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Lean launchpad educators teaching handbook Document Transcript

  • 1. The LeanLaunchPadEducatorsTeaching HandbookSteve Blank & Jerry EngelJuly 2012
  • 2. The LeanLaunchPadEducatorsTeaching HandbookSteve Blank & Jerry EngelJuly 2012
  • 3. PrefacePURPOSEThis goal of this document is to give you the theory of why we created the Lean LaunchPadclass and the practice of how we have run it. However, it is neither a guide nor a cookbookfor a class. As educators we expect you to adopt and adapt the class to your own school andcurriculum as appropriate.SCOPEThe Lean LaunchPad class was developed based on experience mostly at the graduate levelof several of the nation’s leading universities. It’s been taught both in engineering and businessschools, as well as to post-graduate teams under the NSF program. However, we believe themethodology has broader applicability, and it is being adapted to undergraduate programs.FOCUSThe focus of the Lean LaunchPad class has mostly been on scalable startups, often tech-based;however, initial indications are that the approach is generalizable and can embrace the chal-lenges faced by small and medium-sized businesses, as well as new ventures in large corpora-tions.ACKNOWLEDGEMENTS -ogy Ventures Program. Hats off to Kathy Eisenhardt and Tom Byers who gave us the freedomto invent and teach the class.The class would not have been possible without the two VCs who volunteered their time toteach this Stanford class with me: Jon Feiber of Mohr Davidow Ventures and Ann Miura-Ko ofFloodgate. Lisa Forssell taught the “how to present class,” and Thomas Haymore was our inde-fatigable Teaching Assistant. We also owe much to our team of mentors. -partment, and Jerry Engel and Jim Hornthal of CMEA Capital joined the teaching team.by John Burke from True Ventures and Oren Jacobs of Toytalk. They were joined by teachingclass.and their Executive Director, Phil Weilerstein. Their support and assistance has facilitatedtwo key deployments of the Lean LaunchPad method, namely the NSF I-Corps Program andthe Lean LaunchPad Educators Program. Their contribution is accelerating dissemination andfostering best practices by supporting faculty education and collaborative peer to peer ex-changes.None of this would have been possible without Jerry Engel’s persistence and guidance. —Steve Blank PAGE 5© 2012 Steve Blank
  • 4. Table of Contents1. The Lean LaunchPad Manifesto ......................................................................... 9 Strategy...............................................................................................................................9 Process ..............................................................................................................................9 Organization ................................................................................................................. 10 Education ........................................................................................................................11 Instructional Strategy ...................................................................................................12 Lessons Learned .............................................................................................................132. E-School: The New Entrepreneurship Curriculum .....................................143. The Lean LaunchPad Class–Goals ..................................................................17 Helping Startups Fail Less ............................................................................................17 Lean LaunchPad Pedagogy—Experiential Learning ..............................................17 The Flipped Classroom................................................................................................ 18 The Business Model Canvas ...................................................................................... 18 Customer Development ............................................................................................ 204. Teaching Team ......................................................................................................21 Faculty ...............................................................................................................................21 Teaching Assistant......................................................................................................... 22 Pre-class ........................................................................................................................................................ 22 During Class................................................................................................................................................ 22 Mentors & Advisors .................................................................................................... 22 The Role of Mentors .............................................................................................................................. 22 How Mentors Help Teams ................................................................................................................ 23 Mentors and Web-based Startups ........................................................................... 23 The Role of Advisors .............................................................................................................................. 23 Recruiting Mentors/Advisors ............................................................................................................ 235. Student Teams .....................................................................................................24 Team Formation—strategy ........................................................................................ 24 Team Formation—mixers/ information sessions .................................................. 24 Team Formation—admission ..................................................................................... 24 Admission By Interview..........................................................................................................................24 Admission By Teams, Not Individuals .......................................................................................... 25 Team Formation—Application Forms ..................................................................... 256. Class Organization.............................................................................................28 Team Projects ................................................................................................................ 28 Team Deliverables ........................................................................................................ 28 Student Team Coursework and Support Tools..................................................... 28 Class Culture.................................................................................................................. 29 Amount of Work .......................................................................................................... 29 Team Dynamics ............................................................................................................. 30 Sharing Policy ................................................................................................................. 30 Student/Instructor Success Criteria ......................................................................... 30 Process ........................................................................................................................................................... 30 Culture ............................................................................................................................................................31 PAGE 7© 2012 Steve Blank
  • 5. 7. The 10-Week Course, 12-Week Course, 5-Day Course ..........................32 10-Week Course Logistics.......................................................................................... 32 Teaching Team Role and Tools .................................................................................. 33 Best Practices ................................................................................................................. 33 Lectures ........................................................................................................................... 34 LaunchPad Central........................................................................................................ 34 Textbooks ...................................................................................................................... 36 Grading ........................................................................................................................... 36 Guidelines for team presentations .......................................................................... 378. Instructor Pre-Course Preparation ...............................................................389. Detailed Class Curriculum ..............................................................................39 Student assignment—Before the Teams Show Up in Class ............................... 39 Class 1: Intro & Business Models and Customer Development ............................................................................................. 41 Class 1 through 8: Presentation Agenda & Teaching Assistant Activities ...................................................................................... 45 Class 2: Value Proposition .......................................................................................... 48 Class 3: Customer Segments ..................................................................................... 53 Class 4: Distribution Channels .................................................................................. 58 Class 5: Customer Relationships (Get/Keep/Grow) ............................................ 63 Class 6: Revenue Streams .......................................................................................... 69 Class 7: Partners .......................................................................................................... 72 Class 8: Resources, Activities and Costs ............................................................... 75 Workshop 3: Presentation Skills Training ............................................................... 78 Class 9 & 10: Lessons Learned Presentation ........................................................ 8210. Collaborative Google Documents ...............................................................83Appendix11. 10-Week Syllabus—Sample ...........................................................................87 Lessons Learned—Demo Day Presentation Format ........................................... 96 Engineering 245: Frequently Asked Questions (FAQ) ......................................... 9812. 5-Day Syllabus—Example.............................................................................10413. Mentor Handbook—Sample .......................................................................114
  • 6. 1. The Lean LaunchPad Manifestostartups like they are just smaller versions of large companies.However, we now know that a startup is a temporary organization designed to search for a -ture, or it may be a new division or business unit in an existing company.If your business model is unknown—that is, just a set of untested hypotheses—you are a start-features, channels, pricing, Get/Keep/Grow strategy, etc.) is known, you will be executing it.Search versus execution is what differentiates a new venture from an existing business unit.1STRATEGYon until the 1990s. A business model describes how a company creates, delivers and capturesvalue. It became common vernacular to discuss business models, but without a standardframework and vernacular, confusion reigned. In 2010, when Alexander Osterwalder pub-lished his book Business Model Generation, he provided a visual ontology and a clear vernacularthat was sorely needed, and it became clear that this was the tool to organize startup hypoth-eses.The primary objective of a startup is to validate its business model hypothesesand other well-understood management tools.2PROCESSYet as powerful as the Business Model Canvasmodel) is, at the end of the day it was a tool for brainstorming hypotheses without a formal PAGEway of testing them. 9© 2012 Steve Blank
  • 7. The processes used to organize and implement the search for the business model are Cus-tomer Development and Agile Development. A search for a business model can occur in any newbusiness—in a brand new startup or in a new division of an existing company.The Customer Development model breaks out all the customer-related activities of an early-the “search” for the business model. Steps three and four “execute” the business model that’sbeen developed, tested, and proven in steps one and two.The steps: Customer discovery model hypotheses. Then it develops a plan to test customer reactions to those hypoth- eses and turn them into facts. Customer validation tests whether the resulting business model is repeatable and scal- able. If not, you return to customer discovery. Customer creation is the start of execution. It builds end-user demand and drives it into the sales channel to scale the business. Company-building transitions the organization from a startup to a company focused on executing a validated model.In the “search” steps, you want a process designed to be dynamic, so you work with a roughbusiness model description knowing it will change. The business model changes because start-ups use customer development to run experiments to test the hypotheses that make up thethe time these experiments fail. Search embraces failure as a natural part of the startup pro-the founders and change the model. -vice, channel, pricing, etc.), the organization moves from search to execution.The product execution process—managing the lifecycle of existing products and the launchof follow-on products—is the job of the product management and engineering organizations.Waterfall development.ORGANIZATIONSearching for a business model requires a different organization than the one used to execute aplan. Searching customer development team ledor pivot the business model, and to do that they need to hear customer feedback directly. In
  • 8. 3Companies in execution suffer from a “fear of failure culturewere hired to execute a known job spec. Startups with Customer Development Teams have a“learning and discovery” culture for search. The fear of making a move before the last detail isnailed down is one of the biggest problems existing companies have when they need to learnhow to search.The idea of not having a functional organization until the organization has found a proven busi-ness model is one of the hardest things for new startups to grasp. There are no sales, market-ing or business development departments when you are searching for a business model. Ifyou’ve organized your startup with those departments, you are not really doing customer4EDUCATIONbusiness plan-centric view that startups are “smaller versions of a large company.” Venturecapitalists who’ve watched as con-tinue to insist that startups write business plans as the price of entry to venture funding. This PAGE 11© 2012 Steve Blank
  • 9. continues to be the case even as many of the best VCs understand that business “planning,”and not the “plan” itself, is what is important.The trouble is that over time, this key message has gotten lost. As business school professors,many of whom lack venture experience, studied how VCs made decisions, they observed theapparently central role of the business plan and proceeded to make the plan, not the planning,the central framework for teaching entrepreneurship. As new generations of VCs with MBAs“that’s what I learned—or the senior partners learned—in business school.”)Entrepreneurship educators have realized that a plan-centric curriculum may get by forteaching incremental innovation, but won’t turn out students prepared for the realities ofbuilding new ventures. Educators are now beginning to build their own E-School curriculumwith a new class of management tools built around “search and discovery.” Business Model -the management tools MBAs learn for execution. 5INSTRUCTIONAL STRATEGYEntrepreneurial education is also changing the focus of the class experience from case methodto hands-on experience. Invented at Harvard, the case method approach assumes that knowl-edge is gained when students actively participate in a discussion of a situation that may befaced by decision makers.But the search for a repeatable business model for a new product or service is not a predict-able pattern. An entrepreneur must start with the belief that all her assumptions are simplyhypotheses that will undoubtedly be challenged by what she learns from customers. Analyzing -
  • 10. es adds little to an entrepreneur’s knowledge. Cases can’t be replicated, because the world ofa startup is too chaotic and complicated. The case method is the antithesis of how entrepre-neurs build startups—it teaches pattern recognition tools for the wrong patterns, and there-fore has limited value as a tool for teaching entrepreneurship.The replacement for the case method is not better cases written for startups. Instead, itwould be business model design: using the business model canvas as a way to 1) capture andvisualize the evolution of business learning in a company, and 2) see what patterns matchreal-world iterations and pivots. It is a tool that better matches the real-world search for thebusiness model. -eses in front of customers) is the classroom discussion, as all teams present. To keep track ofrecord the week-by-week narrative of their journey.An entrepreneurial curriculum obviously will have some core classes based on theory, lectureand mentorship. There’s embarrassingly little research on entrepreneurship education andoutcomes, but we do know that students learn best when they can connect with the materialin a hands-on way, personally making the mistakes and learning from them directly.needs to search for certainty in a chaotic world.LESSONS LEARNED The search for the business model is the front end of the startup process This is true in the smallest startup or largest company Customer and Agile Development are the processes to search and build the model Searching for the business model comes before executing it Product management is the process for executing the model Entrepreneurial education is developing its own management stack Start with how to design and search for a business model Add all the other skills startups needs The case method is the antithesis of an entrepreneurial teaching method PAGE 13© 2012 Steve Blank
  • 11. 2. E-School: The New Entrepreneurship CurriculumWhile the Lean LaunchPad class can be inserted and taught as part of an existing curriculumin a business or engineering school, it is a harbinger of a completely new entrepreneurshiptools built around “search and discovery” of the business model.The diagram below illustrates a notional curriculum built around these ideas. The sum of allexecution. Think of it as E-School versus B-school. Brief summaries of each of the classes arebelow.ENTREPRENEURSHIP COURSE SUMMARIESENTR 100: Introduction to StartupsThis course is designed to give students a basic introduction to startups and entrepreneurship.What is a startup? What are the types of startups? Why is a startup different from an existingcompany? Who can be an entrepreneur? Why are founders different then employees?small team-based experiential projectsENTR 101: Innovation and CreativityWhere do ideas come from? How to recognize opportunitiesPedagogy—Lecture with small team-based experiential projects
  • 12. ENTR 102: Business Model DesignBased around Osterwalders Business Model Generation text, this class gives students practicein deconstructing existing business models as well as creating new ones.Pedagogy—Lecture with business model casesENTR 103: Customer Discovery—Markets and Opportunitiestechnology…Is there a market? I have a market…Is there technology?); and market sizing.Pedagogy—Lecture with small experiential projectsENTR 104: Metrics that Matter—Startup FinanceFinance before the Income Statement, Balance Sheet and Cash Flow. How to test Customer -Pedagogy—Lecture with business model and customer discovery casesENTR 105: Startup Patent LawPatents, trademarks, copyright, trade secrets, NDAs and contract. Which one to use andwhen? What to patent? Why? When? What matters in a startup? What matters later? Differ-ences by country. How to build a patent portfolio.Pedagogy—Lecture with business model and customer discovery casesENTR 106: Building the Team—Startup Culture and HRWhat is a Startup Culture? Why is it different? Culture versus management style. Founders,early employees, mission, intent, values. Managing the growing startup.Pedagogy—Lecture with business model and customer discovery cases, optional simulationsENTR 107: Get, Keep and Grow—Sales and MarketingHow does a startup get, keep and grow customers? How does this differ for web, mobile and -ponents, etc.Pedagogy—Lecture with simulations and experiential projectsENTR 108: Agile Development PAGE 15© 2012 Steve Blank
  • 13. Pedagogy—Lecture with small team-based projectsENTR 109: User Interface Designiterate and what to optimize.Pedagogy—Lecture with small team-based projectsENTR 150: From Founder to Operating ExecutiveMost founders don’t make the transition to operating exec. Yet the most successful large tech-nology companies are still run by their founders. What skills are needed? Why is the transitionPedagogy—Lecture with business model and customerdiscovery casesENTR 200/202: The Lean LaunchPadExperiential Business Model Design and Customer Development -sive and experiential.
