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Lean Startup Basics - Evidence Based Entrepreneurship
The document outlines essential principles of the Lean Startup methodology, emphasizing the importance of a business model over traditional business plans, fast learning loops for rapid iteration, and the necessity of validating assumptions through direct customer engagement. It highlights the concept of minimum viable products (MVPs) as a progression of tests rather than a final product, advocating for a focus on real user feedback. Key to success are metrics that matter, validating product-market fit, and maintaining an agile development approach.
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Lean Startup Basics - Evidence Based Entrepreneurship
- 1. Lean Startup Basics ©Are held by their respective owners, Eric Reis, Steve Blank, David Skok, Dave McClure and others Evidence-Based EntrepreneurshipTM By Kelly Schwedland kellys@elevateventures.com
- 2. ~Drew Houston, CEODropbox
- 3. Key Points 1. ABusiness Model, Not a Business Plan 2. Fast Learning Loops: Build-Measure-Learn 3. Business Model Validation: Get Out of the Building! 4. MVP - It’s Not What You Think 5. The Lean Startup Path
- 4. 1. A BusinessModel, Not a Business Plan
- 5. No business plan survivesthe first customer contact
- 6. If you buildit, they will not come.
- 7. 9 Out of10 Startups Fail!
- 8. • Building onInvalid Assumptions • Premature Scaling • Lack of Customers and Markets • Change Your Business Model at Scale • Run Out of Money The Path to Disaster
- 9. Discover a Business Model thatworks before you run out of Money and Time. (Nail it, then Scale it.) Your Job as an Entrepreneur:
- 10. Questions • Is thisproblem worth solving? • Who’s problem are you solving? • How are they solving it now? • Does anyone care about your solution? • Will they buy it? • How do you create value for your customers? • How will you grow? • What’s your unfair advantage? • What channels will you use to get to your customers? • What are your acquisition costs per customer? • What is the lifetime value of your customer? • What’s your unit cost model? Unit revenue model?
- 11. Enter the LeanStartup
- 12. 2. Fast LearningLoops
- 13. The “Lean Startup”Model
- 14. But this isstill Chaotic! • How can we organize these loops into an orderly process?
- 15.
- 16. Steve Blanks onlinecourse: udacity.com/course/ep245
- 17. 3. Business ModelValidation: (Get Out of the Building) The Lean Launchpad /I Corp Approach
- 18. Get Out ofthe Building Go To The Source Get Pupil Dilation (Not surveys or focus groups, Talk to customers)
- 19.
- 20. Key Partners Who areour Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform? Key Activities What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? Value Propositions What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Customer Relationships What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Customer Segments For whom are we creating value? Who are our most important customers? Key Resources Do our Value Propositions require?Distribution Channels, Customer Relationships, Revenue Streams? Channel Through which Channels do our Customer Segments want to be reached? Cost Structure What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? Revenue Streams For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues? Customer/Value Hypotheses ? ? ? ? ?? ?? ?
- 21. Customer Interviews • CustomerDemographics (Discover Subsegments) • Validate Their Top Three Problems • Discover New Problems • Rank the Problems • How Do They Solve Them Now? • Document existing workflow. 1 2 3 4 5 How to do customer interviews videos: http://vimeo.com/groups/204136/videos/
- 22. Solution Hypotheses Key Partners Whoare our Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform? Key Activities What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? Value Propositions What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Customer Relationships What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Customer Segments For whom are we creating value? Who are our most important customers? Key Resources Do our Value Propositions require?Distribution Channels, Customer Relationships, Revenue Streams? Channel Through which Channels do our Customer Segments want to be reached? Cost Structure What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? Revenue Streams For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues? Online model tool http://canvanizer.com/new/business-model-canvas
- 23.
- 24. Solution Interviews • RecapDemographics and Problem • Describe and Show Solution (don’t sell it!) • Does it Resonate? • What’s most important, what’s missing, what can you take away? • How do they find out about solutions to this problem? • Will they pay $X? 1 2 3 4 5 6
- 25.
