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S³Startup Strategy StuffDraft 0.3 – 24.11.2012                         Jan-Hendrik Adolphs                         T @twabou
Overview• This presentation is about frameworks, ideas  and ideologies about startup and ideation  strategies.• It gives a...
What is a startup?• A startup is a human institution that desires  to create value for customers in an  environment of hig...
Problem• Who are your customers and what prouct do they  need/want?• P/M vs. P/S fit
So why try it then? And how?• Because its fun, creative, challenging and  fulfilling! => And it‘s YOU!• There are strategi...
Big Picture   • Business Model Canvas* (Alexander Osterwalder)        – Visual presentation of end-to-end business model  ...
Other Frameworks•   Strategy Diamond•   Porters 5 Forces•   Porters Generic Strategies•   PESTIELD•   Bowman’s Strategy Cl...
•   Remember: Its mostly business internal stuff. Also consider external factors•   Work with it from right to left and ke...
Focus• CPS Hypothesis  – Who? Is there a customer & scalable market?  – Why? Is there a problem/need/desire that can be   ...
„Create something people love!“*• Compelling product that people love to use more than  once and recommend to others     m...
Economic Logic• A happy user..  – Is willing to pay for your product (revenue)  – Talks good about your product (referral)...
Source:http://www.businessmodelalchemist.com/2012/01/the-customer-value-canvas-v-0-8.html
Service Design Thinking• A multidisciplinary approach to design better  user-centered services/products• Service-dominant ...
Service Design Tools*• Always ask for the ultimate solution for a  customer – not the product (there is a  difference!) Ex...
How (not) to waste time…• You don’t want to build a product for a market  that does not exist or is not willing to pay for...
Customer Development vs. Product           Development• Why startups fail*: consistent vs. inconsistent  – Scalation befor...
Customer Development• Talk, listen, research, refine, talk, listen, research, refine … do,  refine … do, refine … tune, ta...
MVP• Minimum Viable Product = minimum set of  features of a product or service for that a user  is willing to pay (best is...
A-B / Split Testing• Marketing and product development term for  improving / refining a component  – Can be color of desig...
Pivots• Pivot: A switch from on X to another where X can  be a market, distribution channel, revenue  channel, partner, bu...
Startup Feedback Loop• Mantra: everything is  beta, get to market  asap for customer  feedback and refine• Continuous iter...
Funnel AnalysisYour goal:   Customer uses/orders   product/feature you are trying   to sell.Your task:– Visualize / separa...
Cohort Analysis• A cohort group is a group of people with  similar characteristics• Dont‘t just look at your usergroup as ...
How can You grow?1. increase new customers per month (obvious!)2. decrease churn rate2nd should be prio 1 because  – alrea...
Scaling customer considerations• Different kind of users  – Visitor, no use of product  – One-time-user, no retention, no ...
Measuring improvement over time• Look at # of new customers per period• NOT     # of total customersIncreased # of margina...
So how do I make money?• 7 basic revenue streams on the internet *,**  –   Service Sales            (skype)       scalable...
Basic Revenue Calculation•   M   Market Size (# of potential customers)•   m   Market Share (your estimate, compare with c...
So what about costs?• Fixed costs   –   Not dependent on size/number of business output   –   Capacity costs, Idleness cos...
Other Frameworks•   Strategy Diamond•   Porters 5 Forces•   Porters Generic Strategies•   PESTIELD•   Bowman’s Strategy Cl...
Strategy Diamond•   “Strategy is about what to do and what not to do”        Highlights choices and choice-gaps to str. Go...
Porters 5 Forces        Source:        http://www.mindtools.com/pages/article/newTMC_08.htm
Book Recommendations•   Business Model Generation•   The Lean Startup•   Four Steps to Epiphany•   The Startup Owner’s Man...