  • 14. 3. The Lean LaunchPad Class–GoalsThe Lean LaunchPad class is currently taught in colleges, universities, accelerators, incuba-tors and for the National Science Foundation. It has also been taught inside of Fortune 1000companies as a template for building new businesses. The class has different goals dependingwhere it’s taught and who the audience is.In a graduate engineering or business school university class, the goal of the Lean LaunchPadis to impart a methodology for scalable startups students can use for the rest of their careers.When taught in an accelerator or incubator, the goal of the Lean LaunchPad is a series ofinvestor-funded startups.When taught as part of corporate entrepreneurship, the Lean LaunchPad helps existing com-Finally, the same Lean LaunchPad methodology, by emphasizing small business tactics, can beHELPING STARTUPS FAIL LESSThe Lean LaunchPad doesn’t guarantee that startups will succeed more. It does guaranteethat if they follow this process they will likely fail less.We do this by rapidly helping the Lean LaunchPad student teams to personally discover thattheir idea is just a small part of what makes up a successful company.Here’s how we do it.LEAN LAUNCHPAD PEDAGOGY—EXPERIENTIAL LEARNINGThe Lean LaunchPad is a hands-on program that immerses student teams in testing their busi-ness model hypotheses outside the classroom. Inside the classroom, it deliberately trades offThe Lean LaunchPad uses the customer development process and the business model canvasExperiential learning has been around forever. Think of the guilds, apprentices, etc. Mentorswere the master craftsmen. That’s the core idea of this class.This class uses experiential learning as the paradigm for engaging the participants in discoveryof the classroom and learn by doing.This is very different from how a business school-based “how to write a business plan” classworks. There, it assumes a priori a valid business model. In this Lean LaunchPad class, thepivot). This results in the teams bringing market needs forward. Then they can decide if there’sa business to be built.What this class does not include is execution of the business model. In this course, implemen-tation is all about discovery outside of the classroom. Once discovery has resulted in a high PAGE 17© 2012 Steve Blank
  • 15. If the student teams continue with their companies, they will assemble the appropriate oper-THE FLIPPED CLASSROOMby a live instructor, the lectures can now become homework. Steve Blank has recorded eight -lectures in person.THE BUSINESS MODEL CANVASOften there’s a lack of a shared and clear understanding of how a startup creates, delivers anddiagrammatically illustrate how that happens.The canvas represents any company in nine boxes, depicting the details of a company’s prod-uct, customers, channels, demand creation, revenue models, partners, resources, activities andcost structure.
  • 16. But in addition to using the business model canvas as a static snapshot of the business at asingle moment, frozen in time, Customer Development—and this class—extends the canvasand uses it as a “scorecard” to track progress in searching for a business model.the changes from the last week. PAGE 19© 2012 Steve Blank
  • 17. Then, after the team agrees to the business model changes, they integrate them into whatDuring the next week any new changes are again shown in red. Then the process repeatseach week, with new changes showing up in red. Then a new canvas used for the week.By the end of the class, teams will have at least 8 canvases. When clicked through one at atime they show something never captured before: the entrepreneurial process in motion. The Business Model Canvas as a Weekly ScorecardCUSTOMER DEVELOPMENTThe Business Model Canvas is, at the end of the day, a tool for brainstorming hypotheses with-out a formal way of testing them.The process used to organize and implement the search for the business model is CustomerDevelopment. And that search occurs outside the classroom.The Customer Development model breaks out the customer-related activities into four steps.and four “execute” the business model that’s been developed, tested, and proven in steps oneand two.
  • 18. The Lean LaunchPad class focuses on the two “search” steps. Customer discovery model hypotheses. Then it develops a plan to test customer reactions to those hypoth- eses and turn them into facts. Customer validation tests whether the resulting business model is repeatable and scal- able. If not, you return to customer discovery. Startup Owners Manual as the text to teach Customer Devel-opment concepts.4. Teaching TeamWhile a single instructor and a part time teaching assistant can teach this class, the optimalteaching team has a minimum of: Two instructors A teaching assistant One Mentor per teamFACULTYOn its surface the class can be taught by anyone. The canvas and customer development dooffer to your students are the painful lessons you’ve learned building businesses. If you haven’t,In a perfect world at least one of the instructors would be an adjunct with startup experi-teaching team comments. -change the perception of the investor on the teaching team. VCs will stop believing that abusiness plan or a standard investor pitch deck is useful. They will understand that a customer PAGE 21© 2012 Steve Blank
  • 19. discovery narrative and the business model canvas is a more effective tool to judge early stageventures.TEACHING ASSISTANTGiven all the moving parts of the class, a teaching assistant keeps the trains running on time.Here’s what they do.Pre-class Keep track of the student applicationsDuring Class Communicate in-class information to course participants Collect weekly team presentations and manage the order of presentation timing Create and manage three Google documents: 1. The instructor-grading sheet—used by the teaching team for grading and real-time collaboration for instructors 2. The student-feedback grading sheet used by the students to offer feedback to their - ress of other teams rather than reading their email.) The startup wisdom document which the TA uses to capture and post teachingMENTORS & ADVISORSAdvisors are on-call resources for the entire class.The Role of MentorsMentors are an extension of the teaching team, responsible for the success or failure of ateam with four students. The role of the mentors is to help the teams test their businessmodel hypotheses. Here’s what they do:Offer teams strategic guidance and wisdom: Offer business model suggestions Identify and correct gaps in the teams business knowledgeProvide teams with tactical guidance every week: weekly presentation before they present Comment weekly on teams’ LaunchPad Central Customer Discovery progress
  • 20. Meet one-on-one with teams at least twice during the classIf mentors can’t commit to the time to be a mentor, have them consider being an advisor.How Mentors Help TeamsTeam Mentors are involved on a regular basis with their teams throughout the course. Weeklyinteraction and comments via the LaunchPad Central is the minimum expectation. Bi-monthlyface-to-face meetings are also expected. These should be scheduled at the mentors’ conve-nience. Questions from mentors to their teams that are helpful are, “Have you consideredx?” “Why don’t you look at company z and see what their business model is and compare itheuristics and experience they can apply when they leave the class. The class is about whatthey learned on the journey.MENTORS AND WEB-BASED STARTUPSIf a team is building a web-based business they need to get the site up and running during the -sumptions about minimum feature set, demand creation, virality, stickiness, etc.The Role of AdvisorsAdvisors are a resource to the class and any of its teams for your particular domain expertise.Advisors commit to: twenty-four hoursRecruiting Mentors/AdvisorsThis class has no guest lectures. Getting mentors involved is not about having them come inand tell war stories, nor is it having them teach students how to write a business plan or putA core tenet of the course is that the nine building blocks of a business model are simplyhypotheses until they are validated with customers and partners; and since there are “no factsinside the building, they need to get outside.” This means as part of this class they need to talkto customers, channel partners, and domain experts and gather real-world data—for eachpart of their plan.You’re looking for experienced local entrepreneurs and investors who are willing to learn asmuch as they will teach. -ity, relevant business experience, a generous spirit, and who understand the value of the busi-ness model canvas and customer discovery. If you picked the right one, by the end of the classthey will understand that a customer discovery narrative and the business model canvas is animportant tool to build early stage ventures. PAGE 23© 2012 Steve Blank
  • 21. 5. Student TeamsThrough trial and error we’ve learned that the class is best when: it is team-based it is interdisciplinary admission is based on team compositionWhen taught as a graduate class, this means having a mix of students in each team from a va-riety of academic backgrounds—business school, engineers, medical school, etc. When taughtas an undergrad class, it means having students across a diverse set of majors.TEAM FORMATION— STRATEGYWe insist that the Lean LaunchPad class is open to students from all departments; engineer-ing, business school, etc. The best teams are a mix of engineers and MBAs.having the teaching team try to form teams creates zero team cohesion—“I didn’t do wellbecause you assigned me to people I didn’t like.”).TEAM FORMATION—MIXERS/ INFORMATION SESSIONSWe have our teaching assistant organize an evening session, provide pizza, and create demandby widely broadcasting how exciting the class is and provide the info session location withposters over campus, emails to department lists, etc.In the mixer, the teaching team introduces themselves and provides a short, ten-minute over-has an idea for a team?” We go around the room and let each of those students introduceFinally, we ask, “Who’s looking for a team to join?” We have those students introduce them-if they can form teams.TEAM FORMATION— ADMISSIONAdmission By Interviewteaching team selects the best student teams for admission, as opposed to the best projects. -sion. We’ve taught the class using those rules and found that they greatly diminish the experi-do.)In the past we’d select the best ideas for admission. The irony is what we already knew thatalmost every one of those ideas would substantively change by the end of the class.
