The Lean LaunchPadLecture 1: Business Models and   Customer Development             Steve Blank             Jon Feiber    ...
This Session•   The teaching team•   Course objective(s)•   Teaching team philosophy•   Our expectations of you
Teaching Team
Steve Blank,Jon Feiber, John Burke                               •   BS CS/Astro Physics U of   •   Yale BS EE8 startups i...
Steve Blank, Jon Feiber, John Burke8 startups - 32 years in Silicon Valley• Semiconductors• Supercomputers• Consumer elect...
Steve Blank, Jon Feiber, John Burke8 startups - 32 years in Silicon Valley• Semiconductors• Supercomputers• Consumer elect...
Alexander Osterwalder, Tina Seelig• Ph.D. in Management Information  Systems (MIS) University of Lausanne     Ph.D. Neuros...
Oren Jacob, Jim Hornthal                                     •   CMEA Capital                                     •   Trip...
Oren Jacob, Jim Hornthal•CTO Pixar                            • CMEA Capital                            • Chairman Triporati
Teaching Assistant                                    Bhavik Joshi                                  joshibhavik@gmail.com ...
Alexander Osterwalder, Tina Seelig8 startups - 32 years in Silicon Valley• Semiconductors• Supercomputers• Consumer electr...
Course Assistant (CA’s)    Thomas Haymore                           Stephanie Glass•B.A. in Political Science             ...
Course Assistant (CA’s)            Thomas Haymore                         Stephanie GlassB.A. in Political Science• Stanfo...
Mentors• Mentors are people with real-world experience• Mentors role is to:  –   Help you “Get you out of the building”  –...
Course Objective: Idea to a Business• What does it take to go from idea to a business?  – Business Model + Customer Develo...
Course Objective: Simulate A Startup?• Create the pressures, uncertainty, and challenges  of a real startup  – Our expecta...
Teaching team philosophy• This class is taught using the “Startup Culture”  – We‟re tough, direct, fair - you need to be t...
Getting Out of The Building• This class is not about our lectures• The class is not about your attendance• The class is ab...
Our Expectations of You• This is a full-contact, immersive class   – All of you will be full participants – here and remot...
Team Deliverables• Each Week  – Lessons Learned presentation 5 minutes  – Updated Lean LaunchLab blog  – Hours of “outside...
What Will you Learn?• Opportunity evaluation• Search for a Business Model• Customer Discovery and Validation• Operating an...
The Course ‘By the Numbers’•   4 Instructors, 1 TA, 15+ Mentors,•   8 Lectures•   8 10-minute presentations per class•   1...
This Class is Hard• You can‟t pass by attending the lectures• Your grade is determined by the work you do  outside the cla...
Class Logistics
Course Reading• Business Model Generation• Four Steps to the Epiphany   • www.steveblank.com
Class ScheduleEight (3 hour) Class Sessions:•   1: Sept 1st - Introduction, Business Models, Customer Development•   2: Se...
Teams• team size is 4 people• You chose the roles (hint: no org chart)• Present Weekly and for Final  – Weekly lessons lea...
Team Projects• Any for-profit scalable startup• If you are a domain expert, that’s your best bet  (but not required)• If y...
Team Deliverables - Presentation• Each Week  –   Lessons Learned presentation 10 minutes  –   Updated business model canva...
Team Deliverables - Blog• Each Week  –   Business model canvas updates  –   Interviews  –   Photos/Videos  –   A/B tests  ...
Grading     Individual - 15%                 Team - 85%• Participation in class 15% • 40% out-of-the-building             ...
Grading     Individual - 15%                 Team - 80%• Participation in class 15% • 40% out-of-the-building             ...
Office Hours•   With your team•   Before and after class•   Look at availability here•   Get on the calendar
Intellectual Property - Suggestions• Make sure your project is OK with your company   – disclose to team what IP rights yo...
Class Disclosure/NDA’s• Successful startups are not about the original idea   – It‟s about learning, discovery and executi...
What’s A Company?
What’s A Company?  A business organization which sells aproduct or service in exchange for revenue                 and pro...
How Are Companies Organized?
How Are Companies Organized?   Companies are organized around         Business Models
What’s a Business Model?
What’s a Business Model? A business model describes all the partsof the company necessary to make money
What About My Technology?
What About My Technology?Your technology is one of the manycritical pieces necessary to build a               company.It i...
What About My Technology?Customers don’t care about your technology     They are trying to solve a problem
What’s A Startup?
What’s A Startup?A startup is a temporary organization designed to search for a repeatable    and scalable business model
How to Build A Startup            Idea      Business Model      Size Opportunity   Customer Development
How to Build A Startup        Business   Size of the   Customer    CustomerIdea    Model(s)   Opportunity   Discovery   Va...
How to Build A Startup        Size of the         Business     Size of the                       Business     Customer    ...
How to Build A Startup       Size of the        Business     Size of the                      Business      Customer      ...
How to Build A Startup       Size of the        Business     Size of the                      Business     Customer    Cus...
buzzgroup
A business model describes allthe parts of the companynecessary to make money
what are those parts? whatparts is a business modelcomposed of?
56
?   ?
BusinessModel Canvas
to describe, challenge,design, and inventbusiness models moresystematically
buildingblocks
CUSTOMER SEGMENTS                    images by JAM
VALUE PROPOSITIONS                     images by JAM
CHANNELS           images by JAM
CUSTOMER RELATIONSHIPS                     images by JAM
REVENUE STREAMS                  images by JAM
KEY RESOURCES                images by JAM
KEY ACTIVITIES                 images by JAM
KEY PARTNERS               images by JAM
COST STRUCTURE                 images by JAM
key    value proposition       customer            activities                           relationships     key             ...
key    value proposition       customer            activities                           relationships     key             ...
images by JAM
CANVAS OVERLAYKEY        KEY          OFFER         CUSTOMER      CUSTOMERPARTNERS   ACTIVITIES                 RELATIONSH...
