The Lean Startup

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Eric Ries' presentation on lean startups. From Steve Blank's Customer Development course at Berkeley. Learn more and hear the audio at http://bit.ly/3qsvJ.

Eric Ries' presentation on lean startups. From Steve Blank's Customer Development course at Berkeley. Learn more and hear the audio at http://bit.ly/3qsvJ.

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  • I liked the IMVU example. I've learnt something new today. Thanks
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  • good stuff
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  • Great presentation!

    I'm really interested in anyone's views on applying the methodology in a (non technical) corporate environment? There's little coverage of this by Ries or others so I've set out some thoughts in a short article, but very interested in others opinions and experiences: http://www.businessbigbrother.com/2012/02/lean-startup-for-corporates.html
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  • William, thank you for your comments and the reference to the SWIR canvas. My question who will justify the the strengths and weaknesses. I think there is only one: the probalbe customer. The VC's need evidence from the number of subsriptions from prototype buyers.
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  • When launching a lean startup, I recommend people check out the SWIR (Startup Weakness Identification and Resolution) Canvas and try to work their way through it! The SWIR Canvas can be found here: http://bit.ly/je9Hiv.
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  • 1. The Lean Startup Low Burn by Design not Crisis Steve Blank and Eric Ries
  • 2. Founding IMVU Customer Discovery and Validation ! – Founded company in April 2004 – Sat in Steve Blank’s B-school class Fall of 2004 quot; Shipped in 6 months quot; Charged from Day 1 quot; No press releases
  • 3. The Economy Before • Cash was readily available • Follow on financing was readily available After • Debt markets are tight • IPO & M&A window closed • VC!s deep pessimism Venture fund returns have been on decline for a decade - no end in sight
  • 4. State of Startups • High burn rate • Swing for the fences • Full management teams • Assume customer is known • Assume features are known • Assumes growth is by execution Traditional startups are fighting yesterday’s war
  • 5. Top Gun dogfight scene
  • 6. Warfare Changes Forever
  • 7. Boyd: Winning is about Agility The OODA Loop • Observe • Orient • Decide • Act
  • 8. Boyd Redefines the Rules to Win • Agility requires a continuous cycle of interactions with the environment • But you can’t do it from a desk
  • 9. Winners are Those Who Can Move Faster Than Their Competitors • Winning requires constant assessment of change and ways to mitigate risk • Iterating faster than competitors yields substantial advantage
  • 10. Facing Reality at Today’s Startup There is no 2nd Place • Uncertain environment • Rapid, unanticipated changes that lead to disorientation • Constant threats to any initiative • Burn rate (time, fuel, bullets, dollars) limits window of opportunity
  • 11. Using OODA to Create “Lean Startups” And Changing the Startup Rules Customer Development Agile Product Development
  • 12. Lean Startups Building a New Wave of Companies in Silicon Valley • Continuous customer Customer interaction Development • Revenue goals from day one • No scaling until revenue • Assumes customer and features are unknowns Agile • Low Burn by Design - Not Product Crisis Development
  • 13. IMVU
  • 14. Founding IMVU • History: - Company founded in April 2004 - Founders audit Steve Blank's B-school class Fall of 2004 • Tactics: - Shipped in 6 months - Charged from Day 1 - No press releases - Ship 20 times a day • Results: - Continuous iteration with customers - 2007 revenues of $10MM • Here's what it looked like to their first venture investors