  • 22. Now we select for the best teams. What we look for is a balanced team with passion. Is therea visionary, hacker and hustler on the team? Teams that just have great ideas but no ability toimplement them typically fail. When taught in a university we want the students to focus on ascalable idea, i.e. one that can grow to 10s or 100s of millions of dollars.When taught in colleges, the exact small class can be used to teach small business startups.Admission By Teams, Not IndividualsAdmission to the class is by team. We do not accept individual applications.We found that having the students come in with a formed team accomplishes three things: It saves weeks of class time. Students have met, gotten to know each other, have brain- stormed their idea and are ready to hit the ground running. their time, not yours. Most importantly we get to select for passion, interest, curiosity and the ability to learn on their ownAs teams are formed in the mixers. the Teaching Assistant schedules team interviews duringAdmission by cross-disciplinary team can be a challenge in the bureaucracy of the siloedacademic world. Depending on where the course is situated in your college or university, youmay run into the traditional “you can’t do that” attitude and rules. The business school maywant you to admit its own students regardless of skill or passion. Some may want to controlclass admission by class bidding or some other system. Depending on sponsorship, depart-to push these students really hard.TEAM FORMATION— APPLICATION FORMSStudents apply as teams. They tell us about themselves and their team using the “Team Infor-The teaching team interviews all teams. PAGE 25© 2012 Steve Blank
  • 23. Figure 1: Lean LaunchPad Application—Team InformationFigure 2: Lean LaunchPad Application—Business Model Information
  • 24. The business model canvas as an application form starts the teams thinking long before themodel? What product or service am I offering? Who are my customers? Etc.”We set the pace and tempo of the class by having the teams present the business modelrunning. PAGE 27© 2012 Steve Blank
  • 25. 6. Class OrganizationTEAM PROJECTSTeam projects can be a product or service of any kind. This can include software, physicalstartup. We suggest that they consider a subject in which they are a domain expert, such assomething related to their personal interests or academic research. In all cases, they shouldchoose something for which they have passion, enthusiasm, and hopefully some expertise.TEAM DELIVERABLESTeams are accountable for the following deliverables: Get outside the classroom and test all their business model hypotheses Present a weekly in-class PowerPoint summary of their customer discovery progress - sures their progress Build a physical product showing a costed bill of materials and a prototype Teams building a web product build the site, create demand and have customers using it. See undertake a project they are not prepared to see through to completion.STUDENT TEAM COURSEWORK AND SUPPORT TOOLSThe student teams have both in-class work and between-class assignments. In class, each teampresents their lessons learned presentation, summarizing their out-of-classroom customerdiscovery. When they are not presenting, all teams peer-grade the presenting teams using ashared Google Doc.discovery narrative and an updated business model canvas using the LaunchPad Central tool -
  • 26. Figure 3; Student Assignments and ToolsCLASS CULTUREHere’s what we tell the students:Startups communicate much differently than inside a university or a large company. It is dra-matically different from the university culture most of you are familiar with. At times it can feelin time- and cash-constrained environments. We have limited time and we push, challenge,tough—just like the real world. We hope they can recognize that these comments aren’tpersonal, but part of the process.engage in a real dialog with the teaching team. This approach may seem harsh or abrupt, butand objectively, and to appreciate that as entrepreneurs they need to learn and evolve fasterthan they ever imagined possible.AMOUNT OF WORKHere’s what else we tell the students:other classes. Projects are treated as real start-ups, so the workload will be intense. Teamshave reported up to twenty hours of work per week. Getting out of the classroom is whatof time in between each of the lectures outside the class talking to customers. If they can’tcommit the time to talk to customers, this class is not for them.This class is a simulation of what startups and entrepreneurship are like in the real world: PAGE 29© 2012 Steve Blank
  • 27. This class pushes many people past their comfort zone. It’s not about them, but it’s also notpart of what it is really like.) The pace and the uncertainty pick up as the class proceeds.TEAM DYNAMICSteams. At times we’ve seen: Students will enroll for the course but have overcommitted to other curricular or extra- curricular activities interest Teams can’t agree on level of effort by each team member Other team tensionsteaching team can help them diagnose issues and facilitate solutions. At times, all it takes is aconversation about roles, expectations and desired outcomes from the class. If the problem ismore serious, make sure you document all conversations.SHARING POLICYWe tell the students that one of the key elements of the Lean LaunchPad is that we getsmarter collectively. We learn from each other—from other teams in your class as well as fromteams that came before you.This means that as part of the class, the teams will be sharing your customer discovery jour-ney—the narrative of how their business model evolved as they got out of the building andthe details of the customers they talked to. At times they will learn by seeing how previousclasses solved the same class of problem by looking at their slides, notes and blogs. And theywill share your presentations and business model canvas, blogs and slides with their peers andthe public.Just to be clear, this doesn’t mean sharing Intellectual Property, but it does mean sharing de-tails of what you learned outside the building.STUDENT/INSTRUCTOR SUCCESS CRITERIAThe success of this curriculum is dependent on a consistent set of beliefs and culture by thestudents and instructors. The fundamental principles of the course are:Process1. There are no facts inside your lab or building, so get the heck outside.2. We use the business model canvas to articulate our hypotheses. We use customer development to test those hypotheses. We use the business model canvas to keep track of what we learned.6. We expect that many of our initial hypotheses are wrong. Iterations and pivots are the expectation.
  • 28. Culture1. A mindset of hypotheses-testing, not execution2. Active participation by all team members All are held accountable for team performance High-speed pace and tempo6. Bring your sense of humor—without it, you will suffer PAGE 31© 2012 Steve Blank
  • 29. 7. The 10-Week Course, 12-Week Course, 5-Day Coursethree-hour meeting per week. Each has been a very successful format, but the course materialcan be adapted an applied in various ways. In fact, in the Appendix we have included a syl-and Caltech. For the sake of convenience and cogency, this document describes the ten-week10-WEEK COURSE LOGISTICS prior to the class for team formation The class is offered once a week Each class is three hours - Three workshops are offered outside of normal class hours for Customer DiscoveryWeek Lecture Topic6 weeks prior st interviews2 weeks priorWeek 1 Lecture 1 Intro, Business Models, and Customer DevelopmentWeek 1 Workshop 1 Customer Discovery practice for the real worldWeek 2 Lecture 2 Value Proposition Lecture Customer Segments Lecture ChannelsWeek 4 Workshop 2 Customer acquisition and activation LectureWeek 6 Lecture 6 Lecture PartnersWeek 8 Lecture 8Week 8 Workshop 3 Presentation Skills Training Lessons Learned Lessons Learned Presentations teams 1-6Week 10 Lessons Learned
  • 30. TEACHING TEAM ROLE AND TOOLSFor each weekly class session, students are assigned: Pre-class readings optional pre-recorded on-line lecture with An in-class, ten-minute presentation for each team presenting their “lessons learned” from talking with customers Weekly assignment to get out of the building and test one of the business model com- The last weekly sessions are “Lessons Learned” presentations from each team. They consist of a two-minute video plus an eight-minute PowerPoint presentationIn class, the role of the instructor is to:1.2. tactics Grade the student presentations and share private comments with the rest of teaching teamBEST PRACTICESSome of the best practices we’ve seen work well: Trying hard not to offer students prescriptive advice. Instead, trying to teach the students to see the patterns, not give them answers. Adjuncts telling “war stories” with a lesson for the class. Keeping in mind, that everything you’re hearing from students are hypotheses—guess- es—that you want them to turn into facts. - sights. But the goal is to get them to extract learning from the customer interactions. PAGE 33© 2012 Steve Blank
  • 31. Figure 4: Teaching Team Responsibilities and ToolsLECTURESLectures take the students through each of the business model canvas components, whileteaching them the basics of customer development. The lecture slides are available in Pow-LAUNCHPAD CENTRALkeep track of their progress. Without some way of keeping detailed track of all teams’ prog-
  • 32. -tations.To solve this problem, we insist that each team blog their customer discovery progress. Weforce them to write a narrative each of week of customers they’ve visited, hypotheses they’vetested, results they’ve found, photos of their meetings, and changes in their business modelon-line mash-up of blogging tools); however, we favor using an integrated purpose built toolcalled LaunchPad Central.twenty-seven teams.This tool allows the teaching team to comment on each of the teams’ progress posts andinteractively follow their progress in between class sessions.This means that during the time between each class session, the teaching team needs to goonline and read and comment on each of the teams. You must do this each week. Then, when LaunchPad Central Main Admin Page PAGE 35© 2012 Steve Blank
  • 33. LaunchPad Central Team Admin PageTEXTBOOKSThe Startup Owner’s Manual, The Step-by-Step Guide for Building a Great Company and Bob Dorf, 2012)Business Model Generation: A Handbook for Visionaries, Game Changers and Challengers - der Osterwalder, Yves Pigneur, 2010) -of what’s needed in team presentationsGRADINGlessons learned presentation. The grading criteria are as follows: -sentations each week. Team members must 1) update business model canvas weekly, and 2)provide detailed narrative on customer conversations weekly.