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Startup strategy1

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Startup strategy1

  1. 1. S³Startup Strategy StuffDraft 0.3 – 24.11.2012 Jan-Hendrik Adolphs T @twabou
  2. 2. Overview• This presentation is about frameworks, ideas and ideologies about startup and ideation strategies.• It gives a short introduction to: – Lean Startup – Business Modelling – Customer Development – Service Design
  3. 3. What is a startup?• A startup is a human institution that desires to create value for customers in an environment of high uncertainty and risk.• Therefore: – Test, iterate, try someting
  4. 4. Problem• Who are your customers and what prouct do they need/want?• P/M vs. P/S fit
  5. 5. So why try it then? And how?• Because its fun, creative, challenging and fulfilling! => And it‘s YOU!• There are strategies and frameworks that can lower the chance of failing and wasting your time … but it‘s a lot of work …
  6. 6. Big Picture • Business Model Canvas* (Alexander Osterwalder) – Visual presentation of end-to-end business model – Focuses on the internal of a business model (no PESTIELD**!) – Separated in creation and consumption side – Excelent for group discussion and brainstorming – Don‘t get to excited about massive planning, focus on few details and keep it high-level! A good foundation for business model discussion and enhancement with additional models / frameworks / tools* Business Model Generation (Osterwalder, A.; 2010) / http://www.businessmodelgeneration.com** External factors = political, economic, social, tax, international, ecological, legal, demographic (can bemission critical)
  7. 7. Other Frameworks• Strategy Diamond• Porters 5 Forces• Porters Generic Strategies• PESTIELD• Bowman’s Strategy Clock• SWOT/TOWS• These and more can be found at http://www.mindtools.com/pages/main/newMN_STR.htm(check back-up slides for few examples)
  8. 8. • Remember: Its mostly business internal stuff. Also consider external factors• Work with it from right to left and keep it simple• Start with customer segment and value proposition (or CPS)• Leave costs and revenues for the end
  9. 9. Focus• CPS Hypothesis – Who? Is there a customer & scalable market? – Why? Is there a problem/need/desire that can be solved? – How will we solve this? With what?• What you want is a product/service that serves a customer as a solution to a problem/need that is perceived as a desirable value-creation.
  10. 10. „Create something people love!“*• Compelling product that people love to use more than once and recommend to others make it contagious and sticky! activation / retention / referral• Product / market fit Right set of features (not more than necessary) for identified customer segment• Customer Value Canvas (Link) – Pain => Gain * Service design and entrepreneurial mantra
  11. 11. Economic Logic• A happy user.. – Is willing to pay for your product (revenue) – Talks good about your product (referral) – Sticks with your product (customer lifetime value up)
  12. 12. Source:http://www.businessmodelalchemist.com/2012/01/the-customer-value-canvas-v-0-8.html
  13. 13. Service Design Thinking• A multidisciplinary approach to design better user-centered services/products• Service-dominant logic (Stephen Vargo and Robert Lusch)* => There is no sole product or service, always look at product & service as one for better user experience! (gives you higher retention and refferal) Source: http://courses.ischool.berkeley.edu/i210/f07/readings/VargoLusch.pdf
  14. 14. Service Design Tools*• Always ask for the ultimate solution for a customer – not the product (there is a difference!) Explore it! – 5 Why‘s Root Cause Analysis – User Journey / User Day Walkthrough – Stakeholder Maps / Decision Maker Analysis – Customer Lifecylce Map – Design Scenarios ... Source: This is Service Design Thinking: Basics, Tools, Cases (Schneider, D.; Stickdorn, M.; 2011)
  15. 15. How (not) to waste time…• You don’t want to build a product for a market that does not exist or is not willing to pay for your product.• Gather feedback from customers as early as possible.• Iterate as often as possible in small measurable steps.• Customer Development vs. Product Development
  16. 16. Customer Development vs. Product Development• Why startups fail*: consistent vs. inconsistent – Scalation before proven CPS / MVP / business modell – Waste time on product development instead of unterstanding customers Source: http://visual.ly/why-startups-fail
  17. 17. Customer Development• Talk, listen, research, refine, talk, listen, research, refine … do, refine … do, refine … tune, talk, tune … profit• Steve Blank: 4 Phases – Customer Discovery – Customer Validation – Customer Creation – Business Creation• Its all about product / market fit and proving assumptions / hypothesis• Don’t burn marketing/sales budget on unproven products Source: http://www.amazon.com/The-Four-Steps-Epiphany-Successful/dp/0976470705
  18. 18. MVP• Minimum Viable Product = minimum set of features of a product or service for that a user is willing to pay (best is money, time also good for hypothesis validation hint)• Philosophy: Adress only one specific problem that is solved by your solution for províng your problem / solution hypothesis• 80:20 rule -> spent 80% of your time on existing features and 20% on new ones
  19. 19. A-B / Split Testing• Marketing and product development term for improving / refining a component – Can be color of design element, wording, feature, tag• Two alternatives run and tested at the same time by the same targeted audience• Whichever shows better results will be used in the future• The other one is abandoned (BUT not forgotten!) validated learning
  20. 20. Pivots• Pivot: A switch from on X to another where X can be a market, distribution channel, revenue channel, partner, business modell, etc• Generally a replacment or change of a larger business modell component• Often occurs when a business model doesn‘t seem to be working or other option is more profitable or customer oriented
  21. 21. Startup Feedback Loop• Mantra: everything is beta, get to market asap for customer feedback and refine• Continuous iterative process for product refinement to achieve and enhance product/market fit• One change per iteration so you don‘t mess up cause and effect• Keep changes small and effects measurable (right KPI!) Source: http://blog.octo.com/5-bonnes-raisons-de-deployer-en-continu/
  22. 22. Funnel AnalysisYour goal: Customer uses/orders product/feature you are trying to sell.Your task:– Visualize / separate process steps on getting there– Use available tools to track user journes, e.g. KISS metrics Maximize step-to-step conversion and minimize drop-rate Understand what is important to Source: customer and what is not => http://www.volacci.com/blog/ben- finklea/2010/february/08/social-web-analytics- simplify (don‘t make customer part-1
  23. 23. Cohort Analysis• A cohort group is a group of people with similar characteristics• Dont‘t just look at your usergroup as a whole but at subgroups at different stages of their lifecycle http://blog.kissmetrics.com/wp- content/uploads/2012/01/cohort- analysis.png
  24. 24. How can You grow?1. increase new customers per month (obvious!)2. decrease churn rate2nd should be prio 1 because – already using your product so no additional COAcq – and this seems to be your target market – and (once again) you want a compelling/sticky product=> Once you achieved product/market fit and decreased churn rate go back to 1 => SCALE!
