Why Lean Startup Practices Work and How to Scale Them

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Silicon Flatirons is pleased to host Rally Software Chief Technology Officer, Zach Nies, for a Crash Course about some of the surprising science behind building successful startups. Even though building a startup is hard work with high failure risk, entrepreneurs Steve Blank and Eric Ries have popularized practices that can increase the odds of success. Following the Customer Development or Lean Startup practices will show you what to do. This talk will give you an understanding of why these techniques work, which will allow you to better apply them to your startup or scale them into your enterprise. The event will focus on high growth business based on the deep experience of a CTO from one of the Front Range's leading companies. Entrepreneurs are by nature execution-oriented and you will walk away from the talk with concrete, actionable ideas that will help you make better decisions tomorrow. The subject matter should be relevant to both entrepreneurs creating new companies and entrepreneurs reinventing existing enterprises.

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Why Lean Startup Practices Work and How to Scale Them

  1. 1. Why Lean Startup PracticesWork & How to Scale Them
  2. 2. Zach Nies
  3. 3. @zachnies
  4. 4. First, something to think about
  5. 5. h"p://www.flickr.com/photos/oregondot/4132135156  
  6. 6. Entrepreneurs have achance to create the world they want
  7. 7. There is proven science that canimprove your odds of success
  8. 8. What world do you want to create?
  9. 9. What does that feel like?
  10. 10. Success allows you tocreate the world you want and live your dreams
  11. 11. Why am I here tonight?
  12. 12. Success, but theyweren’t living any dream
  13. 13. Discover & promotethe tools that enable success while living the dream
  14. 14. How I got here
  15. 15. Font Samplerhttp://media.kelbymediagroup.com/layersmagazine/images/columns/artoftype/may06/glyph-set.jpg http://en.wikipedia.org/wiki/File:Caslon-schriftmusterblatt.jpeg
  16. 16. 2,500,000customers
  17. 17. Vision: Civil rights and equality for all
  18. 18. Vision: Reinvent collaboration
  19. 19. Amazing team,exactly the culture Idreamed of creating
  20. 20. Great product
  21. 21. One problem:bad business
  22. 22. Why am I doing this?
  23. 23. Live inside the Internet
  24. 24. Vision: Solve the world’s hardest problems as citizen engineers
  25. 25. 14 minutes in pairs,7 minutes interviews of each person:
  26. 26. You have created a computer game of entrepreneurship. You believe you can combine this game with some educational material and profiles of successful entrepreneurs to make an excellent teaching tool for entrepreneurship. Your inspiration for the product came from several reportsin the newspapers and magazines about increasing demand for entrepreneurship education.
  27. 27. What information would you seekabout potential customers andcompetitors?List questions you would wantanswered.How will you find out thisinformation - what kind of marketresearch would you do?
  28. 28. h"p://www.flickr.com/photos/oregondot/4132135156  
  29. 29. Who would first do market research to determine how toposition the product, calculate addressable market size, and expected financial returns?
  30. 30. Who is focused on identifying possible competitors?
  31. 31. Who would first figure out yourpassion for the idea, what you know about the market, andwho you know? Then talk to a few people to see if you can sell a prototype?
  32. 32. Who is focused on identifying possible partners?
  33. 33. Remember youranswers, we will come back to this later.
  34. 34. Books that informed this talk
  35. 35. People who informed this talk David Max Cynthia KentSnowden Boisot Kurtz BeckFrank H. Mark Eric Knight Newman Ries Steve Blank
  36. 36. Why care about theunderling principles?Aren’t there proven practices?
  37. 37. Following Being the a Recipe Chef VS
  38. 38. We have recipes
  39. 39. For complexproblems, the recipes won’t always work
  40. 40. h"p://www.flickr.com/photos/usarmyafrica/4456180555  
  41. 41. What’suniqueabout hardproblems? h"p://www.flickr.com/photos/horiavarlan/4298997922/  
  42. 42. What you don’tknow is unknown
  43. 43. What you predict,doesn’t come true
  44. 44. What workedyesterday, doesn’t seem to be working today
  45. 45. How do we make sense ofenvironments like this?
  46. 46. h"p://www.flickr.com/photos/virtualeyesee/6107062655  
  47. 47. Some background(and a little math)
  48. 48. Gaussian distributionsh"p://arxiv.org/abs/cond-­‐mat/0412004  
  49. 49. Ratio of smallestto largest values?
  50. 50. 4.8
  51. 51. Power laws and Pareto distributionsh"p://arxiv.org/abs/cond-­‐mat/0412004  
  52. 52. Ratio of smallestto largest values?
