12 Lean Startup Models
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Twelve Lean Startup Models And how they can shape how you think about your startup?
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Transcript of 12 Lean Startup Models
Twelve Lean Startup Models
And how they can shape how you think about your startup?
I would like twenty minutes of your time in which I will present 50 (I know a lot) slides to review 12 Models related to Lean Startup so that I can then introduce the
‘Startup Business Planning Jigsaw’.
Donncha Hughes – Feb 2015
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Lean Startup is about getting you to
focus on the right thing, at the right
time, with the right mindset.
Lean Analytics: Use Data to Build a Better Startup Faster –
Alistair Croll & Benjamin Yoskovitz
Search v’s Execution – Steve Blank & Bob Dorf
Three Stages of a Startup – Ash Maurya
Lean Canvas – Ash Maurya
MVP and Product Market Fit -
Customer Development – Brant Cooper and Patrick Vlaskovits
Get Keep Grow – Steve Blank & Bob Dorf
Pirate Metrics – Dave McClure
Engines of Growth – Eric Ries
Build – Measure – Learn Cycle – Eric Ries
Startup Pyramid – Sean Ellis
Business Model Canvas – Alexander Osterwalder
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One Metric That Matters – Croll & Yoskovitz 12
Business Model Canvas 1
72 Page Preview available http://www.businessmodelgeneration.com/downloads/businessmodelgeneration_preview.pdf
The right side of business model canvas
emphasizes value while the left side is predominantly cost
driven.
Financial considerations (costs, revenues) are on the
bottom and
value is at the centre with connections to
partners and customers.
A lot of ‘business planning’ required by startups.
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Every element of your Business Model must be tested and validated.
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P143 The Startup Owner’s Manual: The Step-by-Step Guide to Building a Great Company – Steve Blank & Bob Dorf
Search v’s Execution 2
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Entrepreneurs now understand the problem, namely that startups are not simply smaller versions of large companies. Companies execute business models where customers, their problems, and necessary product features are all “knowns”. In sharp contrast, startups operate in “search mode”, seeking a repeatable and profitable business model.
The Startup Owner’s Manual:
The Step-by-Step Guide to Building a Great Company
– Steve Blank & Bob Dorf
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A Startup?
Is a human institution designed to deliver a new product or service under conditions of extreme
uncertainty
Eric Ries – The Lean Startup: How constant Innovation Creates Radically Successful Businesses
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If you feel like you don’t know everything at this stage that is ok…. And the feeling won’t go away!
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And Don’t believe the Myth of the Visionary ….
The Lean Entrepreneur, how visionaries create products, innovate with new ventures, and disrupt market by Brant Cooper and Patrick Vlaskovits, Foreword by Eric Ries, illustrations by @fakegrimlock
that someone can predict the future and then bring it to fruition. In reality the visionary is likely someone who is not committed to a specific scenario, but rather seeks change and seizes present opportunities and relentlessly pursues the change
How are opportunities to be grasped – what is the rule or guide book, is there an optimal process to follow?
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• Startups are experiments … to discover new sources of growth
• Somewhat easier to start these days …
BUT
• Startups consume a lot of resources
• And most startups/products still FAIL!
Ash Maurya, Running Lean
most startups fail not because they don’t manage to develop and deliver a product to the market; they fail because they develop and deliver a product that no customers want or need.
Steve Gary Blank – The Four Steps to the Epiphany: Successful Strategies for Products that Win
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Build-Measure-Learn-Feedback Loop
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The faster your organisation iterates through the cycle, the more quickly you will find the right product and market.
Build-Measure-Learn Cycle applies to everything you do, from establishing a vision to building product features to developing channels and marketing strategies
There are no facts inside your building, so get outside
Rule #.1 of the Customer Development Manifesto as detailed in The Startup Owners Manual
Talking to Humans, Success starts with understanding your customers GIFF CONSTABLE with Frank Rimalovski illustrations by Tom Fishburne and foreword by Steve Blank
3 Stages of a Lean Startup 4
Problem/Solution Fit
Product/ Market Fit
Scale
Stage 1 Stage 2 Stage 3
How do I accelerate growth?
Ideal time to raise funding
Problem worth solving?
