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Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
 

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    Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4 Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4 Presentation Transcript

    • Engineering 245 The Lean LaunchPad Session 1: Overview/Business Models/Customer Development Professors Steve Blank, Ann Miura-Ko, Jon Feiber http://e245.stanford.edu/
    • Agenda “ Is This the Right Course for Me?”
      • Course Objectives/teams/project
      • Introductions
      • Class Logistics
      • Building a “Lean Startup”
        • Idea
        • Sizing the Opportunity
        • Business Models
        • Customer Development
      • Break : Stay If You Want to Be in the Class
      • Class “Culture” and Next Steps
    • Course Objectives
      • Understand the real world aspects of Entrepreneurship by getting out of the building
        • Analyze and assess an opportunity
        • Build the product
        • Get orders
        • Work with a team
      • Learn whether entrepreneurship is for you
    • What Will you Learn?
      • Opportunity evaluation
      • Search for a Business Model
      • Customer Discovery and Validation
      • Operating and decision making in chaos with insufficient data
      • Teamwork
    • The Course ‘By the Numbers’
      • 3/4 Units of Credit
      • 3 Instructors, 2 CAs, 25+ Mentors,
      • 8 Lectures
      • 8 Weekly 10-minute presentations
      • 1 Final 30 minute presentation
      • 3 Textbooks
      • 5 -10 hours of work a week outside the classroom
    • Course Reading
      • Business Model Generation
      • Four Steps to the Epiphany
      • Founders at Work
      copies available at the bookstore
    • This Class is Hard
      • You can ’t pass by attending the class
      • Your grade is determined by the work you do outside the class
      • There ’s a lot of it
      • You are dependent on teamwork and teammates – communication is critical
    • Teams
      • Suggested team size is 4 people
        • Deadline for team formation is Jan 6 th
        • Must contact your mentors by Jan 7 th
      • Present Weekly and for Final
        • Weekly lessons learned
        • Final is demo and summary
      • Class is about teamwork, discovery and fast iteration
    • 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)
    • Team Deliverables
      • Each Week
        • Lessons Learned presentation 10 minutes
        • Updated blog/wiki
        • 10 ’s of hours of “outside the building” progress
      • Final Presentation
        • 30 minute Lessons Learned Summary
    • Grading
      • Individual - 20%
      • Participation in class 20%
      • Team - 80%
      • Weekly summary and out of the building progress 50%
      • Final Presentation 30%
    • Introductions
    • Steve Blank, Ann-Miura-Ko, Jon Feiber
      • 8 startups in Silicon Valley
      • Semiconductors
      • Supercomputers
      • Consumer electronics
      • Video games
      • Enterprise software
      • Military intelligence
      • [email_address]
      • twitter sgblank
      • www.steveblank.com
      • Yale BS EE
      • McKinsey and Co.
      • Charles River Ventures
      • Stanford Ph.D MS&E
      • TA: E145, Mayfield Fellows, MS&E 273
      • V.C. @ Floodgate
      • [email_address]
      • @annimaniac
      • BS CS/Astro Physics U of Colorado
      • VP Networking SUN
      • V.C. @ MDV since 1991
    • Steve Blank, Ann-Miura-Ko , Jon Feiber
      • 8 startups - 32 years in Silicon Valley
      • Semiconductors
      • Supercomputers
      • Consumer electronics
      • Video games
      • Enterprise software
      • Military intelligence
      • Teach: Stanford, Berkeley, Columbia
      • Details at www.steveblank.com
      • Yale BS EE
      • McKinsey and Co.
      • Charles River Ventures
      • Stanford Ph.D MS&E
      • V.C. @ Floodgate
      • [email_address]
      • @annimaniac
      • BS CS/Astro Physics U of Colorado
      • VP Networking SUN
      • V.C. @ MDV since 1991
    • Steve Blank, Ann-Miura-Ko, Jon Feiber
      • 8 startups - 32 years in Silicon Valley
      • Semiconductors
      • Supercomputers
      • Consumer electronics
      • Video games
      • Enterprise software
      • Military intelligence
      • Teach: Stanford, Berkeley, Columbia
      • Details at www.steveblank.com
      • Yale BS EE
      • McKinsey and Co.
