Ryan's Lean Startup Introduction


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My Failed Startup Lessons
Lean Startup Introduction

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  • Background:Mining for GoldJim is an engineer, recently retired. Joined up with some well-off friends to start a Lucrative business in gold mining.Jim’s company invested the limited funds they had in purchasing a quarry, large equipment & a building an expensive processing plant.
  • Background:This is some of the heavy equipment required to mine ore for gold.Company A is another mine which has been successful.100 years old, has lots of capital, lots of equipment, runs 24/7 nonstop – and hauls LOTS of oreChallenge:You might think Jim is making a killing. He’s mining for gold.Truth is – Jim and his investors are losing money every day.
  • What you might not know about mining ore for gold:Gold is invisible, microscopic… too small to see in the rocks. Gold is only fractions of a percent. Takes Really expensive operation to run63 TONS OF ROCK = 1 OZ OF GOLDMining & Processing is very expensiveStrip away Waste Rock(explosives, ore mining, massive trucks, crushing; processing plant: wash & separation, extremely hot furnaces, purify, pour)Only at the end of the process do you find – how much gold you were digging.Jim only had a few ounces of gold.Cause:Jim & his friends realized their assumptions about mining for gold were wrong.Spending lots of money & going nowhere.Jim is getting too much ore, not enough gold.Jim is digging in the wrong spot - but doesn’t know where to dig.Forced to Think Differently:Jim is constrained.He’s losing money, he’s got a small team, and running out of timeForced to either Innovate or Die.Innovation:Instead of digging to find the gold…Find the gold. Then dig.----Jim assumed he could do the same things that big companies do.Jim was wrong.Jim’s company is losing money every dayBig company can afford to lose money until they find gold.Small company can’t.
  • Hero:Jim and his team built an X-ray gun to test & find the highest value rocks – before investing in any digging.Jim now only digs the most valuable rocksFast Feedback allows him to find the value before investing resources.Jim’s return on investment is much higherFirst Test – Then Invest.
  • Targeted new customers, instead of existing customersDidn’t even have delete, sometimes not even rename.
  • We moved so fast…Our clients were selling to their clients using our Staging environment, not production environment!Biggest learnings:Dan was the User, not the Buyer. That’s why small agencies were early adopters – they had the user problem. Big agencies didn’t understand how we could help them. Until usage scenarios.Tried to scale too early. Wait to hire sales team until you can reproduce sales.
  • You may not see the crashes, because you tend to focus on the successes.There are a whole lot of rocket crashes going on - all around you.Heap of scrap metal & smoke
  • You see 10 bullet points.I see 5 years of my life.I used to be ashamed of the failure.In many ways - I thought I was a failure.Until I realized – the problem wasn’t me or my team.The problem wasn’t the PEOPLE.It was the PROCESS we’d applied.
  • Your Business IS the product. Businesses are bought and sold.
  • Each pitch is a customer pitch / sale attemptLOT more sales attempts using Lean Startup
  • Living document. Changes rapidly.
  • Cycle through learn loop as fast as possible.
  • Startups are ugly. Chaos. Must change things rapidly to find what works.
  • Key takeaway.
  • Only constant is – we’re losing money every day.
  • Much higher valuationTake on new investment to execute
  • Customer / Problem Fit
  • Be willing to listen.And be willing to be wrong.
  • One of Steve Blank’s healthcare startup students found they could charge 3x as much, by tapping into multiple budgets from multiple personas (sales budget, marketing budget)… was able to deliver value to both personas
  • “Hey mom I built something, what do you think?”Mom: “Oh, I just love it, my dear. I know you will be so successful.”YOUR MOM IS LYING TO YOU.People will try to please you.
  • Customer Segments, Ecosystem, & PersonasTop Goals & Challenges
  • Problem / Solution Fit
  • Usage Scenarios allow you to validate features, even before any demo.Find MINIMUM number of features which solve the customer’s problem.MVP = Minimum Viable Product = Minimum you must do to learn
  • Start removing features – and see if people still commit. Find the MINIMUM.
  • Product / Market Fit
  • 2 Growth engines: Paid & ViralI don’t count Sticky because retention is always important & describes how well you help the customer solve real problems.
  • Ryan's Lean Startup Introduction

    1. 1. Lean Startup Ryan D. Hatch February 2014 rdkhatch #LeanStartup
    2. 2. About Ryan  Co-Founder, Dynamis  Lean & Agile Coach  Recovering Developer  Helping teams accelerate business growth
    3. 3. How Not to Waste Your Life Provide Value to Others Higher Rates of Startup Success.
