Stanford Entrepreneurship Week 030211
 

Stanford Entrepreneurship Week 030211

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Stanford Entrepreneurship Week 030211 Stanford Entrepreneurship Week 030211 Presentation Transcript

  • The Democratization of Entrepreneurship
    Steve Blank
    Stanford - School of Engineering
    www.steveblank.com
    Twitter: @sgblank
  • This Presentation Combines
    www.businessmodelgeneration.com
    www.steveblank.com
  • I Write a Blog
    www.steveblank.com
  • A Few Short Stories
  • Startup Constraints
  • High Cost to First Product
    Startup Constraints
  • Buy expensive workstationsBuy expensive development tools
  • High Cost to First Product
    Long Time to First Product
    Startup Constraints
  • Use Waterfall DevelopmentFirst Customer Ship in months/years
  • High Cost to First Product
    Long Time to First Product
    Startup Constraints
    Slow Customer Adoption
  • Customers – Gov’t/Businesses# of customers - hundreds/thousands
  • High Cost to First Product
    Long Time to First Product
    Startup Constraints
    Slow Customer Adoption
    High Startup Failure Rate
  • Startups are small versions of large companiesFocus is on execution of business plan
  • High Cost to First Product
    Long Time to First Product
    Startup Constraints
    Limited Number of Venture Capitalists
    Slow Customer Adoption
    High Startup Failure Rate
  • 3000 Sand Hill Road
  • High Cost to First Product
    Innovation Limited to a Few Regions
    Long Time to First Product
    Startup Constraints
    Limited Number of Venture Capitalists
    Slow Customer Adoption
    High Startup Failure Rate
  • 3000 Sand Hill RoadMenlo Park, California
  • High Cost to First Product
    Innovation Limited to a Few Regions
    Long Time to First Product
    Startup Constraints
    Limited Number of Venture Capitalists
    Slow Customer Adoption
    High Startup Failure Rate
  • There’s Something Happening Here, What It Is Ain’t Exactly Clear
  • Startup Constraints
    Entrepreneurial Explosion
  • Low Cost to 1st Product
    Entrepreneurial
    Explosion
  • Develop on inexpensive PC’s/Mac’sUse Open Source Software
  • Low Cost to First Product
    Short Time to First Product
    Entrepreneurial
    Explosion
  • Use Agile DevelopmentFirst Customer Ship in weeks/months
  • Low Cost to First Product
    Short Time to First Product
    Entrepreneurial
    Explosion
    Fast Customer Adoption
  • Customers –Consumers# of customers -millions
  • Low Cost to First Product
    Short Time to First Product
    Entrepreneurial
    Explosion
    Fast Customer Adoption
    Lower Startup Failure Rate
  • Startups arenot small versions of large companiesFocus is on Search for a business model
  • Low Cost to First Product
    Short Time to First Product
    Entrepreneurial
    Explosion
    Large Pool of Risk Capital
    Fast Customer Adoption Rate
    Lower Startup Failure Rate
  • Sand Hill Road
  • Low Cost to First Product
    Global Innovation
    Short Time to First Product
    Entrepreneurial
    Explosion
    Large Pool of Risk Capital
    Fast Customer Adoption Rate
    Lower Startup Failure Rate
  • Menlo Park, San Francisco New York, Shanghai, Israel, Chile, Singapore
  • Low Cost to First Product
    Global Innovation
    Short Time to First Product
    Entrepreneurial
    Explosion
    This talk
    Large Pool of Risk Capital
    Fast Customer Adoption Rate
    Lower Startup Failure Rate
  • Not All Startups Are Equal
  • Small Business
    Startup
    Small Business Startups
    • Serve known customer with known product
    • Feed the family
  • Small Business
    Startup
    Exit Criteria
    • Business Model found
    - Profitable business
    • Existing team
    < $1M in revenue
    Small Business Startups
    • known customer known product
    • Feed the family
  • Small Business
    Startup
    - Business Model found
    - Profitable business
    • Existing team
    < $10M in revenue
    Small Business Startups
    • 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
  • Large Company Sustaining Innovation
    Sustaining Innovation
    Transition
