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12 Lean Startup Models

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I would like twenty minutes of your time in which I will present 50 (I know a lot) slides to review 12 Models related to Lean Startup so that I can then introduce the
‘Startup Business Planning Jigsaw’.

The twelve models are:

► Business Model Canvas - Alexander Osterwalder

► Search v's Execution - Steve Blank & Bob Dorf

► Build-Measure-Learn - Eric Ries

►Three Stages of a Startup - Ash Maurya

► MVP and Product Market Fit

►Lean Canvas - Ash Maurya

► Customer Development - Brant Cooper and Patrick Vlaskovits

► Startup Pyramid – Sean Ellis

►Get Keep Grow – Steve Blank & Bob Dorf

► Pirate Metrics – Dave McClure

►One Metric that Matters - Croll & Yoskovitz

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12 Lean Startup Models

  1. 1. Twelve Lean Startup Models And how they can shape how you think about your startup?
  2. 2. I would like twenty minutes of your time in which I will present 50 (I know a lot) slides to review 12 Models related to Lean Startup so that I can then introduce the ‘Startup Business Planning Jigsaw’. Donncha Hughes – Feb 2015
  3. 3. 3 Lean Startup is about getting you to focus on the right thing, at the right time, with the right mindset. Lean Analytics: Use Data to Build a Better Startup Faster – Alistair Croll & Benjamin Yoskovitz
  4. 4. Search v’s Execution – Steve Blank & Bob Dorf Three Stages of a Startup – Ash Maurya Lean Canvas – Ash Maurya MVP and Product Market Fit - Customer Development – Brant Cooper and Patrick Vlaskovits Get Keep Grow – Steve Blank & Bob Dorf Pirate Metrics – Dave McClure Engines of Growth – Eric Ries Build – Measure – Learn Cycle – Eric Ries Startup Pyramid – Sean Ellis Business Model Canvas – Alexander Osterwalder 10 11 1 2 3 4 5 6 7 8 9 A G E N D A One Metric That Matters – Croll & Yoskovitz12
  5. 5. Business Model Canvas1 72 Page Preview available http://www.businessmodelgeneration.com/downloads/businessmodelgeneration_preview.pdf The right side of business model canvas emphasizes value while the left side is predominantly cost driven. Financial considerations (costs, revenues) are on the bottom and value is at the centre with connections to partners and customers.
  6. 6. A lot of ‘business planning’ required by startups. 6
  7. 7. Every element of your Business Model must be tested and validated. 7
  8. 8. P143 The Startup Owner’s Manual: The Step-by-Step Guide to Building a Great Company – Steve Blank & Bob Dorf Search v’s Execution2 8
  9. 9. Entrepreneurs now understand the problem, namely that startups are not simply smaller versions of large companies. Companies execute business models where customers, their problems, and necessary product features are all “knowns”. In sharp contrast, startups operate in “search mode”, seeking a repeatable and profitable business model. The Startup Owner’s Manual: The Step-by-Step Guide to Building a Great Company – Steve Blank & Bob Dorf 9
  10. 10. A Startup? Is a human institution designed to deliver a new product or service under conditions of extreme uncertainty Eric Ries – The Lean Startup: How constant Innovation Creates Radically Successful Businesses 10
  11. 11. If you feel like you don’t know everything at this stage that is ok…. And the feeling won’t go away! 11
  12. 12. And Don’t believe the Myth of the Visionary …. The Lean Entrepreneur, how visionaries create products, innovate with new ventures, and disrupt market by Brant Cooper and Patrick Vlaskovits, Foreword by Eric Ries, illustrations by @fakegrimlock that someone can predict the future and then bring it to fruition. In reality the visionary is likely someone who is not committed to a specific scenario, but rather seeks change and seizes present opportunities and relentlessly pursues the change
  13. 13. How are opportunities to be grasped – what is the rule or guide book, is there an optimal process to follow? 13
  14. 14. 14
  15. 15. • Startups are experiments … to discover new sources of growth • Somewhat easier to start these days … BUT • Startups consume a lot of resources • And most startups/products still FAIL! Ash Maurya, Running Lean
  16. 16. most startups fail not because they don’t manage to develop and deliver a product to the market; they fail because they develop and deliver a product that no customers want or need. Steve Gary Blank – The Four Steps to the Epiphany: Successful Strategies for Products that Win 16
  17. 17. Build-Measure-Learn-Feedback Loop 3 The faster your organisation iterates through the cycle, the more quickly you will find the right product and market. Build-Measure- Learn Cycle applies to everything you do, from establishing a vision to building product features to developing channels and marketing strategies
