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University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
University of Michigan in Silicon Valley 030211
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University of Michigan in Silicon Valley 030211

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  • 1. The Entrepreneurial Explosion<br />Steve Blank<br />Stanford - School of Engineering<br />www.steveblank.com<br />Twitter: @sgblank<br />
  • 2. This Presentation Combines<br />www.businessmodelgeneration.com<br />www.steveblank.com<br />
  • 3. I Write a Blog <br />www.steveblank.com<br />
  • 4. A Few Short Stories<br />
  • 5. Startup Constraints<br />
  • 6. High Cost to First Product<br />Startup Constraints<br />
  • 7. Buy expensive workstationsBuy expensive development tools<br />
  • 8. Low Cost to 1st Product<br />Entrepreneurial <br />Explosion<br />
  • 9. Develop on inexpensive PC’s/Mac’sUse Open Source Software<br />
  • 10. High Cost to First Product<br />Long Time to First Product<br />Startup Constraints<br />
  • 11. Use Waterfall DevelopmentFirst Customer Ship in months/years<br />
  • 12. Low Cost to First Product<br />Short Time to First Product<br />Entrepreneurial <br />Explosion<br />
  • 13. Use Agile DevelopmentFirst Customer Ship in weeks/months<br />
  • 14. High Cost to First Product<br />Long Time to First Product<br />Startup Constraints<br />Slow Customer Adoption<br />
  • 15. Customers – Gov’t/Businesses# of customers - hundreds/thousands<br />
  • 16. Low Cost to First Product<br />Short Time to First Product<br />Entrepreneurial <br />Explosion<br />Fast Customer Adoption<br />
  • 17. Customers – Consumers# of customers - millions<br />
  • 18. High Cost to First Product<br />Long Time to First Product<br />Startup Constraints<br />Slow Customer Adoption<br />High Startup Failure Rate<br />
  • 19. Startups are small versions of large companiesFocus is on execution of business plan<br />
  • 20. Low Cost to First Product<br />Short Time to First Product<br />Entrepreneurial <br />Explosion<br />Fast Customer Adoption<br />Lower Startup Failure Rate<br />
  • 21. Startups are not small versions of large companiesFocus is on Search for a business model<br />
  • 22. High Cost to First Product<br />Long Time to First Product<br />Startup Constraints<br />Limited Number of Venture Capitalists<br />Slow Customer Adoption<br />High Startup Failure Rate<br />
  • 23. 3000 Sand Hill Road<br />
  • 24. Low Cost to First Product<br />Short Time to First Product<br />Entrepreneurial <br />Explosion<br />Large Pool of Risk Capital<br />Fast Customer Adoption Rate<br />Lower Startup Failure Rate<br />
  • 25. Sand Hill Road<br />
  • 26. High Cost to First Product<br />Innovation Limited to a Few Regions<br />Long Time to First Product<br />Startup Constraints<br />Limited Number of Venture Capitalists<br />Slow Customer Adoption<br />High Startup Failure Rate<br />
  • 27. 3000 Sand Hill RoadMenlo Park, California<br />
  • 28. Low Cost to First Product<br />Global Innovation<br />Short Time to First Product<br />Entrepreneurial <br />Explosion<br />Large Pool of Risk Capital<br />Fast Customer Adoption Rate<br />Lower Startup Failure Rate<br />
  • 29. Menlo Park, San Francisco New York, Shanghai, Israel, Chile, Singapore<br />
  • 30. Low Cost to First Product<br />Global Innovation<br />Short Time to First Product<br />Entrepreneurial <br />Explosion<br />This talk<br />Large Pool of Risk Capital<br />Fast Customer Adoption Rate<br />Lower Startup Failure Rate<br />
