WHAT IS LEAN STARTUP? - SESSION 5

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MAIN TOPICS:
- How to capture value?
- How to generate value?
- Introduction to Business Model Generation

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This session is part of a 10-weeks course given to master students of the SOLVAY BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT by professor Olivier WITMEUR.

Published in: Business

WHAT IS LEAN STARTUP? - SESSION 5

  1. 1. www.solvayentrepreneurs.be WHAT IS LEAN STARTUP? SESSION 5 (out of 10) LEAN ENTREPRENEURSHIP This session is part of a 10-weeks course given to master students of the SOLVAY BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT by professor Olivier WITMEUR.
  2. 2. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR 2 •  The importance of assumptions •  How to test fast and cheap •  What is the ‘lean’ movement? A revolution in entrepreneurship? QUESTIONS AGENDA RESOURCES •  Back to Product-Market fit •  Introduction to Lean entrepreneurship •  Lean Canvas and dashboards •  Limitations of lean •  Why lean startup changes everything (HBR) Desired Outcomes of the Session
  3. 3. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR PRODUCT MARKET FIT #1
  4. 4. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Customer – Value Canvas 4 ?   ?   ?   ?   ?  ?   ?   ?   ?   ?   ?   ?   ?  
  5. 5. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Looking for product-market fit? Focus! B. Cooper, 2013 5
  6. 6. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR How to segment? •  Different level pain or passion •  Seek to solve problem differently •  Require different marketing •  Require different distribution •  Require different sales •  Not necessarily demographic-based •  … 6
  7. 7. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Select your customer segment (Segment matrix) Compare different segment in terms of –  Depth of pain –  Budget –  Market size –  Time to prototype –  Easiness to reach –  Fit with personal values –  … Rate: High/moderate/low 7
  8. 8. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR What are your hypothesis? 8 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?
  9. 9. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR LEAN ENTREPRENEURSHIP #2
  10. 10. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Why so many startups fail? •  Ignore customers •  No market need •  Need of business model •  Poor product •  Pricing issues •  Failure to adapt their offering / business model •  Rely to heavily on their (business) plan à Too much rigidity? 10
  11. 11. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Hot topic! 11
  12. 12. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR The new Gurus 12 STEVE BLANK ERIC RIES BRANT COOPER ASH MAURYA
  13. 13. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Lean Startup Movement Mindset “Life’s too short to build something nobody wants” - Eric Ries “Customers don’t care about your solution, they care about their problems” - Dave McClure “Bind a solution to your problem as late as possible” - Ash Maurya “It’s not the customer’s job to know what they want” - Steve Jobs “Given the right context, customers can clearly articulate their problems, but it’s your job to come up with the solution” - Ash Maurya “Remove any feature, process or effort that does not contribute directly to the learning you seek” - Eric Ries “A good design is one that changes customer behaviour for the better” - Eric Ries “Real learning comes from facts and commitment, not opinions and promises” - Eric Ries “Get out of the building” - Steve Blank “Startups that succeed are those that manage to iterate enough times before running out of resources” - Eric Ries “While ideas are cheap, acting on them is quite expensive” - Ash Maurya “Fail often and fail fast… in order to succeed soon.” “You waste if you don’t learn.“ 13
  14. 14. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR What is Lean Startup? Optimize efficiency in the discovery of customers and how to create value. Eliminate non value-add activities. Validated learning. Influenced by lean management, bootstrapping, agile product development methods, design thinking, qualitative market research methods… 14
  15. 15. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR The Lean Startup Cycle 15 BUILD MEASURE LEARN IDEA Value Creation & Business Model Hypotheses PRODUCT •  Basic tests •  Minimum Viable Product (MVP) •  Prototype •  Proof of Concept DATA Metrics PERSEVERE or PIVOT? * Adapted from E. Ries, Lean Startup, 2012 A pivot is a structured course correction designed to test a new fundamental hypothesis about the product, business model and engine of growth. (E. Ries)
  16. 16. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR BUILD - Minimum Viable Product “The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort” - Eric Ries 16
  17. 17. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR MVP vs. Prototype 17 •  Validate the market assumptions •  Can be different from the final product •  Must show the features to the potential customers and enables to gather information from the market •  Verify technical assumptions •  Is a demonstration to potential investors/customers but is not launched on the market. •  Nice if it can be built at minimum cost MVP PROTOTYPE
