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Lean Startup Essentials         #1




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




         Most startups fail from a lack of
              (paying) customers.
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




          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

                                                                                                                                                                                                                                                                                                                                                                                                     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/
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The Business Model Canvas - Example


 KP                      KA                         VP                       CR                      CS
                          LEGO has to                                           LEGO Factory
                           provide and                                        builds a Long Tail     Thousands of new,
                           manage the                 LEGO Factory           community around        customer designed
                        platform/ logistics            substantially         customers who are           kits perfectly
   Customers who                                   expands the scope          truly interested in   complement LEGO’s
                             that allow
   build new LEGO                                  of the off-the-shelf       niche content and       standard sets of
                       packaging/ delivery
  designs and post                                kit offering by giving     want to go beyond          blocks. LEGO
                       of customer made
     them online                                  LEGO fans the tools          off-the-shelf kits     Factory connects
                                sets
     become key                                   to build, showcase,                                  customers who
 partners generating                                and sell their own                               create customised
  content and value      KR                         custom designed          CH                      designs with other
                        LEGO has not yet                    kits                                      customers, thus
                         fully adapted its                                    LEGO Factory’s             becoming a
                          resources and                                      existence depends        customer match-
                       activities, which are                                 heavily on the Web     making platform and
                        optimised primarily                                        channel            increasing sales
                       for the mass market
                                                                             LEGO Factory aims to generate
  C$                                                             R$        small revenues from a large number
            The Factory leverages production                                of customer designed items. This
           and logistics costs already incurred                             represents a valuable addition to
              by its traditional retail mode                                   traditional high-volume retail
                                                                                         revenues.
Lean Startup Essentials       #1: The Lean Canvas




                The Lean Canvas
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.
RUNNING LEAN   5
Lean Startup Essentials             #1: The Lean Canvas




                          Product

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




                          Market

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




        Market <=> Product

        • Unique Value Proposition
        • Distribution & Marketing Channels
        • Key Metrics
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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   #2: Customer Discovery




                Part 2:
           Customer Discovery
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

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Lean Canvas Process and Examples

  • 1. Lean Startup Essentials #1 Part 1: Why? & Lean Canvas
  • 2. Lean Startup Essentials #1: Lean Startup Most startups fail from a lack of (paying) customers.
  • 3. Lean Startup Essentials #1: Lean Startup Startup: Temporary organization used to search for a repeatable and scalable business model. As defined by Steve Blank.
  • 4. 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.
  • 5. 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.
  • 6. Lean Startup Essentials #1: The Canvas Product is only 1 of the 9 critical aspects that make your company work.
  • 7. Lean Startup Essentials #1: The BM Canvas The Business Model Canvas
  • 8. 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.
  • 9. The Business Model Canvas - Example KP KA VP CR CS LEGO has to LEGO Factory provide and builds a Long Tail Thousands of new, manage the LEGO Factory community around customer designed platform/ logistics substantially customers who are kits perfectly Customers who expands the scope truly interested in complement LEGO’s that allow build new LEGO of the off-the-shelf niche content and standard sets of packaging/ delivery designs and post kit offering by giving want to go beyond blocks. LEGO of customer made them online LEGO fans the tools off-the-shelf kits Factory connects sets become key to build, showcase, customers who partners generating and sell their own create customised content and value KR custom designed CH designs with other LEGO has not yet kits customers, thus fully adapted its LEGO Factory’s becoming a resources and existence depends customer match- activities, which are heavily on the Web making platform and optimised primarily channel increasing sales for the mass market LEGO Factory aims to generate C$ R$ small revenues from a large number The Factory leverages production of customer designed items. This and logistics costs already incurred represents a valuable addition to by its traditional retail mode traditional high-volume retail revenues.
  • 10. Lean Startup Essentials #1: The Lean Canvas The Lean Canvas
  • 11. Lean Startup Essentials #1: The Lean Canvas Focused on Early-Stage integrates Problem/Solution fields
  • 12. 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.
  • 14. Lean Startup Essentials #1: The Lean Canvas Product • Solution • Cost Structure • Unfair Advantage
  • 15. Lean Startup Essentials #1: The Lean Canvas Market • Customer Segments • Problem • Revenue Streams (Pricing)
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  • 18. !"#$%&'()*+(,-./#'&"(0&1'&*/.! •  "#$%&'()*!! –  +,!-.!$!/'0112.1!&'$304%5!67(!89)60%(4!2)!67(!/'01! $96704!:72'(!67(!9)(4!2)!$!4($;(4,!! –  <,!-.!$!&7060!)7$42.1!)(4=28(5!67(!89)60%(4!2)!67(! )7$4(45!:72'(!9)(4)!$!4(=2(:(4)!>?$%2'@!$.;!?42(.;)A,! B0.(!2.!0.!&0))2/'(!($4'@!$;0&6(4)! •  C267!67()(!&40/'(%)!2.!%2.;5!1(6!%04(!)&(82D8!0.! 67(!89)60%(4!)(1%(.6,!E$440:!;0:.!67(! ;2)F.192)72.1!87$4$86(42)F8)!0?!@094!&40606@&28$'! 89)60%(4,!!"#$%"&'()*+(%,-%."%/(01(%21%(2$34% 2/"5.($%6%1".%2%72,1-.$(27%)#-."7($8%
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  • 20. Lean Startup Essentials #1: The Lean Canvas Market <=> Product • Unique Value Proposition • Distribution & Marketing Channels • Key Metrics
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  • 42. 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)
  • 43. 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
  • 44. 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
  • 45. Lean Startup Essentials #2: Customer Discovery Part 2: Customer Discovery
  • 46. 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.
  • 47. 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
  • 48. 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?”
  • 49. 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
  • 50. 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