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How to Run a Lean Startup

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More than 90% of all startup fail. Their plan A for their idea doesn't work out. 2/3 of the successful startups change their plan. because plan A almost never works. Lean Startup is an approach to mitigate these risks, use validated learning, and adapt the plan A to a plan that works. Let's start with innovating ideas and make them successful.

How to Run a Lean Startup

  1. 1. How to Run a Lean Startup August 22nd, 2016 Amancio Bouza, PhD
  2. 2. Who am I Amancio Bouza, PhD Adventurous Intrapreneur and Dot Connector Let’s connect: https://ch.linkedin.com/in/amanciobouza Follow me: https://twitter.com/AmancioBouza
  3. 3. 90% of all Startups Fail 3
  4. 4. Let’s fail fast & cheap 4
  5. 5. Still 90% Failures 5
  6. 6. 6 What’s the secret? Source: Ehapa/Promo
  7. 7. 2 out of 3 successful Startups adapt their plan 7
  8. 8. Lean Startup: Measure & Learn and Adapt Your Plan 8
  9. 9. 9 #0 ROADMAP
  10. 10. 10 Everything starts with an idea We all have ideas
  11. 11. 11 “Nie mehr auf dem Trockenen sitzen”
  12. 12. 12 The seconds that matter
  13. 13. 13 Entrepreneurs, in contrast to employees, realize their ideas
  14. 14. 14 However, most Plan A’s don’t work
  15. 15. 15 Iterate from Plan A to a Plan That Works
  16. 16. 16
  17. 17. Essence of Running Lean 1. Document your Plan A 2. Identify the riskiest parts of your plan 3. Systematically test your plan 17
  18. 18. 18 Step 1: Document Your Plan A
  19. 19. Capture Your Business Model Hypotheses with Lean Canvas 19 Share with at least one other person
  20. 20. What is your Product? 20
  21. 21. 21 Your Product is NOT your Product
  22. 22. Your “Business Model” is the product 22 SolutionProblem Cost Structure Key Metrics Unique Value Proposition Unfair Advantage Channels Customer Segments Revenue Streams
  23. 23. Business Model Canvas 23
  24. 24. Lean Canvas vs Business Model Canvas 24
  25. 25. 25 Step 2: Identify the Riskiest Parts of Your Plan
  26. 26. The Three Stages of a Startup 26 Problem/ Solution Fit Product/ Market Fit Scale Stage 1 Stage 2 Stage 3
  27. 27. Stage 1: Problem/Solution Fit Q: Do I have a problem worth solving? • Desirability • Viability • Feasibility 27 Problem/ Solution Fit Product/ Market Fit Scale Stage 1 Stage 2 Stage 3 Source: http://forty.co
  28. 28. Stage 2: Product/Market Fit Q: Have I built something people want? • Minimal Viable Product (MVP) • Test how well your solution solves the problem 28 Problem/ Solution Fit Product/ Market Fit Scale Stage 1 Stage 2 Stage 3
  29. 29. Stage 3: Scale Q: How do I accelerate growth? 29 Problem/ Solution Fit Product/ Market Fit Scale Stage 1 Stage 2 Stage 3
  30. 30. Pivot Before Product/Market Fit, Optimize After 30 Problem/ Solution Fit Product/ Market Fit Scale Validated Learning Pivot Growth Optimization Focus Experiment Focus Experiment Pivot: Find a plan that works (effectivity) Optimization: accelerate that plan (efficiency)
  31. 31. 31 Step 3: Systematically Test Your Plan
  32. 32. An Experiment is One Cycle in the Build-Measure-Learn-Loop 32
  33. 33. Iteration-Meta-Pattern 33 Understand Problem Define Solution Validate Qualitatively Problem/Solution Fit Product/Market Fit Verify Quantitatively
  34. 34. 34 #1 DOCUMENT YOUR PLAN A
  35. 35. Brainstorm Possible Customers Distinguish between customer and user a customer pays for your product, a user doesn’t Split broad customer segments into smaller ones You can’t create a product for everyone Sketch a Lean Canvas for each customer segment start with the top two or three customer segments Put everyone on the same canvas at first Easier to start 35
  36. 36. Sketching Lean Canvas 36 Solution Top 3 Features Problem Top 3 Problems Cost Structure Customer Acquisition Costs Distribution Costs Hosting People, etc. Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states who you are different worth buying Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target Customers Revenue Streams Revenue Model Lifetime Value Revenue Gross Margin