  18. 18. There are no facts inside your building, so get outside Rule #.1 of the Customer Development Manifesto as detailed in The Startup Owners Manual
  19. 19. Talking to Humans, Success starts with understanding your customers GIFF CONSTABLE with Frank Rimalovski illustrations by Tom Fishburne and foreword by Steve Blank
  20. 20. 3 Stages of a Lean Startup4 Problem/Solution Fit Product/ Market Fit Scale Stage 1 Stage 2 Stage 3 How do I accelerate growth? Ideal time to raise funding Problem worth solving? Running Lean: Iterate from Plan A to a Plan that Works, Ash Maurya (The Lean Series – O’Reilly)
  21. 21. What is a Lean Startup? • Uses fast, iterative development practices to: 1. Validate core hypotheses (customer problem- solution). 2. Develop the minimum viable product. 3. Achieve Product-Market fit. 4. Produce a development and marketing roadmap for scaling. 21
  22. 22. Stage 1 – Problem/Solution Fit • The first stage is about determining whether you have a problem worth solving before investing months or years of effort into building a solution: – Is it something customers want? (must have) – Will they pay for it? If not, who will? (viable) – Can it be solved? (feasible) 22
  23. 23. MVP and Product-Market Fit5 © Tristan Kromer … http://grasshopperherder.com/false- positives-and-product-market-fit/ 23 Stage 2 – Product-Market Fit
  24. 24. Minimum Viable Product • A product with the fewest number of features needed to achieve a specific objective, and users are willing to “pay” in some form of a scarce resource. Steve Gary Blank – The Four Steps to the Epiphany: Successful Strategies for Products that Win 24 Concept (Slides) Design & Spec Manual Configuration Demo Beta PROTOTYPE CONTINUUM Alpha First production run LAUNCHIDEA
  25. 25. Product Management (how to select features) Brilliant new Free eBook by Intercom
  26. 26. Product Market Fit • When a product shows strong demand by passionate users representing a sizable market. “achieving Product-Market fit requires at least 40% of users saying they would be “very disappointed” without your product. Sean Ellis – Lean Startup Marketing : Agile Product Development, Business Model Design, Web Analytics, and Other Keys to Rapid Growth [Kindle Edition] 26
  27. 27. The three stages of a Startup cont. Problem/Solution Fit Product/ Market Fit Scale Stage 1 Stage 2 Stage 3 Focus: Validated Learning Experiments : Pivots Focus: Growth Experiments : Optimizations 27 A pivot is a change in strategy that is grounded by learning
  28. 28. Lean Canvas …. Leanstack.com6 PROBLEM SOLUTION KEY METRICS UNIQUE VALUE PROPOSITION COST STRUCTURE REVENUE UNFAIR ADVANTAGE CHANNELS CUSTOMER SEGMENTS PRODUCT MARKET Source : p.27 Running Lean, Ash Maurya Top 3 problems Top 3 features Key activities you measure Single clear compelling message that states why you are different and worth paying attention Target Customers Can’t be easily copied or bought Path to Customers Customer Acquisition Costs Distribution Costs Hosting People etc Revenue Model Lifetime Value Revenue Gross Margin Existing Alternatives Early Adopters BREAKEVEN
  29. 29. • What separates successful startups from unsuccessful ones is not necessarily the fact that successful startups begin with a better initial plan (or Plan A) but rather that they find a plan that works before running out of resources. Ash Maurya– Running Lean: Iterate from Plan A to a Plan that Works
  30. 30. Document your Plan A Systematically test your plan Identify the Riskiest Parts of Your Plan • Document your Plan A • Share your Plan A … identify the riskiest parts of your plan(s) • Systematically test the Plan Roadmap for Running Lean
  31. 31. Understand Problem Define Solution Validate Qualitatively Verify Quantitatively Systematically test your plan Document your Plan A Identify Riskiest Parts of your plan Problem Solution Fit Product Market Fit 31 Time
  32. 32. Ash Maurya’s 10x Product Launch
  33. 33. Customer Development7
  34. 34. www.startuphughes.com/blog/what- enterprise-ireland-are-looking-for-in-a-new- frontiers-phase-2-application/
  35. 35. Startup Pyramid8
  36. 36. Race up the Pyramid • Promise: Highlight the benefits described by your “must have” users (those that say they would be very disappointed without your product). • Economics: Implement the business model that allows you to profitably acquire the most users. • Optimize: Streamline a repeatable, scalable customer acquisition process by testing multiple approaches and tracking to improve the right metrics.
  37. 37. Deliver on the promise • Extreme customer support … go beyond expectations will drive customer loyalty and enhance WOM. • Brand experience over brand awareness … obsess over every element of the customer experience For more see http://startup-marketing.com/milestones-to- startup-success/
