Downloaded 512 times
Uploaded byStanford University
Why fighter pilots run startups
This document discusses the differences between startups and small businesses, and outlines the customer development process that startups should follow to search for a viable business model. It notes that most startups fail due to a lack of customers, not due to product failures, and that founders are often wrong in their assumptions about what customers want. It advocates getting out of the building to test hypotheses with real customers from the beginning, rather than following a traditional product development model and then hiring marketing to create demand.
More Related Content
Similar to Why fighter pilots run startups
More from Stanford University
Why fighter pilots run startups
- 1. Why Fighter PilotsRun StartupsSteve BlankStanford - School of EngineeringU.C. Berkeley - Haas School Of Businesswww.steveblank.comTwitter: sgblank
- 2.
- 3. I Drew ThisCustomerDiscoveryCompany BuildingCustomerValidationCustomer CreationPivot
- 4. I Called It:CustomerDevelopmentCustomerDiscoveryCompany BuildingCustomerValidationCustomer CreationPivot
- 5.
- 6. I Write aBlog www.steveblank.com
- 7.
- 8. Not All StartupsAre Equal
- 9.
- 10. Small BusinessStartup- Business Model found- Profitable business Existing team< $10M in revenueSmall Business Startups
- 11. Small BusinessStartup- BusinessModel found- Profitable business Existing team< $10M in revenueSmall Business Startups97% of all companies in Israel are small businesseshttp://www.milkeninstitute.org/pdf/israel_small_business_0105.pdf
- 12. Small Business Startup:InternetEditionSmall BusinessStartup- Business Model found- Profitable business Existing team< $10M in revenueThe Internet allows a new class of Small Businesses
- 13. Not all businesseson the Internet are “Scalable Startups”Large Company Sustaining InnovationSustaining InnovationTransitionScalableStartupLarge Company Existing Market
- 14. Incremental improvementsLargeCompany Disruptive InnovationNew DivisionTransitionLarge CompanyDisruptive Innovation New Market
- 15. New tech,customers, channelsScalableStartupLarge Company>$100M/yearScalable Startup
- 16. ScalableStartupLarge Company>$100M/yearTotal AvailableMarket > $500m
- 17. Company cangrow to $100m/year
- 18. Business modelfound
- 19. Focused onexecution and processScalable Startup
- 20. ScalableStartupLarge Company>$100M/yearTotal AvailableMarket > $500m
- 21. Company cangrow to $100m/year
- 22. Business modelfound
- 23. Focused onexecution and process
- 24. Typically requires“risk capital”Scalable Startup In contrast a scalable startup is designed to grow big
- 25. Typically needsventure (risk) capital
- 26. What SiliconValley means when they say “Startup”Very Different Startup GoalsSmall BusinessStartup- Business Model found- Profitable business Existing team< $10MScalableStartupLarge Company Total Available Market > $500m
- 27. Company cangrow to $100m/year
- 28. Business modelfound
- 29. Focused onexecution and process
- 30. Typically requires“risk capital”Venture Firms Invest in Scalable StartupsSmall BusinessStartupScalableStartupLarge Company
- 31.
- 32. i.e. Product/Marketfit- Repeatable sales model- Managers hiredWhat’s A Startup?A Startup is the organization used to search for a scalable business model
- 33. What VC’s Don’tTell You:The TransitionScalableStartupTransitionLarge CompanySearchBuildGrow
- 34. What VC’s Don’tTell You:The Transition – Founders LeaveScalableStartupTransitionLarge CompanyFounders depart
- 35.
- 36.
- 37. Beginning ofscalePlan versus Model
- 38. No Business Plansurvives first contact with customers
- 39. So Search fora Business Model
- 40. The Search fora Business ModelA Business Plan is static
- 41. A Business Modeldiagrams how a company creates, delivers and captures value – it’s dynamic
- 42. Or inEnglish: How a company makes moneyEmphasis On Hypotheses Testing
- 43. Startups Continually Pivot(Iterate)
- 44.
- 45. Startups Search andPivotThe Search for the Business ModelScalableStartupTransitionLarge CompanyBusiness Model found
- 46. i.e. Product/Marketfit- Repeatable sales model- Managers hired
- 47. Startups Search, CompaniesExecuteThe Execution of the Business ModelThe Search for the Business ModelScalableStartupTransitionLarge Company- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 peopleBusiness Model found
- 48. Product/Market fit-Repeatable sales model- Managers hired
- 49. Metrics Versus AccountingTheExecution of the Business ModelScalableStartupTransitionLargeCompanyTraditional AccountingBalance Sheet
- 50. Cash FlowStatement
- 51. Income StatementMetricsVersus AccountingThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyStartup Metrics Customer Acquisition Cost
- 52.
