University of Michigan in Silicon Valley 030211

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