    4. 4. Meet Jim Story Time Gold Ore Mining
    5. 5. Jim Company B Story Time Company A
    6. 6. Gold is invisible. 63 tons of rock. Long, expensive process. only 1 oz gold Challenge: Must find rocks with highest value.
    7. 7. Jim Burnell holding his X-ray gun Fast Feedback. Before Investing.
    8. 8. Small teams can beat big teams Use Fast-feedback Innovation – To play by a new set of rules.
    9. 9. My Startup - Dynamis
    10. 10. My Startup Experience  After several startup failures, 4 co-founders  Started in 2009 - Help Employers Optimize Health Insurance Benefits  Early Success & Struggles. Had 5 early adopter customers.  Funded by Golden Angels, Spring 2012. CEO, CTO duo.  Product Owner – v2 Replatform – MVP for new customers  Customer Problem & Solution Interviews. Lost Sales Interviews.  Small, High-Impact Team  Focused on Return on Investment   Cash Burn Rate & Sales Transparency Customer Success kicking into gear “This will double my business in 1 year.” Customer success being featured at tradeshows
    11. 11. Customer Hack Actual Application Mockups How well would this solve your problem?
    12. 12. Customer Types in Product Lifecycle Customer Goal Crossing the Chasm, Geoffrey Moore
    13. 13. Why Lean Startup? Rockets, Risks, and Hockeysticks
    14. 14. 1.) Team builds an awesome product idea
    15. 15. 2.) Launch like Rockets & Hockeysticks
    16. 16. 3.) Dominate
    17. 17. Reality check. 90% of New Concepts Fail.
    18. 18. Don’t Make These Same Mistakes Startup Failures to Learn From
    19. 19. Myth: Build it. And they will come. Truth No business survives first contact with customers. You build it, and no one cares. Customers are often biggest risk. Not Technology. Product development is a discovery process. Sell before you Build.
    20. 20. No Proxies for Paying Customers  Successful people who believe in & mentor you  College Interns  Networking with other Entrepreneurs  Exceptional New Technology  Board of Director at National Realtor Association  Multiple Patent Applications  Board of Advisors at Wyndham Hotels  Business Plan  Partnering with 2x PhD’s  Multiple Pilot Programs  Building Talented Teams & Working Together  Busiest booth at trade shows  Creating New Products  Featured Articles in National magazines  Free Trials  Friends with top industry leaders  Beautiful marketing & UI  Awards in National publications
    21. 21. False Shadow Beliefs - Unspoken Reality Distortion Field  “We know what customers want”  “We can accurately predict the future”  “Executing the plan is progress”
    22. 22. Approaches to New Product Development
    23. 23. Uncertainty grows into Future
    24. 24. Long-term planning is… let’s just call it Guessing
    25. 25. Traditional New Products - Waterfall Business Model: Known Business Plan Raise Capital Solution: Known Requirements Design Development Testing Sales
    26. 26. Business Model: Unknown Solution: Unknown Agile Product Development ?
    27. 27. Business Model: Unknown Customer Development Solution: Unknown Agile Product Development
    28. 28. Lean Startup
    29. 29. What is a Startup?  Temporary organization  Searching for a Repeatable, Scalable Business Model  Environment of uncertainty  Not a small version of a large company  No VP of xyz  No Sales Department
    30. 30. You’re not building a Product You’re building a Business.
    31. 31. Key Benefits of Lean Startup  Process for startups to follow  Learn very fast what people will buy & use.  Start selling as soon as possible.  Eliminates Risk Early.  Uses data to seek truth & avoid opinions / politics  Get more Swings at bat.  Minimizes cash burn rate.  Scales at the right time.  Much higher rates of success.
    32. 32. Customer Development Customer Input Customer Sales & Usage Get to Customer Sales as fast as possible
    33. 33. Living Document
    34. 34. No Facts are inside your building The Answers are outside.
    35. 35. Run Science Experiments - To Learn as Fast as possible ramlijohn.com
    36. 36. Don’t Delay Failure. Test your Assumptions. Get to Business Failure Fast. And Learn what to Fix.
    37. 37. Ok, I get it. I want some. Most people just want to sound cool. Tired of Buzz words & Fluffy pictures? Stop using the Buzz words. Start applying Lean Startup.
