Lean Startup and Entrepreneurship

Lean Startup and Entrepreneurship

Minder Chen, Ph.D.Professor of MIS

Martin V. Smith School of Business and EconomicsCalifornia State University Channel Islands

[email protected]

Jan. 15, 2014

mailto:[email protected]

Design Thinking: Creativity & Innovation- 2© Minder Chen, 2012-2014

Clairvoyance


屯卦屯名的說文解字•《說文》曰 : 「屯 , 難也。象艸木之初生 , 屯然而難。」

•序卦曰 : 「屯者 , 物之始生也。」往上發芽 , 破土而出。

種子 , 幼芽破殻而出

地表

種子往下生出的根

根和芽都有屈曲之象 , 有能屈能伸的涵意


屯卦

爻題爻辭小象辭

初九磐桓，利居貞，利建侯。雖磐桓，志行正也。以貴下賤，大得民也。

六二屯如邅如，乘馬班如，匪寇，婚媾。女子貞不字，十年乃字。

六二之難，乘剛也。十年乃字，反常也。

六三即鹿无虞，惟入于林中。君子幾不如舍，往吝。

即鹿无虞，以從禽也。君子舍之，往吝，窮也。

六四乘馬班如，求婚媾，往吉，无不利。

求而往，明也。

九五屯其膏。小，貞吉；大，貞凶。屯其膏，施未光也。

上六乘馬班如，泣血漣如。泣血漣如，何可長也?


創業 vs. 守成貞觀十年，太宗謂侍臣曰：「帝王之業，草創與守成孰難？」尚書左僕射房玄齡對曰：「天地草昧，群雄競起，攻破乃降，戰勝乃克。由此言之，草創為難。」魏徵對曰：「帝王之起，必承衰亂，覆彼昏狡，百姓樂推，四海歸命，天授人與，乃不為難。然既得之後，志趣驕逸，百姓欲靜而徭役不休，百姓凋殘而侈務不息，國之衰弊，恆由此起。以斯而言，守成則難。」太宗曰：「玄齡昔從我定天下，備嘗艱苦，出萬死而遇一生，所以見草創之難也。魏徵與我安天下，慮生驕逸之端，必踐危亡之地，所以見守成之難也。今草創之難既已往矣，守成之難者，當思與公等慎之。」–唐、吳兢，《貞觀政要》〈君道第一〉


徽商之家訓

•讀書好，營商好，學好便好 ; •創業難，守成難，知難不難。

來源 : 安徽省徽州古民居 ( 黟縣西遞村 ) 中有康熙年間造的「履福堂」，廳堂上的對聯。


屯卦總論創業維艱，勇於冒險；鍾其所愛，義無反顧。結合人才，建立團隊；抓緊技術，掌握市場。權衡時機，或進或退；成敗得失，盡其在我。


Mind and Hand• MIT's motto is "Mens et Manus," which translates

from the Latin to "Mind and Hand."

http://www.mensetmanus.net/mit-motto/motto.shtml


The Startup Owner’s Manual• A startup is a temporary

organization designed to search for a repeatable and scalable business model (under extreme uncertainty).

- Steve Blank, The Startup Owner’s Manual

Steve Blank video at http://www.youtube.com/watch?v=6t0t-CXPpyM


Resources

• http://theleanstartup.com/

• http://steveblank.com/

• http://steveblank.com/2012/11/27/open-source-entrepreneurship/

• http://www.slideshare.net/sblank/lean-launchpad-educators-handbook-sept-2013


10 Top Ten MistakesMistakes of Entrepreneurs1. Multiplying big numbers by 1percent

2. Scaling too soon

3. Partnering

4. Pitching instead of prototyping

5. Using too many slides and too small a font

6. Doing things serially

7. Believing 51% = control

8. Believing patents =defensibility

9. Hiring in your own image

10. Befriending your VCs

11. Thinking VCs can add valueGuy Kawasaki, The Top 10 Mistakes of Entrepreneurshttps://www.youtube.com/watch?v=HHjgK6p4nrw

Design Thinking: Creativity & Innovation- 12© Minder Chen, 2012-2014Source: http://businessmodelgeneration.com/canvas

• Describe• Design• Invent• Validate• Pivot• Discuss

Video


Cash Flow

How

What

Who

Source: Alexander Osterwalder & Yves Pigneur, Business Model Generation (Preview version), 2009.


Reverse Engineering Facebook’s Business Model with Ballpark Figures

http://www.businessmodelalchemist.com/


Questioning Business Model Components


“Get out of the building approach” – It is not a business plan.

