The Basics of Lean Startup

Todd Strother, PhD

UW-Extension: Business and Entrepreneurship

The Center for Technology Commercialization

Build

Measure

Learn

Introductions

•Developer and Program manager of SBIR Advance, and teaching team member for Ideadvance•Assisted over 40 companies through Lean Startup learning

• Two grants: $25K & $50K grants• Faculty, staff, student ‘treps

(excludes UW-Madison)• Licensed tech from WiSys or

UWMRF• www.uwideadvance.org

• Up to $75K in grants• Match current Stage 1 and/or

Stage 2 SBIR/STTR funding• www.wisconsinsbir.org

Goals and Objectves

•Learn what Lean Startup is, and isn’t

•Show where Lean Startup is being used

•Compare Lean Startup to conventional practices

•Become familiar with Business Model Canvas tool

•Recognize Minimal Viable Products and their value

• A method primarily for software startups.

• Lean Startup is the business model canvas.

• Lean Startup focuses on getting companies to fail fast.

• You can learn Lean Startup by reading Steve Blank and Eric Ries books or watching videos

Well, there’s only two of us, so we are running pretty “Lean”

Yes, I’ve worked in Lean manufacturing and have “Lean Six Sigma” Certification

What is Lean Startup? (have you heard these?)

What is Lean Startup?

Process to identify, prioritize and test your most critical business model assumptions to reduce risk.

Process to identify, prioritize and test your most critical business model assumptions to reduce risk.

What is Lean Startup?

Process to identify, prioritize and test your most critical business model assumptions to reduce risk.

Process ideal for innovative concepts where the market opportunity (product/market fit) are

unknown or uncertain

Why Lean Startup

• Data-driven approach to entrepreneurship

• Way to visualize and organize activities

– To easily learn

– Make changes quickly

• Scalable and effective

• Customizable

The heart of Lean Startup--

Application of the Scientific Method to Business

• Set up and RECOGNIZE your hypotheses

• Test them

– By collecting Data

– INTERVIEWS!!

• Revisit/change/pivot to new hypothesis

Goals and Objectves

•Learn what Lean Startup is, and isn’t

•Show where Lean Startup is being used

•Compare Lean Startup to conventional practices

•Become familiar with Business Model Canvas tool

•Recognize Minimal Viable Products and their value

Lean Startup is Taking Hold

Established Companies

Innovative Companies

Colleges and Universities

Lean Startup is Taking Hold

Federal Government

• NSF• NIH• NASA• Dept of Energy

Lean Startup is Taking Hold

Goals and Objectves

•Learn what Lean Startup is, and isn’t

•Show where Lean Startup is being used

•Compare Lean Startup to conventional practices

•Become familiar with Business Model Canvas tool

•Recognize Minimal Viable Products and their value

What people want their business to do

Idea Research Prototype Product

IDEA BUSINESS

IDEA BUSINESS

This is a startup path

This is a not a startup path

What really happens

Failure

“Forget” about Market Track

Parallel Market Track

Customer Research PM Fit Validation

Idea Research Prototype Product

What we hope becomes reality

The Many Things to Learn

• What is my target market? • How big is my target market?• Do I know how this market works?• Do I understand the market

barriers?• Do I truly understand what my

customer needs?• How much better than my

competition do I have to be to attract customers?

• What are the customer acquisition costs?

• What are the channels?• What are my get, keep, grow

customer strategies?

• Do I know all the costs?• Do I know that customers want to

buy what I have to offer? • Do I know how much they will

really pay?• Will that pricing model work for my

business model?• What key resources do I need to

have?• Who are my key partners?• Do I know my key activities?• Who do I need to have on my

team?

No Business Plan survives first contact with customers

You were so preoccupied with whether you could, that you didn’t stop to think if you should

The Wrong Process & Theory

Scalable Startup*high growth

potentialMature Business

Wrong way to think of a Start-Up

scientistChief Scientific Officer CEO

CFO

Patent Agent

Production engineer

Sales Manager

Why?: Because that’s what a ‘real’ Business has

We had:No productNo SalesNo Customers

And No Idea

More startups fail from

a lack of customers than from a

failure of product development

Lean Startup Tests Business Hypotheses

Hypotheses• are not just ideas requiring a plan • are educated guesses

– Require experimentation – data

• validate or invalidate

Hypothesis

Design Experiment

Test

Insight

Goals and Objectves

•Learn what Lean Startup is, and isn’t

•Show where Lean Startup is being used

•Compare Lean Startup to conventional practices

•Become familiar with Business Model Canvas tool

•Recognize Minimal Viable Products and their value

Business Model Canvas- Identify Assumptions

GuessGuess

Guess

Guess

GuessGuessGuess

Guess

Guess

Business Model Canvas as the Scorecard

Where to Focus- Customer DiscoveryDoes the customer have REAL pain? Who really is your customer?

Requires shift from thinking about your idea to focusing on value customers will “pay” for

First Customers To Identify

You want to identify the “Day One” people who are ready tobuy or use your product.

Steve Blank’s Earlyvangelist Definition

User Recommender Economic BuyerDecision Maker SaboteurInfluencer

Who Should You Know?

“Customers” have many roles

Need to understand archetypes for each.

This means understanding how they interact to buy. Can you make an organizational chart, influence map or sales road map?

BMC 3VALIDATION

Grypmat

Learn: Ask about the customer’s life What are their pain points?Don’t talk about the product or the business ideaStart The process by listening- not Pitching!

Confirm: Get commitments, not opinions (i.e. commit time, reputation, money)

Lean Startup is a Contact Sport

Lean Startup is a Contact Sport

Goals and Objectves

•Learn what Lean Startup is, and isn’t

•Show where Lean Startup is being used

•Compare Lean Startup to conventional practices

•Become familiar with Business Model Canvas tool

•Recognize Minimal Viable Products and their value

Minimum Viable Product (MVP)Testing Key Assumptions

• Laura Klein, VP of Product at Hint Health, puts it bluntly (and effectively). “An MVP is not an excuse for a crappy product. MVPs are all about learning, and you don’t learn anything from a crappy product except that people don’t like crappy products.”

Website to gauge interest in products

neuron cardio blood hepatic

Text about products and services: We

provide kits to directly convert

progenitor cells into your target cells,

and partially differentiated cell lines that

you can take to completion.

Click on the cell products of interest

neuron

Technical

data

References

and

published

work:

Marketing

blather

Bulleted list of products and uses.• Progenitor cells

• do your own thing

• Partially diff cell • Takes a load of

work off of you• Kits and supplies

• Do the entire work directly

Kits Cells

MVP also tracks if customers are interested

in Kits or Cells. Which button they click on

is a data point.

This will lead us to see what they want

more: the Kit products to do the entire

work, or the cell line.

4

MVP tracks where the customers click.

Do they click on Neurons, Cardio, Blood,

Hepatic? This will provide quantitative

information on what cell type is of interest.

This will lead us to see what product line

is potentially most important.

MVP examples

1. Explainer Video (Dropbox)

2. Email Campaigns

3. Landing Page(s)

4. Sell it before you build it (crowdfunding validation)

5. “Wizard of Oz” (Zappos)

Questions?

Cheating on customer discovery interviews is like cheating in your parachute packing class- Steve Blank