Lean Startup Roadmap

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Lean Startup Roadmap workshop I conduct in Russian. Combines the methodology from Steve Blank, Eric Ries, Ash Maurya, and others. The intention is to provide practical steps individuals new to business and entrepreneurship can take in order to increase the likelihood of success in their new venture.

The full workshop usually takes 6-8 hours.

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Lean Startup Roadmap

  1. 1. LeanStartup Roadmap Matt Rutter CCI Gagauzia
  2. 2. Matt Rutter CCI Gagauzia Small Enterprise Advisor matt@mattrutter.com
  3. 3. Entrepreneurial
  4. 4. The reason most startups fail is not because they build a bad product, it’s that they build a product nobody needs. -Eric Ries
  5. 5. What separates successful startups is not necessarily starting with a better initial plan (Plan A), but finding a plan that works before running out of resources. - Ash Maurya
  6. 6. Customer Development
  7. 7. Lean Startup
  8. 8. Lean Canvas
  9. 9. Today • Lean Startup –Idea Validation –Lean Canvas (Hands-on Practice) –Testing Solutions (MVP) –Scaling to Market (Leveraging Traction) • Application, Discussion, & Questions
  10. 10. “A startup is not a ‘doll house’ version of a large company.” - Eric Ries
  11. 11. What is а “Lean Startup?” • “Startup” – a temporary organization designed to search for a repeatable and scalable business model. • Tradition – Write and Execute – Assumptions – Static (Unchanging) • Lean – Model and Test – Customer Development – Agile (Iteration, Pivots))
  12. 12. “Startups that succeed are those that manage to iterate enough times before running out of resources.” - Eric Ries
  13. 13. Eric Ries, The Lean Startup
  14. 14. LeanStartup Roadmap • Idea – Problem Interviews – Market Research
  15. 15. Need TalentInterest
  16. 16. IDEA Customer/Problem Fit Determine if the problem exists and is worth solving • Problem Interviews • Market Research
  17. 17. Right Action, Right Time Ash Maurya practicetrumpstheory.co m IDEA Identify and Test Greatest Risks First
  18. 18. Customers care about their problems – not your solution. IDEA - Dave McClure
  19. 19. Problem Interview Goal: To understand… 1. What is the problem? Why is it a problem? 2. Who has the problem? 3. How do they currently solve the problem? Ash Maurya, Running Lean 81
  20. 20. Problem Interview • Do – Create falsifiable hypotheses to test – Speak with customers face-to-face (casual setting) – Use a script – Take notes (bring partner/co-founder) – Listen and ask questions • Don’t – Pitch or sell – Ask about the future – Take more time than needed
  21. 21. Problem Interview • Examples of Falsifiable Hypotheses – X% of interviewees will have problem A – X% of interviewees will currently use and be dissatisfied with an existing alternative – X% of interviewees will be viable customers Ash Maurya, Running Lean 84
  22. 22. Problem Interview • Example Script 1. What’s the hardest part about [problem context]? 2. Can you tell me about the last time that happened? 3. Why was that hard? 4. What, if anything, have you done to solve that problem? 5. What don’t you love about the solutions you’ve tried? Justin Wilcox – How I Interview Customers http://customerdevlabs.com/2013/11/05/how-i-interview-customers/
  23. 23. Problem Interview • Other questions: – How often do you experience this problem? – How much are you spending to solve this problem now? – Where do you find information about [problem context] currently? • Keys: – Focus on emotional reactions – Use “5 Whys” to get to the core problems – Hear 3 problem stories during each interview Justin Wilcox – How I Interview Customers http://customerdevlabs.com/2013/11/05/how-i-interview-customers/
  24. 24. Market Research • What current solutions/alternatives exist? – Cost – Function – Revenue model • What barriers to entry exist? • Is this a rising or dying trend? Resources: – google.com/trends, google.com/think – entrepreneur.com/businessideas/index.html – hbr.org, forbes.com, wsj.com, techcrunch.com
  25. 25. LeanStartup Roadmap • Idea – Problem Interviews – Market Research • Model – Lean Canvas – Solution Interviews
  26. 26. MODEL Problem/Solution Fit Determine if your model solves the problem • Lean Canvas • Solution Interviews
  27. 27. Why Lean Canvas? • Fast • Concise • Dynamic
  28. 28. “Your Product is not The Product” - Ash Maurya
  29. 29. Lean Canvas Modeling In Moldova
  30. 30. A business model describes the rational of how an organization creates, delivers, and captures value. -Alex Osterwalder, Business Model Generation
