Startups often fail because founders confuse searching for a business model with executing one. To avoid failure, founders must structure their search with a business model canvas and treat its elements as hypotheses to be tested. They should get out of the building to formally test hypotheses with customers through a process called customer development. If hypotheses are disproven, founders should pivot the business model without crisis through changes informed by customer feedback.

1. 387 Million Ways For a Startup to Fail…and How to Avoid Them Steve Blank www.steveblank.com Twitter: sgblank

2. This Talk is Based On Business Model Generation Four Steps to the Epiphany Lean Startup

3. I Write a Blog www.steveblank.com

4. Startups Fail Because They Confuse Search with Execute

5. Scalable Startup Large Company >$100M/year What’s A Startup Search Execute Goal is to search for: unknown customer and unknown features

7. i.e. Product/Market fit- Repeatable sales model - Managers hired What’s A Startup? A Startup is a temporary organization used to search for a scalable and repeatable business model

8. Startups Fail Because They Execute When They Should Search

10. Repeatable sales model- Managers hired

12. Product/Market fit- Repeatable sales model - Managers hired

14. Cash Flow Statement

16. Viral coefficient

17. Customer Lifetime Value

18. Average Selling Price/Order Size

19. Monthly burn rate

21. Cash Flow Statement

23. Scalable

24. Price List/Data Sheets

26. Pricing/Feature unstable

27. Not yet repeatable

28. “One-off’s”

30. Scalable

31. Price List/Data Sheets

33. Feature Spec’s

34. Competitive Analysis

36. Feature Spec’s

38. Minimum Feature Set

39. Pivots

41. Waterfall Development

42. QA

44. Waterfall Development

45. QA

47. Continuous

48. Minimum Feature Set

50. Business Model Universe 387 Million Choices (9x9x9x9x9x9x9x9x9) choices

51. More startups fail from a lack of customers than from a failure of product development

52. Failure 1No Business Plan survives first contact with customers

53. You Need a Scientific Method to Search this Space

54. So,Structure the Searchwith a Business Model

55. CUSTOMER SEGMENTS which customers and users are you serving? which jobs do they really want to get done?

56. VALUE PROPOSITIONS what are you offering them? what is that getting done for them? do they care?

57. CHANNELS how does each customer segment want to be reached? through which interaction points?

58. CUSTOMER RELATIONSHIPS what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?

59. REVENUE STREAMS what are customers really willing to pay for? how? are you generating transactional or recurring revenues?

60. KEY RESOURCES which resources underpin your business model? which assets are essential?

61. KEY ACTIVITIES which activities do you need to perform well in your business model? what is crucial? 30

62. KEY PARTNERS which partners and suppliers leverage your model? who do you need to rely on?

63. COST STRUCTURE what is the resulting cost structure? which key elements drive your costs?

64. value proposition customer relationships key activities customer segments key partners cost structure revenue streams key resources channels 33 images by JAM

65. Any Business Model in 9 Boxes

66. Failure 2Assume Your Business Model is Correct

67. So,Realize They’re Hypotheses

68. 9 Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess

69. Failure 3There Are No Facts Inside Your Building

70. So,Formalize Testing Hypotheses Outside

71. Testing the Business Model =Customer Development

73. The Implementation is Agile Development

75. Customer Development The founders ^ Get Out of the Building

76. Customer DevelopmentThe Search For the Business Model Company Building CustomerDiscovery CustomerValidation Customer Creation Pivot

77. Customer Discovery CustomerDiscovery CustomerValidation Company Building CustomerCreation Stop selling, start listening Test your hypotheses Continuous Discovery Done by founders

79. Market Type

80. CompetitionTurning Hypotheses to Facts

82. Customer

83. User

85. Customer

86. User

88. Market Type

90. (Customer)

93. Customer

94. User

96. Market Type

98. (Customer)

101. Customer

102. User

104. Market Type

106. (Customer)

109. So,Pivots are Business Model Changes Without Crisis

111. Business Model changes without crisis

113. (Customer)

115. Market Type

117. Customer

118. User

121. So,Startups Are Built for Rapid Search

123. Minimum feature set speeds up cycle time

125. Assume your business model is correct

126. There are no facts inside your building

127. A mistaken hypothesis creates a crisis

129. Pivot ExamplePersonal Libraries Talked to 75 Customers in 8 weeks

130. Scalable Startup Transition Large Company Leadership Versus Management

131. Scalable Startup Transition Large Company Leadership Versus Management Search

132. Scalable Startup Transition Large Company Leadership Versus Management Build Search

133. Scalable Startup Transition Large Company Leadership Versus Management Build Execute Search

134. Why Startups Aren’t Run By Accountants

135. Inventor of the Modern Corporation Scalable Startup Transition Large Company

136. Inventor of the Modern Corporation Scalable Startup Transition Large Company Alfred P. Sloan

138. MIT Sloan School

139. Sloan Foundation

141. Founder of General Motors Scalable Startup Transition Large Company Billy Durant

143. Fired by board, starts Chevrolet

144. Regains control of GM

145. Fired by board, GM ~$3.6 billion** GM Net sales in 1921 $304.5M = $3.6 Billion today

146. Durant Versus Sloan Scalable Startup Transition Large Company