    Scalable
    Startup
    Large Company
    • Existing Market / Known customer
    • Known product feature needs
  • Large Company Disruptive Innovation
    New Division
    Transition
    Large Company
    Disruptive Innovation
    • New Market
    • New tech, customers, channels
  • Large Company Disruptive Innovation
    New Division
    Transition
    Large Company
    Disruptive Innovation
    • Build
    • Acquire
    - Talent
    - Product
    - Customers
    - Business
  • Scalable
    Startup
    Large Company
    Scalable Startup
    Search
    Goal is to solve for:
    unknown customer and unknown features
  • Execute
    Search
    Scalable
    Startup
    Large Company
    Exit Criteria
    • Business model found
    • Total Available Market > $500m -$1B
    • Can grow to $100m/year
    Scalable Startup
  • 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”
    Scalable Startup
    Execute
    Search
    • In contrast a scalable startup is designed to grow big
    • Typically needs risk capital
    • What Silicon Valley means when they say “Startup”
  • Scalable
    Startup
    Large Company
    • Business Model found
    • i.e. Product/Market fit
    - Repeatable sales model
    - Managers hired
    What’s A Startup?
    A Startup is a temporary organization used to search for a scalable and repeatable business model
  • What VC’s Don’t Tell You:The Transition
    Scalable
    Startup
    Transition
    Large Company
    Search
    Build
    Execute
  • What VC’s Don’t Tell You:The Transition – Founders Leave
    Scalable
    Startup
    Transition
    Large Company
    • Founders depart
    • CEO = Operating Exec
    • Professional Mgmt
    • Process
    • Beginning of scale
  • Scalable
    Startup
    Transition
    Large Company
    • Business Model found
    • i.e. Product/Market fit
    - Repeatable sales model
    - Managers hired
    What’s A Startup?
    You fail if you stay a startup
  • Why Startups Are Not Small Versions of A Large Company
  • Startups Search and Pivot
    The Search for the Business Model
    Scalable
    Startup
    Transition
    Large Company
    Business Model found by founders
    • customer needs/product features found
    i.e. Product/Market fit
    • Repeatable sales model
    - Managers hired
  • Startups Search, Companies Execute
    The Execution of the Business Model
    The Search for the Business Model
    Scalable
    Startup
    Transition
    Large Company
    - Cash-flow breakeven
    - Profitable
    - Rapid scale
    - New Senior Mgmt
    ~ 150 people
    • Business Model found
    • Product/Market fit
    - Repeatable sales model
    - Managers hired
  • Metrics Versus Accounting
    The Execution of the Business Model
    Scalable
    Startup
    Transition
    Large
    Company
    Traditional Accounting
    • Balance Sheet
    • Cash Flow Statement
    • Income Statement
  • Metrics Versus Accounting
    The Search for the Business Model
    The Execution of the Business Model
    Scalable
    Startup
    Transition
    Large
    Company
    Startup Metrics
    • Customer Acquisition Cost
    • Viral coefficient
    • Customer Lifetime Value
    • Average Selling Price/Order Size
    • Monthly burn rate
    • etc.
    Traditional Accounting
    • Balance Sheet
    • Cash Flow Statement
    • Income Statement
  • Customer Validation Versus Sales
    The Execution of the Business Model
    Scalable
    Startup
    Transition
    Large
    Company
    Sales
    • Sales Organization
    • Scalable
    • Price List/Data Sheets
    • Revenue Plan
  • Customer Validation Versus Sales
    The Search for the Business Model
    The Execution of the Business Model
    Scalable
    Startup
    Transition
    Large
    Company
    Customer Validation
    • Early Adopters
    • Pricing/Feature unstable
    • Not yet repeatable
    • “One-off’s”
    Sales
    • Sales Organization
    • Scalable
    • Price List/Data Sheets
    • Revenue Plan
  • Engineering Versus Agile Development
    The Execution of the Business Model
    Scalable
    Startup
    Transition
    Large Company
    Engineering
    • Requirements Docs.