- 53. Customer LifetimeValue
- 54. Average SellingPrice/Order Size
- 55. Monthly burnrate
- 56. etc. Traditional Accounting Balance Sheet
- 57. Cash FlowStatement
- 58. Income StatementCustomerValidation Versus SalesThe Execution of the Business ModelScalableStartupTransitionLargeCompanySalesSales Organization
- 59.
- 60. Price List/DataSheets
- 61. Revenue PlanCustomerValidation Versus SalesThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyCustomer Validation Early Adopters
- 62.
- 63. Not yetrepeatable
- 64.
- 65.
- 66. Price List/DataSheets
- 67. Revenue PlanCustomerDevelopment VersusProduct ManagementThe Execution of the Business ModelScalableStartupTransitionLarge CompanyProduct Management Delivers MRD’s
- 68.
- 69. Competitive AnalysisCustomerDevelopment Versus Product ManagementThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyProduct Management Delivers MRD’s
- 70.
- 71. Competitive AnalysisCustomerDevelopment Hypothesis Testing
- 72.
- 73. PivotsEngineering VersusAgile DevelopmentThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.
- 74.
- 75.
- 76. Tech PubsEngineeringVersus Agile DevelopmentThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.
- 77.
- 78.
- 79. Tech PubsAgileDevelopment Continuous Deployment
- 80.
- 81. Self OrganizingTeams
- 82.
- 83. PivotsStartups Model,Companies PlanThe Execution of the Business ModelScalableStartupTransitionLarge Company Plan describes “knowns”
- 84. Known featuresfor line extensions
- 85.
- 86. Known businessmodelStartups Model, Companies PlanThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyUnknown customer needs
- 87.
- 88. Unknown businessmodel
- 89. Model foundby iteration
- 90. Plan describes“knowns”
- 91. Known featuresfor line extensions
- 92.
- 93. Known businessmodelStartups Don’t Last ForeverScalableStartupTransitionLarge Company- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 people Business Model found
- 94. Product/Market fit-Repeatable sales model- Managers hiredYou failif you remain a startup!
- 95. Customer Risk VersusTechnology Risk
- 96. Industry Affects Typeof RiskWeb 2.0
- 97.
- 98.
- 99.
- 100.
- 101.
- 102.
- 103.
- 104.
- 105.
- 106. Med Dev /Health Care
- 107. Life Science /Biotech
- 108.
- 109.
- 110.
- 111.
- 112.
- 113.
- 114.
- 115.
- 116.
- 117.
- 118.
- 119. Med Dev /Health Care
- 120. Life Science /Biotech
- 121. Personalized MedicineCustomer RiskLargeCompanyTransition
- 122. Technology Unknown, CustomersKnownWeb 2.0
- 123.
- 124.
- 125.
- 126.
- 127.
- 128.
- 129.
- 130.
- 131.
- 132. Med Dev /Health Care
- 133. Life Science /Biotech
- 134.
- 135. Technology and CustomersUnknownWeb 2.0
- 136.
- 137.
- 138.
- 139.
- 140.
- 141.
- 142.
- 143.
- 144.
- 145. Med Dev /Health Care
- 146. Life Science /Biotech
- 147. Personalized MedicineCustomer andTechnology Risk
- 148. Rewards Differ byIndustryWeb 2.0
- 149.
- 150.
- 151.
- 152.
- 153.
- 154.
- 155.
- 156.
- 157.
- 158. Med Dev /Health Care
- 159. Life Science /Biotech
- 160.
- 161. Huge payoff inbiotech for solving technology problem
- 162. In other industriesyou’re giving away your hard workTechnology Risk
- 163. Rewards Differ byIndustryWeb 2.0
- 164.
- 165.
- 166.
- 167.
- 168.
- 169.
- 170.
- 171.
- 172.
- 173. Med Dev /Health Care
- 174. Life Science /Biotech
- 175. Personalized MedicineCustomer RiskNopayoff in Web 2.0 until you solve the customer riskTechnology Risk
- 176. How Do StartupsSearch For A Business Model? The Search is called Customer Development
- 177. The Implementationis called Agile DevelopmentThe Lean Startup The Search is called Customer Development
- 178. The Implementationis called Agile DevelopmentCustomer Development
- 179. Solving For CustomerRisk:Customer Development
- 180. Solving For CustomerRisk:Customer DevelopmentGet the Hell Out of the Building
- 181. Solving For CustomerRisk:Customer DevelopmentGet the Hell Out of the BuildingCountry
- 182. More startups failfrom a lack of customers than from a failure of product development
- 183. Then why dowe have:process to manage product development?
