Lean StartupHow to learn from Customers

Giles Farrowv2

Giles Farrow● Marketing Consultant for Software Companies● 25 years IT & Software Marketing● Company size 1-50,000 employees● Smarter, reliable way for software to succeed

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Before Lean StartupStartup Mythology

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Create Business PlanBrilliant idea in a garage

Build Team

Raise Funds

Massive Launch Execute Stealthily

World Domination

Lean Startup Entrepreneur & EngineerScientific approach to writing software, increasing quality and speedBetter software made little difference to business success

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Eliminate UncertaintyStartup =

● Don’t : Plan and Pontificate● Do: Experiment and Learn● Trust facts not opinions

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“a human institution designed to create a new product or service under conditions of extreme uncertainty”

Minimum Viable ProductMVP: Only solves core problem ● Don’t : Over-Engineer● Do: Get it into customers’ hands ASAPZero Product MVPs● Concierge or Wizard of Oz● Landing pages or fake buttons

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Validated LearningScientific Method● Hypothesis● Design experiment● Record data● Analysis● Validated learning● New hypothesis

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CanvasBusiness Model on 1 Page

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CanvasOne-page business planLiving documentMakes strategy accessibleBlueprint for pitching / marketing

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Exercise 1Complete canvas for your business / idea- 5 mins- Name- Date

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1 CustomerCustomer segments- be specific- real peopleEarly adopters- likely first

customers

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2 ProblemTop problems you solve for customers

Existing Alternatives- what do people do

now?

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3 Unique Value PropositionUnique Value Proposition- What’s different- What’s valuable

High-level Concept- (e.g. YouTube =

Flickr for videos)

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4 SolutionSolution- Brief- Factual

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5 ChannelsPath to reach customers- Direct- Indirect

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6 & 7 Revenue & CostsRevenue Streams- Sources of

revenue- Add-on services?Cost Structure- Fixed- Variable

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8 & 9 Metrics & AdvantageKey Metrics- Key numbers that

show business health / growth

Unfair Advantage- What’s hard to

copy or buy

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10 AssumptionsAssumptions- What facts does

your business model rely on?

E.g.- Demand- Price- Partners

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Example - UberHailo

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PROBLEM● Need quick private ad

hoc transport● Minimal waiting,

minimal hassle● Fare should be clear

and easy to pay

SOLUTION● Mobile app matches

passengers to nearest available driver

● App tracks route, calculates fare and handles payment.

UNIQUE VALUE PROPOSITIONYour own chauffeur summoned at the touch of a button.

UNFAIR ADVANTAGE● Expertise handling

local legislation and unions

CUSTOMER SEGMENTS● Busy professionals in

London, New York, Paris

● International business travellers

● Young urban nighttime social

Existing Alternatives● Hail taxi on street● Call taxi / minicab● Car hire / zipcar● Public transport

KEY METRICS● Drivers signed up● Customers >5 trips

HIGH-LEVEL CONCEPTTaxis re-imagined for the 21st century

CHANNELS● Billboard advertising

at taxi stands● Livery on cabs● PR

EARLY ADOPTERS● Looking for new things

to try● Enjoy mobile apps

Example - UberHailo

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COST STRUCTURE● £x Develop app● £x Operations staff & Phone provision● £x Marketing

REVENUE STREAMS● 20% of fares● Phone rental● Admin fees e.g. cancellations

● Customers willing to trust an app to handle payments

● Getting a taxi quickly is very important for customers

● Customer will register and install app in advance

● Customers will regularly use service

● Customers will recommend to friends

● Can attract publicity at low cost

● Can keep supply of drivers in balance with demand

● App will be easy enough to just use occasionally

● Drivers will adopt “new” technology

● Drivers will agree 20% rate

● Does not break local laws

● Visa / Mastercard will accept payments

ASSUMPTIONS

Canvas → Marketing

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PROBLEM● Need quick private ad

hoc transport● Minimal waiting,

minimal hassle● Fare should be clear

and easy to pay

SOLUTION● Mobile app matches

passengers to nearest available driver

● App tracks route, calculates fare and handles payment.

UNIQUE VALUE PROPOSITIONYour own chauffeur summoned at the touch of a button.

UNFAIR ADVANTAGE● Expertise handling

local legislation and unions

CUSTOMER SEGMENTS● Busy professionals in

London, New York, Paris

● International business travellers

● Young urban nighttime social

Existing Alternatives● Find a taxi● Call taxi / minicab● Car hire / zipcar● Public transport

KEY METRICS● Drivers signed up● Customers >5 trips

HIGH-LEVEL CONCEPTTaxis for the 21st century

CHANNELS● Billboard advertising

at taxi stands● Livery on cabs● PR

EARLY ADOPTERS● Looking for new things

to try● Enjoy mobile apps

What they are thinking about when looking for a solution

and what the competition is

Which customers to target

Canvas → Marketing

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PROBLEM● Need quick private ad

hoc transport● Minimal waiting,

minimal hassle● Fare should be clear

and easy to pay

SOLUTION● Mobile app matches

passengers to nearest available driver

● App tracks route, calculates fare and handles payment.

UNIQUE VALUE PROPOSITIONYour own chauffeur summoned at the touch of a button.