CANVAS OVERLAYKEY        KEY          OFFER         CUSTOMER      CUSTOMERPARTNERS   ACTIVITIES                 RELATIONSH...
Business Model Canvas                    building                    block                                            buil...
illustration               79
why should some of thesmartest scientists in the worldwaste their time thinking abouta business model for coffee?
not just because most scientistsdrink a lot of coffee. we can learna lot from innovative businessmodels across industries
how much did the cost ofhome coffee consumptionchange for Swiss householdsover the last couple of years?
600%to800%more
Nespressochanged the   business (model) for   espresso
RESULTS
one of the fastest-growing businesses inthe Nestlé group
average growth of30% p.a. since 2000
over 3 billion CHF annualrevenue with 1 product line(3.2 bio USD)
buzz group             91
Discuss and describe how youwould design a business modelaround Nespresso‟s invention
?       ?        ?    ?       ??               ?                    94
Nespresso                                            club         production                              Nespresso       ...
but Nespresso almost failed in1987 due to a nonperformingbusiness model
Nespresso system            joint venture                 with            manufacturer                            97
what is the most powerful aboutusing a shared language, such asthe Business Model Canvas?
buzz group
?       ?        ?    ?       ??               ?                    105
possiblealternatives
radiation-freedetection of     hospitalsbreast cancer                             107
medicaldevicemproprietary IP                 anufacturers                           108
?       ?        ?    ?       ??               ?                    109
But,Realize They’re Hypotheses
9 Guesses                            GuessGuess    Guess                                     Guess                  Guess ...
How Does This Really Work?Stanford Lean LaunchPad Class  8 Weeks From an Idea to a Business
I.I.T.Y.I.W.H.T.K.Y
Key OpinionLeaders (KOLs)
Key Opinion  Leaders  (KOLs)
Key OpinionLeaders (KOLs)
Key OpinionLeaders (KOLs)
Key OpinionLeaders (KOLs)
Key OpinionLeaders (KOLs)
••••••
Customer DevelopmentThe founders     ^Get Out of the Building and Search for         the Business Model
The Customer Development Process  Customer            Customer     Customer   Company  Discovery           Validation   Cr...
The Minimum Viable Product (MVP)  Customer            Customer     Customer    Company  Discovery           Validation   C...
A Pivot is the change of one ormore Business Model CanvasComponents
The PivotCustomer            Customer     Customer   CompanyDiscovery           Validation   Creation   Building          ...
Pivot Cycle Time Matters       Customer            Customer         Customer        Company       Discovery           Vali...
186Source: http://giffconstable.com/
The Customer Development Process       Customer Discovery  Customer        Customer       Customer      Company  Discovery...
The Customer Development Process       Customer Validation Customer        Customer           Customer         Company Dis...
Blog Your Progress
How?• Customer Development   – The Process• Narrative   –   Interviews   –   Surveys   –   Videos   –   Prototypes• Busine...
We Made StudentsBlog Their ProgressIt Changed Everything
Interview
Photos   Videos
Surveys
Interview& Photos
Competitive Analysis
Key Findings
A/B TestResults
Key Question
Strategy
Business Model Canvas   as the Scorecard
Market TypeFour Types of Markets
Type of Market               Changes EverythingClone Market   Existing Market     Resegmented      New Market             ...
Definitions: Four Types of Markets  Clone Market   Existing Market     Resegmented   New Market                           ...
Size of Opportunity
Market/Opportunity AnalysisHow Big is It?: Market/Opportunity Analysis  –   Identify a Customer and Market Need  –   Size ...
How Big is the Pie?              Total Available Market                       • How many people would want/need           ...
How Big is My Slice?                Served Available Market                         • How many people need/can use product...
How Much Can I Eat?                          Target Market                              • Who am I going to sell to in yea...
Market Size: Summary• Market Size Questions:  – How big can this market be?  – How much of it can we get?   – Market growt...
Team Deliverable by Tomorrow1.   Hypotheses for each part of business model2.   Test for each of the hypotheses          W...
Sweet SensorsGlucose Monitor:                                                               We have developed a           ...
Examples
Market size  Total availablemarket = $1.2 billion           - 300 million patients worldwide                              ...
Market Size                              • Growing market                                  – Aging population             ...
Business Model Canvas                                                                                  Yi Lu, Tian Lan    ...
Action Plan                                                                                  Yi Lu, Tian Lan              ...
The Business Model Canvas                                                                           Technical AssistancecG...
The Business Model Canvas                                                                           Technical AssistancecG...
Critical Success Factors• Validation of the need  – By talking to diabetic patients, clinician and nurses• Validation of t...
Backup
Customer DiscoveryBus Model     Extract      Test     Test      Pivot or Canvas     Hypotheses   Problem   Solution   Proc...
Customer Discovery - PhysicalBus Model       Extract          Test          Test      Pivot or Canvas       Hypotheses    ...
Customer Discovery - WebBus Model        Extract           Test           Test      Pivot or Canvas        Hypotheses     ...
Customer Discovery - PhysicalBus Model           Extract                Test          Test      Pivot or Canvas           ...
Customer Discovery - WebBus Model           Extract                Test            Test      Pivot or Canvas           Hyp...
Customer Discovery - PhysicalBus Model         Extract           Test          Test           Pivot or Canvas         Hypo...
Customer Discovery - WebBus Model          Extract                       Test                  Test          Pivot or Canv...
Customer Discovery – Web/PhysicalBus Model         Extract                       Test                  Test           Pivo...
Customer Validation - WebGet Ready           Sell, Sell,                 Pivot or                                  Positio...
Customer Validation - Physical     Get Ready      Sell, Sell, S                 Pivot or                                  ...
Customer Validation - Web    Get Ready         Sell, Sell,                 Pivot or                                    Pos...
