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Lean Startup Essentials




                 Lean Startup
                  Essentials
                             Lukas Fittl
                              lukas@fittl.com

                          STARTup Live Graz
                             30th April 2011
Lean Startup Essentials



                          Agenda
             Today’s focus: The early stage

        • 10 - 20min blocks, quick Q&A after each
        • 1: Why? & The Canvas
        • 2: Customer Discovery
        • 3: Case Study
Lean Startup Essentials         #1




                Part 1:
           Why? & Lean Canvas
Lean Startup Essentials                          #1: Introduction



                          About Me
        • 2nd time entrepreneur
        • 2007-2010: Soup.io (Co-founder)
        • The Efficient Cloud
            “Heroku for Europe” to
            “PaaS technology for hosting providers”
            (Seedcamp 2011 company)
        • Collaborated with Ash Maurya
            on the Lean Canvas
Lean Startup Essentials                      #1: Introduction



       Where this all comes from

        • Steve Blank - Customer Development
        • Alex Osterwalder - Business Model Canvas
        • Eric Ries - The Lean Startup
        • Ash Maurya - Lean Canvas
Lean Startup Essentials                #1: Lean Startup




         Most startups fail from a lack of
              (paying) customers.
Lean Startup Essentials                #1: Lean Startup




           Startups are not just a small
            version of a big company.
Lean Startup Essentials                               #1: Lean Startup




                      Startup:
           Temporary organization used to
         search for a repeatable and scalable
                   business model.
                          As defined by Steve Blank.
Lean Startup Essentials                           #1: Lean Startup




                    Your initial Goal:
         Improve likely success rate of your venture,
                 and reduce risk of failure.

                 Enable yourself to actually
         make the jump into a full-time entrepreneur.
Lean Startup Essentials                              #1: Lean Startup




                             Your Process:
                          Likely entirely chaotic.

              No one implements the lean startup
                      as a strict process.

             Similar to agile adoption (e.g. Kan-ban)
               you need to make a slow transition
                 into more structured thinking.
Lean Startup Essentials              #1: The Canvas




              So, we need a language
           in order to talk about your
                     startup.
Lean Startup Essentials               #1: The Canvas




          Product is only 1 of the 9
         critical aspects that make your
                  company work.
Lean Startup Essentials     #1: The BM Canvas




            The Business Model
                 Canvas
Lean Startup Essentials                          #1: The BM Canvas




          Alex Osterwalder - Business Model Generation
Lean Startup Essentials                                                                                                                                                                                                                                                                                                                             #1: The BM Canvas

                                                                                                                                                                                                                                                                                                                                                                                                     Day     Month   Year




                                                                                                                                                                                                                                                                                                                                                                                                           No.




     Who are our Key Partners?                                           What Key Activities do our Value Propositions require?   What value do we deliver to the customer?                                             What type of relationship does each of our Customer                                                        For whom are we creating value?
     Who are our key suppliers?                                          Our Distribution Channels?                               Which one of our customer’s problems are we helping to solve?                         Segments expect us to establish and maintain with them?                                                    Who are our most important customers?
     Which Key Resources are we acquiring from partners?                 Customer Relationships?                                  What bundles of products and services are we offering to each Customer Segment?       Which ones have we established?
     Which Key Activities do partners perform?                           Revenue streams?                                         Which customer needs are we satisfying?                                               How are they integrated with the rest of our business model?
                                                                                                                                                                                                                        How costly are they?




                                                                         What Key Resources do our Value Propositions require?                                                                                          Through which Channels do our Customer Segments
                                                                         Our Distribution Channels? Customer Relationships?                                                                                             want to be reached?
                                                                         Revenue Streams?                                                                                                                               How are we reaching them now?
                                                                                                                                                                                                                        How are our Channels integrated?
                                                                                                                                                                                                                        Which ones work best?
                                                                                                                                                                                                                        Which ones are most cost-efficient?
                                                                                                                                                                                                                        How are we integrating them with customer routines?




     What are the most important costs inherent in our business model?                                                                                                       For what value are our customers really willing to pay?
     Which Key Resources are most expensive?                                                                                                                                 For what do they currently pay?
     Which Key Activities are most expensive?                                                                                                                                How are they currently paying?
                                                                                                                                                                             How would they prefer to pay?
                                                                                                                                                                             How much does each Revenue Stream contribute to overall revenues?