Running Lean: Iterate from Plan A to a Plan that Works, Ash Maurya (The Lean Series – O’Reilly)
What is a Lean Startup?
• Uses fast, iterative development practices to:
1. Validate core hypotheses (customer problem- solution).
2. Develop the minimum viable product.
3. Achieve Product-Market fit.
4. Produce a development and marketing roadmap for scaling.
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Stage 1 – Problem/Solution Fit
• The first stage is about determining whether you have a problem worth solving before investing months or years of effort into building a solution: – Is it something customers want? (must have)
– Will they pay for it? If not, who will? (viable)
– Can it be solved? (feasible)
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MVP and Product-Market Fit 5
© Tristan Kromer … http://grasshopperherder.com/false-positives-and-product-market-fit/
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Stage 2 – Product-Market Fit
Minimum Viable Product
• A product with the fewest number of features needed to achieve a specific objective, and users are willing to “pay” in some form of a scarce resource.
Steve Gary Blank – The Four Steps to the Epiphany: Successful Strategies for Products
that Win
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Concept (Slides) Design & Spec Manual Configuration
Demo Beta
PROTOTYPE CONTINUUM
Alpha
First production run
LAUNCH IDEA
Product Management (how to select features)
Brilliant new Free eBook by Intercom
Product Market Fit
• When a product shows strong demand by passionate users representing a sizable market.
“achieving Product-Market fit requires at least 40% of users saying they would be “very disappointed” without your product.
Sean Ellis – Lean Startup Marketing : Agile Product Development, Business Model Design, Web Analytics,
and Other Keys to Rapid Growth [Kindle Edition]
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The three stages of a Startup cont.
Problem/Solution Fit
Product/ Market Fit
Scale
Stage 1 Stage 2 Stage 3
Focus: Validated Learning Experiments : Pivots
Focus: Growth Experiments : Optimizations
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A pivot is a change in strategy that is grounded by learning
Lean Canvas …. Leanstack.com 6
PROBLEM SOLUTION
KEY METRICS
UNIQUE VALUE
PROPOSITION
COST STRUCTURE REVENUE
UNFAIR ADVANTAGE
CHANNELS
CUSTOMER SEGMENTS
PRODUCT MARKET
Source : p.27 Running Lean, Ash Maurya
Top 3 problems
Top 3 features
Key activities you measure
Single clear compelling
message that states why you are
different and worth paying attention
Target Customers
Can’t be easily copied or bought
Path to Customers
Customer Acquisition Costs Distribution Costs Hosting People etc
Revenue Model Lifetime Value
Revenue Gross Margin
Existing Alternatives
Early Adopters
BREAKEVEN
• What separates successful startups from unsuccessful ones is not necessarily the fact that successful startups begin with a better initial plan (or Plan A) but rather that they find a plan that works before running out of resources. Ash Maurya– Running Lean: Iterate from Plan A to a Plan that
Works
Document your Plan A Systematically test your plan
Identify the Riskiest Parts of Your Plan
• Document your Plan A • Share your Plan A … identify the riskiest parts of
your plan(s) • Systematically test the Plan
Roadmap for Running Lean
Understand Problem
Define Solution
Validate Qualitatively
Verify Quantitatively
Systematically test your plan Document
your Plan A
Identify Riskiest Parts of your plan
Problem Solution Fit
Product Market Fit
31 Time
Ash Maurya’s 10x Product Launch
Customer Development 7
www.startuphughes.com/blog/what-enterprise-ireland-are-looking-for-in-a-new-frontiers-phase-2-application/
Race up the Pyramid
• Promise: Highlight the benefits described by your “must have” users (those that say they would be very disappointed without your product).
• Economics: Implement the business model that allows you to profitably acquire the most users.
• Optimize: Streamline a repeatable, scalable customer acquisition process by testing multiple approaches and tracking to improve the right metrics.
Deliver on the promise
• Extreme customer support … go beyond expectations will drive customer loyalty and enhance WOM.
• Brand experience over brand awareness … obsess over every element of the customer experience
For more see http://startup-marketing.com/milestones-to-
startup-success/
Get Keep Grow Model 9
‘Get Keep Grow’ for Web Mobile Figure 3.10
Startup Owner’s Manual
Acquisition
Activation
Retention
Revenue
Referral
How do users find you?