    38. 38. Race to Learning
    39. 39. Breakeven Burndown Running out of Cash & Time $ Profit Burn Rate Death Time (Runway) * plus variable costs
    40. 40. Race to Scalable Business Model $ Scalable Business Model Burn Rate Death Time (Runway)
    41. 41. Multiple Funding Rounds $ Scalable Business Model Profit Burn Rate Death Time (Runway) * plus variable costs
    42. 42. Roadmap High Value Problem Solution Commitment Scalable Solution 10 Customers 100 Customers Scale Have I found customers with a problem worth solving? Are customers committed to my proposed solution? Have I developed a Scalable Business Model? Let’s throw money at this puppy custdevframework.com
    43. 43. High Value Problem Solution Commitment High Value Problem Have I found customers with a problem worth solving? Scalable Solution 10 Customers 100 Customers Scale
    44. 44. This is not about You. Get to know your Customers.
    45. 45. Discover Problems: Voice of the Customer  What are your goals for the next year?  What could make the biggest impact on accomplishing those goals?  What are the barriers you are encountering?  How are you solving today? Customer Goals Barriers / Problems
    46. 46. Ecosystem of Target Customer Understanding the customer Allowed 3X the Price!
    47. 47. Problem Interviews  Everyone is Lying to you - including your Mom!  The Mom Test = Would your mom tell you the truth?  Never talk about your solution ideas.  Ask specifics about the past.  Prioritize: Rank this problem more important / less important  What would a solution allow you to achieve? What impact value to business?  Have you tried to solve in the past? If so, How?  Was there a budget set?
    48. 48. Creative Problem Interviews Fake Ad
    49. 49. Gated Outcomes  12 Customers confirmed Problem  High Value Problem Ranked Problem as MUST HAVE Solution Commitment  Market is large & accessible enough. Scalable Solution 10 Customers 100 Customers Scale
    50. 50. High Value Problem Solution Commitment Solution Commitment What is the minimum proposed solution customers will commit to? Scalable Solution 10 Customers 100 Customers Scale
    51. 51. Solution Interviews 1. Problem Confirmation 2. Usage Scenarios = Feature Validation Event: Question: Player: Action: When asleep at night Would you & your family feel more safe If a device Monitored your home for carbon monoxide gas and woke you up in case of an emergency? 3. Demo - Low Fidelity MVP 4. How well would your problem be solved with this solution? 5. Pricing Never ask what people will pay! 6. Ask for Commitment!
    52. 52. Low-Fidelity MVP  Ad words + Landing Page MVP  Video MVP  Clickable Mockups MVP  App demo MVP  Wizard of Oz MVP  Concierge MVP  No code MVP  Pre-orders, Capture Commitments!  Start Removing Features!
    53. 53. Gated Outcomes  Quantified Problem Value to Buyer  Minimum Solution will solve Problem  Validated Pricing  5 Early Adopters committing to pay for it  Letters of Intent…. Pre-sales are even better!  High Value Problem Am I ready to COMMIT to making this go? Solution Commitment Scalable Solution 10 Customers 100 Customers Scale
    54. 54. High Value Problem Solution Commitment Scalable Solution Can I mold this into a Scalable Business Model? Scalable Solution 10 Customers 100 Customers Scale
    55. 55. Metrics that Matter
    56. 56. Continuous Delivery Development Production source: CollabNet
    57. 57. High-Fidelity MVP  Silent Launch  Split A/B Tests  Fake Door / Mock Features  Sales & Marketing Positioning  All aspects of Business Model
    58. 58. Innovation Accounting  Flow Metrics  # of Customer Interviews  # of Hypotheses Tested
    59. 59. Pivot, Persevere, or Reboot? Instant Messaging Plug-in The Point
    60. 60. Gated Outcomes  Paying customers (100+)  Sales Roadmap  Scalable Business Model High Value Problem Solution Commitment Scalable Solution Revenue per customer 10 Customers 100 Customers exceeds Customer acquisition cost Scale
    61. 61. Do This Tomorrow
    62. 62. Do this Tomorrow 1. Lean Canvas 2. Rank Highest-Risk Assumptions 3. Identify fastest test possible.
    63. 63. Scalable Business Launch Weekend
    64. 64. Test for Value. Then Execute.
    65. 65. Lean Startup Ryan D. Hatch February 2014 rdkhatch #LeanStartup
    66. 66. Myths of Product Development
    67. 67. Myth: We just need to hit Scale Truth Traffic & Hits are not a business. Premature scaling is the #1 cause of startup failure. Spending money faster cannot fix a business model. Product must be fit to Customer before scaling.
    68. 68. Myth: It’s all about Execution Truth Achieving Failure = Successfully executing a flawed plan. Startups don’t know enough to just execute.
    69. 69. Myth: I must be the Hero Truth Share your struggles. Transparency sets you free from the hero burden Builds Trust Team effort – Let’s solve this together. Be fair to employees & their families.
    70. 70. Lean Startup Ryan D. Hatch February 2014 rdkhatch #LeanStartup