From Idea to a Business

Getting from an Idea to a Business
Workshop 1: Discover your business model using the Lean Canvas
Rory Cawley rcawley@linkedin.com
http://ie.linkedin.com/in/rorycawleyAll based on Running Lean by Ash Maurya

TECHNICAL PRODUCT CONSULTING
Workshop aims
1. Understand what to do once you have a startup idea
2. Learn a systematic technique to reduce the risk of your startup
failing
3. Create a framework for your startup that can progress you further
LinkedIn © 2013 All Rights Reserved 2

What to do once you have a startup idea
LinkedIn © 2013 All Rights Reserved

You have a big idea, what’s next?
 Don’t waste any more time – let’s BUILD IT!

 Entrepreneurs love to create things
 This creative work will only last as long as there
is money in the bank
 When the money runs out that’s it!

 Life is too short building something no-one wants
– this is the top reason startups fail

Why is building successful products so hard?
 It’s a myth that a visionary entrepreneur just comes up with the
product and builds it to great applause from the market
 Startups who just focus on building their imagined product
mostly find there is a poor market fit and poor customer demand
 The result is very costly failure

Most Startups fail!
 Startups that are capable of changing their plan to eventually find
one that works before running out of resources have the best
chance of success
 Most initial plans FAIL

Facts versus opinions
 A strong vision is vital but it needs to be backed by facts not just
opinions

Vision backed by facts
 Initial vision is largely
a set of untested
assumptions
 To strengthen the
vision all
assumptions need
to be tested to
ensure the vision is
upheld with facts

Write down your initial vision

Share your vision with people

Understand the problem
“A problem well stated is a problem half-solved” – Charles Kettering
“Customers don’t care about your solution. They care about their
problems” – Dave McClure
You must figure out what
customers want and will
pay for as quickly and cost
effectively as possible

Learning from the customer
“It’s not the customer’s job to know what they want” – Steve Jobs
“If I had asked people what they wanted they would have said faster
horses” – Henry Ford
 In the case of Ford, the customer really had a problem with
transport speed and that was the problem Ford set out to solve

Learning as startup progress
 It’s up to you to help customers clearly spell out what their problems
are
 The customer isn’t expected to come up with a solution however!
 Instead of pitching your solution focus on learning from people –
customers, team members, advisors, investors
In fact, learning is the true
measure of progress for a
startup

Have enough runway to deliver your product
 Your startup can keep going as long as it has enough resources –
usually money
 Entrepreneurs pitch their idea (the solution) to internal
stakeholders or investors to get enough of a runway to deliver the
product
 However, people and especially investors don’t really care about
your amazing and innovative solution

What do investors care about?
 Investors want a return on investment so the first thing they seek
is evidence of traction, engagement with your customers or markets
 Investors want to know about your cost structures and revenue
streams (margins) or how you will build a scalable and profitable
business
 Investors care about what the market size is, how big is this
problem
 Investors worry about how easy it would be to keep other people
from just copying your business

Traction
 Internal stakeholders or investors care about traction more than
anything else
 Traction is the engagement of your product with customers
 Therefore before going to investors it’s best to start off with
customers

What do customers care about?
 Customers don’t care (that much) about the solution
 Customers buy products that solve the underlying problems they
have
 The way you tell customers about your product is through a well
crafted Unique Value Proposition (the promise)
 The UVP is the intersection of the customers top problems and
your solution
 The UVP starts the conversation, it should get you noticed – it
doesn’t close the deal
 Important to start by identifying who needs your solution the
most
 If you try to market to everyone then you market to no-one, start
with early adopters
 Price is very important for customers – the price of your product
needs to be in line with the value it brings

The solution versus the business model
 We’ve seen that a successful business needs to appeal to
customers and investors
 We saw that the entrepreneur needs to initially write out your
assumptions about:
– The top customer problems
– The unique value proposition
– The market size
– How to show traction
– What makes your idea difficult to copy
– Costs involved in running the company
– Price of the product
– The ways customers can find and buy your product
– And of course the amazing solution
 All the above can be covered by creating a business model
 The business model is the real product

What to do with the business model
 The initial working business model consists of a
bunch of assumptions
 The job of the entrepreneur is to
– systematically de-risk this business model over time
– through a series of conversations
– With
 Customers
 Internal team
 Competitors
 Investors
 Advisors
 The true benefit of the model is when it facilitates
learning from other people

One page format for your business model

Learn a systematic technique to reduce the risk of
your startup failing

The three stage approach

Stage 1: document your plan A on a lean canvas
 Divide and conquer
 Take the tough parts of creating a business
 Break them into smaller bits to make it more manageable
 Do a separate canvas for each possible customer segment
 A suggested order to fill in the boxes is on the canvas below
 Some of the models can be eliminated straight away

Stage 2: identify the riskiest parts of your plan
 Standard project management
 Start with the riskiest stuff first
 Avoid some last minute surprises as you approach deadline
 Test what’s riskiest in the business model vs. what’s easiest
 The riskiest part is often not the solution but the problem

Stage 3: systematically test your plan
 Test your assumptions going from highest risk to lowest risk
 Run experiments to test the assumptions and get answers
 Test multiple models in parallel
 At this stage some models might be prioritised on review of the
answers from certain customer segments
 Feedback the results to adjust the plan

Create a framework for your startup that can progress
you further

Creating a lean canvas for your startup step by step

Lean Canvas Example

The Problem – Customer Segment pair drives model
Problem
Top 3 Problems
Existing Alternatives
Customer Segments
Early Adopters

What’s unique about your product?
Unique Value Proposition
High-level concept

What features would solve the top problems?
Solution

Channels – getting your product to customers
Channels

Revenue Streams and Cost Structure
Revenue Streams Cost Structure

Key Metrics
Key Metrics

Unfair Advantage
Unfair Advantage

Where to next?

Lean Canvas:
Problem Solution Unique Value
Proposition
Unfair
Advantage
Customer
Segments
Cost Structure Revenue Streams
Key Metrics Channels
Date: Version Name:
name
12th May 2013 First brainstorm
Top 3 problems.
Top 3 features.
Single, clear, compelling
message that states why you
are different and worth
buying.
Can't be easily copied or
bought.
Target Customers.
Early Adopters:
Personas:
Activity that drives
retention/revenue.
Path to customers.
Customer Acquisition Costs
Distribution Costs
Hosting
People, etc.
Revenue Model
Lifetime value
Revenue
Gross Margin

From Idea to a Business

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