- 184. Then why dowe have:process to manage product development?no process to manage customer development?
- 185. Because:The smarter thefounders the more likely, “I know what customers want”Usually wrongUsually come from military intelligenceStartups are not an intelligence test
- 186. Product Development ModelConcept/SeedRoundProduct Dev.Alpha/Beta TestLaunch/1st Ship
- 187. Tradition – HireMarketingConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing
- 188. Tradition – HireSalesConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Organization
- 189.
- 190. Hire 1st Sales StaffSales
- 191. Tradition – HireBus DevelopmentConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Channel / Distribution
- 192.
- 193. Pick distribution ChannelSalesBusiness Development Hire First Bus Dev
- 194. Do dealsfor FCSTradition – Hire EngineeringConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Channel / Distribution
- 195.
- 196. Pick distribution ChannelSalesBusiness Development Hire First Bus Dev
- 197. Do dealsfor FCSEngineering Write MRD
- 198.
- 199.
- 200. Tech PubsProduct DevelopmentConcept/Bus.PlanProduct Dev.Alpha/Beta TestLaunch/1st Ship+CustomerDevelopmentCompanyBuildingCustomerDiscoveryCustomerValidationCustomer CreationCustomer Development
- 201. Customer DiscoveryCustomerDiscoveryCustomerValidationCompanyBuildingCustomerCreationStop selling,start listeningTest your hypothesesContinuous Discovery
- 202. Customer ValidationCustomerDiscoveryCustomerValidationCustomer CreationCompanyBuildingPivotRepeatableand scalable business model?
- 203.
- 204. Pivot back toDiscovery if no customersThe Pivot The heart of Customer Development
- 205.
- 206. Fast, agile andopportunisticSo What Does Engineering Do?
- 207. Traditional Product DevelopmentUnitof progress: Advance to Next StageWaterfallRequirementsDesignProblem: knownSolution: knownImplementationVerificationMaintenanceSource: Eric Rieshttp://startuplessonslearned.blogspot.com
- 208. When the CustomerProblem is Known“Product Owner” or in-house customer Problem: KnownSolution: UnknownSource: Eric Rieshttp://startuplessonslearned.blogspot.com
- 209. Agile - CustomerProblem is KnownUnit of progress: a line of working code“Product Owner” or in-house customer Problem: KnownSolution: UnknownSource: Eric Rieshttp://startuplessonslearned.blogspot.com
- 210. When the CustomerProblem is UnknownProblem: UnknownSolution: UnknownSource: Eric Rieshttp://startuplessonslearned.blogspot.com
- 211. Customer Problem isUnknownUnit of progress: learning about customersProblem: UnknownSolution: UnknownSource: Eric Rieshttp://startuplessonslearned.blogspot.com
- 212.
- 213.
- 214.
- 215. ScalableStartupTransitionLarge CompanyLeadership VersusManagementSearch
- 216.
- 217.
- 218. Why Fighter PilotsRun Startups
- 219. No Surprises inan AirlineScalableStartupTransitionLarge CompanyScheduled Airline Scheduled
- 220.
- 221. Burn ratepreplannedAir-Air Combat is Constant SurpriseScalableStartupTransitionLarge CompanyAir-Air Combat Uncertain environment
- 222. Rapid, unanticipatedchanges
- 223. Changes leadto disorientation
- 224. Burn rate(time, fuel, bullets, $’s)limits window of opportunityObserve, Orient, Decide and Act:OODA LoopJohn Boyd
- 225. Observe, Orient, Decideand Act:OODA LoopAgility requires continuous interactions with the environment
- 226. Winning requires constantassessment of change and ways to mitigate risk
- 227. Iterating faster thancompetitors yields substantial advantage = Victory
- 228. 86Boyd’s OODA LoopObserveOrientDecideActImplicitGuidance&ControlImplicitGuidance& ControlUnfoldingCircumstancesCulturalTraditionsObservationsGeneticHeritageDecision(Hypothesis)Analyses &SynthesisAction(Test)FeedForwardFeedForwardFeedForwardNewInformationPreviousExperienceOutsideInformationInteractionWithEnvironmentInteraction w/Environment
- 229. Customer Development =OODA LoopObserveOrientActDecide
- 230. OODA Loop isNot an Intelligence TestIt’s about Agility
- 231.
- 232. It’s not aboutwinning arguments inside the company
- 233. Fighters pilots vs.military intelligenceWarfare (Startups) Changes Forever
- 234.