Lean Startup 301

Lean Startup 301
Welcome to Lean Startup 301 Aubrey Smith November 16, 2015 Sponsored by:
Agenda 1. Who is in the room? 2. How will this be valuable? 3. What will we cover? 4. How to participate? 5. What should I do next?
Who is in the room? • Founders • 1st Time Entrepreneurs • Serial Entrepreneurs • Intrapraneurs • Designers • Developers • Newbies • Book Readers
How will this be valuable? This Session Is • Practical • Clear • Direct • Simple • Introductory • Wisdom sharing • Hands-on This Session Is Not • Book review • Brainstorming session • Full of jargon
How will this be valuable? Addressing the Main Questions • What is it? • Why does it work? • How does it work? • Why does it matter? • How can I get started? • How can I apply this to my company?
What will we cover? What we will cover today • Deep dive into MVPs, experiments • Discussion of Advanced Topics • Live Case Studies • Exercise: Design an Experiment Innovation Accounting Governance Application in the Enterprise Regulated Markets
How to participate? Experiment Exercise Live Case Studies • Listen • Share • Please, ask questions! • Need Volunteers • Group Participation • Sharing 1 2
What is the Lean Startup? Key Areas to Discuss History Basic Terminology / Definitions Application / Applicability Advanced Topics
What is the Lean Startup? History • Robert Deming • Toyota Lean Manufacturing • Agile Software Development • Lean Startup • Steve Blank • Eric Ries • Alexander Osterwalder • Lean Startup Community
What is the Lean Startup? A method to systematically address uncertainty through rapid iteration and market learning.
Core Principles Entrepreneurs are everywhere Entrepreneurship is management Validated Learning Build-Measure-Learn Loop Innovation Accounting What is the Lean Startup?
Common Purpose We share a vision for the kind of company we want to create: A company that continuously creates new sources of growth.
The Lean Startup is… Everywhere.
Who’s accountable? • Jack Stack: The Great Game of Business Build a culture of ownership • Key Parallels Lean Startup capability and accountability should be the job of everyone at the company Governance will vary Customer learning trumps internal feedback loops and decisions about products/features
Case 1: Lean Startup at GE? What is FastWorks? - Organizational change - Teams to Growth Boards - 500 projects, 500 coaches What are GE Beliefs? - Customers Determine our Success - Stay Lean to Go Fast - Learn and Adapt to Win - Empower and Inspire Each other - Deliver Results in an Uncertain World
Key Areas to Discuss History Basic Terminology / Definitions Application / Applicability Advanced Topics What is the Lean Startup?
What is The Lean Startup? Terminology / Definitions • Entrepreneurs • Startups • Uncertainty • Vision • Assumptions • Hypotheses • Minimum Viable Product • Validated Learning • Pivots
Your Vision What business do you want to create? And, why? What will you not pursue? And, why? 1 2
Now, get the facts... • Biggest mistake you can make is to not test the underlying assumptions of your business plan • Leap of Faith Assumptions: If you prove your Leap of Faith assumptions false, your business plan falls apart
Isolating critical assumptions What is the riskiest element of your business plan? Impact Time horizon OR Will kill Won’t kill
Customer Problem Solution Business Model Scale / Growth Types of Assumptions
• “If then” statements that help design tests for an assumption Paypal - If people can easily transact across multiple devices, they will be more frequent users of the service • Clarifies your current understanding of what uncertainty you seek to resolve Paypal - Specific action? Timing? Value/amount Draft your Hypothesis
Minimum Viable Product • Experiment that helps you validate (or invalidate) hypotheses about the value or growth potential for a new product • An MVP helps you answer a specific question about one or a few of your critical assumptions
Case 2: Testing @ AirBnb Test: • Photography Concierge MVP • 20 Photographers in the field Critical Hypothesis: “Professional photographed listings get 2-3 times more business (and host don’t turn down free professional photography.” (SXSX, Airbnb)
Case 2: Testing @ AirBnb
MVP: Expert Tip The MVP begins the process of validated learning… • This is an experiment, not a product • No such thing as “an MVP” • The smallest possible product we can imagine to achieve maximum learning about our hypothesis
Build, Measure, Learn Loop
Minimum Viable Product Translate your critical assumptions into an experiment: Validated Learning 1. Isolate critical assumptions for testing 2. Draft your hypothesis to be tested 3. Build an experiment 4. Measure the results 5. Collect the data and learning in a systematic 1. What artifact will you use? 2. How will you use/test it? 3. Who will you test with (segments)
Minimum Viable Product Translate your critical assumptions into an experiment: Validated Learning 1. Isolate critical assumptions for testing 2. Draft your hypothesis to be tested 3. Build an experiment 4. Measure the results 5. Collect the data and learning in a systematic 1. What artifact will you use? 2. How will you use/test it? 3. Who will you test with (segments)
Fears • Change in direction without a change in vision • OR • Persevere: A team’s decision to test the next most important hypothesis Pivot
Innovation Accounting • The problem with Vanity Metrics • Quantitative vs. Qualitative Data • Leading vs. Lagging Indicators
Minimum Viable Product Translate your critical assumptions into an experiment: Validated Learning 1. Isolate critical assumptions for testing 2. Draft your hypothesis to be tested 3. Build an experiment 4. Measure the results 5. Collect the data and learning in a systematic 1. Who will you test with (segments) 2. What artifact will you use? 3. How will you use/test it?
