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The Lean Startup Overview


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Overview for Startup Weekend Vancouver 2013

Published in: Business, Technology
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The Lean Startup Overview

  1. 1. The Lean Start UpEvan Huevan@alavetta.comtwitter @evnhu
  2. 2. Why are youhere today
  3. 3. Share withthe personbeside you(that you did not show up with)
  4. 4. MarshmallowTowerChallenge
  5. 5. 18Minutes…In
  6. 6. teams mustbuild theTallestfreestandingstructure.
  7. 7. Out of20 sticks of spaghetti1 yard of tape1 yard of stringAnd 1 marshmallow
  8. 8. The marshmallow needs to be on top!If you have done/seen this before…leave your table and form the “special” team!
  9. 9. Tom Wujec has run this samemarshmallow experimenthundreds of times and foundsome interesting patterns.
  10. 10. Business studentsand lawyersbuilt about half theaverage heightof 20 inches.
  11. 11. Engineers andArchitects did thebest (and so theyshould)!
  12. 12. BUT here is the really interesting thing...
  13. 13. Kindergarten KIDS usually do as wellas architects and engineers!
  14. 14. HUH?
  15. 15. MBAs and lawyers want totheir way to an optimaloutcome and then execute onthe plan.PLAN
  16. 16. Instead of wasting time trying tomake a plan or establish who is incharge, kindergarten kids simplyover and over until they find a modelthat works.EXPERIMENT
  17. 17. On virtuallyevery measureof innovationthey createtaller and moreinterestingstructures.
  18. 18. Under conditions ofambiguity, where outcomesare unknown, most people fallback on a planning mindset.
  19. 19. A planning mindset increasesyour chances of failurebecause you waste timedevising strategiesinstead of trying out ideas.
  20. 20. And incentivesincrease thechances offailure!
  21. 21. What if youengaged in anexperimentationmindset?
  22. 22. discovery skillsdistinguish the most innovativeentrepreneurs from other executives(Dyer, Gregersen and Christensen)Research shows that
  23. 23. Questioningallows innovators to breakout of the status quo andconsider new possibilities.
  24. 24. Through observinginnovators detect small behavioraldetails—in the activities of customers,suppliers, and other companies—thatsuggest new ways of doing things.
  25. 25. Inexperimentingthey relentlessly try on newexperiences and explore the world.
  26. 26. Throughnetworkingwith individuals and ideas from diversebackgrounds they gain radicallydifferent perspectives.
  27. 27. the four patterns of action togetherhelp innovators associate tocultivate new insights.Associational Thinking
  28. 28. Associational Thinking:the ability to make connections betweenseemingly unconnected things.
  29. 29. A calligraphyclass inspiredSteve Jobsemphasis ontypography onthe revolutionaryMacintosh.
  30. 30. DOINGquestioningobservingexperimentingnetworking
  31. 31. ASSOCIATIONALTHINKINGassociate to cultivate new insights
  32. 32. 35through continuous product andprocess improvement and theelimination of non-value addedactivities.Leanpreserving value with less work
  33. 33. 36Waste is any human activity which absorbs resources but creates no value.Eliminating wasteis the fundamental principle of lean thinking.
  34. 34. • Principles of the Lean StartupTheSteve Blank, Eric Ries, Alexander Osterwalder
  35. 35. You don’t have to work in a garage to be ina startup…Entrepreneurs AreEverywhere
  36. 36. Entrepreneurship IsManagementA startup is an institution, not just a product.It requires management…a new kind of management specifically geared toits context.
  37. 37. 40ValidatedLearningStartups exist not to make stuff, make money, orserve customers.They exist to learn how to build a sustainablebusiness.
  38. 38. 41InnovationAccountingTo improve entrepreneurial outcomes, and to holdentrepreneurs accountable, we need to focus on boringstuff such as:how to measure progress, how to setup milestones,how to prioritize work.This requires a new kind of accounting, specific tostartups.