  31. 31. Customer Segments • The specific group of people or organizations a business intends to serve. – Who has the problem? – For whom are we creating value? – Who must we sell to or make happy? • Early Adopters: The characteristics of the first group of people who will purchase your product. • Sketch: – Title – Age – Family Details – Income Level – Amount of Free Time – Location – Their Values/Morals – Social Groups – Professional Associations – Hobbies – Where They Shop
  32. 32. Problems • The top 1-3 problems your Customer Segments need solved. – What problem are we curing? – How strong is this problem? – Will the customer pay to have this problem removed? • Existing Alternatives: How the problem is currently solved by the Customer Segments. • Sketch: – Frequency – Expense – Awareness – Reaction – Newness
  33. 33. – Customer Segments • Businessmen • Foreigners • University Students • Early Adopters – Young Adults (22-35 years old) • First 10 customers: 4th year students at ASEM
  34. 34. – Problems • No comfortable, well-recognized place to meet for a good cup of coffee in Chisinau. • Existing Alternatives – McDonald’s – Andy’s Pizza – Marcu’s Coffee – 3 в 1
  35. 35. Team Time Customer Segments and Problems • CS: The specific group of people or organizations a business intends to serve. • Sketch: – Title – Age – Family Details – Income Level – Amount of Free Time – Location – Their Values/Morals – Social Groups – Professional Associations – Hobbies – Where They Shop • P: The top 1-3 problems your Customer Segments need solved. • Existing Alternatives: How the problem is currently solved by the Customer Segments. • Sketch: – Frequency – Expense – Awareness – Reaction – Newness
  36. 36. Solution • The minimum activities or features needed to solve the Customer Segments’ top 1-3 Problems. – Outline a feature set to solve each problem (description of your product or service) – Only include what is necessary (according to Solution Interviews) • Sketch: – How problem is solved – Time needed for solution – Resources needed – Partners needed
  37. 37. – Solution 1. Offer consistently high-quality café goods from a professionally trained staff. 2. Create an easily identifiable facility with an atmosphere conducive for good conversation. 3. Instill customer service and appreciation into every interaction with a Tucano employee or the Tucano facilities.
  38. 38. Team Time - Solution • The minimum activities or features needed to solve the Customer Segments’ top 1-3 Problems. – Outline a feature set to solve each problem (description of your product or service) – Only include what is necessary (according to Solution Interviews) • Sketch: – How problem is solved – Time needed for solution – Resources needed – Partners needed
  39. 39. Unique Value Proposition • A clear and short message stating the business’ unique Solution to the Customer Segments’ Problem. – The value you create for the Customer Segment – How are you improving the lives of our customers? – How are you different? • High-Level Concept: Brief relation of your UVP to something commonly understood (i.e. ВКонтакте: “Facebook for Russians”). • Sketch: – How your solution relates to the customer’s #1 problem – Finished story benefit of purchasing your product – How the solution will make your customer feel Note: The UVP represents the emotional trigger that will convince your customer to purchase your product/service
  40. 40. – Unique Value Proposition • Slogan: Love. Peace. Coffee. • Offering great coffee, with a great atmosphere, to enable great conversations. • Truly superior customer service and experience from entrance to exit. • Fair-Trade and always-fresh 100% Arabica coffee roasted at Tucano Coffee Roasting Factory. • World-class coffee machines operated by baristas certified to SCAE standards . • High-Level Concept: Starbucks for Chisinau.
  41. 41. Team Time - Unique Value Proposition • A clear and short message stating the business’ unique Solution to the Customer Segments’ Problem. – The value you create for the Customer Segment – How are you improving the lives of our customers? – How are you different? • High-Level Concept: Brief relation of your UVP to something commonly understood (i.e. ВКонтакте: “Facebook for Russians”). • Sketch: – How your solution relates to the customer’s #1 problem – Finished story benefit of purchasing your product – How the solution will make your customer feel Note: The UVP represents the emotional trigger that will convince your customer to purchase your product/service
  42. 42. Channels 1. Product: How a company delivers its Value Proposition to the Customer Segments. 2. Marketing: How a company attracts the interest of its Customer Segments. • Customer Relationship – The closeness and frequency of the relationship developed with the Customer Segments. • Sketch: – How will you deliver your solution? – How will your customer make a purchase? – How will you find your first 10 paying customers? – What is the most resource efficient way to attract Early Adopters?