Customer Validation - Physical           Get Ready               Sell, Sell,                    Pivot or                  ...
Customer Validation - Web           Get Ready              Sell, Sell, S                       Pivot or                   ...
Customer Validation - Physical/Web                Get Ready                Sell, Sell,                                  Pi...
Customer Validation - Physical/Web                Get Ready              Sell, Sell, S                                    ...
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
Lecture 1 intro bus model cust dev 120411
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  • 1. One person at a timeFocus groups are a group-think, distraction-filled mess. Avoid them and only talk to one person at a time. If desired, you can bring someone with you to take notes — some UX designers like this approach. Personally, I tend to do one-on-one interviews because I think people loosen up and thus open up a bit more.2. Know your goals and questions ahead of timeHave your assumptions and thus learning goals prioritized ahead of time. Decide who you want to talk to (age, gender, location, profession/industry, affluence, etc), and target interviewees accordingly. Prep your basic flow and list of questions. You might veer off the plan to follow your nose, which is great, but go in prepared.3. Separate behavior and feedback in discussionDecide up front if your focus is going to be on learning a user’s behavior and mindset, and/or getting direct feedback or usability insights on a product or mockup. Do not mix the two in the discussion flow or things will get distorted.Put “behavior and mindset” first in your discussion flow. During this part, don’t let the interviewee go too deep in terms of suggesting features (some people can’t help it), but keep them focused on if they have a problem, how they think about the problem space, and if and how they have tried to solve it in past. Getting people to discuss their actual actions, not just opinions, is very useful.4. Get psyched to hear things you don’t want to hearIf you don’t do this, you might find yourself selling or convincing, or even hearing what you want to hear. Remember, the goal in this early stage is learning and validation/invalidation, not a sale.Unless, of course, you have set a sale or LOI as a goal. You might want to shoot for a commitment from the interviewee as a way to measure true demand. If so, keep it entirely out of the behavior/mindset portion of the discussion.5. Disarm “politeness” trainingPeople are trained not to call your baby ugly. You need to make them feel safe to do this. My approach was to explain that the worst thing that could happen to me was building something people didn’t care about, so the best way they could help me was absolute, brutal honesty.6. Ask open ended questionsDo not ask too many yes/no questions. For example, minimize such questions as “do you like Groupon?” Instead ask “what kinds of deals do you look for, if any?” “What motivates you to hunt for deals?” “How do you discover deals?” “Do you get frustrated with the deal sites out there?”7. Listen, don’t talkTry to shut up as much as possible, and try to keep your questions short and unbiased (i.e. don’t embed the answer you want to hear into the question). Don’t rush to fill the “space” when the customer pauses, because they might be thinking or have more to say.Make sure you are learning, not selling! (at least not until that part of the conversation, if relevant)8. Encourage but don’t influenceIf you stay *too* quiet, some folks might start getting uncomfortable, thinking that they are boring you or you are judging them. You can keep things rolling with little motions of encouragement, such as nods, “I see”, “interesting”, etc. But do not say things that might steer or influence the interviewee.9. Follow your nose and drill downAnytime something tweaks your antenna, drill down with follow up questions. Don’t be afraid to ask for clarifications and the “why” behind the “what”. You can even try drilling into multiple layers of “why” (see “Five Whys”), as long as the interviewee doesn’t start getting annoyed.10. Parrot back or misrepresent to confirmFor important topics, try repeating back what the person said. You can occasionally get one of two interesting results through this. In the first, they correct you because you’ve misinterpreted what they said. In the second, by hearing their own thoughts, they’ll actually realize that their true opinion is slightly different, and they will give you a second, more sophisticated answer.Another approach is to purposefully misrepresent what they just said when you parrot it back, and then see if they correct you. But use this technique sparingly, if at all.11. Ask for introductionsAt the end of every interview, see if you can get leads to another 1 to 3 people to talk to.12. Write up your notes as quickly as possibleThe details behind a conversation fade fast, so if you haven’t recorded the session, write up your notes and color commentary as soon as you can. I brain-dump into a shared Google Doc so the rest of the team can see it. (Note: I typically have not recorded sessions for fear of making interviewees more self-conscious or careful, but other entrepreneurs have said to me that, while it takes some rapport-building at the start, pretty soon people forget about a recorder.)Afterwards: Look for patterns and apply judgementCustomer development interviews will not give you statistically significant data, but they will give you insights based on patterns. They can be very tricky to interpret, because what people say is not always what they do.You need to use your judgement to read between the lines, to read body language, to try to understand context and agendas, and to filter out biases based on the types of people in your pool of interviewees. But it is exactly the ability to use human judgement based on human connections that make interviews so much more useful than surveys.Ultimately, you are better off moving fast and making decisions from credible patterns than dithering about in analysis paralysis. 