  • 34. GUIDELINES FOR TEAM PRESENTATIONSSlide 1 with, what the team does)Slide 2 Hypothesis: Here is what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do nextFeedback from the teaching team during oral presentations is where the most learning occurs.Due to the pace and tempo of the course, participants must be held accountable to the mate- PAGE 37© 2012 Steve Blank
  • 35. 8. Instructor Pre-Course PreparationObjective: Have a basic understanding of: The Lean LaunchPad class Business Model Canvas Customer Development1. Textbooks Business Model Generation Steven Blank, The Startup Owners Manual2. - nd -annual-international- - L1tF
  • 36. 9. Detailed Class CurriculumSTUDENT ASSIGNMENT—BEFORE THE TEAMS SHOW UP IN CLASSLearningObjectives What’s the difference between search and execution? What is a business model versus business plan? What is the business model canvas? What are the nine components of the business model canvas? What is a hypothesis? What is Customer Development? What are the key tenets of Customer Development?Why? These are the fundamental principles of the course. Having the students prep on their own time allows us to go into full-immersion on day one,How? Assign readings before the class starts. Inform students that knowing these Teams present their canvas as the introduction to their cohort. But more prepared for the course.ReadingAssignment forday 1 of the Business Model Generationclass Startup Owners ManualTeam Prepare your team’s business model using the business model canvasAssignmentfor day 1Assignment We don’t expect teams to get the canvas right. We just want themObjective thinking hard about what it means. They will be living with the canvas for the next few months. Get the teams accustomed to a cover slide that provides us with a one- page summary of who they are, number of customers talked to that week, what their team does.Presentation Prepare a two-slide presentation to present your team to the cohort:Guidelines Slide 1: Title Slide Slide 2: Business Model Canvas See below for the presentation formatHold Mentor over the Mentor Handbook PAGE 39© 2012 Steve Blank
  • 37. CLASS 1: INTRO & BUSINESS MODELS ANDCUSTOMER DEVELOPMENT 1st Team Presentation based on pre-class reading In Person Lecture 0: Class Introduction In Person Lecture 1: Business Models and Customer DevelopmentTeaching Assess each team’s level of preparation and understanding.Objective Introduce the business model canvas development principles.StudentPresentations method.Instructor initial business models is critical during this session to emphasize theCritiques level of preparation necessary by the students. Have students understand that there is no such thing as “spare time,” and they need to be out of the building talking to customers.Why? These are the fundamental principles of the course. The format of all the classes will be: Teams present in front of their peers Instructors lecture on a component of the business model canvas Having the students present on day one gives them full-immersion on It also gives the teaching team the ability to provide remedial help for In almost every class, one or two need coachingHow? Have teams start by presenting their business model canvases as their introduction to the class 1. models and team members. An interactive dialogue is encouraged. 2. channels, customer relations and revenue model. a. They’re usually wrong. b. Don’t go deep on one team. It’s the sum of the comments across the teams that is important. c. When you see a common error, announce, “This is a big idea. It’s one you will all encounter.” d. impressions of each team’s business model. e. Have the students grade and comment their peers on the student Google Doc grading sheet. PAGE 41© 2012 Steve Blank
  • 38. Common 1. Business Model ignorancestudent errors 2. Not understanding the difference between a value prop and featureson their 1st Not understanding any detail about their customerspresentation No understanding of a channel Fantasy revenue model 6. Business Model canvas looks like a business plan Thinking that they’re in the class to “execute” their plan, not search for oneLecture Start with Lecture 0, Introduction to the class and teaching team.Learning Next have the teams present their business model canvases.Objectives Students will understand the level of hypotheses testing their business Students should understand the concepts of: Nine parts of a Business Model Hypotheses versus facts Getting out of the building Iteration versus Pivot Focus on the right half of the canvas Students should understand the relationship between canvas components: Many startups spend years attacking a small market. Having them think about size of the opportunity early helps them keep asking, “How big can this really be? Is it worth doing?” See key lecture concept diagrams below.
  • 39. Lecture 0 Introduce the teaching team. Key concepts:Class Start by saying the students are or will become domain experts inIntroduction But we are the domain experts in building companies. We have a model that works, is intensive and will make all of you work extremely hard. It’s nothing personal. Key Points The class is all about “getting out of the building.” The program is intensive and fast-paced. The importance of actively grading their peers Your technology is ONE of the many critical pieces necessary to build a company and is part of the value proposition—customers do not care about your technology; they are trying to solve a problem. channelsLecture 1 Intro of the business model canvas and customer developmentBusinessModel Canvas& Customer Description of experimentsDevelopment How do you determine whether a business model is worth doing?Reading for BMG,next week SOM, What’s a Startup? First Principles A Startup is Not a Smaller Version of a Large Company Twelve Tips for Early Customer Development InterviewsAssignment Lecturefor next week Presentation Identify your market size Propose experiments to test your value proposition, customer segment, channel and revenue model of your business model what’s needed in tomorrow’s presentation Talk to at least 5 potential customers PAGE 43© 2012 Steve Blank
  • 40. Typical Class 1 Student Business Model Canvas—A business plan in small typeTomorrow’s Slide 1: Cover slidePresentation Slide 2: Current business model canvas with any changes markedGuidelines unknown segment, value proposition, channel and revenue model of the hypotheses would you say that your hypothesis wasn’t even close to correct)?
  • 41. CLASS 1 THROUGH 8: PRESENTATION AGENDA &TEACHING ASSISTANT ACTIVITIES Teaching Before Each Class Assistant Communicate with students: Activities for Topic to be addressed for class Classes 1-8 Presentation Assignment When presentations should be uploaded to DropBox Team Presentation order Allotted time for presentation Location of presentation Collect student slides beforehand so no individual computer setup is necessary. Then load them on a single presentation computer minute to go shared Google Doc grading sheets One for the teaching team A separate one for the students capture the verbal teaching team critiques in a separate Google Doc—this should be shared with all the teams. This should be repeated for all classes During Each Class Time all presentations Give students 1 minute warning PAGE 45© 2012 Steve Blank
  • 42. Lecture 1: Key Concept Diagrams Ensure students understand all the parts of the Business Model Canvas
  • 43. Ensure students understand the four steps of Customer Development Ensure students understand all the Hypothesis>Design>Test>Insight Loop PAGE 47© 2012 Steve Blank
  • 44. CLASS 2: VALUE PROPOSITION Team Presentation based on Business Model Canvas and Customer Development Lecture Lecture 2: Value Proposition (watched online before class or presented in person)Teaching Set expectations for:ObjectiveStudent Annotation of the business model canvas updatesPresentations Their blog as “a customer discovery narrative”InstructorCritiques Customer calls are not optional. They need to be continuous. Hypotheses need to be turned into facts. There are no facts inside This class is not about the execution of their original idea.How? The teams have spoken to after class yesterday. They were supposed to set up meetings before they arrived. one.) Stop their presentation. Have them leave to make phone calls. Tell them if they have something to add before the rest of the presentations are over, they can present. Make the point clearly that this is what the class is about. In today’s presentations, teams explain what they learned in those calls. Have them annotate the canvas with new learning each week. Make comments to show you’ve read their blog and it’s critical to update. Make sure they are articulating their hypotheses of what they expected to learn versus what they found. Without that it’s just a bunch of random customer interviews This “hypothesis>experiment>data>insight” loop is the core of the process and class.Common Not enough customer callsstudent errors Vague data from the callson their 2nd Little to no insight from the datapresentation No clue about market size or overly optimistic Did not articulate experiments to test their hypothesesOptionally lecture is on-line. All students need to watch it before class.
  • 45. Lecture 2 Students should understand:Value The smartest teams believe “it’s all about my invention.”Proposition Your goal is to teach them “it’s all about the business model.”Learning The majority of product features are never used by customers.Objectives Engineers love to add features. minimum feature set. The difference in an MVP for a physical product versus the Low and Explain why customer development can’t be done with Waterfall engineering but needs an Agile Development process. See key lecture concept diagrams below.Lecture 2Value How does it differ from an ideaProposition Identifying the competition and how your customers view these competitive offerings What’s the minimum viable product? What’s the market type? Insight into market dynamics or technological shift that makes this a fresh opportunity? Instructors should emphasize: The difference between value proposition and feature sets minimum viable product The value of annotating the business model canvas The need to be open to changing initial business model canvas hypotheses PAGE 49© 2012 Steve Blank
  • 46. Reading for BMGNext Week SOMAssignment Lecturefor NextWeek Presentation What is the resulting MVP? Propose experiments to test your value proposition what’s needed in tomorrow’s presentation Post discovery narrativesPresentation Slide 1: Cover slideGuidelines Slide 2: Current business model canvas with any changes marked Hypothesis: Here’s what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do next
  • 47. Lecture 2: Key Concept Diagrams Ensure students understand the three components of the Value Proposition Casually introduce the three components of the Customer Segment PAGE 51© 2012 Steve Blank
  • 48. Ensure students understand they have to articulate their hypotheses, design experiments, test, and hopefully get insights
  • 49. CLASS 3: CUSTOMER SEGMENTS Team Presentation based on Value Proposition Lecture Remote Lecture 3: Customer SegmentsTeaching Continue the pace of discovery, customer calls, insights,ObjectivesStudent Make sure teams continue to:Presentations Annotate the business model canvas with updatesInstructor Critiques proposition. Acknowledge you’ve read their blog. Comment on other egregious parts of the canvas as necessary. Before they leave, make sure you solve any apparent team dysfunctions.How? set. Make sure they’ve articulated pain killers, gain creators, MVP. value proposition is solving, and what gains it is creating Which features will do that? What is the MVP to prove the value proposition? Start emphasizing the importance of diagrams for each component of the business modelCommon Not enough customer callsstudent errorson their 3rdpresentation customers and here’s what they said…”) Team thinks the purpose of the class is the execution of their idea versus testing their hypotheses. Still confused about the difference between a value proposition versus features Prop is not a spec sheet) Did not articulate experiments to test their hypotheses.Optionally this lecture is on-line. All students need to watch it before class. PAGE 53© 2012 Steve Blank
  • 50. Lecture 3 Students should understand:Customer SegmentsLearning Customer pains and gainsObjectives Customer “Jobs to be done” Problem versus Needs decision makers, economic buyers and saboteurs Market Type—explain the difference between Existing, Explain why it matters to know which one you are in The difference between single- and multi-sided markets Lecture slides can be found here: See key lecture concept diagrams below.Why? Scientists and engineers usually have a vague sense of who will buy. Get them started with talking to their peers, others at conferences, etc. an idea and a successful company awkward.Lecture 3 Instructors should emphasize:Customer Customers need to match their value proposition.Segments In a multi-sided market, each side of a market has its own value proposition, customer segment, revenue model and may have its own channel and customer relationships.