      • Charles River Ventures
      • Stanford Ph.D MS&E
      • V.C. @ Floodgate
      • [email_address]
      • @annimaniac
      • BS CS/Astro Physics U of Colorado
      • 50 th employee, VP Networking @ Sun
      • V.C. @ MDV since 1991
      • [email_address]
    • Course Assistant (CA ’s) Felix Huber
      • MS MS&E 2010
      • Google Translate Product Mgr
      • CA ’s role : Class/lecture questions, Grading and attendance
      Thomas Haymore
      • B.A. in Political Science
      • Stanford Law ( ‘06)
      • J.D. Stanford Law ( ‘12)
      [email_address] [email_address]
    • Volunteer Course Assistant (CA ’s) Felix Huber
      • MS MS&E 2010
      • Google Translate Product Mgr
      • CA ’s role : Class/lecture questions, Grading and attendance
      Thomas Haymore
      • B.A. in Political Science
      • Stanford Law ( ‘06)
      • J.D. Stanford Law ( ‘12)
      [email_address] [email_address]
    • Mentors
      • Mentors are Venture Capitalists or Entrepreneurs
      • 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
    • Class Logistics
    • How the Class Works Class Topic Deliverable for the Next Week (Submit interview notes, present results, update wiki/blog) January 4 th Class 1 Business Model and Customer Development - Hypotheses for each part of business model. - Test for whether your business is worth  pursuing (market  size) - 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)?
    • How the Class Works Class Topic Deliverable for the Next Week (Submit interview notes, present results, update wiki/blog) January 4 th Class 1 Business Model and Customer Development - Hypotheses for each part of business model. - Test for whether your business is worth  pursuing (market  size) - 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)? January 6 th Team Mixer - Teams by midnight Jan 6 th
    • How the Class Works Class Topic Deliverable for the Next Week (Submit interview notes, present results, update wiki/blog) January 4 th Class 1 Business Model and Customer Development - Hypotheses for each part of business model. - Test for whether your business is worth  pursuing (market  size) - 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)? January 6 th Team Mixer - Teams by midnight Jan 6 th January 11 th Class 2 Testing the Value Proposition
      • - Name your team.  
      • - What are your value proposition hypotheses?    
      • - What did you discover from customers?    
    • How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog) January 18 th Class 3 Testing Customers /Users / Payers
      • - What were your user/customer hypotheses?  
      • - Did  you learn anything different?    
      • - Anything change about Value Proposition?      -
      • - What are your customer acquisition costs?    
      • - What are the direct benefits (economic/other)?
      • - Who is the decision maker, how large is their   budget? What are they spending it on today?  
      • - How will this buying decision be made?  
      • - What  resonates with customers?
      • - For web startups, start coding the product .  
      • - Setup Google or Amazon cloud infrastructure
    • How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog) January 18 th Class 3 Testing Customers and Users  
      • - What were your user/customer hypotheses?  
      • - Did  you learn anything different?    
      • - Anything change about Value Proposition?      -
      • - What are your customer acquisition costs?    
      • - What are the direct benefits (economic/other)?
      • - Who is the decision maker, how large is their   budget? What are they spending it on today?  
      • - How will this buying decision be made?  
      • - What  resonates with customers?
      • - For web startups, start coding the product .  
      • - Setup Google or Amazon cloud infrastructure
      January 25 th Class 4 Testing Demand Creation - Anything change about Value Proposition or  Customers/Users or Channel? - Present and explain your marketing campaign.  - What  worked best and why?
    • How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog) Feb 1 st Class 5 Testing Sales Channel For web teams : Get working website/analytics up.  - Track where visitors are coming from, how behavior differs.  - What were your hypotheses about site results? - Anything in Value Proposition or Customers/Users?     For non-web  teams : Interview 10 people in channel - Anything change in Value Proposition, Channel or  Customers/Users? - Does your product extend/replace existing channel revenue? - What ’s the “cost” of your channel/ it’s efficiency vs. product selling price. For Everyone : What is your customer lifetime value? - What feedback did you receive from your users? - What are the entry barriers?
    • How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 1 st Class 5 Testing Sales Channel For web teams: Get working website/analytics up.  - Track where visitors are coming from, how behavior differs.  - What were your hypotheses about site results? - Did anything  change about Value  Proposition or Customers/Users?     For non-web  teams: Interview 10 people in channel - Did  anything  change  about  Value  Proposition  or  Customers/Users? - Does your product extend/replace existing channel revenue? - What ’s the “cost” of your channel/ it’s efficiency vs. product selling price. For Everyone: What is your customer lifetime value? - What feedback did you receive from your users? - What are the entry barriers? Feb 8 th Class 6 Testing Revenue Model - Assemble income statement for your business model.   - Lifetime  value  calculation   for  customers.    
    • How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 15 th Class 7 Testing Partners - Any change of Value Proposition, Customers/Users,  Channel, or Demand  Creation? - What are the partners incentives/impediments?
    • How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 15 th Class 7 Testing Partners - Any change of Value Proposition, Customers/Users,  Channel, or Demand  Creation? - What are the partners incentives/impediments? Feb 22 nd Class 8 Testing Key Resources and Cost Structure
      • - Assemble a “resources assumptions” spreadsheet.    
      • - Include  people, hardware, software, prototypes,  financing, etc.
      • - When will you need these resources?