  • Lecture 1 intro bus model cust dev 120411

    1. 1. The Lean LaunchPadLecture 1: Business Models and Customer Development Steve Blank Jon Feiber Ann Miura-Ko John Burke Jerry Engel Jim Hornthal Oren Jacob
    2. 2. This Session• The teaching team• Course objective(s)• Teaching team philosophy• Our expectations of you
    3. 3. Teaching Team
    4. 4. Steve Blank,Jon Feiber, John Burke • BS CS/Astro Physics U of • Yale BS EE8 startups in Silicon Valley Colorado • McKinsey and Co.• Semiconductors • VP Networking SUN • Charles River Ventures • V.C. @ MDV since 1991 • Stanford Ph.D MS&E• Supercomputers • TA: E145, Mayfield• Consumer electronics • Fellows, MS&E 273 V.C. @ Floodgate• Video games ann@floodgate.com• Enterprise software @annimaniac• Military intelligence sblank@stanford.edu @sgblank www.steveblank.com
    5. 5. Steve Blank, Jon Feiber, John Burke8 startups - 32 years in Silicon Valley• Semiconductors• Supercomputers• Consumer electronics • BS CS/Astro Physics U of Colorado • Yale BS EE Co. • McKinsey and• Video games• Enterprise software • 50 employee, VP Networking @ Sun • Charles River Ventures th• Military intelligence • Stanford Ph.D MS&E • V.C. @ MDV since 1991 • V.C. @ FloodgateTeach: Stanford, Berkeley, Columbia jdf@mdv.com ann@floodgate.comDetails at www.steveblank.com @annimaniac
    6. 6. Steve Blank, Jon Feiber, John Burke8 startups - 32 years in Silicon Valley• Semiconductors• Supercomputers• Consumer electronics • BS CS/Astro • BSMechEngineering U.C. Berkeley,• Video games Physics U of• Enterprise software Colorado • BA Economics U.C. Santa Cruz,• Military intelligence • 50th employee, • MBA Harvard Business School VP NetworkingTeach: Stanford, Berkeley, Columbia @ Su • Founder BMI SoftwareDetails at www.steveblank.com • VC at ABS Ventures • V.C. @ MDV since 1991 • Co-founder True Ventures • jdf@mdv.com jburke@trueventures.com @andemca
    7. 7. Alexander Osterwalder, Tina Seelig• Ph.D. in Management Information Systems (MIS) University of Lausanne Ph.D. Neuroscience Stanford Med School• Founder, Business Model Foundry • Mgmt consultant Booz, Allen, Hamilton• Author Business Model Generation • Multimedia producer at Compaq Computer• Co-founder, The Constellation for AIDS • Founder multimedia competence (NGO) companyBookBrowser. • Exec Director Stanford Technology Ventures Program (STVP), EpiCenter • tseelig@stanford.edu • @tseelig
    8. 8. Oren Jacob, Jim Hornthal • CMEA Capital • Triporati• CEO, stealth startup• EIR, August Capita• lCTO, Pixar• Director, Studio Tools, Pixar• Technical Director, Finding Nemo
    9. 9. Oren Jacob, Jim Hornthal•CTO Pixar • CMEA Capital • Chairman Triporati
    10. 10. Teaching Assistant Bhavik Joshi joshibhavik@gmail.com http://about.me/bhavikjoshi•Better Place (13th employee, first non-Israeli, non-Jewish, non ex-SAP, Asian employee)• Berkeley/Columbia MBA class of 2008/09• Co-founder: Berkeley Stanford Cleantech Conference Series (since 2007)• 2000 – 2007 Enterprise Software• 1998 – 2000 Tata Motors India •TA’s role: Class/lecture questions, Grading and attendance
    11. 11. Alexander Osterwalder, Tina Seelig8 startups - 32 years in Silicon Valley• Semiconductors• Supercomputers• Consumer electronics • Ph.D. Neuroscience Stanford Med School• Video games• Enterprise software • Mgmt consultant Booz, Allen, Hamilton• Military intelligence • Multimedia producer at Compaq ComputerTeach: Stanford, Berkeley, Columbia • Founder multimedia companyBookBrowser.Details at www.steveblank.com • Exec Director Stanford Technology Ventures Program (STVP), EpiCenter tseelig@stanford.edu @tseelig
    12. 12. Course Assistant (CA’s) Thomas Haymore Stephanie Glass•B.A. in Political Science •MS MS&E 2010• Stanford Law („06)• J.D. Stanford Law („12)thomas.haymore@gmail.com •CA’s role: Class/lecture questions, Grading and attendance
    13. 13. Course Assistant (CA’s) Thomas Haymore Stephanie GlassB.A. in Political Science• Stanford Law („06) •MS MS&E 2012• J.D. Stanford Law („12)thomas.haymore@gmail.com srglass@stanford.edu •CA’s role: Class/lecture questions, Grading and attendance
    14. 14. Mentors• Mentors are people with real-world experience• Mentors role is to: – Help you “Get you out of the building” – Share contacts – Offer “Real-world” entrepreneurial advice – Critical feedback• You arrange your schedule for the mentors, not the other way around
    15. 15. Course Objective: Idea to a Business• What does it take to go from idea to a business? – Business Model + Customer Development – Hypotheses testing of the business model(s) – Get “out of the building”
    16. 16. Course Objective: Simulate A Startup?• Create the pressures, uncertainty, and challenges of a real startup – Our expectations are unreasonable, they require extraordinary effort – We expect failures, iterations and Pivots – Class is a “lab” - books/lectures are tools, not answers – Fail fast, learn quick, push you outside your comfort zone
    17. 17. Teaching team philosophy• This class is taught using the “Startup Culture” – We‟re tough, direct, fair - you need to be the same – Startup culture has no hierarchy - in this class you are an entrepreneur - not a PI, lab mgr or center director – We‟re your biggest supporters – we want you to succeed• Question us, challenge us, push us as hard as we push you• We don‟t pretend to be domain experts, we know you are smarter than we are
    18. 18. Getting Out of The Building• This class is not about our lectures• The class is not about your attendance• The class is about the work you do outside the building• It‟s the difference between a vision and a hallucination
    19. 19. Our Expectations of You• This is a full-contact, immersive class – All of you will be full participants – here and remotely – You will spend lots of time outside of your university – You all will do all the work assigned (and it is a lot more than you probably realize) – No “dine and dash”• If you think you are not learning, or you all cannot commit the time, see your NSF program manager
    20. 20. Team Deliverables• Each Week – Lessons Learned presentation 5 minutes – Updated Lean LaunchLab blog – Hours of “outside the building” learning• December Presentation – 20 minute Lessons Learned Summary
    21. 21. What Will you Learn?• Opportunity evaluation• Search for a Business Model• Customer Discovery and Validation• Operating and decision making in chaos with insufficient data• Ruthless pursuit of an objective by a team
    22. 22. The Course ‘By the Numbers’• 4 Instructors, 1 TA, 15+ Mentors,• 8 Lectures• 8 10-minute presentations per class• 1 Final 20 minute presentation• 2 Textbooks10-15 hours of work a week outside the classroom
    23. 23. This Class is Hard• You can‟t pass by attending the lectures• Your grade is determined by the work you do outside the class• There‟s a lot of it• You are dependent on group success – communication is critical• You don‟t need to be friends you need to be partners