  • 51. Reading for next BMGweek SOMAssignment for Lecturenext week Presentation What are the Pains, Gains and Jobs to be done? What is the resulting MVP? Draw a diagram of your customer archetypes. proposition solve it? How? What was it that made customers interested? Excited? If your customer is part of a company, who is the decision maker, how large is their budget, what are they spending it on today, how are they individually evaluated within that organization, and how will this buying decision be made? of what’s needed in tomorrow’s presentation. Talk to at least ten potential customers. Post discovery narratives.Presentation Slide 1: Cover slideGuidelines Slide 2: Current business model canvas with any changes marked segment? from talking to customers? Hypothesis: Here’s what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do next Did anything change about Value Proposition? PAGE 55© 2012 Steve Blank
  • 52. Lecture 3: Key Concept Diagrams Ensure students understand the three components of The Customer Segment Ensure students understand the four Market Types
  • 53. Example of a Customer Flow Diagram Example of a Customer Archetype/Persona PAGE 57© 2012 Steve Blank
  • 54. CLASS 4: DISTRIBUTION CHANNELS Team Presentation based on Customer Segments Lecture Remote Lecture 4: Distribution ChannelsTeachingObjectives Make sure teams continue to:Student Annotate the business model canvas with updates Include diagrams of each part of the hypothesisPresentationsInstructorCritiques segments Acknowledge you’ve read their blog Comment on other egregious parts of the canvas as necessaryHow? Most students usually think of customers as the users of the product Make sure they understand there might be multiple customer Make sure their presentation includes a customer archetype slide Ask them if they can draw a day in the life of customer. If not, tell them they don’t know enough. customers have, what gains they are looking for, and what jobs they want done. Which features from the value prop will do that? Give compliments to teams who drew archetypes and customer Do not be polite to those who haven’t. If you can’t draw it you don’t understand it.Common Not enough customer callsstudent Vague data from the callserrors on their PI appears to be doing all the customer calls4th presentation Mentors driving the team to an early conclusion rather than learning Little to no insight from the data Most entrepreneurs start with a vague statement such as “customer segments are end users”Optionally this lecture is on-line. All students need to watch it before class.Lecture 4 Students should understand:DistributionChannels Direct, Indirect and OEMLearning Difference between physical and virtual channelsObjectives Types of physical and virtual channels Distribution channel versus product complexity Distribution Channel economics See key lecture concept diagrams below
  • 55. Why? Scientists and engineers think of sales as a tactic a salesperson uses. Most entrepreneurs confuse channels with customers. They do not understand an impact a channel can have on its revenue streams. The more complex the channel, the smaller the margins will be.Lecture 4 Instructors should emphasize:Distribution Channels need to match their customer segmentsChannels Channel economics need to match revenue goals channelReading for SOMnext weekAssignment Lecturefor next week Presentation What is the distribution channel? Are there alternatives? Draw the channel diagram Annotate it with the channel economics be? Did you learn anything different? What was it that made channel partners interested? Excited? Did anything change about Value Proposition or Customer segment? what’s needed in tomorrow’s presentation Talk to at least ten potential customers and channel partners (Salesmen, OEMs distributors, etc.) Post your discovery narrativesPresentation Slide 1: Cover slideGuidelines Slide 2: Current business model canvas with any changes marked customers? Hypothesis: Here’s what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do next Did anything change about Value Proposition? PAGE 59© 2012 Steve Blank
  • 56. Lecture 4: Key Concept Diagrams Ensure students understand the Physical Distribution Channels alternatives Ensure students understand the Web/Mobile Distribution Channels
  • 57. Ensure students understand Direct Sales Channel Economics Ensure students understand Reseller Channel Economics PAGE 61© 2012 Steve Blank
  • 58. Ensure students understand OEM Sales Channel EconomicsEnsure students understand Channel versus Product Complexity
  • 59. CLASS 5: CUSTOMER RELATIONSHIPS (GET/KEEP/GROW) Team Presentation based on Distribution Channels Lecture Remote Lecture 5: Customer Relationships (Get/Keep/Grow)TeachingObjectives Make sure teams continue to:Student Annotate the business model canvas with updates Include diagrams of each part of the hypothesisPresentationsInstructorCritiques channel Acknowledge you’ve read their blog Comment on other egregious parts of the canvas as necessaryHow? Most students confuse the channel with the users of the product Make sure their presentation includes a channel diagram Make sure the channel diagram has the economics on it What type of channel they’d use Why they would pick that one How much it will cost them to use it Ask, “Can you draw your channel map, showing how the product moves from your startup to its end user, along with the costs and Make sure they’ve diagrammed it. Is it repeatable and scalable? Can they prove it? What is the length of the sales cycle? What are the critical points within that process? Is your sales funnel predictable?Common They may be stuck on their original customer segment or value propstudent By now some might need encouragement to pivoterrors on Some might be making lots of calls, getting lots of data but not have atheir 5th clue what it meanspresentation Students often do not ask for an order or know what it takes to get an order from the customer in their contact They may not understand: The relationship between a channel and its revenue streams The more complex the channel the smaller the margins will be Did not articulate experiments to test their hypothesesOptionally this lecture is online. All students need to watch it before class. PAGE 63© 2012 Steve Blank
  • 60. Lecture 5 Students should understand:Customer How teams get customers into their sales channel and move themRelationships successfully through the sales cycleGet / Keep / How to keep them as customers andGrow How to grow additional revenue from those customers over time. Students should understand how to develop “get customer”Learning experiments to determine tactics that move customers into andObjectives through the sales funnel in a repeatable and scalable way. Ensure that the students have an understanding of the concept of See key lecture concept diagrams belowWhy? “Get, Keep and Grow” are among the most important hypotheses for any startup to test. Customer relationships are the result of a complex interplay among customers, sales channel, value proposition and budget for marketing. Businesses that successfully “Keep” their customers focus heavily on retention. Students should use strategies, tactics and metrics such as purchase patterns, cohort analysis, complaints, and participation in “Grow” efforts, amongst others. Multi-sided markets need separate “Get, Keep and Grow” strategiesLecture 5 Instructors should emphasize:CustomerRelationships segments. Emphasis on repeatable and scalable relationship strategies 1.Get / Keep / a. Awareness Interest Consideration Purchase KeepGrow Customers b. Grow” a customer for their relevant market. 2. Demand creation—drives customers to chosen sales channels a. a. How to create end user demand b. Difference between web and other channels c. Evangelism vs. existing need or category How demand creation differs in a multi-sided market
  • 61. Reading for SOMnext week Assessment”Assignment Lecturefor nextweek Presentation Talk to at least ten potential customers . Build demand creation budget and forecast. What is your customer lifetime value? Channel? what’s needed in tomorrow’s presentationPresentation Slide 1: Cover slideGuidelines Slide 2: Current business model canvas with any changes marked Annotate it with costs to “Get” customers customers? Hypothesis: Here’s what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do next PAGE 65© 2012 Steve Blank
  • 62. Ensure students understand Get/Keep Grow Customers for Physical Channels Ensure students understand Consumer Acquisition Cost
  • 63. Ensure students understand Lifetime Value Ensure students understand Atrrition and Churn PAGE 67© 2012 Steve Blank
  • 64. Lecture 5: Key Concept Diagrams Ensure students understand Get/Keep/Grow Customers
  • 65. CLASS 6: REVENUE STREAMS Team Presentation based on Customer Relationships Lecture Remote Lecture 6: Revenue StreamsTeaching Teams should be showing some real progress.ObjectivesStudent Do not give up on the ones who seem lost; about half of thosePresentations surprise you.Instructor Critiques Don’t let them slow down the pace of discovery and customer calls. Make sure teams continue to: Annotate the business model canvas with updates Include diagrams of each part of the hypothesis Acknowledge you’ve read their blog relationships Comment on other egregious parts of the canvas as necessaryHow? Ask, “What earned media activities do you plan to do for your startup? What do you hope to achieve?” Even though they won’t have time to do real demand creation Ensure their diagrams show funnel and real $s for costs Ask, “Do you know what your customers read, what trade shows they attend, gurus they follow, and where they turn for new product information?”Common To most, marketing is even more of a mystery than sales.student errors Let them know that the funnel is their magic decoder ring toon their 6th marketing.presentation Students often do not understand the difference between startups. Online marketing is important, even if the product and sales channels are physical.Optionally this lecture is online. All students need to watch it before class. PAGE 69© 2012 Steve Blank
  • 66. Lecture 6 Students should understand:Revenue Streams from each customer segment Direct Sales, Licensing, Subscription Within the revenue model—how do I price the product?Learning Pricing is a tactic.Objectives strategy. This is not about income statement, balance sheet and cash See key lecture concept diagrams belowLecture 6 Instructors should emphasize:Revenue Streams Types of revenue streams Pricing Tactics market revenue modelsReading for SOMNext WeekAssignment for LectureNext Week Presentation Talk to at least ten potential customers. Test pricing in front of What’s the revenue model strategy? What are the pricing tactics? Draw the diagram of What are the metrics that matter for your business model? of what’s needed in tomorrow’s presentationPresentation Slide 1: Cover slideGuidelines Slide 2: Current business model canvas with any changes marked Pricing? Hypothesis: Here’s what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do next
  • 67. Lecture 6: Key Concept Diagrams PAGE 71© 2012 Steve Blank
  • 68. CLASS 7: PARTNERS Team Presentation based on Revenue Streams Lecture Remote Lecture 7: PartnersTeaching Teams shold be showing some real progress.ObjectivesStudent Do not give up on the ones who seem lost; about half of thoseObjectives surprise you. Don’t let them slow down the pace of discovery and customer calls. Make sure teams continue to: Annotate the business model canvas with updates Include diagrams of each part of the hypothesis Acknowledge you’ve read their blog. and pricing. Comment on other egregious parts of the canvas as necessary.How? Ask: What is your revenue model? Why did you select it? How do customers buy today? What do they pay today? What do competitors charge?Common Students confuse pricing tactics with revenue model strategy.student Students price on cost versus value.errors on their No appreciation of competitive pricing or offerings; revenue adds up7th presentation to a small business Business too small for a company; should focus on licensingOptionally this is lecture is online. All students need to watch it before class.Lecture 7 Students should understand:Partners What is a Partner?Learning Types of PartnersObjectives Suggestions related to selecting a Partner as a startup See key lecture concept diagrams below
  • 69. Lecture 7 Instructors should emphasize:Partners Who are Partners The difference between strategic alliances, competition, joint ventures, buyers, suppliers and licensees do not do everything by themselves), strategic alliances and joint partnerships are not needed to serve Earlyvangelists. They are needed for mainstream customers. For startups, Partners can monopolize your time. Partners must have aligned goals and customers. Some examples: Strategic Alliances: Starbucks partners with Pepsi, create Frappuccino Joint Business Development: Intel partners with PC vendors Coopetition: Automotive suppliers create AIAG Key Suppliers: Apple builds iPhone from multiple suppliersReading for SOMNext WeekAssignment Lecturefor NextWeek Presentation Talk to at least ten potential customers including potential partners What partners will you need? Why do you need them and what are risks? Why will they partner with you? What’s the cost of the partnership? What are the incentives and impediments for the partners? of what’s needed in tomorrow’s presentation.Presentation Slide 1: Cover slideGuidelines Slide 2: Current business model canvas with any changes marked Partners? Hypothesis: Here’s what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do next PAGE 73© 2012 Steve Blank
  • 70. Lecture 7: Key Concept Diagrams
  • 71. CLASS 8: RESOURCES, ACTIVITIES AND COSTS Team Presentation based on Partners Lecture Remote Lecture 8: Resources, Activities and CostsTeaching This is the last presentation.Objectives Teams will want to slow down or stop calling customers. Don’t letStudent them slow down the pace of discovery and customer calls.Presentations Comment on other egregious parts of the canvas as necessary.InstructorCritiquesHow? Ask: How many partners have you spoken to? What alignment does this partner have with your customers? What need do you solve for this partner and how important is it to the partner? How many partners are there like this?Common Students think their business has to do everything and don’t realizestudent the value of a partner in their value delivery.errors on their Students assume getting a partner is a relatively easy process.8th presentation Students confuse partnership interest with successful closing a partnership deal. Students confuse partnership closing with successful executing partnership.Optionally this lecture is online. All students need to watch it before class.Lecture 8 Students should understandResources, Cover the four categories of resourcesActivities and Cover the types of activitiesCosts Talk about the effect of people upon the culture of the startupLearning Enumerate the ways in which a startup’s intellectual property can beObjectives protected Add up all the costs. Is this a business? worth doing? See key lecture concept diagrams belowLecture 8 Students should understandResources,Activities andCosts not be the right one to choose at this stage. Activities: Manufacturing? Supply Chain? Problem Solving? Costs: Fixed costs? Variable Costs?Assignment Keep talking to ten customers a week Final seven-minute presentation and two-minute videoVideoPresentationGuidelines PAGE 75© 2012 Steve Blank
  • 72. Lecture 8: Key Concept Diagrams
  • 73. PAGE 77© 2012 Steve Blank
  • 74. WORKSHOP 3: PRESENTATION SKILLS TRAININGTeachingObjectives day, changing slides, editing video, reshooting interviews, and redoing voiceovers while receiving comments and suggestions from the instructors along the way. The emphasis is on how they present compelling story.Format Two weeks before the workshop Teams are instructed to have early versions of all their presentation materials available for online review by the presentation skills instructors the week before this workshop. One week before the workshop Teams are reminded to email links to their presentations and videos. Teams who follow these instructions receive initial comments and suggestions via email a few days before the workshop. The day of the workshop Then, instructors walk the room and work with teams, one at a time. Often, a comment or suggestion comes up that all the teams would in the room and share learnings with everyone. After a break, each team gives their presentation to instructors and the other groups and receives notes in a formal practice session.Assignment Students have two deliverables for the “Lessons Learned” Class: Story Video: Two-minute video focused on your journey through I-Corps as it relates to your business Lessons Learned Slide Deck presentation)BestPractices learned about their particular product or service. Teams who emailed YouTube links to their videos and slide decks several days in advance got much better feedback, and had time to act on the feedback. accept YouTube links. Dropbox, and especially email attachments, are not and drag the entire process to a standstill.