  39. 39. The fundamental activity of a startup is toturn ideas into products,measure how customers respondand then learn whether to pivot or persevere.BuildMeasureLearn
  40. 40. The minimum viable productis that version of a new product which allows a teamto collect the maximum amount of validated learningabout your hypothesis with the least effort.It puts your hypotheses to the test. MVP
  41. 41. Hypothesis(Leap of Faith Assumptions)“Genchi Gembustsu”(go see for yourself)“Get Out of the Building”Learning MilestonesMinimizeTOTAL timeof the MVPthrough loopPivot (or Persevere)Innovation Accounting(evaluate progress)Build. Measure. Learn.Most learning forthe least effort
  42. 42. 45whathypotheseswill yoube testing ?
  43. 43. 46Whether a product orservices really deliversvalue to customersonce they are using it.ValueHypothesis
  44. 44. 47GrowthHypothesisHow a customer willdiscover a product orservice.
  45. 45. 48More HypothesesCustomer (Arch-type)Technical FeasibilityProductionDevelopmentScalability
  46. 46. 49The minimum viable productMVP is that version of a newproduct which allows a team tocollect the maximum amount ofvalidated learning about yourhypotheses with the leasteffort.It puts your hypotheses to thetest.
  47. 47. MVPApproaches50
  48. 48. - Smoke test- Mock-up demo- Wizard of Oz prototype ( fake-it No. 1)- Concierge prototype (fake-it No. 2)- Ghetto mash-up- Minimally functioning working prototype51
  49. 49. Hypothesis(Leap of Faith Assumptions)“Genchi Gembustsu”(go see for yourself)“Get Out of the Building”Learning MilestonesMinimizeTOTAL timeof the MVPthrough loopPivot (or Persevere)Innovation Accounting(evaluate progress)Build. Measure. Learn.Most learning forthe least effort
  50. 50. Your resources are precious.EnergyTimeMoney
  51. 51. timeis more valuable thanmoneyWhile money can fluctuate up or down time onlymoves in one direction.
  52. 52. PersonalEnergyYou only have a finite reservoir that you can drawfrom and must share with family and the most precious of all.
  53. 53. Iterateuntil you find asustainable and scalablebusiness model beforeyou run out of resources:personal energy, time,money.
  54. 54. 57Failure
  55. 55. I have not failed,Ive just found10,000 waysthat wont work.- Thomas A. Edison
  56. 56. 59- Samuel Beckett “Worstword Ho” 1983All of old.Nothing else ever.Ever tried.Ever failed.No matter.Try again.Fail again.Fail better.
  57. 57. 60David Kelley, Ideo 1997Fail faster to succeed sooner.
  58. 58. 61Eric Raymond, Art of Unix Programming 1999Fail early, fail noisily.
  59. 59. 62John Maxwell, Falling Forward 2007Fail early, fail often, fail forward.
  60. 60. about failing63It’s notlearningIt’s about
  61. 61. Learn EarlyLearn OftenLearn CheapValidate (or invalidate)your assumptions.
  62. 62. Learn EarlyLearn OftenLearn CheapGet out of the office.
  63. 63. Learn EarlyLearn OftenLearn CheapPivot or Persist.
  64. 64. 67Learn EarlyLearn OftenLearn Cheap
  66. 66. 69In a Nutshell…
  67. 67. 70- What are your Hypothesis?- What do you Measure to validate your Hypothesis?- MVP features = measurement- Build an MVP with least effort- Get out of the office and Measure- Learn From your Data that you measure
  68. 68. 71Find a business model that works before you run out of:Personal Energy. Time. Money.
  69. 69. BusinessModelGeneration72
  70. 70. 73A business modeldescribes the rationaleof how an organizationcreates, delivers, andcaptures value.
  71. 71. The Money Earning LogicPlanningLevelArchitecturalLevelImplementationLevelStrategicBusinessModelProcessVision, Goals&ObjectivesMoneyEarning LogicOrganization& Workflow74
  72. 72. BusinessModelCanvas
  73. 73. 76Ideation tool that distilsthe essence of yourbusiness down to onepage that articulatesyour hypotheses.