Do users have a great first experience?
Do users come back?
How do you make money?
Do users tell others?
Before Product
Market Fit
Dave McClure’s AARRR Pirate Metrics as presented by Ash Maurya
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For more see http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version
• Acquisition describes the point when you turn an unaware visitor into an interested prospect
• Activation describes when the interested customer has her first gratifying user experience
• Retention measures ‘repeated use’ and/or engagement with your product.
• Revenue measures the events that you get paid • Referral is a more advanced form or a user
acquisition channel where your happy customers refer or drive potential prospects into your conversion funnel.
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11 Engines of Growth help identify Product Market Fit
• The moment when a startup finally finds a widespread set of customers that resonate with the product
• Easy to recognise when it happens but not so easy to know how far off a particular company is from reaching its Product Market Fit.
Three Engines of Growth
I. Sticky .. when the rate of new customer acquisition exceeds the churn
II. Viral .. Growth happens as a consequence of customers using the product.
III. Paid .. ROI on marketing activity.
What to measure?
Depends on Your Engine of Growth
I. Sticky .. rate of new customer acquisition versus the churn.
II. Viral .. How many new customers will use the product as a result of each new customer who signs up.
III. Paid .. Customer acquisition costs relative to lifetime value.
Success looks like …
Depends on Your Engine of Growth
I. Sticky .. Widening gap between new customers minus churn over short periods (day/week/month).
II. Viral .. Is viral coefficient increasing? A viral coefficient of 0.9 is very close (every ten people bring in around 9 e.g every person invites 3 people and in 9 of 10 cases 1 of those 3 joins)
III. Paid .. Are customer acquisition costs reducing relative to lifetime value.
Your Engine of Growth Helps Prioritise Startup priorities
I. Sticky .. Focus development efforts on customer usability.
II. Viral .. Focus development efforts on customer sign up and user flow optimisation to increase conversion.
III. Paid .. Focus on getting Sales & Marketing right.
Acquisition
Activation
Retention
Revenue
Referral
How do users find you?
Do users have a great first
experience?
Do users come back?
How do you make money?
Do users tell others? Viral
Paid
Sticky
Dave McClure’s Pirate Metrics
AARRR
One Metric That Matters
• Do you know your One Metric That Matters .. Read chapter 6
• Beware of Vanity Metrics
Lean Analytics: Use Data to Build a Better Startup Faster, Alistair Croll & Benjamin Yoskovitz (The Lean Series – O’Reilly)
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Lean frameworks to think about your business
• Start with the Lean Canvas, to help you map out the components of your business model so you can evaluate and test them.
• Engage in Customer Development – Think about the Startup Pyramid and the Get
Keep Grow Model to identify how you will acquire and retain customers to drive business growth.
• Identify your Engine of Growth, Pirate Metrics and One Metric that Matters to clarify startup stage and agree priorities.
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THE STARTUP BUSINESS PLANNING JIGSAW
www.startuphughes.com
• The idea origins of the problem and solution
• Lean Canvas sketches details of the business model
• The Promoter/ Team domain knowledge, credibility and track record (plus advisors)
• Customer Development/ Market Validation start testing the canvas
• MVP (Solution) start charging
• Business Model Validation 9 building blocks
• Learning market product customers strategy
• Lean Metrics measure for results and decisions
• Business Action Plan for investors (and own team)
Read full article on Startup Business Planning Jigsaw by Donncha Hughes on LinkedIn Pulse.
Donncha Hughes Startup Mentor, Advisor & Trainer
• Trainer – e.g. New Frontiers in GMIT, DKIT, and LyIT/ IT Sligo • Areas of Expertise – Marketing, Sales, Business Plans, R&D
Applications, Projections. • Mentor – LEO Galway, Enterprise Ireland, SCCUL • Member of EI Competitive Start Evaluation Panel • Member InterTrade Ireland Seedcorn Business Plan Evaluation
Panel.
• Non Executive Director of an Irish Tech startup • Former Manager of Incubation Centre • 7.5 years with IBEC
www.startuphughes.com www.startuphughes.com/blog