  • 75. Story Video Think of the story video as the heart of the team presentation told withDetails video(Two minutes) Suggested Story Video Outline What are your names and what is your team’s name? Introduce you work. How many customers did you talk to? When you started the class, what was the most important thing you thought you would have to do to successfully launch a scalable startup? How do you feel about that now? Thinking back across the class, who was the most interesting customer you met and where did you meet them? What happened?? conversation? Now that the class is over, what was the most surprising thing you learned in the class? Teams need to see examples of story videos! Point the teams to good examples including: nsf phi-optics-story-video-nsf PAGE 79© 2012 Steve Blank
  • 76. Lessons LearnedPowerPointPresentation presentations. Here it is, in full:(8 min) Story. Show me, don’t tell me. Arcs. Beginning, middle, end. Character, setting, plot. Editing. Notes. Look before... Practice! Use (or enhance) the diagrams you developed in weekly presentations to illustrate these points. decks and video links that are emailed in advance. Spend the morning sessions talking about the common pitfalls in team presentations. Made sure Slide 1 has Team Name, your product, what business you ended up in and the number of customers you talked to. Every presentation requires a diagram of Customer Archetypes, Every presentation requires hypotheses you tested, experiments you ran, and results. Final Slides—Click through each one of your business model canvas slides. Teams need to see examples of successful presentations! Point the teams to good examples, including: nsf-presentation
  • 77. Common Students often make very bland story videos.student errors their technology, their customers, and their learning process. This isPresentation andvideo can extrapolate to generality, which is what one wants an investor to do. Students often spend time thanking instructors, speaking excitedly about the Lean Launchpad program, or making cheeky references or inside jokes. This is a big mistake, and can make years of research feel like a Junior High School Science Fair Project. Students should spend absolutely zero time on any of these topics, and all meta references to how important teamwork is should be aggressively cut. This is very hard for many students to internalize. None of that has any place in a two-minute video about a real company that is really trying to raise real money from real investors. Investors will ascertain team dynamics for themselves when they meet a given company and the people involved. Students think they need to tell a whitewashed success story. This is another mistake, and will damage their attempts at getting Students must strive to tell the story of their mistakes, pitfalls discovered, and pivots made. possible about the customers they actually met, what they actually said, and how that changed their business model canvases. Students don’t label their axes on graphs, label their arrows in diagrams, or make a legend showing their color coding scheme. They should. PAGE 81© 2012 Steve Blank
  • 78. CLASS 9 & 10: LESSONS LEARNED PRESENTATIONTeaching Teams present:Objectives 2-minute video 8-minute Lessons Learned PresentationLogistics All teams present in the same room Split over two weeks
  • 79. Appendix PAGE 83© 2012 Steve Blank
  • 80. 10. Collaborative Google Documents Instructor Grading Document Student Peer-Grading Document
  • 81. Startup Wisdom Document PAGE 85© 2012 Steve Blank
  • 82. 11. 10-Week Syllabus—SampleENGR 245: The Lean Launch PadCourse Title: Technology Entrepreneurship and Lean StartupsUnitsInstructors: Steve Blank, Ann Miura-Ko, Jon FeiberTAs: Thomas HaymoreGradingDays and TimesLocation: TBDWebpageTexts: Steven Blank, Four Steps to the EpiphanyBusiness Model GenerationPrerequisiteGoal: Provide an experiential learning opportunity showing how engineers, together withscientists and other professionals, really build companies.Course Description:This course provides real world, hands-on learning on what it’s like to actually start a high-techcompany. This class is not about how to write a business plan. It’s not an exercise on how smartyou are in a classroom, or how well you use the research library to size markets. And the endresult is not a PowerPoint slide deck for a VC presentation -bator where you come to build a “hot idea.”This is a practical class—essentially a lab, not a theory or “book” class. Our goal, within the con-straints of a classroom and a limited amount of time, is to create an entrepreneurial experiencefor you with all of the pressures and demands of the real world in an early stage start up.You will be getting your hands dirty talking to customers, partners, and competitors, as youencounter the chaos and uncertainty of how a startup actually works. You’ll work in teamslearning how to turn a great idea into a great company. You’ll learn how to use a businessmodel to brainstorm each part of a company and customer development to get out of theon the customer and market feedback you gathered, you will use agile development to rapidlyiterate your product to build something customers would actually use and buy. Each block willbe a new adventure outside the classroom as you test each part of your business model andthen share the hard earned knowledge with the rest of the class.class.Class Culture:Startups communicate much differently than inside a university or a large company. It isdramatically different from the university culture most of you are familiar with. At times it can feelbrusque and impersonal, but in reality is focused and oriented to create immediate action intime- and cash-constrained environments. We have limited time and we push, challenge, and PAGE 87© 2012 Steve Blank
  • 83. the real world. We hope you can recognize that these comments aren’t personal, but part ofthe process.a real dialog with the teaching team. This approach may seem harsh or abrupt, but it is all partthat as entrepreneurs you need to learn and evolve faster than you ever imagined possible.Amount of Work:This class requires a phenomenal amount of work on your part, certainly compared to many otherclasses. Projects are treated as real startups, so the workload will be intense. Teams havereported up to twenty hours of work per week. Getting out of the classroom is what the effort -tween each of the lectures outside your lab talking to customers. If you can’t commit the timeto talk to customers, this class is not for you.This class is a simulation of what startups and entrepreneurship is like in the real world:This class pushes many people past their comfort zone. It’s not about you, but it’s also notpart of what it is really like.) The pace and the uncertainty pick up as the class proceeds.Team Organization:This class is team-based. Working and studying will be done in teams. You will be admitted as ateam. Teams must submit a proposal for entry before the class begins. Projects must be ap-proved before the class.Team projects can be software, a physical product, or service of any kind. The teams will self-constant parsing and allocating of the tasks that need to be done. -preneur or VC) to provide assistance and support.Suggested Projects:in which you are a domain expert, such as your graduate research. In all cases, you shouldchoose something for which you have passion, enthusiasm, and hopefully some expertise.Teams that select a web or mobile-based product will have to build the site for the class. Do notselect this type of project unless you are prepared to see it through.Deliverables:Teams building a physical product must show us a costed bill of materials and a prototype.1. Teams building a web product need to build the site, create demand, and have customers using it. See - .2. LaunchLab. It’s how we measure your progress.) Your team will present a weekly in-class Powerpoint summary of progress.
  • 84. Grading Criteria: each weekTeam members must:1. weekly2. Identify which team member did which portion of the work Submit a detailed report on what the team did each week Submit a weekly email of team member participationClass RoadmapEach week’s class is organized around: Student presentations on their “lessons learned” from getting out of the building and iterating or pivoting their business model. Comments and suggestions from other teams, and teaching teams on the lessons learned. from Business Model Generation).“Genius is the ability to make the most mistakes in the shortest amount of time.”Pre-class PreparationRead: Business Model Generation. 2012 Four Steps to the EpiphanyTeams: Form teams of fourIdea Approval Attend a meeting with the teaching teach in Nov or December th, submit your team project for approval to the teaching team PAGE 89© 2012 Steve Blank
  • 85. _______________________________________________________________1. Jan 10th: Intro/Business Model/Customer DevelopmentWhat’s a business model? What are the nine parts of a business model? What are hypoth-eses? What is the Minimum Feature Set? What experiments are needed to run to test busi-ness model hypotheses? What is market size? How to determine whether a business model isworth doing?Read: Business Model Generation,Deliverable for January 17th: Write down hypotheses for each of the nine parts of the business model. Come up with ways to test: Each of the hypotheses
  • 86. you say that your hypothesis wasn’t even close to correct)?___________________________________________________________________2. Jan 17th: The Value PropositionClass Lecture/Out of the Building Assignment:What is your product or service? How does it differ from an idea? Why will people wantit? Who’s the competition and how does your customer view these competitive offerings?Where’s the market? What’s the minimum feature set? What’s the Market Type? What washave into the market dynamics or into a technological shift that makes this a fresh opportu-nity?Action:Read: Business Model Generation Four Steps to the Epiphany The Blue Ocean Strategy pages 3-22Deliverable for Jan 18th: Find a name for your team. What were your value proposition hypotheses? What did you discover from customers? Submit interview notes, present results in class.___________________________________________________________________3. Jan 24th: Customers/users /payersClass Lecture/Out of the Building Assignment: How is a business customer different from a consumer?Action: PAGE 91© 2012 Steve Blank
  • 87. Read: Business Model Generation Four Steps to the Epiphany -Deliverable for Jan 25th: What were your hypotheses about who your users and customers were? Did you learn anything different? Submit interview notes, present results in class. Did anything change about Value Proposition? If your customer is part of a company, who is the decision-maker, how large is the bud- get they have authority over, what are they spending it on today, how are they individu- ally evaluated within that organization, and how will this buying decision be made? What resonates with customers? For web startups, start coding the product. Setup your Google or Amazon cloud infrastructure.___________________________________________________________________4. Jan 31st: The ChannelClass Lecture/Out of the Building Assignment: What’s a channel? Direct channels, indirect channels, OEM. Multi-sided markets. B-to-B Action: If you’re building a web site, get the site up and running, including minimal fea- tures. - ners. Four Steps to the EpiphanyDeliverable for Feb 1st : For web teams: Get a working web site and analytics up and running. Track where your visitors differs. What were your hypotheses about your web site results? Submit web data or customer interview notes; present results in class.