    • How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 15 th Class 7 Testing Partners - Any change of Value Proposition, Customers/Users,  Channel, or Demand  Creation? - What are the partners incentives/impediments? Feb 22 nd Class 8 Testing Key Resources and Cost Structure
      • - Assemble a “resources assumptions” spreadsheet.    
      • - Include  people, hardware, software, prototypes,  financing, etc.
      • - When will you need these resources?
      March 1 st Class 9 Present!
      • Group 1 – 30 Minute Presentations
      March 8 th Class 10 Present!
      • Group 2 – 30 Minute Presentations
    • How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 15 th Class 7 Testing Partners - Any change of Value Proposition, Customers/Users,  Channel, or Demand  Creation? - What are the partners incentives/impediments? Feb 22 nd Class 8 Testing Key Resources and Cost Structure
      • - Assemble a “resources assumptions” spreadsheet.    
      • - Include  people, hardware, software, prototypes,  financing, etc.
      • - When will you need these resources?
      March 1 st Class 9 Present!
      • Group 1 – 30 Minute Presentations
      March 8 th Class 10 Present!
      • Group 2 – 30 Minute Presentations
      March 11 th Funding!
      • Optional presentations at VC firm for funding
    • How to Build A Startup Idea Size Opportunity Business Model Customer Development
    • How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation
    • How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation Theory Practice
    • How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation
      • Web startups get the product in front of customers earlier
    • How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation
    • Idea
    • We ’re Engineers Darn It!
      • Aren ’t companies all about product?
      • I have a great technology idea
      • Teach me how to make a company around it
      • Just like Facebook and Google (or Intel or Apple)
      Stanford
    • Sources of Startup Ideas?
      • Technology shifts
        • Moore ’s Law
        • Disruptive tech
        • Research
      • Market changes
        • Value chain disruption
        • Deregulation
      • Societal changes
        • Changes in ways we live, learn, work, etc.
        • The world is flat (outsourcing)
      • Dinosaur factor
        • Arrogance
        • Deadened reflexes
      • Irrational exuberance
        • Undervalued assets
    • An Idea is _Not_ a Company
    • Size of Opportunity
    • This Class is about Scalable Startups
      • Not all startups are designed to scale
      • Small business startups have different goals
        • They are done by normal people
      • Scalable startups are designed to grow big
        • Typically require venture capital
      • This means the size of the opportunity needs to be $100’s of millions to billions
    • Small Business Startups Small Business Startup
      • - Business Model found
      • - Profitable business
      • Existing team
      • < $1M in revenue
    • Small Business Startups
      • - Business Model found
      • - Profitable business
      • Existing team
      • < $10M in revenue
      • 5.7 million small businesses in the U.S. <500 employees
      • 99.7% of all companies
      • ~ 50% of total U.S. workers
      http://www.sba.gov/advo/stats/sbfaq.pdf Small Business Startup
    • Scalable Startup Scalable Startup Large Company >$100M/year
      • Total Available Market > $500m
      • Company can grow to $100m/year
      • Business model found
      • Focused on execution and process
    • Scalable Startup Scalable Startup Large Company >$100M/year
      • Total Available Market > $500m
      • Company can grow to $100m/year
      • Business model found
      • Focused on execution and process
      • Typically requires “risk capital”
      • In contrast a scalable startup is designed to grow big
      • Typically needs risk capital
      • What Silicon Valley means when they say “Startup”
    • Very Different Startup Goals Small Business Startup
      • - Business Model found
      • - Profitable business
      • Existing team
      • < $10M
      Scalable Startup Large Company
      • Total Available Market > $500m
      • Company can grow to $100m/year
      • Business model found
      • Focused on execution and process
      • Typically requires “ risk capital ”
    • Venture Firms Invest in Scalable Startups Small Business Startup Scalable Startup Large Company
    • Market/Opportunity Analysis
      • How Big is It?: Market/Opportunity Analysis
        • Identify a Customer and Market Need
        • Size the Market
        • Competitors
        • Growth Potential
    • How Big is the Pie? Total Available Market Total Available Market
      • How many people would want/need the product?
      • How large is the market be (in $ ’s) if they all bought?
      • How many units would that be?
      • How Do I Find Out?
      • Industry Analysts – Gartner, Forrester
      • Wall Street Analysts – Goldman, Morgan
    • 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
      • How large would the market be (in $ ’s) if they all bought?
      • How many units would that be?
      • How Do I Find Out?
      • Talk to potential customers
      Served Available Market Total Available Market
    • 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?
      • How many units would that be?
      • How Do I Find Out?
      • Talk to potential customers
      • Identify and talk to channel partners
      • Identify and talk to competitors
      Total Available Market Target Market Served Available Market
    • Segmentation Identification of groups most likely to buy Target Market
      • Geographic
      • Demographic
      • Psychographic variables
      • Behavioral variables
      • Channel
      • etc…
      Total Available Market Served Available Market
    • 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
    • Business Model
    • What Is a Business Model ?