  18. 18. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Minimum Viable Product Types 18 •  Open interviews •  Pitch of a fake product: email, call, face-to-face… •  Low fidelity prototypes •  Mock-up •  Basic advertising campaign •  Like on Facebook, sign-up page… •  Landing page with call-to- action. •  Video, 3D, pictures … NEEDS / DEMAND PROOF OF CONCEPT VALUES / DRIVERS •  Wizard of Oz, Concierge… •  Interactive mock-up •  Video demo •  Actual prototype, Beta version … •  Partly implemented solution •  Full offering presentation: website, folder, PowerPoint… •  Letter of intent, pre-order… from customers •  Crowd funding campaign •  Offering, quote … from suppliers •  A/B testing, incl. for pricing strategy test, conversion rate… •  Real life marketing campaign Desirability   Feasibility   Sustainability   * Adapted from S. Montreuil, E&I 2013
  19. 19. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR MEASURE - Metrics Example of key assumptions –  Problem hypothesis: test if the product really create value to customers –  Customer hypothesis: test who is the customer and how he/she (re)act –  Growth hypothesis: test how new customers will discover the product, incl. funnel metrics Vanity vs. actionable metrics –  Vanity metrics: “good for feeling awesome”  –  Actionable metrics: “the only metrics that entrepreneurs should invest energy in collecting are those that help them make decisions” 3 A’s of metrics •  Actionable •  Accessible •  Auditable 19
  20. 20. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR LEARN - Persevere, Pivot or Abandon “A pivot is a structured course correction designed to test a new fundamental hypothesis about the product, business model and engine of growth” – Eric Ries 20
  21. 21. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Run test Building a Business with the Lean Approach 21 Prioritize Hyp. validated Hyp. rejected SCALE-UP STOP PERSEVERE Envision PIVOT Revision Set vision * Adapted from Eisenmann & al., HBS, 2 Create test - MVP / Experience - Market research - … Define hypotheses - Value proposition - Market sizing - Channels - Partnerships - …
  22. 22. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR MVP Examples Dropbox 2008 Lockitron (First 1000) Your case … from idea to real product 22
  23. 23. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR LEAN CANVAS AND DASHBOARDS #3
  24. 24. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Validation canvas (To be compared with your entrepreneurial course journal) 24
  25. 25. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Lean Canvas Ash Maurya, 2012 25 Solution((S) Top$3$features Unfair(Advantage( (UA) Can't$be$easily$ copied$or$bought Key(Metric((KM) Key$activity$you$ measure$ Channels((CH) Path$to$customers Problem((P) Top$3$problems Unique(Value( Propistion((UVP) Single,$clear,$ compelling$message$ that$states$why$you$ are$different$and$ worth$buying Customer(segments( (CS) Target$custmers$ (early$adopters) Cost(Structure((C$) Customer$acquisition$cost Distribution$costs Hosting People,$etc. Revenu(Streams((R$) Revenu$Model Life$Time$Value Revenue Gross$Margin
  26. 26. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Lean Dashboard Spark59.com 26
  27. 27. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Customer Development Brant Cooper / Steve Blank 27
  28. 28. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Lean Launchpad Steve Blank 28
  29. 29. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR LIMITATIONS OF LEAN #4
  30. 30. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Lean is good… but not magic. Beware the fad. •  In the past, it was called qualitative ‘market research’ •  Test with the customer… but who is the customer. Is she/he ready to play the game? •  Time consuming. Too much tests? •  Ability to build MVP? Costs? •  OK when you have many customer (mass market) but how to deal with very small market •  Reputation risk (with ‘crappy’ MVP) •  Confidentiality issues •  Pivot is trendy … but not a recipe for success. 30
  31. 31. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR The main steps towards your final project. 31 VALUE PROPOSITION BUSINESS MODEL ROADMAP Key activities, resources & partners Revenues model & costs structure Problem-Solution fit Product-Market fit Market sizing Competition Stages & milestones Get-Keep-Grow Risks & scenario FINANCE P&L, cash and balance sheet Financing CREATE TEST = BUILD MEASURE LEARN YOU
  32. 32. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR 32 NEVER STOP WONDERING & ASKING!
  33. 33. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR A real passion for entrepreneurship education and entrepreneurs. •  Student entrepreneurs: 2x •  Full time entrepreneur: once, in a team of 5 •  Coach: 500+ projects over the last 20 years •  (Advisory) Board member in multiple new ventures •  Policy making: 2x •  Director of Solvay Entrepreneurs •  PhD in entrepreneurship in 2008 •  … never as an investor My wife (as Colombo), no kids, one dog (Vicky). 33 Olivier Witmeur (Belgian, 46)
  34. 34. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Solvay entrepreneurs is the entrepreneurship center of the Université Libre de Bruxelles. We support entrepreneurs through the development of their venture, from an idea to a successful and sustainable business. 34 Solvay Entrepreneurs
  35. 35. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Let’s keep in touch! 352014%©%Olivier%Witmeur FOLLOW US ON LinkedIn.com/company/ Solvay-Entrepreneurs in Facebook.com/ SolvayEntrepreneurs f Twitter.com/ SolvayStart t SolvayEntrepreneurs.be www YouTube.com/user/ SolvayEntrepreneurs Foursquare.com/ SolvayStart

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