  37. 37. How to Sketch a Lean Canvas: Tips: Go from 1 to 9 Sketch a canvas in one sitting (<15min) It’s OK to leave sections blank Be concise Think in the present Use a customer-centric approach 37
  38. 38. Problem and Customer Segments List the top one to three problems of customer seg. List existing alternatives How do customers solve the problem now? Identify other user roles What user interact with the customer? Focus on Early Adopter 38 Solution Top 3 Features Problem Top 3 Problems Cost Structure Customer Acquisition Costs Distributing Costs Hosting People, etc. Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states who you are different worth buying Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target Customers Revenue Streams Revenue Model Lifetime Value Revenue Gross Margin 1 2
  39. 39. Unique Value Proposition (UVP) UVP: Why you are different and worth buying getting attention Be different, but make sure your difference matters Derive from number one problem Target early adopters Answer: what, who, and why Create a high-concept pitch Focus on finished story benefits 39 Solution Top 3 Features Problem Top 3 Problems Cost Structure Customer Acquisition Costs Distributing Costs Hosting People, etc. Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states who you are different worth buying Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target Customers Revenue Streams Revenue Model Lifetime Value Revenue Gross Margin 3
  40. 40. Unique Value Proposition (UVP) 40 Solution Top 3 Features Problem Top 3 Problems Cost Structure Customer Acquisition Costs Distributing Costs Hosting People, etc. Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states who you are different worth buying Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target Customers Revenue Streams Revenue Model Lifetime Value Revenue Gross Margin 3
  41. 41. Solution DON’T DEFINE THE SOLUTION YET All you have are untested problems Sketch out the simplest solution to address each problem 41 Solution Top 3 Features Problem Top 3 Problems Cost Structure Customer Acquisition Costs Distributing Costs Hosting People, etc. Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states who you are different worth buying Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target Customers Revenue Streams Revenue Model Lifetime Value Revenue Gross Margin 4
  42. 42. Channels Freer versus paid Inbound versus outbound Direct versus automated Direct versus indirect Retention before referral 42 Solution Top 3 Features Problem Top 3 Problems Cost Structure Customer Acquisition Costs Distributing Costs Hosting People, etc. Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states who you are different worth buying Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target Customers Revenue Streams Revenue Model Lifetime Value Revenue Gross Margin 5
  43. 43. Revenue Streams and Cost Structure Revenue Streams – But why for an MVP? Price is part of the product Price defines your customer Getting paid is the first form of validation Tip: pricing against existing alternatives Cost structure How much to interview 30-50 customers? How much to build and launch MVP? Burn rate of fixed and variable costs? 43 Solution Top 3 Features Problem Top 3 Problems Cost Structure Customer Acquisition Costs Distributing Costs Hosting People, etc. Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states who you are different worth buying Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target Customers Revenue Streams Revenue Model Lifetime Value Revenue Gross Margin 67
  44. 44. Key Metrics 44 Solution Top 3 Features Problem Top 3 Problems Cost Structure Customer Acquisition Costs Distributing Costs Hosting People, etc. Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states who you are different worth buying Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target Customers Revenue Streams Revenue Model Lifetime Value Revenue Gross Margin 8 Source: Dave McClure’s Pirate Metrics