    24. 24. Class Logistics
    25. 25. Course Reading• Business Model Generation• Four Steps to the Epiphany • www.steveblank.com
    26. 26. Class ScheduleEight (3 hour) Class Sessions:• 1: Sept 1st - Introduction, Business Models, Customer Development• 2: Sept 2nd – Value Proposition/Customer Segment• 3: Sept 22nd – Channels• 4: Sept 23rd - Demand Creation (Customer Relationships)• 5: Oct 13th – Revenue Model• 6: Oct 14th – Key Resources and Activities• 7: Nov 11th - Cost Structure• 8: Nov 12th – Fund Raising9 & 10: Dec 1st / 2nd – Lessons Learned Presentations
    27. 27. Teams• team size is 4 people• You chose the roles (hint: no org chart)• Present Weekly and for Final – Weekly lessons learned – Final is demo and summary• Class is about discovery and fast iteration
    28. 28. Team Projects• Any for-profit scalable startup• If you are a domain expert, that’s your best bet (but not required)• If you pick a web project, you have to build it (and there needs to be some novelty)
    29. 29. Team Deliverables - Presentation• Each Week – Lessons Learned presentation 10 minutes – Updated business model canvas – Update blog/wiki – 10‟s of hours of “outside the building” progress• Final Presentation – 20 minute Lessons Learned Summary
    30. 30. Team Deliverables - Blog• Each Week – Business model canvas updates – Interviews – Photos/Videos – A/B tests – Strategy
    31. 31. Grading Individual - 15% Team - 85%• Participation in class 15% • 40% out-of-the-building progress as measured by blog write-ups each week. • 20% weekly team “lesson learned” summaries • 25% team final report Grade is on how much you learn
    32. 32. Grading Individual - 15% Team - 80%• Participation in class 15% • 40% out-of-the-building progress as measured by blog write-ups each week. • 20% weekly team “lesson learned” summaries • 25% team final reportYou’re graded on how much learn, not how much you sell
    33. 33. Office Hours• With your team• Before and after class• Look at availability here• Get on the calendar
    34. 34. Intellectual Property - Suggestions• Make sure your project is OK with your company – disclose to team what IP rights your company has to inventions• You own what IP you brought to class with you – No team member has claim to anything you brought• Your team jointly owns any IP developed for the class – If any of you decide to start a company based on the class, you own only what was developed and completed in the class – You have no claim for work done before or after the class quarter – If a subset of the team decides to start a company they do NOT “owe” anything to other team members for work done in and during the class – All team members are free to start the same company, without permission of the others• You are agreeing to this unless the team decides in writing to do something different
    35. 35. Class Disclosure/NDA’s• Successful startups are not about the original idea – It‟s about learning, discovery and execution – You will not be presenting your IP/technical details• You get to see how previous teams solved problems by looking at their slides, notes and blogs Therefore:• Your slides, notes and blogs will be public• This is an open class. No non-disclosures
    36. 36. What’s A Company?
    37. 37. What’s A Company? A business organization which sells aproduct or service in exchange for revenue and profit
    38. 38. How Are Companies Organized?
    39. 39. How Are Companies Organized? Companies are organized around Business Models
    40. 40. What’s a Business Model?
    41. 41. What’s a Business Model? A business model describes all the partsof the company necessary to make money
    42. 42. What About My Technology?
    43. 43. What About My Technology?Your technology is one of the manycritical pieces necessary to build a company.It is part of the “Value Proposition”
    44. 44. What About My Technology?Customers don’t care about your technology They are trying to solve a problem
    45. 45. What’s A Startup?
    46. 46. What’s A Startup?A startup is a temporary organization designed to search for a repeatable and scalable business model
    47. 47. How to Build A Startup Idea Business Model Size Opportunity Customer Development
    48. 48. How to Build A Startup Business Size of the Customer CustomerIdea Model(s) Opportunity Discovery Validation
    49. 49. How to Build A Startup Size of the Business Size of the Business Customer CustomerIdea Opportunity Model(s) Opportunity Model(s) Discovery Validation Theory Practice
    50. 50. How to Build A Startup Size of the Business Size of the Business Customer CustomerIdea Opportunity Model(s) Opportunity Model(s) Discovery Validation • Web startups get the product in front of customers earlier
    51. 51. How to Build A Startup Size of the Business Size of the Business Customer CustomerIdea Opportunity Model(s) Opportunity Model(s) Discovery Validation
    52. 52. buzzgroup
    53. 53. A business model describes allthe parts of the companynecessary to make money
    54. 54. what are those parts? whatparts is a business modelcomposed of?
    55. 55. 56
    56. 56. ? ?
    57. 57. BusinessModel Canvas
    58. 58. to describe, challenge,design, and inventbusiness models moresystematically
    59. 59. buildingblocks
    60. 60. CUSTOMER SEGMENTS images by JAM
    61. 61. VALUE PROPOSITIONS images by JAM
    62. 62. CHANNELS images by JAM
    63. 63. CUSTOMER RELATIONSHIPS images by JAM
    64. 64. REVENUE STREAMS images by JAM
    65. 65. KEY RESOURCES images by JAM
    66. 66. KEY ACTIVITIES images by JAM
    67. 67. KEY PARTNERS images by JAM
    68. 68. COST STRUCTURE images by JAM
    69. 69. key value proposition customer activities relationships key customerpartners segments cost revenuestructure key streams resources channels images by JAM
    70. 70. key value proposition customer activities relationships key customerpartners segments cost revenuestructure key streams resources channels images by JAM
    71. 71. images by JAM
    72. 72. CANVAS OVERLAYKEY KEY OFFER CUSTOMER CUSTOMERPARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS KEY CHANNELS RESOURCESCOST STRUCTURE REVENUE STREAMS images by JAM
    73. 73. CANVAS OVERLAYKEY KEY OFFER CUSTOMER CUSTOMERPARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS KEY CHANNELS RESOURCESCOST STRUCTURE REVENUE STREAMS images by JAM
    74. 74. Business Model Canvas building block building block building block building building block block building block building block building block building building block block building building building building block block block block
    75. 75. illustration 79
    76. 76. why should some of thesmartest scientists in the worldwaste their time thinking abouta business model for coffee?