  • 15. Customer Discovery & Validation Q4 2004 Product: • 9,000 $8,000 – 3D IM add-on for hanging out 8,000 $7,000 online with friends 7,000 $6,000 • Piggy back on existing buddy 6,000 lists and IM programs $5,000 Our customers told us: • 5,000 $4,000 – Avatar customization is the key 4,000 $3,000 appeal. 3,000 – “Add-on” concept is confusing. $2,000 2,000 They actually want a separate $1,000 1,000 buddy list. 0 $0 So we: • Feb-05 Dec-04 Mar-05 Jan-05 Nov-04 May-05 Aug-05 Apr-05 Jul-05 Jun-05 – Ditched the IM add-on idea
  • 16. Customer Discovery & Validation Q1 and Q2 2005 Product: • 9,000 $8,000 3D IM service for hanging out with – 8,000 $7,000 friends and meeting people 7,000 Introduced Chat Now feature (instant • $6,000 matching)! 6,000 Our customers told us: • $5,000 5,000 Meeting new friends is as important – $4,000 as talking with existing friends 4,000 (50/50)! $3,000 3,000 Not enough people on IMVU – $2,000 Retention is a problem – 2,000 So we: • $1,000 1,000 Scaled up our advertising budget (to – 0 $0 $40/day)! Feb-05 Dec-04 Mar-05 Jan-05 Nov-04 May-05 Aug-05 Apr-05 Jul-05 Jun-05 Learned about retention from market – leaders (Cyworld, Myspace)!
  • 17. Customer Discovery & Validation Q3 2005 Product: • 9,000 $8,000 3D IM service plus avatar home pages – Introduced avatar home pages, plus • 8,000 $7,000 messages, gifts, picture galleries blogs 7,000 Our customers are telling us: • $6,000 6,000 Avatar home pages are highly addictive – $5,000 2D and 3D complement each other – 5,000 $4,000 Messages in home pages and realtime – 4,000 interaction complement each other $3,000 3,000 Want more than two avatars per – $2,000 window: parties and chat rooms 2,000 Fix the bugs; polish – $1,000 1,000 0 $0 Feb-05 Dec-04 Mar-05 Jan-05 Nov-04 May-05 Aug-05 Apr-05 Jul-05 Jun-05
  • 18. Lean Startup Principles Extraordinary Value at Low cost in Little Time • Leverages: Customer - Technology commoditization Development - Agile management practices - Customer Development • Designed to test hypothesis and answer the unknowns Agile Product Development
  • 19. The Lean Startup Agile Product Development • Continuous cycle of Product Development - Product release cycle in hours not years - Tightly coupled with customer development - Minimum feature sets, Agile maximum customer coverage Product Development
  • 20. What has changed? Technology Lean Startups Leverage Commoditized Technology Licensed Software/ Open Source/ Proprietary Hardware Commodity Technology
  • 21. Product Development a la Microsoft Unit of progress: Advance to Next Stage Waterfall Problem: known Solution: known
  • 22. Product Development at Typical Venture Startup Assumes Customers and Markets are Understood Agile (XP)! “Product Owner” or in-house customer Solution: unknown Problem: known
  • 23. Product Development at Lean Startup Assumes Customers and Markets are Unknown Customer Development Engineering Customer Scale Customer Customer Discovery Company Validation Creation Data, feedback, insights Problem: unknown Solution: unknown Hypotheses, experiments, insights
  • 24. The Lean Startup Customer Development • Continuous cycle of customer interaction Customer - Rapid hypothesis testing about Development market, pricing, customers, … - Extreme low cost, low burn, tight focus - Measurable gates for investors
  • 25. The Lean Startup Customer Development Parallels Agile Development Agile Development Concept / Continuous Agile Continuous Business Plan Test Development Ship Customer Development Customer Company Customer Customer Discovery Building Validation Creation
  • 26. Customer Development Turns Market Risk/Product Fit Hypothesis into Facts Customer Company Customer Customer Discovery Building Validation Creation • Discovery - Test hypotheses I.e. problem and product concept • Validation - Build a repeatable and scalable sales process • Creation - Create end-user demand and fill the sales pipeline • Building - Scale via relentless execution
  • 27. Lean Startup Advantages Customer Development • Builds low-burn companies by design - Low cost market risk testing Agile • Organized around learning and Product Development discovery • Right model for current conditions The next wave of capital efficient startups