  43. 43. – Channels • Product: 1. Purchase coffee beans and equipment from an international distributor, purchase raw ingredients for baked goods from local producers 2. Trained and certified Tucano employees bake and roast products 3. Engaging and pleasant staff take the customer’s order and payment 4. Tucano employee searches for customer and delivers the order to their seat.
  44. 44. – Channels • Marketing: – Highly-visible and prominently placed storefronts – Brightly colored and large advertisements on billboards – Catering partnerships at prominent events with occasional giveaways – Word-of-mouth by encouraging existing customers to invite friends/colleagues for a meeting – Hosting evening events for NGOs or clubs.
  45. 45. Team Time - Channels 1. Product: How a company delivers its Value Proposition to the Customer Segments. 2. Marketing: How a company attracts the interest of its Customer Segments. • Customer Relationship – The closeness and frequency of the relationship developed with the Customer Segments. • Sketch: – How will you deliver your solution? – How will your customer make a purchase? – How will you find your first 10 paying customers? – What is the most resource efficient way to attract Early Adopters?
  46. 46. Definitions • Income/Revenue: Money coming in to a business. • Expense/Cost: Money exiting a business (items the business pays for). • Profit: Money a business keeps Profit = Revenue – Expenses
  47. 47. Definitions • Fixed Costs: Expenses that do not change depending on the number of products sold. • Variable Costs: Expenses that change in proportion to the number of products sold. • Break Even Point: Time (in # of products sold) when Revenue = Expenses. BEP = Fixed Costs / (Price – Variable Costs)
  48. 48. Break Even Point Gourmet Food Cart • Price of lunches = 55 MDL per lunch • Variable expenses = 20 MDL per lunch • Fixed expenses = 6000 MDL per month BEP = Fixed Costs / (Price – Variable Costs) BEP = 6000 / (55-20) BEP = 171 lunches per month
  49. 49. Revenue Streams • The various income- generating activities of a business. – Customer Segment paying money to receive the business’ Value Proposition – Charge as early as the customer will permit – Determine price based on the value you add, not the cost of production • Sketch: – For what features will the customer pay? – What features will be free? – How will you position your business against alternative solutions? – Are you adding value to non-customers who would be willing to pay?
  50. 50. Cost Structure • All operational expenses of running your business. • Sketch: – Immediate fixed costs – Immediate variable costs (including your labor) – Break-even point
  51. 51. – Revenue Streams • Coffee • Baked Goods • Meals • Catering
  52. 52. – Cost Structure • Fixed Costs – Human Resource Overhead (including salaries) – Equipment – Decorations – Electricity, Gas, Insurance – Marketing • Variable Costs – Ingredients – Presentation materials – Water – Electricity • BEP (45% Coffee, 30% Meals, 15% Backed Goods, 10% Catering) – BEP = 27.000/ (48 – 39) = 3.000 “products”
  53. 53. Team Time Revenue Streams and Cost Structure • R$: The various income- generating activities of a business. – Determine price based on the value you add, not the cost of production • Sketch: – For what features will the customer pay? – What features will be free? – How will you position your business against alternative solutions? – Are you adding value to non- customers who would be willing to pay? • C$: All operational expenses of running your business. • Sketch: – Immediate fixed costs – Immediate variable costs (including your labor) – Break-even point
  54. 54. Key Metrics • The 3-5 indicators of a business’ health (success). – How you track your customer’s behavior and preferences – Monitoring the implementation of your business’ key activities – Informs a business whether or not it needs to pivot/iterate • Sketch: – Customer Segment Awareness – New Customer Acquisition – Inventory Turnover – Time Needed to Complete Job – On-Time Payments – Customer Retention – Customer Referral
  55. 55. Pirate Metrics - Dave McClure (500hats.com)
  56. 56. Unfair Advantage • The features of your business that are difficult for competitors to copy or buy. – What keeps new competitors from taking your customers? – If someone “steals” your idea, how will you continue to exist? • Sketch: – Current advantages (often based on existing relationships or networks) – Advantages your business could develop over time – Note: passion, existing resources, and being “first to market” are not sustainable competitive advantages.