    77. 77. not just because most scientistsdrink a lot of coffee. we can learna lot from innovative businessmodels across industries
    78. 78. how much did the cost ofhome coffee consumptionchange for Swiss householdsover the last couple of years?
    79. 79. 600%to800%more
    80. 80. Nespressochanged the business (model) for espresso
    81. 81. RESULTS
    82. 82. one of the fastest-growing businesses inthe Nestlé group
    83. 83. average growth of30% p.a. since 2000
    84. 84. over 3 billion CHF annualrevenue with 1 product line(3.2 bio USD)
    85. 85. buzz group 91
    86. 86. Discuss and describe how youwould design a business modelaround Nespresso‟s invention
    87. 87. ? ? ? ? ?? ? 94
    88. 88. Nespresso club production Nespresso machines Nespresso pods distribution Nespresso channels .com productioncoffee facilites 1x B2C machine distribution sales 95
    89. 89. but Nespresso almost failed in1987 due to a nonperformingbusiness model
    90. 90. Nespresso system joint venture with manufacturer 97
    91. 91. what is the most powerful aboutusing a shared language, such asthe Business Model Canvas?
    92. 92. buzz group
    93. 93. ? ? ? ? ?? ? 105
    94. 94. possiblealternatives
    95. 95. radiation-freedetection of hospitalsbreast cancer 107
    96. 96. medicaldevicemproprietary IP anufacturers 108
    97. 97. ? ? ? ? ?? ? 109
    98. 98. But,Realize They’re Hypotheses
    99. 99. 9 Guesses GuessGuess Guess Guess Guess Guess Guess Guess Guess
    100. 100. How Does This Really Work?Stanford Lean LaunchPad Class 8 Weeks From an Idea to a Business
    101. 101. I.I.T.Y.I.W.H.T.K.Y
    102. 102. Key OpinionLeaders (KOLs)
    103. 103. Key Opinion Leaders (KOLs)
    104. 104. Key OpinionLeaders (KOLs)
    105. 105. Key OpinionLeaders (KOLs)
    106. 106. Key OpinionLeaders (KOLs)
    107. 107. Key OpinionLeaders (KOLs)
    108. 108. ••••••
    109. 109. Customer DevelopmentThe founders ^Get Out of the Building and Search for the Business Model
    110. 110. The Customer Development Process Customer Customer Customer Company Discovery Validation Creation Building Pivot
    111. 111. The Minimum Viable Product (MVP) Customer Customer Customer Company Discovery Validation Creation Building Pivot •Smallest feature set that gets you the most … - orders, learning, feedback, failure…
    112. 112. A Pivot is the change of one ormore Business Model CanvasComponents
    113. 113. The PivotCustomer Customer Customer CompanyDiscovery Validation Creation Building Pivot•The heart of Customer Development•Iteration without crisis•Fast, agile and opportunistic
    114. 114. Pivot Cycle Time Matters Customer Customer Customer Company Discovery Validation Creation Building Pivot•Speed of cycle minimizes cash needs•Minimum feature set speeds up cycle time• Near instantaneous customer feedback drives feature set
    115. 115. 186Source: http://giffconstable.com/
    116. 116. The Customer Development Process Customer Discovery Customer Customer Customer Company Discovery Validation Creation BuildingBus Model Extract Test Test Pivot or Canvas Hypotheses Problem Solution Proceed
    117. 117. The Customer Development Process Customer Validation Customer Customer Customer Company Discovery Validation Creation Building Get Ready Sell, Sell, Pivot or Positioning to Sell Sell Proceed
    118. 118. Blog Your Progress
    119. 119. How?• Customer Development – The Process• Narrative – Interviews – Surveys – Videos – Prototypes• Business Model Canvas – Scorekeeping• Real-time Feedback• Physical Reality Checks – Skype – Face-to-face
    120. 120. We Made StudentsBlog Their ProgressIt Changed Everything
    121. 121. Interview
    122. 122. Photos Videos
    123. 123. Surveys
    124. 124. Interview& Photos
    125. 125. Competitive Analysis
    126. 126. Key Findings
    127. 127. A/B TestResults
    128. 128. Key Question
    129. 129. Strategy
    130. 130. Business Model Canvas as the Scorecard
    131. 131. Market TypeFour Types of Markets
    132. 132. Type of Market Changes EverythingClone Market Existing Market Resegmented New Market Market• Market • Sales • Customers – Market Size – Sales Model • Needs – Cost of Entry – Margins • Adoption – Launch Type – Sales Cycle – Competitive – Chasm Width Barriers •Finance • Ongoing Capital – Positioning • Time to Profitability
    133. 133. Definitions: Four Types of Markets Clone Market Existing Market Resegmented New Market Market• Clone Market – Copy of a U.S. business model• Existing Market – Faster/Better = High end• Resegmented Market – Niche = marketing/branding driven – Cheaper = low end• New Market – Cheaper/good enough, creates a new class of product/customer – Innovative/never existed before