UNFAIR ADVANTAGE● Expertise handling

local legislation and unions

CUSTOMER SEGMENTS● Busy professionals in

London, New York, Paris

● International business travellers

● Young urban nighttime social

Existing Alternatives● Find a taxi● Call taxi / minicab● Car hire / zipcar● Public transport

KEY METRICS● Drivers signed up● Customers >5 trips

HIGH-LEVEL CONCEPTTaxis for the 21st century

CHANNELS● Billboard advertising

at taxi stands● Livery on cabs● PR

EARLY ADOPTERS● Looking for new things

to try● Enjoy mobile apps

Marketing campaigns / tactics

Brief factual description of what you actually do

e.g on home page

Headline or tagline - quickly grab attention

Canvas → Marketing

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PROBLEM● Need quick private ad

hoc transport● Minimal waiting,

minimal hassle● Fare should be clear

and easy to pay

SOLUTION● Mobile app matches

passengers to nearest available driver

● App tracks route, calculates fare and handles payment.

UNIQUE VALUE PROPOSITIONYour own chauffeur summoned at the touch of a button.

UNFAIR ADVANTAGE● Expertise handling

local legislation and unions

CUSTOMER SEGMENTS● Busy professionals in

London, New York, Paris

● International business travellers

● Young urban nighttime social

Existing Alternatives● Find a taxi● Call taxi / minicab● Car hire / zipcar● Public transport

KEY METRICS● Drivers signed up● Customers >5 trips

HIGH-LEVEL CONCEPTTaxis for the 21st century

CHANNELS● Billboard advertising

at taxi stands● Livery on cabs● PR

EARLY ADOPTERS● Looking for new things

to try● Enjoy mobile apps

How to measure marketing effectiveness

Possible way to build trust / credibility

ExperimentHow to get validated learning

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Riskiest Assumption = Core to business but least data

Riskiest Assumption

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● Customers willing to trust an app to handle payments

● Getting a taxi quickly is very important for customers

● Customer will register and install app in advance

● Customers will regularly use service

● Customers will recommend to friends

● Can attract publicity at low cost

● Can keep supply of drivers in balance with demand

● App will be easy enough to just use occasionally

● Drivers will adopt “new” technology

● Drivers will agree 20% rate

● Does not break local laws

● Visa / Mastercard will accept payments

UberHailo ASSUMPTIONS

Validated LearningScientific Method● Hypothesis● Design experiment● Record data● Analysis● Validated learning● New hypothesis

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Experiment Hypothesis

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Riskiest Assumptionriskiest = we have least datait is fundamental to viability

Getting a taxi quickly is very important for customers

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Customer / Problem Hypothesise.g. I believe [customer segment] has a significant problem achieving [goal / objective]

I believe young urban professionals out late in London for parties, nightclubs… desire a service that is comparable to taxis but finding a cab is much faster

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Problem / Solution Hypothesise.g. I believe this solution will result in [quantifiable outcome]

Experiment Test & Measure

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Test Methodthe least expensive way to test my assumption is to…

Hire a black cab Friday / Saturday night. Stand at back of taxi lines and offer to summon a cab instantly but it will cost 10% extra.

Success Criteriae.g. I will run experiment with X customers and Y will respond by...[It must be possible for test to fail]

10 of 50 young urban professionals queuing for a taxi pay extra 10% for instant cab, where expected wait time is at least 5 minutes.

Experiment Results

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Result 10 of 25 agreed. Police moved us on three times. People who declined were concerned about safety and legality. Cold / rain seemed to encourage most people.

Decision Data is conclusive - getting a cab quickly is an important factor. Should be used in marketing. Means need large pool of drivers to provide quick response

Learning Quick pickup importantSafety / legality are concernsAdverse weather will increase demand

Learn from CustomersHow to ask “good” questions

Learning from CustomersNormal Approach● Explain idea● Ask opinion● Would they buy?

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People lie all the time● Polite● Want to look good● Abysmal predicting

Customers hold the truth - the facts.We need a different way to learn.

Talk about their life, not your idea● Past not future● Fact not opinion● Specifics not general● Relaxed not questionnaire

Learning from Customers

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Mom TestA good question is one your mother could say “no” to

Exercise 2 - Customer Questions

● Select Riskiest Assumption related to customers really caring about the problem

● Write Customer / Problem Hypothesiso I believe [customer segment] has a

significant problem achieving [goal / objective]

● Write 5 Questions to ask Customer33

Good or Bad Question?

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Do you think UberHailo is a good idea?

Bad

Good or Bad Question?

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Would you sign up for UberHailo when it becomes available?

Bad

Good or Bad Question?

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How do you currently get taxis?

OK

Good or Bad Question?

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The last time you got a taxi, how did you get it?

Good

Good or Bad Question?

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When do you have a problem getting a taxi?

OK

Good or Bad Question?

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Tell me about the last time you had a problem getting a taxi.

Good

Good or Bad Question?

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What problems do you encounter when getting a taxi?

OK

Good or Bad Question?

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Tell me about a time when you had a big problem getting a taxi.

Good

Good or Bad Question?

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What have you tried to do about making it easier to get taxis?

Good

Good or Bad Question?

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Please help me understand why you...

Good

Good or Bad Question?

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How much would you pay for a taxi service you can summon quickly?

Bad

Good or Bad Question?

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How much did you spend on taxis last month?

Good

Good or Bad Question?

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What would you need to see before signing up?

OK

Good or Bad Question?

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Who else should I talk to?

Good

RecapWhat did we cover?

Recap● Eliminate uncertainty● Canvas, 1-page business model● Validated learning

o Hypothesiso Experimento Measure

● Learning from customers

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Resources● Slides, handouts at sm8.co/lean ● or email Giles g@sm8.coReading● Lean Startup Eric Ries● Running Lean Ash Maurya● The Mom Test Rob Fitzpatrick● The Lean Entrepreneur Brant Cooper

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