Culture of Testing 1. Experiment design is important 2. But, recording and evaluating the learning is more important
1. Experiment design is important 2. But, recording and evaluating the learning is more important • Establish an organization that learns together • Only step up to the sophistication of the experiment and innovation accounting when you are ready to do so as a team • Team learning is the most important outcome Culture of Testing
Discipline of Testing 1. Focus the learning 2. Establish the baseline 3. Track MVPs on a dashboard 4. Employ the right cadence of testing
1. Focus the learning 2. Establish the baseline 3. Track MVPs on a dashboard 4. Employ the right cadence of testing • Only as sophisticated as your organization is ready to handle • Remember: A well-designed experiment will inform what your next experiment will be • Parallel path testing should only be employed if you have available resources Discipline of Testing
Minimum Viable Product Translate your critical assumptions into an experiment: Validated Learning 1. Isolate critical assumptions for testing 2. Draft your hypothesis to be tested 3. Build an experiment 4. Measure the results 5. Collect the data and learning in a systematic 1. Who will you test with (segments) 2. What artifact will you use? 3. How will you use/test it?
• Customers do not always do what they say they will • Avoid “Voice of Customer” • Measure conversion on the path to purchase (ex. Funnel metrics) • “Purchase intent” may require a ‘new’ rung in the funnel Exchange of Value
Identify “Early Adopters” • What customers have this problem/need? • Who uses a ‘workaround’ today? • Who values this solution for a unique reason? • How would we classify segments? • Innovations may cut across traditional segmentation • Dig for segmentation variables (time, cost) A. Build – What segments?
A. Build – What artifact? Begin with a low fidelity artifact • Paper brochure • PowerPoint • Landing page • Website • Clickable Mobile App • 3d CAD Rendering • Video
A. Build – What test? Pick a test • Interviews (Face-to-face, phone, video) • Digital Campaign • Google Adwords • U/X in-person Test • Email • Live Demonstration
Test Problem/Solution Fit • Bring bare bones “artifact” • Set Context • Focus on hypotheses to be tested • Begin with direct statements (“We believe”) • Allow customers to hint/point you to what pain / need they do have • Seek an “exchange of value” c The Interview
A. Build Advanced Concepts • Concierge MVP (“Man behind the curtain”) • A/B Split Test
A. Build Advanced Concepts • Concierge MVP (“Man behind the curtain”) • A/B Split Test • Helps you obtain statistically significant information about your potential offering • Allows you to see what customers do with your product / service / site • Gives you information to make decisions – such as, which features to cut / build
Experiment Example [software]
❶ MVP #1 Display non-working prototype at a showroom ❷ MVP #2 Build full-scale driving prototype to verify technology Avg. down- payment Pre-order rate Prototype • Driving prototype (MVP2) improved which indicates strategy effectiveness • MVP #2 validated technical feasibility assumptions Learning ↗ ↗ • Purchase intent was validated by innovation metrics: Pre-order rate & avg. down payment Case 3: Lit Motors Test
Exercise – Part I Please see White Board
Live Case Ursula Shekufendeh AppFolio
Live Case: AppFolio About AppFolio • Web-based real estate property management software • Property managers can market & manage property portfolio Testable Hypothesis: “If we build a tenant screening service that landlords can subscribe to, then we can sell a service to 80% of RentApp users (and, quickly reach profitability).”
Exercise – Part II Please see White Board
B. Measure Results • One metric that matters, OR • Simple Dashboard / Excel Spreadsheets, AND • “Exchange of Value” • Customers say and do different things • Avoid “Voice of Customer” • Measure conversion on the path to purchase (ex. Funnel metrics) • Create “proxy” in funnel, if needed
Sample Dashboard ❷ ✓ ✓ ✗ → ❸
• Pivot vs. Persevere • Continuous Deployment Tips: • Pivoting is a team sport • Ground decisions entirely in the learning • Learning is cumulative • Good experiments should teach you what experiment to do next C. Commit to Learning
Innovation Accounting • Actionable • Must demonstrate cause and effect • Removes bias to report / overvalue “numbers that go up” • Accessible • Simple, easy for the team to understand • Should not require retraining team to read reports • Auditable • Credible data reduces the ability to place blame
• The growth operating system requires new management principles • No “one size fits all” Lean Startup Process • Start small to get big • Small, honest success cases will bring leaders into the fold • Sophistication should be aligned with team capability and resources Lean Startup in Enterprise
Live Case Chris Brown Vodafone Global Enterprise
Questions? Aubrey Smith Sparked Advisory (202) 907-3993 Heather McGough Co-Founder, Lean Startup Company (415) 830-2479 Heather@LeanStartup.co
Appendix
• Vision -> Strategy -> Team • Strategy is leadership-led: Governance PortfolioTeam Company
Startup approach opens market opportunities Important Themes: • Dialogue is critical • Layering regulation improves impact Regulated Markets
Prioritize Assumptions • Focuses you, your team • Draws a line in the sand • Introduces accountability • Saves time • Introduces culture of “learning”
Eric’s Point of View

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