  53. 53. 150,000
  54. 54. Other Pareto distributionsh"p://arxiv.org/abs/cond-­‐mat/0412004  
  55. 55. High impact, lowprobability events
  56. 56. An example
  57. 57. h"p://en.wikipedia.org/wiki/File:Sultan_Kosen_Tallest_Man_in_the_World.jpg  
  58. 58. h"p://www.flickr.com/photos/jurvetson/4368494308  
  59. 59. Business involves many Pareto distributions
  60. 60. But wait, there’s more…
  61. 61. 4 Dots
  62. 62. 6 Connections
  63. 63. 64 Patterns
  64. 64. 10 Dots
  65. 65. 45 Connections
  66. 66. ? Patterns
  67. 67. Patterns35,184,372,088,832
  68. 68. In business a fewpatterns are more valuable than all the rest
  69. 69. but which ones?
  70. 70. h"p://www.flickr.com/photos/virtualeyesee/6107062655  
  71. 71. How do we make sense of this?
  72. 72. Plausible ProbableUnordered Ordered
  73. 73. Plausible ProbableUnordered Ordered
  74. 74. Plausible ProbableChaotic Complex Complicated SimpleUnordered Ordered
  75. 75. An examplePlausible Probable Chaotic Complex Complicated SimpleUnorderedh"p://www.flickr.com/photos/ksionic/383240468   Ordered
  76. 76. Plausible Probable Complex ComplicatedChaotic SimpleUnordered Ordered
  77. 77. Plausible Probable Complex Complicated Chaotic SimpleUnordered Ordered
  78. 78. Plausible Probable Complex Complicated Chaotic SimpleUnordered Ordered
  79. 79. Plausible Probable Complex Complicated Cause & Effect is obvious to all and is repeatable Chaotic SimpleUnordered Ordered
  80. 80. Plausible Probable Complex Complicated Cause & Effect is not obvious and requires analysis or expertise Chaotic SimpleUnordered Ordered
  81. 81. Plausible Probable Complex Complicated Cause & Effect is only coherent in retrospect, and not repeatable Chaotic SimpleUnordered Ordered
  82. 82. Plausible Probable Complex Complicated Cause & Effect not perceivable Chaotic SimpleUnordered Ordered
  83. 83. The Cynefin Framework Complex Complicated Cause & Effect is only Cause & Effect is not coherent in obvious and requires retrospect, and not analysis or expertise repeatable Disorder Cause & Effect is Cause & Effect not obvious to all and is perceivable repeatable Chaotic SimpleUnordered Ordered
  84. 84. How about an example?
  85. 85. Music Industry in 2000 - Napster Complex Complicated Independent Managing a large tour musicians self publishing online Disorder Managing a NIN tour Major label online distribution CD distribution Chaotic SimpleUnordered Ordered
  86. 86. What does thisimply about taking action?
  87. 87. Probe, Sense, Respond Sense, Analyze, RespondComplex Complicated DisorderChaotic Simple Act, Sense, Respond Sense, Categorize, Respond
  88. 88. Probe, Sense, Respond Sense, Analyze, RespondComplex Complicated Disorder Standard procedures Process re-engineeringChaotic Simple Act, Sense, Respond Sense, Categorize, Respond
  89. 89. Probe, Sense, Respond Sense, Analyze, RespondComplex Complicated Analysis Planning Many expert opinions DisorderChaotic Simple Act, Sense, Respond Sense, Categorize, Respond
  90. 90. Probe, Sense, Respond Sense, Analyze, RespondComplex Complicated Frequent experiments Pattern matching Exploring hunches DisorderChaotic Simple Act, Sense, Respond Sense, Categorize, Respond
  91. 91. Probe, Sense, Respond Sense, Analyze, RespondComplex Complicated Disorder Crisis management Innovation managementChaotic Simple Act, Sense, Respond Sense, Categorize, Respond
  92. 92. Probe, Sense, Respond Sense, Analyze, RespondComplex Complicated 15 - 30 < 150 Disorder 5 > 150Chaotic Simple Act, Sense, Respond Sense, Categorize, Respond
  93. 93. An example
  94. 94. EntrepreneurshipComplex Complicated Disorder  Chaotic Simple
  95. 95. Complex Domain Probe, Sense, Respond Cause & Effect is only Frequent experiments apparent in Pattern matching retrospect, and not Exploring hunches repeatable 15 – 30 people
  96. 96. What is ourboundary?
  97. 97. Vision & Empathy  
  98. 98. h"p://www.flickr.com/photos/virtualeyesee/6107062655  
  99. 99. The journey starts with vision and empathy
  100. 100. “He knows the ‘why’ for his existence, will be able to bear almost any ‘how.’ Viktor Frankl
  101. 101. In pairs for 2 minutes:Think about the world you want to create. Describe it. Also,what does it feel like?
  102. 102. Manage theemergence of beneficial coherence
  103. 103. Coevolution
  104. 104. Probe, Sense, Respond
  105. 105. Probe, Sense, RespondA $40 example
  106. 106. Successful MBASerial StudentsEntrepreneurs
  107. 107. You have created a computer game of entrepreneurship. You believe you can combine this game with some educational material and profiles of successful entrepreneurs to make an excellent teaching tool for entrepreneurship. Your inspiration for the product came from several reportsin the newspapers and magazines about increasing demand for entrepreneurship education.