  45. 45. Unfair Advantage (aka The Hardest One) Insider information The right “expert” endorsements A dream team Personal authority Large network effects Community Existing customers SEO ranking 45 Solution Top 3 Features Problem Top 3 Problems Cost Structure Customer Acquisition Costs Distributing Costs Hosting People, etc. Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states who you are different worth buying Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target Customers Revenue Streams Revenue Model Lifetime Value Revenue Gross Margin 9
  46. 46. 46 #2 IDENTIFY THE RISKIEST PARTS OF YOUR PLAN
  47. 47. 47 Prioritize Where to Start
  48. 48. Uncertainty: Lack of complete certainty. Existence of more than one possibility Risk: A state of uncertainty where some of the possibilities involve an undesirable outcome 48
  49. 49. How to Quantify Risk P(Risk) x LO$$(Risk) 49
  50. 50. Three Categories of Risks Product Risk Getting the product right Customer Risk Building a path to customers Market Risk Building a viable business 50 SolutionProblem Existing Alternatives Cost Structure Key Metrics Unique Value Proposition Unfair Advantage Channels Customer Segments Early adopter Revenue Streams P C M C P MM C P P M Product Risk Customer Risk Market Risk
  51. 51. How to Rank Your Business Models 1. Customer pain level (Problem) 2. Ease of reach (Channels) 3. Price/gross margin (Revenue Streams/Cost Structure) 4. Market size (Customer Segments) 5. Technical feasibility (Solution) 51
  52. 52. Seek External Advice Avoid the 10-slide deck Just uncover the Lean Canvas Devote 20% of time to , 80% to conversation Listen, Listen, Listen. Everybody has an opinion Ask specific questions What is the riskiest aspect of the plan? Have they overcome similar risks? How? Are there other people I should speak with? “Advisor Paradox” Don’t follow advice, apply it. 52
  53. 53. 53 Get Ready to Experiment
  54. 54. Assemble a Problem/Solution Team Problem Team Interviews, Tests 54 Solution Team Developing MVP Source: Innovation Process Technology AG Source: Innovation Process Technology AG
  55. 55. 55 “Get out of the building.” – Steve Blank
  56. 56. Product/Solution Team: two to three people Start with smallest team possible Communication is easier You build less You keep costs low You need: Development Design Marketing NEVER outsource learning about customers! 56 Source: Innovation Process Technology AG
  57. 57. Running Effective Experiments 57 Focus Speed Learning
  58. 58. Maximize for Speed, Learning, and Focus 58 Speed FocusLearning Premature optimization Chasing your tail Running out off resources The optimal learning loop
  59. 59. Formulate a Falsifiable Hypothesis Formula for falsifiable hypothesis: [Specific Repeatable Action] will [Expected Measurable Outcome] Examples: Bad: Being known as an “expert “ will drive early adopters Good: Blog post will drive 100 signups 59
  60. 60. 60 Validate Qualitatively, Verify Quantitatively
  61. 61. Do the Smallest Thing Possible to Learn 61
  62. 62. 62
  63. 63. Lessons Learned Report What we Thought Insights What’s Next Key Metrics Lean Canvas 63
  64. 64. 64
  65. 65. 65
  66. 66. 66 “Startups that succeed are those that manage to iterate enough times before running out of resources.” – Eric Ries
  67. 67. 67 #3 SYSTEMATICALLY TEST YOUR PLAN
  68. 68. 68 “If I had asked people what they wanted, they would have said faster horses.” – Henry Ford
  69. 69. 69 “It is not the customer’s job to know what they want.” – Steve Jobs
  70. 70. Applying the Iteration Meta-Pattern to Risks 70 Understand Problem Define Solution Validate Qualitatively Problem/Solution Fit Product/Market Fit Verify Quantitatively
  71. 71. S1. Understand the problem Who, What, How solved today? S2. Define the solution Demo, Pricing? S3. Validate qualitatively MVP, soft launch. Getting paid? S4. Verify quantitatively Scale? Viable? 71 SolutionProblem Existing Alternatives Cost Structure Key Metrics Unique Value Proposition Unfair Advantage Channels Customer Segments Early adopter Revenue Streams 1 1 1 2 2 2 34 3 4 2 2 Product Risk Customer Risk Market Risk
  72. 72. 72 Take Home: Your Plan A will NOT work
  73. 73. 73 Iterate from Plan A to a Plan That Works Understand Problem Define Solution Validate Qualitatively Problem/Solution Fit Product/Market Fit Verify Quantitatively

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