  • 31. Why Startups Are Not Small Versions of A Large Company<br />
  • 32. Startups Search, Companies Execute<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Search<br />Build<br />Execute<br />
  • 33. Startups Search and Pivot<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br /> Business Model found by founders<br /><ul><li> customer needs/product features found</li></ul> i.e. Product/Market fit<br /><ul><li> Repeatable sales model</li></ul>- Managers hired<br />
  • 34. Startups Search, Companies Execute<br />The Execution of the Business Model<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />- Cash-flow breakeven<br />- Profitable<br />- Rapid scale<br />- New Senior Mgmt<br />~ 150 people<br /><ul><li>Business Model found
  • 35. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
  • 36. Metrics Versus Accounting<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Traditional Accounting<br /><ul><li>Balance Sheet
  • 37. Cash Flow Statement
  • 38. Income Statement</li></li></ul><li>Metrics Versus Accounting<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Startup Metrics<br /><ul><li> Customer Acquisition Cost
  • 39. Viral coefficient
  • 40. Customer Lifetime Value
  • 41. Average Selling Price/Order Size
  • 42. Monthly burn rate
  • 43. etc. </li></ul>Traditional Accounting<br /><ul><li> Balance Sheet
  • 44. Cash Flow Statement
  • 45. Income Statement</li></li></ul><li>Customer Validation Versus Sales<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Sales<br /><ul><li>Sales Organization
  • 46. Scalable
  • 47. Price List/Data Sheets
  • 48. Revenue Plan</li></li></ul><li>Customer Validation Versus Sales<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Customer Validation<br /><ul><li> Early Adopters
  • 49. Pricing/Feature unstable
  • 50. Not yet repeatable
  • 51. “One-off’s”</li></ul>Sales<br /><ul><li> Sales Organization
  • 52. Scalable
  • 53. Price List/Data Sheets
  • 54. Revenue Plan</li></li></ul><li>Engineering Versus Agile Development<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Engineering<br /><ul><li> Requirements Docs.
  • 55. Waterfall Development
  • 56. QA
  • 57. Tech Pubs</li></li></ul><li>Engineering Versus Agile Development<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Engineering<br /><ul><li> Requirements Docs.
  • 58. Waterfall Development
  • 59. QA
  • 60. Tech Pubs</li></ul>Agile Development<br /><ul><li> Continuous Deployment
  • 61. Continuous Learning
  • 62. Self Organizing Teams
  • 63. Minimum Feature Set
  • 64. Pivots</li></li></ul><li>Startups Model, Companies Plan<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Business Plan<br /><ul><li> describes “knowns”
  • 65. features
  • 66. customers/markets
  • 67. business model</li></li></ul><li>Startups Model, Companies Plan<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li>Business Model
  • 68. describes “unknowns”
  • 69. customer needs
  • 70. feature set
  • 71. business model
  • 72. found by iteration
  • 73. Plan describes “knowns”
  • 74. Known features for line extensions
  • 75. Known customers/markets
  • 76. Known business model</li></li></ul><li>How Do Startups Search For A Business Model?<br /><ul><li> The Search is called Customer Development
  • 77. The Implementation is called Agile Development</li></li></ul><li>Customer Development<br />
  • 78. Why Startups Fail<br />
  • 79. More startups fail from a lack of customers than from a failure of product development<br />
  • 80.