    • Waterfall Development
    • QA
    • Tech Pubs
  • Engineering Versus Agile Development
    The Search for the Business Model
    The Execution of the Business Model
    Scalable
    Startup
    Transition
    Large Company
    Engineering
    • Requirements Docs.
    • Waterfall Development
    • QA
    • Tech Pubs
    Agile Development
    • Continuous Deployment
    • Continuous Learning
    • Self Organizing Teams
    • Minimum Feature Set
    • Pivots
  • Startups Model, Companies Plan
    The Execution of the Business Model
    Scalable
    Startup
    Transition
    Large Company
    Business Plan
    • describes “knowns”
    • features
    • customers/markets
    • business model
  • Startups Model, Companies Plan
    The Search for the Business Model
    The Execution of the Business Model
    Scalable
    Startup
    Transition
    Large Company
    • Business Model
    • describes “unknowns”
    • customer needs
    • feature set
    • business model
    • found by iteration
    • Plan describes “knowns”
    • Known features for line extensions
    • Known customers/markets
    • Known business model
  • How Do Startups Search For A Business Model?
    • The Search is called Customer Development
    • The Implementation is called Agile Development
  • Customer Development
  • Why Startups Fail
  • More startups fail from a lack of customers than from a failure of product development
  • Product Introduction Model:Two Implicit Assumptions
    Customer Problem: known
    Concept/Seed Round
    Product Dev.
    Alpha/Beta Test
    Launch/
    1st Ship
    Product Features: known
  • Tradition – Hire Marketing
    Concept/Seed Round
    Product Dev.
    Alpha/Beta Test
    Launch/
    1st Ship
    - Create Demand
    - Launch Event
    - “Branding”
    - Hire PR Agency
    - Early Buzz
    • Create Marcom
    Materials
    - Create Positioning
    Marketing
  • Tradition – Hire Sales
    Concept/Seed Round
    Product Dev.
    Alpha/Beta Test
    Launch/
    1st Ship
    - Create Demand
    - Launch Event
    - “Branding”
    - Hire PR Agency
    - Early Buzz
    • Create Marcom
    Materials
    - Create Positioning
    Marketing
    • Build Sales Organization
    • Hire Sales VP
    • Hire 1st Sales Staff
    Sales
  • Tradition – Hire Bus Development
    Concept
    Product Dev.
    Alpha/Beta Test
    Launch/
    1st Ship
    - Create Demand
    - Launch Event
    - “Branding”
    - Hire PR Agency
    - Early Buzz
    • Create Marcom
    Materials
    - Create Positioning
    Marketing
    • Build Sales Channel / Distribution
    • Hire Sales VP
    • Pick distribution Channel
    Sales
    Business
    Development
    • Hire First Bus Dev
    • Do deals for FCS
  • Tradition – Hire Engineering
    Concept
    Product Dev.
    Alpha/Beta Test
    Launch/
    1st Ship
    - Create Demand
    - Launch Event
    - “Branding”
    - Hire PR Agency
    - Early Buzz
    • Create Marcom
    Materials
    - Create Positioning
    Marketing
    • Build Sales Channel / Distribution
    • Hire Sales VP
    • Pick distribution Channel
    Sales
    Business
    Development
    • Hire First Bus Dev
    • Do deals for FCS
    Engineering
    • Write MRD
    • Waterfall
    • Q/A
    • Tech Pubs
  • How Startups Succeed
  • Customer Development
    The founders
    ^
    Get Out of the Building
  • Product Development
    Concept/Bus. Plan
    Product Dev.
    Alpha/Beta Test
    Launch/1st Ship
    +
    CustomerDevelopment
    Company
    Building
    CustomerDiscovery
    CustomerValidation
    Customer Creation
    Customer Development
    Pivot
  • Customer Discovery
    CustomerDiscovery
    CustomerValidation
    Company
    Building
    CustomerCreation
    Test yourbusiness model hypotheses
    Continuous Discovery
    Done by founders
  • No Business Plan survives first contact with customers
  • So Search for a Business Model
  • The Business Model:
    Any company can be described in 9 building blocks
  • 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?