  74. 74. 77SimpleFastPortableConciseIterative
  75. 75. 78EveryoneOne Page for
  76. 76. 79Value PropositionWhat are you offeringthem?What is thatgetting done for them?Do they care?Characteristics:- Newness- Performance- Customization-“Getting the Job Done” Design- Brand/Status- Price- Cost Reduction- Risk Reduction Accessibility- Convenience/Usability
  77. 77. 80Customer SegmentsWhich customersand users are youserving?Which jobs do theyreally want to getdone?Mass MarketNiche MarketSegmentedDiversifiedMulti-sided Platform
  78. 78. 81Customer RelationshipsWhat relationshipsare you establishingwith each segment?Personal?Automated?Acquisitive?Retentive?Examples:- Personal assistance- Dedicated Personal Assistance- Self-Service- Automated Services- Communities- Co-creation
  79. 79. 82Channelshow does each customersegment want to be reached?through which interactionpoints?Channel Phases:1. AwarenessHow do we raise awareness about our company’sproducts and services?2. EvaluationHow doe we help customers evaluate our organization’sValue Proposition?3. PurchaseHow do we allow customers to purchase specificproducts and services?4. DeliveryHow do we deliver a Value Proposition to customers?5. After SalesHow do we provide post-purchase customer support?
  80. 80. 83Revenue StreamsWhat are customersreally willing to pay for?How?Are you generatingtransactional orrecurring revenues?Examples:- Asset Sale- Usage Fee- Subscription Fees- Lending/Renting/Leasing- Licensing- Brokerage Fees- AdvertisingFixed Pricing:- List Price- Product Feature Dependent- Customer Segment Dependent- Volume DependentDynamic Pricing:- Negotiation- Yield Management- Real-time Market
  81. 81. 84Key Activitieswhich activities do youneed to perform well inyour business model?what is crucial?Categories:- Production- Problem Solving- Platform/Network
  82. 82. 85Key Resourceswhich resourcesunderpin yourbusiness model?which assets areessential?Types:- Physical- Intellectual (brand patents,copyrights, data)- Human- Financial
  83. 83. 86Key Partnerswhich partners andsuppliers leverageyour model?who do you need torely on?Motivations for partnerships:- Optimization and economy- Reduction of risk and uncertainty- Acquisition of particular resourcesand activities
  84. 84. 87Cost Structureswhat is theresulting coststructure?which keyelements driveyour costs?Is your business more:- Cost Driven (leanest cost structure, low pricevalue proposition, maximum automation,extensive outsourcing)- Value Driven ( focused on value creation,premium value proposition)Sample characteristics:- Fixed Costs (salaries, rents, utilities) Variablecosts- Economies of scale- Economies of scope
  85. 85. 88BMC is Open: Lean Canvas by Ash Mauya
  86. 86. 89How to use the BMCCreate a poster size copy of the BMC.Stick it to a wall.Write your hypothesis on post-it notes.Place the post-it notes on your BMC.
  87. 87. Ask lots ofquestionsProduct vs. ServiceTransactional vs. recurring revenuesFixed vs. variable costsAcquisition vs. RetentionOne Customer Segment vs. AnotherCapital Expenditure vs. PartnershipLow vs. High TouchPaid vs. FreeCopyright vs. Creative CommonsOpen vs. ClosedHuman Intensive vs. System IntensivePersonal vs. AutomatedDirect Sales vs. Indirect SalesAdvertising vs. SalesNiche Market vs. Mass MarketBlue Ocean vs. Red OceanScale vs. Scope90
  88. 88. 91EvergreenKeep it
  89. 89. 92Share
  90. 90. 93Exercise:Apple iPod/iTunes Business ModelSplit up in teams of 4-5.Sketch out the businessmodel.Each team must present aleast one building block.
  91. 91. 94MoreEric RiesAlexander OsterwalderSteve Blank
  92. 92. 95
  93. 93. Experimentation MindsetDiscovery SkillsLean Startup Approach
  94. 94. The Lean Start UpEvan Huehu@mtroyal.catwitter @evnhu