    134. 134. Size of Opportunity
    135. 135. Market/Opportunity AnalysisHow Big is It?: Market/Opportunity Analysis – Identify a Customer and Market Need – Size the Market – Competitors – Growth Potential
    136. 136. How Big is the Pie? Total Available Market • How many people would want/need the product? • How large is the market be (in $‟s) if they all bought?Total Available Market • How many units would that be? How Do I Find Out? • Industry Analysts – Gartner, Forrester • Wall Street Analysts – Goldman, Morgan
    137. 137. How Big is My Slice? Served Available Market • How many people need/can use product? • How many people have the money to buy the product Total • How large would the market be (in $‟s)Available Served if they all bought? Market Available • How many units would that be? Market How Do I Find Out? • Talk to potential customers
    138. 138. How Much Can I Eat? Target Market • Who am I going to sell to in year 1, 2 & 3? • How many customers is that? • How large is the market be (in $‟s) if they all bought? Total Served • How many units would that be?Available Available Market Market Target Market How Do I Find Out? • Talk to potential customers • Identify and talk to channel partners • Identify and talk to competitors
    139. 139. Market Size: Summary• Market Size Questions: – How big can this market be? – How much of it can we get? – Market growth rate – Market structure (Mature or in flux?)• Most important: Talk to Customers and Sales Channel• Next important: Market size by competitive approximation – Wall Street analyst reports are great• And : Market research firms Like Forester, Gartner
    140. 140. Team Deliverable by Tomorrow1. Hypotheses for each part of business model2. Test for each of the hypotheses What constitutes a pass/fail signal for the test (e.g. at what point would you say your hypotheses wasn‟t even close to correct?3. Plan to get out of the building to test the hypotheses• Summarized in a 5 Minute PowerPoint Presentation – Business Model Canvas – Market Size – Getting out of the building plan Don’t Over Think Your Hypotheses
    141. 141. Sweet SensorsGlucose Monitor: We have developed a novel technology to use• Widely available any glucose monitor• Cheap without modifications to• Quantitative detect a wide range of information non-glucose targets at• $10 billion market very low concentrations (such as diseasesHowever, it can detect (e.g., TB), heavy metalonly one target: ionsglucose (e.g., Pb, Hg), organicand at very high toxins, bacteria, virusesconcentrations and cancers) Yu Xiang and Yi Lu, Nature Chem. 3, 697-703 (2011).
    142. 142. Examples
    143. 143. Market size Total availablemarket = $1.2 billion - 300 million patients worldwide - Required HbA1C testing every 60-90 days Serviceable Available Market = $600 million - Available in-home HbA1C tests today are $100/10 tests Target market - Assuming $1 per test, TAM = $1.2 billion = $120 million - Assuming 50% people have the access to a HbA1c test, SAM = $600 million - Assuming we can capture 20% of SAM (high-end diabetics and early adopters), Target market = $120 million
    144. 144. Market Size • Growing market – Aging population – Living Style & DietsTotal Available market – Chronic disease 170M (US & EU5) $25B • Driving factors – Healthcare costs – Reimbursement – Healthcare labor shortage Target market 3.5M (Resistant Hypertension) $500M
    145. 145. Business Model Canvas Yi Lu, Tian Lan Sweet Sensors Neil Kane Chris Sorensen Conferences Product R&D Diabetics At home Product supportsGlucose monitor QC Clinicians (in rural area) Convenient Patient manufacturers Marketing network/community Triage nurses Less exposure toKit manufacturers infectious diseases Pre-diabetics in the hospitalReagent suppliers Cheaper More frequent Retailers (Walgreen) IP Personnel Better indicator of Online vendors (Amazon) health (diabetic management) Direct sales Reagents Manufacture Disposable test kit (used repeatedly Licensing on a regular basis) FDA certification?
    146. 146. Action Plan Yi Lu, Tian Lan Sweet Sensors Neil Kane Chris Sorensen Conferences Product R&D Diabetics At home Product supportsGlucose monitor QC Clinicians (in rural area) Convenient Patient manufacturers Marketing network/community Triage nurses Less exposure toKit manufacturers infectious diseases Pre-diabetics in the hospitalReagent suppliers Cheaper More frequent Retailers (Walgreen) IP Personnel Better indicator of Online vendors (Amazon) health (diabetic management) Direct sales Reagents Manufacture Disposable test kit (used repeatedly Licensing on a regular basis) FDA certification?