                                                                                                                                                                                                                                                                                                This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.
                                                                                                                                                                                                                                                                                                              To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/3.0/
                                                                                                                                                                                                                                                                                       or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
Lean Startup Essentials       #1: The Lean Canvas




                The Lean Canvas
Lean Startup Essentials                           #1: The Lean Canvas




                      Ash Maurya - Running Lean
Lean Startup Essentials            #1: The Lean Canvas




            Focused on Early-Stage
           integrates Problem/Solution
                       fields
Lean Startup Essentials                                                                                                          #1: The Lean Canvas


      Problem                      Solution                      Unique Value Unfair                                       Customer
                                                                 Proposition  Advantage                                    Segments
      Top 3 problems                Top 3 features
                                                                 Single, clear,               Can’t be easily  Target customers
                                                                 compelling                   copied or bought
                                                                 message that
                                                                 states why you
                                                                 are different and
                                   Key Metrics                   worth buying                 Channels

                                   Key activities you                                         Path to
                                   measure                                                    customers




      Cost Structure                                                           Revenue Streams

      Customer Acquisition Costs                                               Revenue Model
      Distribution Costs                                                       Life Time Value
      Hosting                                                                  Revenue
      People, etc.                                                             Gross Margin



      Lean Canvas is adapted from The Business Model Canvas (http://www.businessmodelgeneration.com) and is licensed under the
      Creative Commons Attribution-Share Alike 3.0 Un-ported License.
Lean Startup Essentials               #1: The Lean Canvas




                          Market

        • Customer Segments
        • Problem
        • Revenue Streams (Pricing)
Lean Startup Essentials             #1: The Lean Canvas




                          Product

        • Solution
        • Cost Structure
        • Unfair Advantage
Lean Startup Essentials               #1: The Lean Canvas




        Market <=> Product

        • Unique Value Proposition
        • Distribution & Marketing Channels
        • Key Metrics
Lean Startup Essentials                                                              #1: The Lean Canvas


                         Example: Tupalo
      Problem           Solution             Unique Value Unfair                  Customer
                                             Proposition  Advantage               Segments
      #1 Finding         Business DB
      information,                           Yellowpages        Herold / ED       #1 9-to-5 folks
      quality & location #1 Search           online.            Partnership       looking for lunch
      of a business      function, Sitemap                                        options, etc.
                         #2 Business CP      Find the best      SEO Know-How
      #2 Promoting a                         restaurant/etc.                      #1 Long-tail
      business,          Key Metrics         near you.          Channels          mainstream
      providing correct
      information to     #1 Avg. Reviews                        #1 Long-tail SEO #2 Business
      customers          per user                                                owners
                                                                #2 European      (restaurants, etc.)
                        #2 Avg. Revenue                         Directories (B2B
                        per business                            Sales)

      Cost Structure                                  Revenue Streams

      Software Development                            #1 Free
      SEO
      Partnership Deals                               #2 Hundreds/Thousands of EUR (recurring)
Lean Startup Essentials                                                         #1: The Lean Canvas


                       Example: Freckle
      Problem          Solution           Unique Value Unfair                 Customer
                                          Proposition  Advantage              Segments
      Tracking time     Time tracking
      precisely without with superb UX,   Time tracking     Existing          Freelancers
      effort            no unnecessary    software that     audience:
                        fuss              you’ll actually   Mailinglists,     Agencies
      Easily invoice                      use.              Twitter, etc.
      clients with good
      report on         Key Metrics                         Channels
      performed work
                        Hours tracked                       - Word of mouth
                                                            - Cross-sales
                       Rev. per user                        - Freebies
                                                            - Existing
                                                            audience

      Cost Structure                                Revenue Streams

      Software Development                          12-50 USD / month (dep. on company size)
      Marketing/Copywriting
      CC fees
      Hosting
Lean Startup Essentials                                                           #1: The Lean Canvas


