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Lean Startup & Corporate Innovation Strategies - April 2015

Intro to Lean Startup and insight into the barriers and strategies for corporate innovation. Corporate Innovation inspired by Trevor Owens, CEO of Lean Startup Machine.

Lean Startup & Corporate Innovation Strategies - April 2015

  1. 1. Lean Startup & Corporate Innovation Kevin Shutta Lean Startup Machine Organizer & Coach 1
  2. 2. Who is this guy? 2 Organize three-day Lean Startup workshops in Washington D.C. and the SF Bay Area Experience in several startups Often invited to speak on Lean Startup for accelerators
  3. 3. Who are you? Who has read the lean startup? Who has gone to a startup competition? Who has experience in a startup? Who has experience creating disruptive new products? 3
  4. 4. Agenda What is Lean Startup and how you can use it in corporate innovation Rough outline: • Lean Startup Overview • Corporate Innovation • Questions 4
  5. 5. 98% of Startups FAIL 5 We believe most fail because never get customers to pay for their offering and/or build something nobody wants.
  6. 6. My Experience without Lean 6
  7. 7. College Hobby I created over 2,000 videos teaching myself how to speak in public. Practice generally included 10-60 second videos on skills that someone could practice on his/her own: • Pronunciation • Gestures • Stance • Confidence • Etc. 7
  8. 8. Startup Idea: Share this with the world through online network for public speaking 8
  9. 9. Washington, D.C. Summer 2013 9 Top Competitor Solution Resolve fear through skill-building using low cost, low effort, high feedback training online through a guided community and content.
  10. 10. Successes • 1st Place at Startup competition • Designed a few courses of content • Team of 4-7 working on this for 5 months • Investors LOVED the idea, they just wanted to see the PRODUCT 10
  11. 11. Customers (Sales Pitch) 50 people in the streets of Washington, D.C. • 48 thought the idea would be good for other people, but not for themselves • “This would be good for introverts, but not me” • “I take beta blockers before I speak, so I’m fine.” • “I’m a teacher. I got used to the stress a long time ago, so I don’t look for solutions anymore.” • 1 Person liked it because he wanted to recruit me for network marketing • 1 Person ACTUALLY wanted to give it a try 11
  12. 12. Customers (Product Demo) Demo in Asperger’s group • 100% (about 10 of 10) saw their speaking skills improve after their combined content and video course • 0% wanted continued lessons 12
  13. 13. Online platform for Public Speaking Customers Money Problem Offering Solves Problem for customer Captures Money Scalable Money to Build Technology to Build People to Build Willing to Use $$$ to solve Problem
  14. 14. Wall of Shame 14
  15. 15. Lesson Learned: forcing my idea on the world doesn’t work even when everyone thinks it’s a great idea and is ready to be built 15
  16. 16. Being wrong and failing is the norm in entrepreneurship. So what can we do? 16
  17. 17. What is Lean Startup? 17
  18. 18. Startup 18 A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. - Eric Ries
  19. 19. Two Types of Innovation 19
  20. 20. Sustaining Innovation – Improving Existing Products • Product improvements • Cost cutting • Applying best practices 20 Companies are naturally great at this. Startups generally do not address sustaining innovation. I will not talk about this today.
  21. 21. Disruptive Innovation Definition: Uncovering new prodcuts and creating new lines that grow massive profits and destroy existing markets Examples: • Music disks to cassettes to CDs to digital • Letters to emails and texting Drastically changed businesses and market players, lost jobs. 21 Lean Startup addresses how this can be done. Companies are not good at doing this
  22. 22. Lean Startup Lean Startup is about finding the cheapest, fastest way to Reduce the risk of your startup not succeeding, And rapidly iterating until you find the business that succeeds 22
  23. 23. Your Startup idea is a set of [untested] Questions and Hypotheses “I believe [Customer] has a problem with [Problem]” “I believe [Solution] will solve [Problem] for [Customer]” “I believe [Customer] will pay for [Solution]” “I believe [Customer] will repeat buy the [Solution] or recommend to a friend” 23
  24. 24. So… identify and reduce your risks of failing by testing, validating, and getting to the right model 24
  25. 25. Experiments Provide Answers Hypothesis: “I believe [customer] has a problem with [problem]” Experiment: Ask the customers. See if they exhibit the behavior of someone with that problem (discussed later) 25
  26. 26. 26 Build Experiment MeasureLearn Create new experiments to validate / invalidate business models until you fine one that works
  27. 27. Some Types of Experiments 27