  108. 108. 1.  Who could be your potential customers for this product?2.  Who could be your potential competitors for this product?3.  What information would you seek about potential customers and competitors - list questions you would want answered.4.  How will you find out this information - what kind of market research would you do?5.  What do you think are the growth possibilities for this company?
  109. 109. Probe, Sense, Respond
  110. 110. Validated LearningEric Ries
  111. 111. Design Thinking
  112. 112. h"p://www.flickr.com/photos/virtualeyesee/6107062655  
  113. 113. How do youmanage complex systems?
  114. 114. “The only valid model of a complex system is the system itself. Murray Gell-Mann
  115. 115. Finely Grained Objects
  116. 116. Small teams 5 - 30
  117. 117. Small experiments
  118. 118. Meaning emerges through interaction
  119. 119. Get out of the building!
  120. 120. Learn throughexperiments that are safe to run
  121. 121. Hard forstartups
  122. 122. Hard forcompanies
  123. 123. How do you make $600 Million in 2010?
  124. 124. Hundreds of A/Bexperiments at all times
  125. 125. Maximize learning – Don Reinertsenhttp://jchyip.blogspot.com/2010/05/lean-software-and-systems-conference.html
  126. 126. How small shouldexperiments be?
  127. 127. Chip flip game
  128. 128. The power ofsmall batches
  129. 129. The power of Agile
  130. 130. Waterfall“Managing the Development of Large Software Systems”Dr. Winston W. Royce – 1970
  131. 131. Waterfall All Features in Release“Managing the Development of Large Software Systems”
  132. 132. Waterfall All Features in Release“Managing the Development of Large Software Systems”
  133. 133. Waterfall All Features in Release“Managing the Development of Large Software Systems”
  134. 134. Iterative Feedback
  135. 135. Scrum Framework Backlog Standup Grooming Iteration Demo / Review Planning & Retrospective Iteration Product Iteration Product Backlog Backlog Increment
  136. 136. Focus on Stories Stor y Stor y Stor y 1 2 3 All Storiesin Iteration All Stories in Iteration All Stories in Iteration
  137. 137. Flow of valueVision Design In Done Deployed What was Development learned?
  138. 138. h"p://www.flickr.com/photos/virtualeyesee/6107062655  
  139. 139. Distributed Cognition
  140. 140. Wise Crowd
  141. 141. Wise CrowdDiversityIndependenceDecentralizationAggregation
  142. 142. Wise CrowdFrancis Galton
  143. 143. An experimentCount the passes the white team makes
  144. 144. An experiment How many passes?
  145. 145. An experimentWhat else did you notice?
  146. 146. SelectiveAttention Bias
  147. 147. Change Blindness
  148. 148. Disintermediation
  149. 149. Help everyone detect weak signals
  150. 150. Share raw datafrom experiments with everyone
  151. 151. Democratizeinformation
  152. 152. h"p://www.flickr.com/photos/virtualeyesee/6107062655  
  153. 153. A case study
  154. 154. Jerome Breche, CEO
  155. 155. Scaling these concepts
  156. 156. What is Lean?
  157. 157. h"p://reallycoolthings.net/2010/06/10/lean-­‐and-­‐agile/  
  158. 158. Lean is … Organizational Learning System OperatingPeople System System Frode  L.  Odegard,  Lean  SoTware  InsVtute  
  159. 159. Making sense at scale
  160. 160. At a startupComplex Complicated Disorder  Chaotic Simple Idea/Market Fit – Code Base – People/Org
  161. 161. New product inside big companyComplex Complicated   DisorderChaotic Simple Idea/Market Fit – Code Base – People/Org
  162. 162. Applying thiswith your team
  163. 163. Does everyone know why?h"p://www.flickr.com/photos/lejoe/2800660239  
  164. 164. No death marchesh"p://www.flickr.com/photos/west_point/5566824566   h"p://www.flickr.com/photos/elcapitan/2387917709  
  165. 165. Cut debt days h"p://www.flickr.com/photos/consumerist/4406234952  
  166. 166. Learn from setbacks h"p://www.flickr.com/photos/cakesquared/3819067260  
  167. 167. Small experimentsh"p://www.flickr.com/photos/denisecarbonell/5593039053  
  168. 168. Retrospectives What S What has What HYPOTHESE HELPED HIND has could we ERED us?! us?! draw about how we move forward?!
  169. 169. Publicize what you learnh"p://www.flickr.com/photos/lorenkerns/4114441322  
  170. 170. Every situation isn’t the same
  171. 171. h"p://www.flickr.com/photos/virtualeyesee/6107062655  
  172. 172. Entrepreneurs have achance to create the world they want
  173. 173. There is proven science that canimprove your odds of success
  174. 174. Pick 2 concepts from tonight
  175. 175. Take them back to your team
  176. 176. Create the world you want
  177. 177. h"p://www.flickr.com/photos/fla"op341/224597838  

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