                        Example: Garmz
      Problem           Solution           Unique Value Unfair                  Customer
                                           Proposition  Advantage               Segments
      #1 Mass-          No-barriers
      producing a       fashion            #1 Make your    Team with            #1 Fashion
      fashion garment   production,        design talent   industry             designers
                        chosen by the      visible         experience
      #1 Marketing &    community                                               #2 Trend-chasing
      sales                                #2 Find the latest                   hipsters
                        Key Metrics        fashion trend &    Channels
      #2 Buy trendy                        be unique
      clothes           #1 New designs                     Fashion blogs
                                                           Partnerships
                        uploaded                           #1 Fashion schools
                                                           #1 Fashion events
                        #2 Conv. rate to                   #2 Word of mouth /
                        actual sale                        strong brand

      Cost Structure                               Revenue Streams

      Production! (super expensive)                #2 100 EUR / piece
      Prototyping
      Payout to designer
      Marketing, Biz Dev, Software Dev
Lean Startup Essentials               #1: The Lean Canvas




                     Live Example:
                      Rails on Fire
Lean Startup Essentials         #1




                          Q&A
Lean Startup Essentials             #1




                          [break]
Lean Startup Essentials   #2: Customer Discovery




                Part 2:
           Customer Discovery
You probably already
 have a product idea
Lean Startup Essentials   #2: Customer Discovery




              And an implict
          assumption about your
                 market
Lean Startup Essentials    #2: Customer Discovery




            Focus on qualitative
             feedback from the
                   market
Lean Startup Essentials      #2: Customer Discovery




        Listen to what customers
       have to say - don’t execute
       a fabricated value proposition
Lean Startup Essentials   #2: Customer Discovery




           Customer Discovery
                Methods
Lean Startup Essentials             #2: Customer Discovery




            Customer Interviews

                 30 min in-person with
               your prototypical customer

       People like talking about their field -
            explore their worldview.
Lean Startup Essentials             #2: Customer Discovery




       How to conduct an interview

           1. Set context & tell your story
           2. Tell your problem hypothesis
              3. Listen to their worldview
           4. Ask for follow up / references
Lean Startup Essentials                 #2: Customer Discovery




            Online Market Tests:

                  Google Adwords
               Fake Landing Page with
           “Signup to be notified when we launch”
          “Can we call you to ask a couple of Qs?”
Lean Startup Essentials                                                         #2: Customer Discovery




      User Groups & Conferences:

      Hand out cards with invite codes -
      landing page with “join our soon-to-
            launch beta programme”

                          SolidRails
                          European VPS cloud. Fully-integrated Rails hosting.

                          Your private beta access code: OEWO8C
Lean Startup Essentials                   #2: Customer Discovery




                           Amy Hoy’s
                          Sales Safari:

        Lurk in online forums of your
      customer segment, learn how they
        talk about products & benefits
Lean Startup Essentials         #2




                          Q&A
Lean Startup Essentials             #2




                          [break]
Lean Startup Essentials                #3: Case Study




                           Part 3:
                          Case Study
Lean Startup Essentials                Literature




                          Literature
Lean Startup Essentials                                    Literature




            Steve Blank - The Four Steps to the Epiphany

                          steveblank.com
Lean Startup Essentials                                  Literature




          Alex Osterwalder - Business Model Generation

                     businessmodelgeneration.com
Lean Startup Essentials                              Literature




                      Eric Ries - The Lean Startup

                                lean.st
Lean Startup Essentials                            Literature




                      Ash Maurya - Running Lean

                          book.runningleanhq.com
Lean Startup Essentials                                   Literature




               Neil Davidson - Don’t Just Roll the Dice
Lean Startup Essentials




                          Thanks!
                          Lukas Fittl
                          lukas@fittl.com

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Lean Startup Essentials - STARTup Live Graz