- 26. Drill down to MinimumViable Product (MVP) 1 2 3 4 5 X X 6
- 27. 4. MVP -It’s Not What You Think!
- 28. More on MVP •Not one snapshot, but a progression of experiments • Early experiments have no product. • At some point, you need to start development. That’s where Agile comes in
- 29. Groupon: Wordpress Blog,Widget from The Point, PDF Coupons via email. Foursquare used Google Docs to collect customer feedback. No code, no maintenance. Grockit puts up a notify-me-when-you-release form on steroids. Auto e-commerce site uses manualation and flintstoning for their backend. Allicator uses Facebook ads: “Ditch Digger? Feeling spread thin? Click here to complete a survey and tell us about it.” ManyWheels uses Microsoft Visio to build clickable web demos for prospective customers. Cloudfire uses a classic customer development problem presentation. Example MVPs
- 30. Key Partners Who areour Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform? Key Activities What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? Value Propositions What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Customer Relationships What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Customer Segments For whom are we creating value? Who are our most important customers? Key Resources Do our Value Propositions require?Distribution Channels, Customer Relationships, Revenue Streams? Channel Through which Channels do our Customer Segments want to be reached? Cost Structure What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? Revenue Streams For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues? Continue Validating Hypotheses 7 8 1 4 23 5 9 6
- 31. Use Canvas Asa Weekly Scorecard Week 3 Week 2 Week 1 Useful tool for tracking weekly updates: https://www.launchpadcentral.com/
- 32. 5. The LeanStartup Path
- 33. Lean Startup: Two FastFeedback Loops
- 34.
- 35. Validate Business Model YouNeed to Get Here! Replicable/Scalable Fit: LTV/3 >= CAC You Are Here You’ve only just begun Metrics that Matter
- 36. Post Launch Goal: DecreaseCAC and Increase LTV
- 37. Post Launch Fast FeedbackLoops You have real users and precise usage data - Analyze it! (By cohort) Make small changes fast (hours, not weeks to get into production) When you make changes - A/B test (or multivariate w/ traffic.)
- 38. Get/Keep/Grow – CustomerRelationships Web/Mobile Products Metrics that Matter
- 39. Investment Readiness Level MktSize/Competitive analysis Complete first-pass canvas Problem/Solution Validation Low Fidelity MVP Experiments Validate Product/Market fit Validate right side of canvas Prototype High-Fidelity MVP Validate left-side of canvas Validate metrics that matter Friends and Family Angel investors Venture Capital None Validation Stage Investment Type
- 40. $1B+ Market? Scalable Solution? RecurringRevenue? Past Successes? Full team? (Hipster, Hacker, Hustler) Traction? Investment Interest Level
- 41. What Does TractionLook Like? *cost of acquisition is less than 1/3 lifetime value; $1 in, $3+ out Typical AngelList Investments $1M raise (2013) • Enterprise: 1000 seats @ $10/seat/mo., • Big Enterprise: 2 pilot contracts and some $ • Social: 100,000 downloads/signups • Marketplace: $50,000 revenue/mo. • E-Commerce: $50,000 revenue/mo. LTV > 3X CAC?
- 42. Common Mistakes • TooBroad a Segment • Not a Big Enough Problem • Surveys Instead of Interviews • Conflate Problems and Solutions • Confuse Users and Customers • Build Too Much (Fat Experiments) • Don’t Test Revenue Model Early Enough • Stop Experimenting When You Have Customers (No Metrics) • No UX and No Agile
- 43. Summary 1. A BusinessModel, Not a Business Plan 2. Fast Learning Loops: Build-Measure-Learn 3. Get Out of the Building! 4. MVP - It’s Not What You Think 5. The Lean Startup Path
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- 46.
- 47. Get/Keep/Grow – CustomerRelationships Physical Products
Editor's Notes
- #12 Business Model - ComplicatedMaking a Business work is a complicated thing. Rationale - how you create, deliver and capture value. It’s interrelated. There's lots of moving parts that need to work together. Usually, there's lot's of ways to approach it. [business model canvas]