  • 88. What is your assumed customer lifetime value? Are there any proxy companies that would suggest that this is a reasonable number? For non-web teams: What is your customer lifetime value? Channel incentives—does your product or proposition extend or replace existing revenue for the channel? What kind of initial feedback did you receive from your users? What are the entry barriers?___________________________________________________________________5. Feb 7th: Customer Relationships/Demand CreationClass Lecture/Out of the Building Assignment: How do you create end-user demand? How does it differ on the web vs. other chan- nels? Evangelism vs. existing need or category? General Marketing, Sales Funnel, etcAction: If you’re building a web site: A small portion of your site should be operational on the web * Ask your users to take action, such as signing up for a newsletter. * * Change messaging on site during the week to get costs lower; team that gets lowest delta costs wins. If you’re assuming virality of your product, you will need to show viral propaga- experiments. If non-web, Build demand creation budget and forecast. * Get real costs from suppliers.Read: Four Steps to the Epiphany startup-metrics-for-pirates-seedcamp-2008-presentation PAGE 93© 2012 Steve Blank
  • 89. Watch:Deliverable for Feb 8th Submit interview notes; present results in class. Present and explain your marketing campaign. What worked best and why?___________________________________________________________________6. Feb 14th: The Revenue ModelClass Lecture/Out of the Building Assignment: What’s a revenue model? What types of revenue streams are there? How does it differ on the web versus other channels? Action: What’s your revenue model? How will you package your product into various offerings if you have more than one? How will you price the offerings? What are the risks involved? What are your competitors doing?Read: Getting to Plan BDeliverable for Feb 15th : Assemble an income statement for your business model. Include lifetime value calcula- tion for customers. Submit interview notes, present results in class.__________________________________________________________________
  • 90. 8. Feb 21st: PartnersClass Lecture/Out of the Building Assignment: Who are partners? Strategic alliances, competition, joint ventures, buyer supplier, licensees. Action: What partners will you need? Why do you need them and what are risks? Why will they partner with you? What’s the cost of the partnership? Talk to actual partners.Deliverable for Feb 22nd Assemble an income statement for the your business model. Submit interview notes, present results in class. Demand Creation? What are the incentives and impediments for the partners?___________________________________________________________________9. Feb 28th: Key Resources & Cost StructureClass Lecture/Out of the Building Assignment: What resources do you need to build this business? How many people? What kind? Any hardware or software you need to buy? Any IP you need to license? How much money vs. when do you pay others? Action: What’s your expense model? costs in your business model? Costs vs. ramp vs. product iteration? Access to resources: What is the best place for your business?Deliverable for March 1st Assemble a resources assumptions spreadsheet. Include people, hardware, software, When will you need these resources? Submit interview notes, present results in class. PAGE 95© 2012 Steve Blank
  • 91. Guest:Alexander OsterwalderFor March 1st or 8th__________________________________________________________________10. March 6th: Team Presentations of Lessons Learned (1st half of the class)Deliverable:Each team will present a thirty-minute “Lessons Learned” presentation about their business._______________________________________________________________11. March 13th: Team Presentations of Lessons Learned (2nd half of the class)Deliverable: Each team will present a thirty-minute “Lessons Learned” presentation abouttheir business.LESSONS LEARNED—DEMO DAY PRESENTATION FORMAT Deliverable: Each team will present a thirty-minute “Lessons Learned” presentation about their business. Slide 1—Team Name, with a few lines of what your initial idea was and the size of the opportunity Slide 2—Team members—name, background, expertise and your role for the team up your own). Here was our original idea. up your own). We iterated or pivoted…explain why and what you found. up your own). We iterated or pivoted…explain why and what you found.
  • 92. Side n—“So here’s where we ended up.” Talk about: What you learned Whether you think this a viable business, Whether you want to purse it after the class, etc.Final Slides—Click through each one of your business model canvas slides. PAGE 97© 2012 Steve Blank
  • 93. ENGINEERING 245: FREQUENTLY ASKED QUESTIONS (FAQ)Enrollment Admission is by teams of four. Teams must interview with the teaching team prior to the class start date. Enrollment application closes the week before the class. th There’s a mandatory student mixer prior to the class Wednesday, December xx and - tors.Students Non-graduates and non-students can serve as advisors to the teams, but our priority is providing a learning environment for Stanford graduate students. Each team must have at least four Stanford graduate students. Exceptions for team size and external members will be made on a case-by-case basis. Note your special team needs on your application form. We will let you know on Day One of the class. This is very intense class with a very high workload. We expect you to invest at leastCompany IdeasIs this class for web startups only?No, anyone with any idea and preferably a product can form or join a team.What if I do want to test a web idea?Great. The only condition is that you have to get the site up and deliver the minimum productTeam FormationDo I need to be part of a team before I enroll in class?Yes.Does my team need to have a product/business idea to enroll in E245?YesHow do teams form? Will I be assigned to a team?We do not assign members to teams. The mixer sessions will introduce you topotential team members.How many people compose a team?Typically four.
  • 94. Attendance and Participation class is not for you. and oriented to create immediate action in time- and cash-constrained environments. notify your team members and teaching team and drop the class. If you expect to miss a class, please let the TAs and your team members know ahead of time via email. We cold call in class. Be prepared. We expect your attention during our presentations and those of your fellow students. If you’re getting bored, tired, or inattentive, step outside for some air. If we see reading email or browsing the web we will ask you to leave the class.Intellectual PropertyWho owns the intellectual property tested in the Business Model?1. brought to class with you. No one has claim to anything you brought to class.2. based project) developed during class. If a team is working with a Stanford related- understand any Stanford licensing and royalties issues. company you’ve worked at has to inventions you make at school. If any of you decide to start a company based on the class, you own only what was written and completed in the class. You have no claim for work done before or after If a subset of the team decides to start a company they do NOT “owe” anything to any other team members for work done in and during the class. All team members are free modicum of common sense and fairness would apply.)I feel my idea/Business Model may become a real company and the “next killer app,” and I want toown it myself. What should I do?shared. Your team owns everything done in class. Discuss Intellectual Property rights withyour team from the beginning. If you can’t come to agreement with the team, join anotherclass is public.Will my Intellectual Property rights be protected when I discuss my ideas with the class?NO. This is an open class. There are no non-disclosures. All your presentations and CustomerDiscovery and Validation notes, business model canvas, blogs and slides can, and more likelywill, be made public. PAGE 99© 2012 Steve Blank
  • 95. This class is not an incubator. At times you will learn by seeing how previous classes solved the same class of problem by looking at their slides, notes, and blogs. Keep in mind that successful companies are less about the original idea and more about must be prepared to share your ideas openly with the class. It is a forum for you to “bounce” your ideas off your peers.I’m not comfortable sharing what I learn with others. What should I do?Don’t take this class.Help!What kind of support will our team have?The teaching team consists of three professors, two TAs, and at least two mentors per team.A mentor is an experienced entrepreneur or venture capitalist assigned to your team. They’vevolunteered to help with the class and your team because they love startups. Their job is toguide you as you get out of the building.How often can we/should we meet with our mentors?Your mentor is expecting to meet with you at least every two weeks face-to-face. You canemail them or meet with them more often as they have time.Can I talk to a mentor not assigned to my team?By all means, do so. All the mentors are happy to help. However, they cannot support yourteam full-time unless your mentor decides to swap places with them.I have a busy schedule and my mentor can’t meet when I want them to.Mentors have day jobs. Asking them to meet or reply to you ASAP is not acceptable. So planahead to allow for a reasonable amount of time for a reply or meeting. Be concise with yourI need help now. -sooner, email us.Who are the Mentors?See the mentor list at the end of this document and on the class website.Team DynamicsWhat roles are in each team?Traditionally, each team member is part of the “customer development team.” You have toWhat if my team becomes dysfunctional?team. Do notWhat if one of my teammates is not “pulling his/her weight”?Try to resolve it within your team. If the situation continues longer than a week, please ap- -tion.
  • 96. GradingHow do you determine our grade? each week. Team members must: weekly Identify which team member did which portion of the work Provide a detailed report on what the team did each week Provide a weekly email of team member participationDoes everyone in the team get the same grade?No. Individual participation and contribution is also considered. You get to grade your teammembers on their contribution.What kind of feedback can I expect?your attention.Can I take this class Pass/NoCredit?No. Letter grade only. PAGE 101© 2012 Steve Blank
  • 97. Teaching TeamSteve Blank—Lecturer, Stanford Technology Ventures Programsblank@stanford.edu@sgblankJon Feiber—General Partner Mohr DavidowJdf@mdv.comAnn Miura-Ko General Partner FloodgateTeaching AssistantsBhavik Joshi—Better Place, Bus Dev Asia, Co-Founder Berkeley Stanford Cleantech Confer-ence Seriesjoshibhavik@gmail.com@joshi_bhavikSteve Blank After twenty-one years in eight high technology companies, Steve - tor companies, Zilog and MIPS Computers; a workstation company - er peripheral supplier, SuperMac; a military intelligence systems sup- After he retired, Steve wrote a book about building early stage companies called Four Steps to the Epiphany. He moved from beingan entrepreneur to teaching entrepreneurship to both undergraduate and graduate studentsMBA program.department of Management Science and Engineering. In 2010, he was awarded the Earl F.Steve followed his curiosity about why entrepreneurship blossomed in Silicon Valley and wasstillborn elsewhere. It has led to several talks on The Secret History of Silicon Valley. -mission, the public body which regulates land use and public access on the California coast.