  28. 28. Types of Experiments 28 Experiment Possible Tools Question it Answers (Validation/Invalidation) Learning Available Problem Interview Open-ended questions Does the customer have the problem I think they have? What problems do they have? • Customer pain points (if any) • Alternative solutions • Customer Segments • Potential Use Cases (stories) Solution Interview Prototype Screenshots Mock-ups Could the solution work? • Identify early adopters • Features required / not required in minimum viable product
  29. 29. Types of Experiments 29 Experiment Possible Tools Question it Answers (Validation/Invalidation) Learning Available Pitch MVP Scripts Sales materials (e.g. screenshots) Letter of Intent Landing Page Can we drive traffic? Can we get signups? Will people sacrifice time / money / emails / other currency to solve their pain (with our solution)? • Sales & marketing tactics • Customer objections • Pricing information Concierge MVP A person (you) Simple technology (sometimes) Does the manual version of my product solve the customer need? Do they return or refer others? • Product optimization (features needed and not needed) • Sales funnel optimization • Potential lifetime customer value and sales model
  30. 30. Find your Customers GET OUT OF THE BUILDING. Find customers who have the problem you think they have. 30
  31. 31. Find early adopters that have a problem 31 • Aware that they have the problem • Previously searched for a solution • Tried to solve it themselves • Have money to pay for solution Learn about them! Help them solve the problems they do have.
  32. 32. Once you have customer and problem, SELL IT! Get emails, money, etc. 33
  33. 33. Pitch MVP Purpose: see if your customer with the problem will put something on the line to solve that problem Script: • Intro and qualify them • Do you have a problem with [Problem]? • Present a solution (doesn’t have to work!) • Ask for the currency (attention, money, email address, etc.) 34
  34. 34. 35
  35. 35. If people will not give up their email address for a promise to solve their problem, they will not pay money for a product that promises that it will. 36
  36. 36. Concierge Purpose: see if the solution solves the pain Experiment: manually do what your service is intended to do 38
  37. 37. Concierge Sample 39 Grace Ng Lean Startup Machine @uxceo Question: Will connecting people with websites and UX Designers for $$$ create a mutually beneficial experience? 1. Let customers fill out an online form that sends email to Grace 2. UX Designers fill out form that submits email to Grace 3. Grace manually introduces them in an email Result: the experience was OK and Grace had more to improve See the experiment at
  38. 38. What does Minimum and Viable mean? The minimum feature set that solves the customer’s pain 41
  39. 39. Pivots If you find that your proposed hypothesis failed in the market, the market is telling you something. CHANGE YOUR MODEL (PIVOT) and try the new one. Otherwise, you are beating a dead horse. 42
  40. 40. Starbucks Started as… Selling expresso makers and coffee beans Ended as.. 43
  41. 41. Case Study [Lean] 45
  42. 42. 46
  43. 43. Common Objection: Lean Startup is just for simple consumer software products 48
  44. 44. Lean Startup is about finding and eliminating your risks cheaply and effectively. It’s for everything 49 Sometimes, you need to know if something is technically possible, and the customer aspects are not risks. With lean, you build the riskiest parts first, and you only build one (prototype) for proof of concept. Either way, YOU’RE STILL LEAN
  45. 45. Corporate Lean Innovation 50
  46. 46. Purpose: Maintain & Increase Profits 1. Protect or grow future market share 2. Launch new products in new markets 3. Make returns 51
  47. 47. Why are startups better at disrupting? • Internal barriers • Lack of innovative culture Questions often asked before creating new products • "Are we good at this?" • "How does this fit into our existing business model?" • "Does it suit our brand? • "What sithe impact on our portfolio?" • "Does my boss like this?" 52
  48. 48. Self-Cannibalization 53 Steve Jobs: we need to invest money in new technology. The Apple II will be outdated in a few years Board: We need to pour more than the Apple II rather than side projects. It’s 70% of our sales!
  49. 49. Person Motivations Entrepreneurs • Power and influence • Autonomy • Managing People • Financial Gain • Altruism Employees • Security • Prestige • Financial Gain • Affiliation • Recognition • Lifestyle 54
  50. 50. Lastly There are millions of entrepreneurs and startups trying to eat yours and your competitors’ lunch. Many will get the resources to compete. There is one of you. 55 GOOD LUCK!
  51. 51. What can Companies do about it? 56 Type Definition Potential Upside Company Control Incubation Innovate from within Lower High Acquisition Purchase innovative companies (> 50% stake) High High Investment Invest in innovative companies (< 50% stake High Low