  • 1. Lean Startup Essentials Lean Startup Essentials Lukas Fittl lukas@fittl.com STARTup Live Graz 30th April 2011
  • 2. Lean Startup Essentials Agenda Today’s focus: The early stage • 10 - 20min blocks, quick Q&A after each • 1: Why? & The Canvas • 2: Customer Discovery • 3: Case Study
  • 3. Lean Startup Essentials #1 Part 1: Why? & Lean Canvas
  • 4. Lean Startup Essentials #1: Introduction About Me • 2nd time entrepreneur • 2007-2010: Soup.io (Co-founder) • The Efficient Cloud “Heroku for Europe” to “PaaS technology for hosting providers” (Seedcamp 2011 company) • Collaborated with Ash Maurya on the Lean Canvas
  • 5. Lean Startup Essentials #1: Introduction Where this all comes from • Steve Blank - Customer Development • Alex Osterwalder - Business Model Canvas • Eric Ries - The Lean Startup • Ash Maurya - Lean Canvas
  • 6. Lean Startup Essentials #1: Lean Startup Most startups fail from a lack of (paying) customers.
  • 7. Lean Startup Essentials #1: Lean Startup Startups are not just a small version of a big company.
  • 8. Lean Startup Essentials #1: Lean Startup Startup: Temporary organization used to search for a repeatable and scalable business model. As defined by Steve Blank.
  • 9. Lean Startup Essentials #1: Lean Startup Your initial Goal: Improve likely success rate of your venture, and reduce risk of failure. Enable yourself to actually make the jump into a full-time entrepreneur.
  • 10. Lean Startup Essentials #1: Lean Startup Your Process: Likely entirely chaotic. No one implements the lean startup as a strict process. Similar to agile adoption (e.g. Kan-ban) you need to make a slow transition into more structured thinking.
  • 11. Lean Startup Essentials #1: The Canvas So, we need a language in order to talk about your startup.
  • 12. Lean Startup Essentials #1: The Canvas Product is only 1 of the 9 critical aspects that make your company work.
  • 13. Lean Startup Essentials #1: The BM Canvas The Business Model Canvas
  • 14. Lean Startup Essentials #1: The BM Canvas Alex Osterwalder - Business Model Generation
  • 15. Lean Startup Essentials #1: The BM Canvas Day Month Year No. Who are our Key Partners? What Key Activities do our Value Propositions require? What value do we deliver to the customer? What type of relationship does each of our Customer For whom are we creating value? Who are our key suppliers? Our Distribution Channels? Which one of our customer’s problems are we helping to solve? Segments expect us to establish and maintain with them? Who are our most important customers? Which Key Resources are we acquiring from partners? Customer Relationships? What bundles of products and services are we offering to each Customer Segment? Which ones have we established? Which Key Activities do partners perform? Revenue streams? Which customer needs are we satisfying? How are they integrated with the rest of our business model? How costly are they? What Key Resources do our Value Propositions require? Through which Channels do our Customer Segments Our Distribution Channels? Customer Relationships? want to be reached? Revenue Streams? How are we reaching them now? How are our Channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines? What are the most important costs inherent in our business model? For what value are our customers really willing to pay? Which Key Resources are most expensive? For what do they currently pay? Which Key Activities are most expensive? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues? This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
  • 16. Lean Startup Essentials #1: The Lean Canvas The Lean Canvas
  • 17. Lean Startup Essentials #1: The Lean Canvas Ash Maurya - Running Lean
  • 18. Lean Startup Essentials #1: The Lean Canvas Focused on Early-Stage integrates Problem/Solution fields
  • 19. Lean Startup Essentials #1: The Lean Canvas Problem Solution Unique Value Unfair Customer Proposition Advantage Segments Top 3 problems Top 3 features Single, clear, Can’t be easily Target customers compelling copied or bought message that states why you are different and Key Metrics worth buying Channels Key activities you Path to measure customers Cost Structure Revenue Streams Customer Acquisition Costs Revenue Model Distribution Costs Life Time Value Hosting Revenue People, etc. Gross Margin Lean Canvas is adapted from The Business Model Canvas (http://www.businessmodelgeneration.com) and is licensed under the Creative Commons Attribution-Share Alike 3.0 Un-ported License.
  • 20. Lean Startup Essentials #1: The Lean Canvas Market • Customer Segments • Problem • Revenue Streams (Pricing)
  • 21. Lean Startup Essentials #1: The Lean Canvas Product • Solution • Cost Structure • Unfair Advantage