    147. 147. The Business Model Canvas Technical AssistancecGMP manufacturer SOPs for precursors (Image Atlas) RadiopharmaciesRadiopharmacies and drugs Accessibility (RCY) FDA regulatory supportNuclear Medicine and Recruit clinical sites Purity Equipment producersRadiology In vivo animal studies Speeddepartments Develop regulatory PET/SPECT Prescribing physicians plan for pre IND Multiplatform meeting Technical assistance Sensitivity (nca) Radiologist who ID cGMP CRO Specific compounds Pharmaceutical perform studies Fund-raising development companies General IP methodology for PoP data Direct sales of Drug developers adding fluorine to precursor lead compounds of IP interest PoP data R&D and clinical studies presented in Radiologists Regulatory plan Understanding of journals and meetings the regulatory process Sales of intermediates Contract cGMP precursor manufacture Salary, Rents Technology license Clinical trials Product license (royalty)
    148. 148. The Business Model Canvas Technical AssistancecGMP manufacturer SOPs for precursors (Image Atlas) RadiopharmaciesRadiopharmacies and drugs Accessibility (RCY) FDA regulatory supportNuclear Medicine and Recruit clinical sites Purity Equipment producersRadiology In vivo animal studies Develop regulatory Speeddepartments PET/SPECT Prescribing physicians plan for pre IND meeting Multiplatform Technical assistance Sensitivity (nca) Radiologist who ID cGMP CRO Pharmaceutical Specific compounds perform studies Fund-raising development companies General Direct sales of IP methodology for precursor PoP data adding fluorine to Drug developers lead compounds of R&D and clinical IP interest studies presented in PoP data journals and meetings Radiologists Regulatory plan Understanding of Sales of precursor the regulatory through global finished process pharmaceutical distributor Sales of intermediates Contract cGMP precursor manufacture Salary, Rents Technology license Clinical trials Product license (royalty)
    149. 149. Critical Success Factors• Validation of the need – By talking to diabetic patients, clinician and nurses• Validation of the customer segmentation – By talking to glucose monitor and kit manufactures• Evidence of market accessibility – By talking to glucose monitor and kit distributors
    150. 150. Backup
    151. 151. Customer DiscoveryBus Model Extract Test Test Pivot or Canvas Hypotheses Problem Solution Proceed
    152. 152. Customer Discovery - PhysicalBus Model Extract Test Test Pivot or Canvas Hypotheses Problem Solution Proceed • TAM/SAM •Product MVP • Customers •Channel •Market Type • Customer Relationships: Get/Keep/Grow • Key Resources • Partners • Pricing
    153. 153. Customer Discovery - WebBus Model Extract Test Test Pivot or Canvas Hypotheses Problem Solution Proceed • TAM/SAM •Low Fidelity MVP • Customers/Source • Channel •Market Type • Customer Relationships: Acquire/Activate •Traffic Partners • Pricing
    154. 154. Customer Discovery - PhysicalBus Model Extract Test Test Pivot or Canvas Hypotheses Problem Solution Proceed •TAM/SAM • Low Fidelity MVP •Customer Contacts • Customers •Problem Understanding • Channel •Market Type • Customer Understanding •Cust Relationships • Traffic Partners •Market Knowledge • Pricing
    155. 155. Customer Discovery - WebBus Model Extract Test Test Pivot or Canvas Hypotheses Problem Solution Proceed •TAM/SAM • Low Fidelity MVP •Customer Engagement • Customers •Test Low Fidelity MVP • Channel •Market Type • Customer Understanding •Cust Relationships • Traffic Partners •Traffic & Competitive Analysis • Pricing
    156. 156. Customer Discovery - PhysicalBus Model Extract Test Test Pivot or Canvas Hypotheses Problem Solution Proceed • TAM/SAM • Low Fidelity MVP •Update Bus Model • Customers •Create Prototype/Prod Presentation • Channel •Market Type •Test Solution with Customer •Cust Relationships • Traffic Partners • Update Business Model • Pricing • 1st Advisory Board Members
    157. 157. Customer Discovery - WebBus Model Extract Test Test Pivot or Canvas Hypotheses Problem Solution Proceed • TAM/SAM • Customer Engagement • Low Fidelity MVP • Test Low Fidelity MVP • Update Bus Model • Customers • Customer Understanding •Test High Fidelity MVP • Channel • Traffic & Competitive Analysis •Market Type • Measure Customer Behavior •Cust Relationships • Traffic Partners • Update Business Model • Pricing • 1st Advisory Board Members
    158. 158. Customer Discovery – Web/PhysicalBus Model Extract Test Test Pivot or Canvas Hypotheses Problem Solution Proceed • TAM/SAM • Customer Engagement • Low Fidelity MVP • Test Low Fidelity MVP Verify the: • Customers • Customer Understanding •Value Prop • Channel • Traffic & Competitive Analysis •Market Type •Cust Segment •Cust Relationships • Traffic Partners •Cust Relationships • Pricing • Channel • Revenue Model • Pivot or Proceed
    159. 159. Customer Validation - WebGet Ready Sell, Sell, Pivot or Positioning to Sell Sell Proceed Pivot
    160. 160. Customer Validation - Physical Get Ready Sell, Sell, S Pivot or Positioning to Sell ell Proceed•Craft Positioning•Develop Sales Materials•Hire “Sales Closer”•Sales Channel Action Plan• Refine the Sales Roadmap• Formalize advisory board
    161. 161. Customer Validation - Web Get Ready Sell, Sell, Pivot or Positioning to Sell Sell Proceed•Craft Positioning•Acquire/Activate Plans and Tools• Build High Fidelity MVP• Build Metrics Toolset• Hire data analytics chief• Formalize advisory board
    162. 162. Customer Validation - Physical Get Ready Sell, Sell, Pivot or Positioning to Sell Sell Proceed•Craft Positioning•Acquire/Activate Plans• Build High Fidelity MVP •Find Earlyvangelists• Build Metrics Toolset• Hire data analytics chief • Test Sell – Out of the Building• Formalize advisory board • Refine Sales Roadmap • Test Sell Channel Partners
    163. 163. Customer Validation - Web Get Ready Sell, Sell, S Pivot or Positioning to Sell ell Proceed•Craft Positioning•Acquire/Activate Plans •Prepare Optimization Plans & Tools• Build High Fidelity MVP• Build Metrics Toolset • Out of the building Activation Test• Hire data analytics chief • Measure and Optimize Results• Formalize advisory board • Test Sell Traffic Partners
    164. 164. Customer Validation - Physical/Web Get Ready Sell, Sell, Pivot or Positioning to Sell Sell Proceed•Craft Positioning• Acquire/Activate Plans • Prepare Optimization Plans • Company Positioning• Build High Fidelity MVP • Out of the building Activation Test • Measure and Optimize Results • Product Positioning• Build Metrics Toolset• Hire data analytics chief • Test Sell Traffic Partners • Validate Positioning• Formalize advisory board
    165. 165. Customer Validation - Physical/Web Get Ready Sell, Sell, S Pivot or Positioning to Sell ell Proceed•Craft Positioning• Acquire/Activate Plans • Prepare Optimization Plans • Assemble Data• Build High Fidelity MVP • Out of the building Activation Test • Validate Business Model• Build Metrics Toolset • Measure and Optimize Results• Hire data analytics chief • Test Sell Traffic Partners • Validate Financial Model• Formalize advisory board • Pivot or Proceed
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