  • 98. Jon Feiber It was a chance meeting that brought Jon Feiber into the venture industry. Jon, then a vice president at Sun Micro- systems, was considering leaving Sun for a startup. After a preliminary discussion about the startup at Mohr Davidow, Today, he is among Mohr Davidow’s most senior partners - ments. Most of Jon’s investments harness emerging technol- ogy. “I like the intersection of emerging technology and big markets—geeky projects,” he admits. He began his career as a software programmer for main- frame maker Amdahl Corp. “I tend towards entrepreneurs who have real insight into hard problems and a sense of their need by customers.”Mohr Davidow, he believes, will remain one of the technology industry’s most successful inves-for being direct and open in its relationships with entrepreneurs,” he explains. “Our enthusi-asm for the entrepreneur is matched by depth of knowledge and experience in the areas thatwe choose to invest in.”“Being a venture capitalist is one of the greatest jobs you can have,” he continues. “I get tohang out with the smartest people in the world and help them turn their ideas into worldclass companies.”Jon holds a bachelor’s degree in computer science and mathematics and astro-physics from PAGE 103© 2012 Steve Blank
  • 99. 12. 5-Day Syllabus—ExampleCOLUMBIA B7739-002: ADVANCED ENTREPRENEURSHIPInstructors: Steve Blank, Bob Dorf, and Alexander OsterwalderCreditsTAs: Christopher Fong and Dennis KwonDays and TimesLocationTexts: Steve Blank and Bob Dorf, The Startup Owner’s Manual Business Model GenerationPrerequisitePre-class Assignments: Business Model Generation. The Startup Owner’s Manual each team made over the course.)Each team comes into the 1st day of class: With a Business Model Canvas. You will present for three minutes on Day One. s not in sessionGoal: provide an experiential learning opportunity showing how startups and newventures are built.Course Description:This course provides real world, hands-on learning on what it’s like to actually start a scalablecompany. This class is not about how to write a business plan. It’s not an exercise on howsmart you are in a classroom, or how well you use the research library to size markets. Andthe end result is not a PowerPoint slide deck for a VC presentation.This is a practical class—essentially a lab, not a theory or “book” class. Our goal, within theconstraints of a classroom and a limited amount of time, is to create an entrepreneurialexperience for you with all of the pressures and demands of the real world in an early stagestartup.You will be getting your hands dirty talking to customers, partners, and competitors, as youencounter the chaos and uncertainty of how a startup actually works. You’ll work in teamslearning how to turn a great idea into a great company. You’ll learn how to use a businessmodel to brainstorm each part of a company and customer development to get out of the
  • 100. be a new adventure outside the classroom as you test each part of your business model andthen share your hard-earned knowledge with the rest of the class.Class CultureStartups communicate much differently than inside a university or a large company. It is dra-matically different from the corporate culture most of you are familiar with. At times it can immediate actionin time- and cash-constrained environments. We have limited time and we push, challenge,like the real world. We hope you can recognize that these comments aren’t personal, butpart of the process.Amount of WorkThis class requires a lot of work on your part, certainly compared to many other classes. This classis a simulation of what startups and entrepreneurship are like in the real world: chaos, uncer-Team OrganizationThis class is team-based. Working and studying will be done in teams.Team projects can be software, physical products, or services of any kind. The teams will self-constant parsing and allocating of the tasks that need to be done.Class RoadmapEach day’s class is organized around: Student presentations on their “lessons learned” from getting out of the building and iterating or pivoting their business model. Comments and suggestions from other teams, and teaching teams, on the lessons learned. taken from Business Model Generation).“Genius is the ability to make the most mistakes in the shortest amount of time.”___________________________________________________________________MONDAY, APRIL 16TH Lecture 0: Class Introduction Teaching Team Introductions Class Goals Teaching Philosophy Expectations of You PAGE 105© 2012 Steve Blank
  • 101. _______________________________________________________________ Working Lunch_______________________________________________________________ Lecture 1: Business Model/Customer DevelopmentWhat’s a business model? What are the nine parts of a business model? What are hypotheses?What is the Minimum Feature Set? What experiments are needed to run to test businessmodel hypotheses? What’s “getting out of the building?” What is market size? How do youdetermine whether a business model is worth doing?_______________________________________________________________ Lecture 2: Customer Discovery—The ArtClass Lecture: How to Talk to Customers_______________________________________________________________ Get out of the building!We expect you to have set up meetings to talk to potential customers in the New York Area. The Startup Owner’s Manual -In a startup there is no “spare time.”___________________________________________________________________ Business Model Generation The Startup Owner’s Manual
  • 102. You will be presenting your results tomorrow morning. Market size Type of business: IP, licensing, startup, unknown Proposed experiments to test customer segment, value proposition, channel and rev- enue model of the hypotheses: your hypothesis wasn’t even close to correct)?______________________________________________________________________________________________________________________TUESDAY, APRIL 17TH Team Presentations Slide 2: Current business model canvas with any changes marked - tion, channel and revenue model of the hypotheses: that your hypothesis wasn’t even close to correct)?___________________________________________________________________ Lecture 3: Value Proposition / Customer SegmentsClass Lecture: Value PropositionWhat is your product or service? How does it differ from an idea? Why will people wantit? Who’s the competition and how does your customer view these competitive offerings?Where’s the market? What’s the minimum feature set? What’s the Market Type? What washave into the market dynamics or into a technological shift that makes this a fresh opportu-nity? PAGE 107© 2012 Steve Blank
  • 103. reach them? How is a business customer different from a consumer? What’s a multi-sidedmarket? What’s segmentation? What’s an archetype?_______________________________________________________________ Working Lunch_______________________________________________________________ Lecture 4: Business Model Canvas ExamplesClass Lecture: Best practice examples in the evolution of business models.___________________________________________________________________ Lecture 5: Corporate Entrepreneurship—Part IClass Lecture: The Startup inside of a companySustaining versus disruptive innovation. Impediments to innovation.___________________________________________________________________
  • 104. Get out of the building!We expect you to have set up meetings to talk to potential customers in the New York Area.___________________________________________________________________Deliverables for Wednesday, April 18th Business Model Generation The Startup Owner’s ManualTeam Presentation for tomorrow, Wednesday, April 18th Get out of the building and talk to as many people as you can. What were your value proposition hypotheses? Get out of the building and begin to talk to customers for April 18th . What did potential customers think about your value proposition hypotheses?______________________________________________________________________________________________________________________WEDNESDAY, APRIL 18th Team Presentations Slide 1: Cover slide Slide 2: Current business model canvas with any changes marked Hypothesis: Here’s what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do next___________________________________________________________Lecture 6: Channels / Get, Keep, Grow / Revenue Model PAGE 109© 2012 Steve Blank
  • 105. What’s a channel? Physical versus virtual channels. Direct channels, indirect channels, OEM.business to consumer).How do you Get, Keep and Grow customers? How does it differ on the web versus otherchannels? Evangelism vs. existing need or category? General Marketing, Sales Funnel, etc. Howdoes demand creation differ in a multi-sided market?What’s a revenue model? What types of revenue streams are there? What are pricing tactics?How does revenue model and pricing differ on the web versus other channels? How does thisdiffer in a multi-sided market?___________________________________________________________________ Working Lunch___________________________________________________________________ Lecture 7: Business Model Canvas ExamplesClass Lecture: Best practice examples___________________________________________________________________ Lecture 8 : Corporate Entrepreneurship—Part IIClass Lecture: The Startup inside of a companySustaining versus disruptive innovation. Impediments to innovation.___________________________________________________________________ Get out of the building!We expect you to have set up meetings to talk to potential customers in the New York Area.___________________________________________________________________ The Startup Owner’s Manual anything different?
  • 106. Present and explain your marketing campaign. How will you get customers? Did anything change about your Value Proposition?______________________________________________________________________________________________________________________THURSDAY, APRIL Team Presentations Slide 1: Cover slide Slide 2: Current business model canvas with any changes marked customers? Hypothesis: Here’s what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do next______________________________________________________________ Guest Speaker: Fred Wilson, Union Square Ventures___________________________________________________________________ Team Presentations: 10 minutes each (all teams)—continued___________________________________________________________________ Working Lunch___________________________________________________________________ Lecture 9: Partners, Key Resources & ActivitiesClass Lecture: Who are partners?Strategic alliances, competition, joint ventures, buyer supplier, licensees. What resources doyou need to build this business? How many people? What kind? Any hardware or softwareyou need to buy? Any IP you need to license? How much money do you need to raise? When?Why? PAGE 111© 2012 Steve Blank
  • 107. ___________________________________________________________________ Lecture 10: Business Model Canvas ExamplesClass Lecture: Best practice examples___________________________________________________________________ Get out of the building!We expect you to have set up meetings to talk to potential customers in the New York Area.Deliverables for Friday, April 20th: Business Model Generation, pages 200-211 The Startup Owner’s ManualFinal Team Presentation for Friday, April 20th______________________________________________________________________________________________________________________FRIDAY, APRIL 20TH Team Final Presentations Slide 1: Cover slide Slide 2: Current business model canvas with any changes marked customers? Hypothesis: Here’s what we thought Experiments: So here’s what we did Iterate: So here’s what we are going to do next___________________________________________________________________Time: 12:00—1:00 pm Lunch___________________________________________________________________
  • 108. Time: 1:00—2:00 pm Team Final Presentations, continued___________________________________________________________________ Lecture 11: Costs and Metrics that MatterPivot or Proceed: What data you need to assemble, and how to determine whether you havevalidated your business model to the point where moving forward makes sense. PAGE 113© 2012 Steve Blank
  • 109. 13. Mentor Handbook—Sample E245 The Lean LaunchPad Mentor and Advisor Handbook Classes meet 4:15 -7:05 pm Yang and Yamazaki Environment and Energy (Y2E2) building—Room 111Professors:Steve Blank sblank@kandsranch.comJon Feiber jdf@mdv.comTeaching assistants:Thomas Haymore thomas.haymore@gmail.com
  • 110. Welcome as a team mentor or advisor Lean Launchpad course inStanford School of Engineering.MentorsAdvisors are on-call resources for the entire class.The Role of MentorsAs a mentor, you are an extension of the teaching team responsible for the success or failureof one team with four students. In ten very short weeks your team has to 1) get outside theclassroom and test all their business model hypotheses and 2) if it’s a web-based business getit up and running and if it’s a physical product, build a prototype.Here’s what you are signing up for: Offering your team strategic guidance and wisdom: Offer business model suggestions Identify and correct gaps in the teams business knowledge Providing your team with tactical guidance every week: weekly presentation before they present Commenting weekly on your team’s Customer Discovery progress blog Meeting one-on-one with the team at least twice during the classIf you can’t commit to the time to be a mentor, consider being an Advisor.The Role of AdvisorsAs an advisor, you are a class resource for your particular domain expertise.Here’s what you are signing up for:Invitations to both Mentors/AdvisorsYou are welcome to attend any and all lecturesYou’re invited to speak at a class for ten minutes on a subject of general interestCourse Goal: Lean StartupsProvide an experiential learning opportunity to see how entrepreneurs really build companies. PAGE 115© 2012 Steve Blank
  • 111. In ten weeks, teach a four-person team how to transform a technology idea into a venture-scale business opportunity. Do it by having them get outside the classroom and test eachelement of their business model.The goal is not a business plan, revenue plan, 5 year forecast, etc.By the way, this is the class that the National Science Foundation has standardized to teachMentors and Getting Out of the BuildingThe class is about teaching the students that the nine building blocks of a business modelare simply hypotheses until they actually validate them with customers and partners. Thereare “no facts inside the building, they need to get outside.” This means as part of this classthey need to talk to customers, channel partners, and domain experts and gather real-worlddata—for each part of their plan.This can be a daunting and formidable task. To the best of your ability, help them network,teach them how to send email and make phone calls and run customer surveys. Open yourrolodex to whatever level you feel comfortable.Your role is to help the teams learn how to test their hypotheses about their business model.Questions that are helpful are, “Have you considered x?” “Why don’t you look at companyz and see what their business model is and compare it to yours?” or “Here are some nameswhat to do. -about what they learned on the journey.Mentors and Web-based StartupsIf your team is building a web-based business, they need to get the site up and running during -sumptions about minimum feature set, demand creation, virality, stickyness, etc.StudentsAdmission to the class is by interviews of pre-formed teams of graduate students. We’ll taketen to twelve teams. The students are typically working on their Masters or PhDs in engineer-ing or science; however the class is also open to MBA students.The teams will self-organize and establish individual roles on their own. There are no formalDeliverables:Teams that select a web-based product will have to build the website for the class. Teams thatselect a physical product must have a bill of materials and a prototype.The teams will be blogging their progress in between classes. It is an integral part of their -tations.) Each time they post they must notify you. Please look at their posts in-between class andgive them feedback.
  • 112. Lean Launchpad Course OrganizationThe course is organized around Alexander Osterwalder’s Business Model Canvas and SteveEach week’s class is organized around: A lecture on one of the nine building blocks of a business model. Student teams present their “lessons learned” from getting out of the building and iter- ating or pivoting their business model.The Eight (3 hour) Class Sessions: Session 1: Jan 10th—Course Introduction, Business Models, Customer DevelopmentSchedule PAGE 117© 2012 Steve Blank
  • 113. Textbooks Business Model Generation -Steven Blank, Four Steps to the EpiphanyGetting PreparedThe best way for you to get a feel of the course is to: -2. Download and breeze through the explanation of Osterwalder’s Business Model Canvas -Thanks once again for your support and participation,Steve, Jon and Ann
  • 114. PAGE 119© 2012 Steve Blank