  38. 38. Get Keep Grow Model9 ‘Get Keep Grow’ for Web Mobile Figure 3.10 Startup Owner’s Manual
  39. 39. Acquisition Activation Retention Revenue Referral How do users find you? Do users have a great first experience? Do users come back? How do you make money? Do users tell others? Before Product Market Fit Dave McClure’s AARRR Pirate Metrics as presented by Ash Maurya 10 For more see http://www.slideshare.net/dmc500hats/startup- metrics-for-pirates-long-version
  40. 40. • Acquisition describes the point when you turn an unaware visitor into an interested prospect • Activation describes when the interested customer has her first gratifying user experience • Retention measures ‘repeated use’ and/or engagement with your product. • Revenue measures the events that you get paid • Referral is a more advanced form or a user acquisition channel where your happy customers refer or drive potential prospects into your conversion funnel. 41
  41. 41. 11 Engines of Growth help identify Product Market Fit • The moment when a startup finally finds a widespread set of customers that resonate with the product • Easy to recognise when it happens but not so easy to know how far off a particular company is from reaching its Product Market Fit.
  42. 42. Three Engines of Growth I. Sticky .. when the rate of new customer acquisition exceeds the churn II. Viral .. Growth happens as a consequence of customers using the product. III. Paid .. ROI on marketing activity.
  43. 43. What to measure? Depends on Your Engine of Growth I. Sticky .. rate of new customer acquisition versus the churn. II. Viral .. How many new customers will use the product as a result of each new customer who signs up. III. Paid .. Customer acquisition costs relative to lifetime value.
  44. 44. Success looks like … Depends on Your Engine of Growth I. Sticky .. Widening gap between new customers minus churn over short periods (day/week/month). II. Viral .. Is viral coefficient increasing? A viral coefficient of 0.9 is very close (every ten people bring in around 9 e.g every person invites 3 people and in 9 of 10 cases 1 of those 3 joins) III. Paid .. Are customer acquisition costs reducing relative to lifetime value.
  45. 45. Your Engine of Growth Helps Prioritise Startup priorities I. Sticky .. Focus development efforts on customer usability. II. Viral .. Focus development efforts on customer sign up and user flow optimisation to increase conversion. III. Paid .. Focus on getting Sales & Marketing right.
  46. 46. Acquisition Activation Retention Revenue Referral How do users find you? Do users have a great first experience? Do users come back? How do you make money? Do users tell others?Viral Paid Sticky Dave McClure’s Pirate Metrics AARRR
  47. 47. One Metric That Matters • Do you know your One Metric That Matters .. Read chapter 6 • Beware of Vanity Metrics Lean Analytics: Use Data to Build a Better Startup Faster, Alistair Croll & Benjamin Yoskovitz (The Lean Series – O’Reilly) 12
  48. 48. Lean frameworks to think about your business • Start with the Lean Canvas, to help you map out the components of your business model so you can evaluate and test them. • Engage in Customer Development – Think about the Startup Pyramid and the Get Keep Grow Model to identify how you will acquire and retain customers to drive business growth. • Identify your Engine of Growth, Pirate Metrics and One Metric that Matters to clarify startup stage and agree priorities. C O N C L U S I O N
  49. 49. THE STARTUP BUSINESS PLANNING JIGSAW www.startuphughes.com
  50. 50. • The idea origins of the problem and solution • Lean Canvas sketches details of the business model • The Promoter/ Team domain knowledge, credibility and track record (plus advisors) • Customer Development/ Market Validation start testing the canvas • MVP (Solution) start charging • Business Model Validation 9 building blocks • Learning market product customers strategy • Lean Metrics measure for results and decisions • Business Action Plan for investors (and own team)
  51. 51. Read full article on Startup Business Planning Jigsaw by Donncha Hughes on LinkedIn Pulse.
  52. 52. Donncha Hughes Startup Mentor, Advisor & Trainer • Trainer – e.g. New Frontiers in GMIT, DKIT, and LyIT/ IT Sligo • Areas of Expertise – Marketing, Sales, Business Plans, R&D Applications, Projections. • Mentor – LEO Galway, Enterprise Ireland, SCCUL • Member of EI Competitive Start Evaluation Panel • Member InterTrade Ireland Seedcorn Business Plan Evaluation Panel. • Non Executive Director of an Irish Tech startup • Former Manager of Incubation Centre • 7.5 years with IBEC www.startuphughes.com www.startuphughes.com/blog

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