  52. 52. Incubation Grow disruption from within Skunkworks – take best and brightest and assign them to a program 57 Lockheed Martin assigned a team to develop the fast, light X-56A aircraft to undermine other offerings Advantages: accomplish specific goals Disadvantages: often secretive, best with structured innovation
  53. 53. Incubation Grow disruption from within Intrapreneurship – programs to commercialize internal employee ideas 58 Advantages: increase idea pool. Can be followed by accelerator program Disadvantages: Governed by existing lines, employees don’t know how to implement ideas, encouraging sustaining innovation Collected 550 business plans per year from employees 3-month boot camp for finalists to polish ideas Winners were passed to business lines for implementation
  54. 54. Incubation Grow disruption from within Innovation Lab – salaried intrapreneurs research and innovate together 59 Advantage: invent cool stuff Disadvantage: may not have commercialization/implementation knowledge, may not have incentives Xerox invented the mouse and Ethernet, although they were commercialized by others
  55. 55. Incubation Grow disruption from within Techstars model: teams apply with ideas, finalists work on ideas for 3 months, then teams pitch to company and investors at closing. 60 Advantages: incentives (employees keep most of profits), semi- unstructured innovation Disadvantage: corporate chosen ideas, which limits innovative potential Microsoft collected applications & put 11 teams in Techstars for 3 months, purchasing one for $5 million. Others companies have done the same
  56. 56. Acquisition Purchase disruptive companies Advantages: any company can innovate, doesn’t have to be you. Own technology, innovative teams, fastest option to acquire Disadvantages: costly 61 Three of Google’s highest profile acquisitions
  57. 57. Investment Purchase a financial share of disruptive companies 62 Advantages: any company can innovate, doesn’t have to be you. Hedge risks of disruption. Disadvantages: costly. Expect to pay more than Venture Capitalists and Angels for similar shares as they usually bring contacts, expertise, and support, and corporations have a bad reputation for managing startups $850 million in investments in internal venture fund (large example) Invest in companies related to Intel Large returns include MySQL and Citrix
  58. 58. Combination of Strategies Innovation Colony – separate department dedicated to creating new products. Department has budget to incubate, acquire, or invest as appropriate 63 Advantages: corporate control, combination of approaches, budgetary approach, fits in with corporate structure Disadvantages: requires money and many ideas for best results
  59. 59. Innovation Tips 64
  60. 60. To increase disruption, connect with startup world • Learn about startups and investment/acquisition opportunities through your Venture Capitalist and Angel investor friends • Connect with entrepreneurs • Connect with other executives who are doing the same thing you are 65
  61. 61. Use a Different Brand Name Problems with using your brand name or “powered by…” • Increased conversions due to brand recognition (experiment externality) • No worry about putting out a poor product • Risk publicity for unforeseen issues 66
  62. 62. Bring in Entrepreneurs and Innovators to Lead, Manage, and Coach • Your portfolio managers need to know how to manage innovation • Your entrepreneurs and innovators need good practices and knowledge from someone who has done it before • Bureaucrats will not know how to manage or coach innovation teams will 67
  63. 63. Be Cautious with your Leadership Team • Innovation practices need leadership support in both ideas and implementation • If implement 10% time, needs to be: • Applied to product teams • Results tracked • Enforced by you • Enforced and celebrated by your management team If you don’t get support, old corporate habits will take over again. 68
  64. 64. Wrapping Up 69
  65. 65. Sources 70 The Lean Enterprise (main source) by Trevor Owens, CEO of Lean Startup Machine Other content is a mix of my own and from other sources
  66. 66. Lean Startup Machine The hands-on Lean Startup workshop • Learn a repeatable process for finding products that succeed with companies • Hands-on guidance and practice from successful entrepreneurs and leaders in Lean • Three days of hands-on training • In most major cities worldwide 71
  67. 67. Learn More about Lean 72 There are plenty of books out there these days.
  68. 68. Lean Startup Machine does enterprise workshops 73 Go here to learn more: A few companies LSM has worked with:
  69. 69. Questions Connect and Contact Info Kevin Shutta @KevinShutta 74

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Intro to Lean Startup and insight into the barriers and strategies for corporate innovation. Corporate Innovation inspired by Trevor Owens, CEO of Lean Startup Machine.


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