  25. 25. Scaling customer considerations• Different kind of users – Visitor, no use of product – One-time-user, no retention, no referral – X-time-user, low retention, no referral – X-time-user, high retention, no referral – X*Y-time-user, retention, referral => You want the last type for scaling your business for exponential growth (viral! = free marketing) Source: http://www.seedcamp.com/resources/startup-metrics-for-pirates-by-dave-mcclure
  26. 26. Measuring improvement over time• Look at # of new customers per period• NOT # of total customersIncreased # of marginal customers tells you if youriteration was good for your businessIt‘s nice to increase your total # of customers butyou want to find out if a certain product change isworth keeping or reverting to original.
  27. 27. So how do I make money?• 7 basic revenue streams on the internet *,** – Service Sales (skype) scalable? – Retail (amazon) warehouse/returns? – Subscription (WOW) compelling offering? – Commission (ebay) side deals/rate? – Ads (google) annoying? – License Sales (apple) quality content – Financial (still emerging) trust• Freemium and 5/95 rule – On the internet it is possible to create a sustainable business with only 5% of paying customers (-> the long tail) • Combinations and derivates possible • Source: Simply Seven: … (Schlie, E et al, 2011)
  28. 28. Basic Revenue Calculation• M Market Size (# of potential customers)• m Market Share (your estimate, compare with competition)• X Purchases per Period (month, year, day?)• Y Periods (how often will one customer buy)• P Price R=m*M*X*Y*P (very basic but a quick and dirty way to show revenues)(when calculating revenue over time consider churn rate of 25%)
  29. 29. So what about costs?• Fixed costs – Not dependent on size/number of business output – Capacity costs, Idleness costs, step costs – Necessary for keeping the business operable at a minimum scale – E.g. rent, administrative/general expenses, long term wages• Variable costs – Dependent on size/number of business output – Economics of scale – E.g. material, wages, traffic, storage, short term wages• Generally C = Cf + n * Cv – Where Cf = sum of fixed costs and Cv = variable costs per business output
  30. 30. Other Frameworks• Strategy Diamond• Porters 5 Forces• Porters Generic Strategies• PESTIELD• Bowman’s Strategy Clock• SWOT/TOWS• These and more can be found at http://www.mindtools.com/pages/main/newMN_STR.htm• Following are a basic complement to BMC
  31. 31. Strategy Diamond• “Strategy is about what to do and what not to do” Highlights choices and choice-gaps to str. Goals• Arenas: Where will we compete? (external environment) – Products, customer / geographic market, technologies, value creation stages• Vehicles: With what we get there? (ratio internal activities /partners) – Internal development, JV / M&A• Differentiators: Why will WE be successful? – UVP, value prop, brand, price, customization• Staging & Pacing: How will we get there? What’s our actionplan? – Sequence and speed of strategy implementation, decision points• Economic Logic: R – C = $$$ – Lowcost (scale/scape), premium price (service quality / product features) Sources: http://www.strategyhub.net/2012/07/framework-of-week-84-strategy-diamond.html http://www.provenmodels.com/598/strategy-diamond/donald-c.-hambrick--james-w.-fredrickson/ http://www.nwcor.com/NWCOR/Content/Readings/Chapter%2013-%20Strategy-%20AME%20CLassic.pdf
  32. 32. Porters 5 Forces Source: http://www.mindtools.com/pages/article/newTMC_08.htm
  33. 33. Book Recommendations• Business Model Generation• The Lean Startup• Four Steps to Epiphany• The Startup Owner’s Manual• The Tipping Point• From Good to Great• Don’t make me think• This is Service Design Thinking• Venture Deals: Be smarter than your lawyer and VC

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