  • 81. Customer Problem: known<br /> Product Features: known<br />
  • 82. No Business Plan survives first contact with customers<br />
  • 83. So Search for a Business Model<br />
  • 84. The Business Model:<br />Any company can be described in 9 building blocks<br />
  • 85. CUSTOMER SEGMENTS<br />which customers and users are you serving? <br />which jobs do they really want to get done?<br />
  • 86. VALUE PROPOSITIONS<br />what are you offering them? what is that <br />getting done for them? do they care?<br />
  • 87. CHANNELS<br />how does each customer segment want to be reached? through which interaction points?<br />
  • 88. CUSTOMER RELATIONSHIPS<br />what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?<br />
  • 89. REVENUE STREAMS<br />what are customers really willing to pay for? how? <br />are you generating transactional or recurring revenues?<br />
  • 90. KEY RESOURCES<br />which resources underpin your business model? which assets are essential?<br />
  • 91. KEY ACTIVITIES<br />which activities do you need to perform well in your business model? what is crucial?<br />58<br />
  • 92. KEY PARTNERS<br />which partners and suppliers leverage your model? <br />who do you need to rely on?<br />
  • 93. COST STRUCTURE<br />what is the resulting cost structure? <br />which key elements drive your costs?<br />
  • 94. value proposition<br />customer relationships<br />key activities<br />customer segments<br />key partners<br />cost structure<br />revenue streams<br />key <br />resources<br />channels<br />61<br />images by JAM<br />
  • 95. sketch out your business model<br />
  • 96. building<br />block<br />
  • 97. building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />
  • 98. building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />building<br />block<br />
  • 99. But,Realize They’re Hypotheses<br />
  • 100. 9 Guesses<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />
  • 101. How Startups Succeed<br />
  • 102. Customer Development<br />The founders<br />^<br />Get Out of the Building<br />
  • 103. Product Development<br />Concept/Bus. Plan<br />Product Dev.<br />Alpha/Beta Test<br />Launch/1st Ship<br />+<br />CustomerDevelopment<br />Company<br />Building<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Customer Development<br />Pivot<br />
  • 104. Customer Discovery<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br />Test yourbusiness model hypotheses<br />Continuous Discovery<br />Done by founders<br />
  • 105. Test Hypotheses:<br /><ul><li>Product
  • 106. Market Type
  • 107. Competition</li></ul>Turning Hypotheses to Facts<br />
  • 108. Test Hypotheses:<br /><ul><li>Problem
  • 109. Customer
  • 110. User
  • 111. Payer</li></li></ul><li>Test Hypotheses:<br /><ul><li>Channel</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  • 112. Customer
  • 113. User
  • 114. Payer</li></ul>Test Hypotheses:<br /><ul><li>Product
  • 115. Market Type
  • 116. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  • 117. (Customer)
  • 118. (Problem)</li></ul>Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  • 119. Validate Business Model</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  • 120. Customer
  • 121. User
  • 122. Payer</li></ul>Agile Development<br />Test Hypotheses:<br /><ul><li>Product
  • 123. Market Type
  • 124. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  • 125. (Customer)
  • 126. (Problem)</li></ul>Customer Development Team<br />Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  • 127. Validate Business Model</li></li></ul><li>The Minimum Viable Product (MVP)<br /><ul><li> Smallest feature set that gets you the most …orders, learning, feedback, failure…
  • 128. MVP + Customer are the first two you need to nail
  • 129. MVP is just 1 of the 9 parts of your model</li></li></ul><li>The Pivot<br /><ul><li>The heart of Customer Development
  • 130. Iteration without crisis
  • 131. Fast, agile and opportunistic</li></li></ul><li>Wrap Up<br />Startup are not small versions of large companies<br />Traditional big company planning tools fail<br />Startups are built on hypotheses<br />You need to test each one of them<br />Business Models help you keep score<br />Customer Development is how you test hypotheses<br />
  • 132. Why Startups Aren’t Run By Accountants<br />
  • 133. Inventor of the Modern Corporation<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  • 134. Inventor of the Modern Corporation<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Alfred P. Sloan<br />
  • 135. Alfred P. Sloan<br />Scalable<br />Startup<br />Transition<br />Large Company<br />General Motors, President/Chairman<br /><ul><li> Cost Accounting
  • 136. MIT Sloan School
  • 137. Sloan Foundation
  • 138. etc. </li></li></ul><li>Founder of General Motors<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  • 139. Founder of General Motors<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Billy Durant<br />
  • 140. Billy Durant<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li> Leader in horse-drawn buggy’s
  • 141. Fired by board, starts Chevrolet
  • 142. Regains control of GM
  • 143. Fired by board, GM ~$3.6 billion*</li></ul>* GM Net sales in 1921 $304.5M = $3.6 Billion today<br />
  • 144. Durant Versus Sloan<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  • 145. Durant Versus Sloan<br /><ul><li>Dies, rich, honored and famous</li></li></ul><li>Durant Versus Sloan<br /><ul><li>Dies managing a bowling alley
  • 146. Dies, rich, honored and famous</li></li></ul><li>Durant Versus Sloan<br />Accountant<br /><ul><li>Dies managing a bowling alley
  • 147. Dies, rich, honored and famous</li></li></ul><li>You are here<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  • 148. Thanks<br />www.steveblank.com<br />

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