  • 22. Lean Startup Essentials #1: The Lean Canvas Market <=> Product • Unique Value Proposition • Distribution & Marketing Channels • Key Metrics
  • 23. Lean Startup Essentials #1: The Lean Canvas Example: Tupalo Problem Solution Unique Value Unfair Customer Proposition Advantage Segments #1 Finding Business DB information, Yellowpages Herold / ED #1 9-to-5 folks quality & location #1 Search online. Partnership looking for lunch of a business function, Sitemap options, etc. #2 Business CP Find the best SEO Know-How #2 Promoting a restaurant/etc. #1 Long-tail business, Key Metrics near you. Channels mainstream providing correct information to #1 Avg. Reviews #1 Long-tail SEO #2 Business customers per user owners #2 European (restaurants, etc.) #2 Avg. Revenue Directories (B2B per business Sales) Cost Structure Revenue Streams Software Development #1 Free SEO Partnership Deals #2 Hundreds/Thousands of EUR (recurring)
  • 24. Lean Startup Essentials #1: The Lean Canvas Example: Freckle Problem Solution Unique Value Unfair Customer Proposition Advantage Segments Tracking time Time tracking precisely without with superb UX, Time tracking Existing Freelancers effort no unnecessary software that audience: fuss you’ll actually Mailinglists, Agencies Easily invoice use. Twitter, etc. clients with good report on Key Metrics Channels performed work Hours tracked - Word of mouth - Cross-sales Rev. per user - Freebies - Existing audience Cost Structure Revenue Streams Software Development 12-50 USD / month (dep. on company size) Marketing/Copywriting CC fees Hosting
  • 25. Lean Startup Essentials #1: The Lean Canvas Example: Garmz Problem Solution Unique Value Unfair Customer Proposition Advantage Segments #1 Mass- No-barriers producing a fashion #1 Make your Team with #1 Fashion fashion garment production, design talent industry designers chosen by the visible experience #1 Marketing & community #2 Trend-chasing sales #2 Find the latest hipsters Key Metrics fashion trend & Channels #2 Buy trendy be unique clothes #1 New designs Fashion blogs Partnerships uploaded #1 Fashion schools #1 Fashion events #2 Conv. rate to #2 Word of mouth / actual sale strong brand Cost Structure Revenue Streams Production! (super expensive) #2 100 EUR / piece Prototyping Payout to designer Marketing, Biz Dev, Software Dev
  • 26. Lean Startup Essentials #1: The Lean Canvas Live Example: Rails on Fire
  • 29. Lean Startup Essentials #2: Customer Discovery Part 2: Customer Discovery
  • 30. You probably already have a product idea
  • 31. Lean Startup Essentials #2: Customer Discovery And an implict assumption about your market
  • 32. Lean Startup Essentials #2: Customer Discovery Focus on qualitative feedback from the market
  • 33. Lean Startup Essentials #2: Customer Discovery Listen to what customers have to say - don’t execute a fabricated value proposition
  • 34. Lean Startup Essentials #2: Customer Discovery Customer Discovery Methods
  • 35. Lean Startup Essentials #2: Customer Discovery Customer Interviews 30 min in-person with your prototypical customer People like talking about their field - explore their worldview.
  • 36. Lean Startup Essentials #2: Customer Discovery How to conduct an interview 1. Set context & tell your story 2. Tell your problem hypothesis 3. Listen to their worldview 4. Ask for follow up / references
  • 37. Lean Startup Essentials #2: Customer Discovery Online Market Tests: Google Adwords Fake Landing Page with “Signup to be notified when we launch” “Can we call you to ask a couple of Qs?”
  • 38. Lean Startup Essentials #2: Customer Discovery User Groups & Conferences: Hand out cards with invite codes - landing page with “join our soon-to- launch beta programme” SolidRails European VPS cloud. Fully-integrated Rails hosting. Your private beta access code: OEWO8C
  • 39. Lean Startup Essentials #2: Customer Discovery Amy Hoy’s Sales Safari: Lurk in online forums of your customer segment, learn how they talk about products & benefits
  • 42. Lean Startup Essentials #3: Case Study Part 3: Case Study
  • 43. Lean Startup Essentials Literature Literature
  • 44. Lean Startup Essentials Literature Steve Blank - The Four Steps to the Epiphany steveblank.com
  • 45. Lean Startup Essentials Literature Alex Osterwalder - Business Model Generation businessmodelgeneration.com
  • 46. Lean Startup Essentials Literature Eric Ries - The Lean Startup lean.st
  • 47. Lean Startup Essentials Literature Ash Maurya - Running Lean book.runningleanhq.com
  • 48. Lean Startup Essentials Literature Neil Davidson - Don’t Just Roll the Dice
  • 49. Lean Startup Essentials Thanks! Lukas Fittl lukas@fittl.com