  57. 57. – Key Indicators • 100 new customers per week • 40% of customers return once per week • 70% of customers recommend to friends/family • 750 orders between all locations per day • 6 minutes – average time it takes from the moment a customer enters the ordering line until the customer’s food/drink is delivered
  58. 58. - Unfair Advantage • American research experience and professional network • Location of real estate • Employee acquisition and training program
  59. 59. Team Time Key Metrics and Unfair Advantage • KM: The 3-5 indicators of a business’ health (success). • Sketch: – Customer Segment Awareness – New Customer Acquisition – Inventory Turnover – Time Needed to Complete Job – On-Time Payments – Customer Retention – Customer Referral • UA: The features of your business that are difficult for competitors to copy or buy. • Sketch: – Current advantages – Advantages your business could develop over time – Note: passion, existing resources, and being “first to market” are not sustainable competitive advantages
  60. 60. MODEL • Lean Canvas • Solution Interviews – Return to the earlier interviewees and propose the Solution and UVP you sketched • Do you have the right feature set? – Discuss your business model (the interaction of all 9 boxes) with mentors or fellow entrepreneurs • Do you have a realistic path to profit?
  61. 61. LeanStartup Roadmap • Idea – Problem Interviews – Market Research • Model – Lean Canvas – Solution Interviews • Test – MVP – Early Adopter Sales
  62. 62. TEST Solution/Product Fit Determine how to effectively offer your solution in a minimal product • Minimal Viable Product (MVP) • Early Adopter Sales
  63. 63. Minimum Viable Product
  64. 64. Minimum Viable Product • Strategy used for fast and qualitative market testing of a product or product feature • The most resource-efficient (time, money, energy) method of creating and capturing value from the Customer Segment – MUST solve the problem of customer – Should not require a loan or long timeframe
  65. 65. Minimum Viable Product • Create falsifiable hypotheses – One quantitative metric per test • Sell product, but continue learning • Produce product in small batches • Communicate insights with team early and often
  66. 66. Minimum Viable Product • Moldovan Agritourism Business – Plan and organize excursions/events for individual customers – Drive them personally – Provide food and sleeping arrangements from home – Work on own garden/field/orchard, collect payment • Internet-Based Food Distributor – Create online form (free) for customers (in one town) to place order (5 products) – Purchase these products from the local market – Personally deliver to homes the next day – Collect payment Examples:
  67. 67. Early Adopter Sales • Begin selling to very specific Customer Segment (10-15 people) • Learn which features are “must-have” and which are unnecessary • Determine price point – High enough the customer must contemplate the purchase, low enough the customer will buy Goal: Validate business model not # of sales
  68. 68. LeanStartup Roadmap • Idea – Problem Interviews – Market Research • Model – Lean Canvas – Solution Interviews • Test – MVP – Early Adopter Sales • Scale – Product 1.0 Launch – Business Plan – Investors
  69. 69. SCALE Product/Market Fit Determine if your product will attract demand from regional / national / international markets • Product 1.0 Launch • Business Plan • Investors
  70. 70. Product 1.0 Launch • Use recommendations from Early Adopters to expand sales • Test various price points • Execute marketing strategy • Maintain close contact with customers • Keep learning who is and who is not your customer segment
  71. 71. Business Plan 1. Unique Value Proposition 2. Customer Development Learnings 3. Solution 4. Problem/Customer Segments 5. Problem/UVP/Unfair Advantage 6. Solution/Revenue Streams 7. Channels (Marketing) 8. Channels (Production) 9. Conversations w/ Partners, UA 10. Solution Interviews/MVP/Early Sales 11. Key Metrics 12. Cost Structure/Revenue Streams 13. Cost Structure/Revenue Streams 1. Cover 2. Executive Summary 3. Company Description 4. Market 5. SWOT Analysis 6. Product/Service Line 7. Marketing and Sales 8. Operational Activity 9. Ownership and Management 10. Risk Assessment and Mitigation 11. Action Plan 12. Budget 13. Break Even Point 14. Funding Request 15. Staff 16. Appendices
  72. 72. Investors • Family and Friends • Business Plan Competitions • Economic Development Projects • Angel Investors • Banks • Venture Capital Lowest Risk Greatest Risk
  73. 73. What is Success? Know the impact you wish to make in the world and scale accordingly.
  74. 74. Discussion Matt Rutter Entrepreneurial Development Consultant Chamber of Commerce and Industry of Gagauzia +(373) 60 735 102 matt@mattrutter.com Skype: matthewlrutter

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