      • Diagram of flows between company and customers
      • Scorecard of hypotheses testing
      • Rapid change with each iteration and pivot
      • Founder- driven
      * Alex Osterwalder
    • 9 building blocks of a business model:
    • CUSTOMER SEGMENTS which customers and users are you serving? which jobs do they really want to get done?
    • VALUE PROPOSITIONS what are you offering them? what is that getting done for them? do they care?
    • CHANNELS how does each customer segment want to be reached? through which interaction points?
    • CUSTOMER RELATIONSHIPS what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?
    • REVENUE STREAMS what are customers really willing to pay for? how? are you generating transactional or recurring revenues?
    • KEY RESOURCES which resources underpin your business model? which assets are essential?
    • KEY ACTIVITIES which activities do you need to perform well in your business model? what is crucial?
    • KEY PARTNERS which partners and suppliers leverage your model? who do you need to rely on?
    • COST STRUCTURE what is the resulting cost structure? which key elements drive your costs?
    • images by JAM customer segments key partners cost structure revenue streams channels customer relationships key activities key resources value proposition
    • sketch out your business model
    • building block building block building block building block building block building block building block building block building block building block building block building block
    • But, Realize They ’re Hypotheses
    • 9 Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess
    • How Do Startups Search For A Business Model?
      • The Search is called Customer Development
      • The Implementation is called Agile Development
    • Customer Development Solving For Customer Risk
    • Customer Development Get Out of the Building The founders ^
    • More startups fail from a lack of customers than from a failure of product development (focus on “who” more than “what”)
    • Customer Development Concept/ Bus. Plan Product Dev. Alpha/Beta Test Launch/1st Ship Product Introduction Model Customer Development Company Building Customer Discovery Customer Validation Customer Creation Pivot
      • Stop selling, start listening
      • Test your hypotheses
      • Continuous Discovery
      • Done by founders
      Customer Discovery Customer Discovery Customer Validation Company Building Customer Creation Pivot
    • Turning Hypotheses to Facts
      • Test Hypotheses:
      • Product
      • Market Type
      • Competition
      • Test Hypotheses:
      • Problem
      • Customer
      • User
      • Payer
      • Test Hypotheses:
      • Channel
      • Test Hypotheses:
      • Problem
      • Customer
      • User
      • Payer
      • Test Hypotheses:
      • Demand Creation
      • Test Hypotheses:
      • Channel
      • Test Hypotheses:
      • Product
      • Market Type
      • Competitive
      • Test Hypotheses:
      • Pricing Model / Pricing
      • Test Hypotheses:
      • Size of Opportunity/Market
      • Validate Business Model
      • Test Hypotheses:
      • Channel
      • (Customer)
      • (Problem)
      • Test Hypotheses:
      • Problem
      • Customer
      • User
      • Payer
      • Test Hypotheses:
      • Demand Creation
      • Test Hypotheses:
      • Channel
      • Test Hypotheses:
      • Product
      • Market Type
      • Competitive
      • Test Hypotheses:
      • Pricing Model / Pricing
      • Test Hypotheses:
      • Size of Opportunity/Market
      • Validate Business Model
      • Test Hypotheses:
      • Channel
      • (Customer)
      • (Problem)
      Customer Development Team Agile Development
      • Test Hypotheses:
      • Problem
      • Customer
      • User
      • Payer
      • Test Hypotheses:
      • Demand Creation
      • Test Hypotheses:
      • Channel
      • Test Hypotheses:
      • Product
      • Market Type
      • Competitive
      • Test Hypotheses:
      • Pricing Model / Pricing
      • Test Hypotheses:
      • Size of Opportunity/Market
      • Validate Business Model
      • Test Hypotheses:
      • Channel
      • (Customer)
      • (Problem)
      Customer Development Team Agile Development
    • The Pivot
      • The heart of Customer Development
      • Iteration without crisis
      • Fast, agile and opportunistic
    • Break
    • Our “Culture” for E245
      • Show up on time and stay ‘til we’re done
      • Keep your commitments (in class and out)
      • Step outside if you must call, email, skype, twitter, chat, surf the web, or do anything unrelated to E245
      • Entrepreneurship is a team sport
        • 80% of your grade depends on working with others
    • What Lies Ahead: “To Do” List
      • Check web site for admission lists
        • attendance is mandatory in session 2
        • waitlist (if any) will be cleared at beginning of class
      • Form full teams by Session 2
        • mixer on Thursday, 5:15 at Thornton 110
      • Team deliverable by next week:
        • Hypotheses for each part of business model.
        • - Test for whether your business is worth  pursuing (market  size)
        • - 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)?