<br />www.steveblank.com<br />Twitter: sgblank<br />
  2. 2. I Write a Blog <br />www.steveblank.com<br />
  3. 3. Startups Fail Because They Confuse Search with Execute<br />
  4. 4. Scalable<br />Startup<br />Large Company<br />>$100M/year<br />What’s A Startup<br />Search<br />Execute<br />Goal is to search for:<br /> unknown customer and unknown features <br />
  5. 5. Scalable<br />Startup<br />Large Company<br />Search <br /><ul><li>Business Model found
  6. 6. i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />What’s A Startup?<br />A Startup is a temporary organization used to search for a scalable and repeatable business model <br />
  7. 7. Startups Fail Because They Execute When They Should Search<br />
  8. 8. 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
  9. 9. Repeatable sales model</li></ul>- Managers hired<br />
  10. 10. 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
  11. 11. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
  12. 12. 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
  13. 13. Cash Flow Statement
  14. 14. 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
  15. 15. Viral coefficient
  16. 16. Customer Lifetime Value
  17. 17. Average Selling Price/Order Size
  18. 18. Monthly burn rate
  19. 19. etc. </li></ul>Traditional Accounting<br /><ul><li> Balance Sheet
  20. 20. Cash Flow Statement
  21. 21. 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
  22. 22. Scalable
  23. 23. Price List/Data Sheets
  24. 24. 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
  25. 25. Pricing/Feature unstable
  26. 26. Not yet repeatable
  27. 27. “One-off’s”
  28. 28. Done by founders</li></ul>Sales<br /><ul><li> Sales Organization
  29. 29. Scalable
  30. 30. Price List/Data Sheets
  31. 31. 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
  32. 32. Feature Spec’s
  33. 33. Competitive Analysis
  34. 34. 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
  35. 35. Feature Spec’s
  36. 36. Competitive Analysis</li></ul>Customer Development<br /><ul><li> Hypothesis Testing
  37. 37. Minimum Feature Set
  38. 38. Pivots
  39. 39. 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.
  40. 40. Waterfall Development
  41. 41. QA
  42. 42. 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.
  43. 43. Waterfall Development
  44. 44. QA
  45. 45. Tech Pubs</li></ul>Agile Development<br /><ul><li> Continuous Deployment
  46. 46. Continuous
  47. 47. Minimum Feature Set
  48. 48. Pivots</li></li></ul><li>387 Million Ways to FailAnd the 5 Key Reasons Why<br />
  49. 49. Business Model Universe<br />387 Million Choices (9x9x9x9x9x9x9x9x9) choices<br />
  50. 50. More startups fail from a lack of customers than from a failure of product development<br />
  51. 51. Failure 1No Business Plan survives first contact with customers<br />
  52. 52. You Need a Scientific Method to Search this Space<br />
  53. 53. So,Structure the Searchwith a Business Model<br />
  54. 54.
  55. 55.
  56. 56.
  57. 57.
  58. 58.
  59. 59.
  60. 60.
  61. 61.
  62. 62.
  63. 63.
  64. 64. Any Business Model in 9 Boxes<br />
  65. 65. Failure 2Assume Your Business Model is Correct<br />
  66. 66. So,Realize They’re Hypotheses<br />
  67. 67. 9 Guesses<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />
  68. 68. Failure 3There Are No Facts Inside Your Building<br />
  69. 69. So,Formalize TestingHypotheses Outside<br />
  70. 70. Testing the Business Model =Customer Development<br />
  71. 71. Test Hypotheses:<br /><ul><li>Product
  72. 72. Market Type
  73. 73. Competition</li></ul>Turning Hypotheses to Facts<br />
  74. 74. Test Hypotheses:<br /><ul><li>Problem
  75. 75. Customer
  76. 76. User
  77. 77. Payer</li></li></ul><li>Test Hypotheses:<br /><ul><li>Channel</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  78. 78. Customer
  79. 79. User
  80. 80. Payer</li></ul>Test Hypotheses:<br /><ul><li>Product
  81. 81. Market Type
  82. 82. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  83. 83. (Customer)
  84. 84. (Problem)</li></ul>Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  85. 85. Validate Business Model</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  86. 86. Customer
  87. 87. User
  88. 88. Payer</li></ul>Agile Development<br />Test Hypotheses:<br /><ul><li>Product
  89. 89. Market Type
  90. 90. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  91. 91. (Customer)
  92. 92. (Problem)</li></ul>Customer Development Team<br />Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  93. 93. Validate Business Model</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  94. 94. Customer
  95. 95. User
  96. 96. Payer</li></ul>Agile Development<br />Test Hypotheses:<br /><ul><li>Product
  97. 97. Market Type
  98. 98. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  99. 99. (Customer)
  100. 100. (Problem)</li></ul>Customer Development Team<br />Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  101. 101. Validate Business Model</li></li></ul><li>Testing the Business Model is Customer Development<br />Search <br />Execution<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br />Pivot<br />
  102. 102. Customer Development is the Search<br />Search <br />CustomerDiscovery<br />CustomerValidation<br />Pivot<br />
  103. 103. Failure 4A Mistaken Hypothesis Creates A Crisis<br />
  104. 104. So,Pivots are Business ModelChanges Without Crisis<br />
  105. 105. The Pivot Turns Failure Into Insight<br /><ul><li> The heart of Customer Development
  106. 106. Business Model changes without crisis
  107. 107. Fast, agile and opportunistic</li></li></ul><li>A Pivot Changes the Business Model<br />The Business Model/Customer Development Canvas<br />Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Agile Development<br />Test Hypotheses:<br /><ul><li>Channel
  108. 108. (Customer)
  109. 109. (Problem)</li></ul>Test Hypotheses:<br /><ul><li>Product
  110. 110. Market Type
  111. 111. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Problem
  112. 112. Customer
  113. 113. User
  114. 114. Payer</li></ul>Customer Development Team<br />Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  115. 115. Validate Business Model</li></li></ul><li>Failure 5We Have Plenty of Time<br />
  116. 116. So,Startups Are Built for Rapid Search<br />
  117. 117. Pivot Cycle Time Matters<br /><ul><li>Speed of cycle minimizes cash needs
  118. 118. Minimum feature set speeds up cycle time
  119. 119. Near instantaneous customer feedback drives feature set</li></li></ul><li>387 Million Ways to Fail<br /><ul><li>No business plan survives first contact with customers
  120. 120. Assume your business model is correct
  121. 121. There are no facts inside your building
  122. 122. A mistaken hypothesis creates a crisis
  123. 123. We have plenty of time</li></li></ul><li>Both Books on Amazon<br />
  124. 124. Thanks<br />www.steveblank.com<br />
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