    82
  • 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?
  • value proposition
    customer relationships
    key activities
    customer segments
    key partners
    cost structure
    revenue streams
    key
    resources
    channels
    85
    images by JAM
  • Test Hypotheses:
    • Product
    • Market Type
    • Competition
    Turning Hypotheses to Facts
  • Test Hypotheses:
    • Problem
    • Customer
    • User
    • Payer
  • Test Hypotheses:
    • Channel
  • Test Hypotheses:
    • Demand Creation
    Test Hypotheses:
    • Problem
    • Customer
    • User
    • Payer
    Test Hypotheses:
    • Product
    • Market Type
    • Competitive
    Test Hypotheses:
    • Channel
    • (Customer)
    • (Problem)
    Test Hypotheses:
    • Channel
    Test Hypotheses:
    • Pricing Model / Pricing
    Test Hypotheses:
    • Size of Opportunity/Market
    • Validate Business Model
  • Test Hypotheses:
    • Demand Creation
    Test Hypotheses:
    • Problem
    • Customer
    • User
    • Payer
    Agile Development
    Test Hypotheses:
    • Product
    • Market Type
    • Competitive
    Test Hypotheses:
    • Channel
    • (Customer)
    • (Problem)
    Customer Development Team
    Test Hypotheses:
    • Channel
    Test Hypotheses:
    • Pricing Model / Pricing
    Test Hypotheses:
    • Size of Opportunity/Market
    • Validate Business Model
  • Test Hypotheses:
    • Demand Creation
    Test Hypotheses:
    • Problem
    • Customer
    • User
    • Payer
    Agile Development
    Test Hypotheses:
    • Product
    • Market Type
    • Competitive
    Test Hypotheses:
    • Channel
    • (Customer)
    • (Problem)
    Customer Development Team
    Test Hypotheses:
    • Channel
    Test Hypotheses:
    • Pricing Model / Pricing
    Test Hypotheses:
    • Size of Opportunity/Market
    • Validate Business Model
  • The Minimum Viable Product (MVP)
    • Smallest feature set that gets you the most …orders, learning, feedback, failure…
    • MVP + Customer are the first two you need to nail
    • MVP is just 1 of the 9 parts of your model
  • The Pivot
    • The heart of Customer Development
    • Iteration without crisis
    • Fast, agile and opportunistic
  • Wrap Up
    Startup are not small versions of large companies
    Traditional big company planning tools fail
    Startups are built on hypotheses
    You need to test each one of them
    Business Models help you keep score
    Customer Development is how you test hypotheses
  • Why Startups Aren’t Run By Accountants
  • Inventor of the Modern Corporation
    Scalable
    Startup
    Transition
    Large Company
  • Inventor of the Modern Corporation
    Scalable
    Startup
    Transition
    Large Company
    Alfred P. Sloan
  • Alfred P. Sloan
    Scalable
    Startup
    Transition
    Large Company
    General Motors, President/Chairman
    • Cost Accounting
    • MIT Sloan School
    • Sloan Foundation
    • etc.
  • Founder of General Motors
    Scalable
    Startup
    Transition
    Large Company
  • Founder of General Motors
    Scalable
    Startup
    Transition
    Large Company
    Billy Durant
  • Billy Durant
    Scalable
    Startup
    Transition
    Large Company
    • Leader in horse-drawn buggy’s
    • Fired by board, starts Chevrolet
    • Regains control of GM
    • Fired by board, GM ~$3.6 billion*
    * GM Net sales in 1921 $304.5M = $3.6 Billion today
  • Durant Versus Sloan
    Scalable
    Startup
    Transition
    Large Company
  • Durant Versus Sloan
    • Dies, rich, honored and famous
  • Durant Versus Sloan
    • Dies managing a bowling alley
    • Dies, rich, honored and famous
  • Durant Versus Sloan
    Accountant
    • Dies managing a bowling alley
    • Dies, rich, honored and famous
  • You are here
    Scalable
    Startup
    Transition
    Large Company
  • Thanks
    www.steveblank.com