No startup business plan survived first contact with customers.

Validate Your Business Model

• Most startups lack a structured process for testing their business model hypotheses.


A Starting Point of Innovation

A customer friction is a (re)discovered of relevant and often unmet needs in a recognizable situation from a target group.

– Adapted form http://www.innovationexcellence.com/blog/2011/07/08/solve-customer-frictions/


Three Attributes of User Experiences

• Experience, Expectancy, Envy

• Excitement, Enjoyment, Enforcement

• Entertainment, Esthetic, Escape, Education


Product Experience


Hypotheses Testing and Insight

Hypotheses

Facts

Business Model


Learning and Assumptions Testing


Persona• A persona is an archetype of

an organization’s typical customer, and is defined primarily by a customer’s goals when interacting with the products. They are not real people, but are used to represent real users during the design process.

• Products generally have a “cast” of personas, ranging from 3 to 8, one of which is considered the primary persona. These are best presented as narratives. Providing a persona with real characteristics:

• Name• Age• Photo• Candid quotes• Personal information• Work environment• Computer proficiency• Motivation for using the product• Information-seeking habits• Personal and professional goals

• Evokes a strong sense of empathy in the project team

• Eliminates the need to design for an abstract, elastic “user group” whose goals and needs are not fully understood

• Facilitates user-centered design – the focus is now on the goals of your typical customer rather than the project team

Source: The ABCs of Personas: Design for People, Design for Success


The Customer Development Process

1. Try many times before you get it right. 2. It is OK to fail so plan to learn from it.3. Only move to the next stage when you learn

enough and reach the “escape velocity”http://www.ctinnovations.com/images/resources/Startup%20Owners%20Manual%20-%20BlankDorf.pdf

More startups fail from a lack of customers than from a failure of product development


BioIQ.Com Case Study


The Lean Start-Up

Steve Blank, "Why The Lean Start-up Change Everything," HBR, May 2013. (link)


What Is Pivot?

• Pivot: A change to business model component based on customer feedbacks. A pivot is not a failure.

• Pivot is a structured course correction designed to test a new fundamental hypothesis about the product, strategy, engine of growth, etc.

– Eric Ries, The Lean Startup, 2013.

• Pivots are vision driven.


MVP

• In product development, the Minimum Viable Product (MVP) is a strategy used for fast and quantitative market testing of a product or product features. It is an iterative process of idea generation, prototyping, presentation, data collection, analysis and learning.


An MVP Example

Why is Dropbox more popular than other programs with similar functionality?

•Well, let’s take a step back and think about the sync problem and what the ideal solution for it would do:

– There would be a folder.

– You’d put your stuff in it.

– It would sync.

Source: http://michaelrwolfe.com/2013/10/19/why-is-dropbox-more-popular-than-other-programs-with-similar-functionality/


Startup vs. Large Company

http://steveblank.com/2012/03/05/search-versus-execute/


Lessons Learning

• The search for the business model is the front end of the startup process

• The goal is to find a repeatable/scalable model, and then execute

• Customer and Agile Development are the processes to search and build the model

• Execution requires operating plans and financial forecasts

• Product management is the process for executing the model

• This is true in the smallest startup or largest company

http://steveblank.com/2012/03/05/search-versus-execute/


Transition/Buyout

Transition/Buyout

Large Company

Large Company

ScalableStartup

ScalableStartup

Sustaining Innovation

• Existing Market / Known customer

• Known product feature needs

From Startup to Large Company Sustaining

Innovate or Evaporate

Disruptive Innovation• New Market• New tech, customers, channels

Goal is to solve for: unknown customer

and unknown features Search Execute

Build

Exit Criteria- Business model found- Total Available Market > $500m- Can grow to >$100m/year- Can be Venture capital funded


The Lean Startup Method

• Entrepreneurs are everywhere.

• Entrepreneurship is management.

• Validated learning.

• Build-Measure-Learn.

• Innovation accounting.

– Eric Ries, The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, 2011.


SCRUM Process

Source: https://www.youtube.com/watch?v=WxiuE-1ujCM


Lean Startup = Customer Development + Agile Method


Investment Readiness: Levels 1 & 2

Hypotheses• Value Proposition summarized• Canvas hypotheses articulated

Hypotheses



Problem / Solution Fit• Problem Solution fit• Low fidelity MVP

Hypotheses

Problem/Solution



Validate• Product/Market fit• Right side of canvas

Hypotheses

Problem/Solution

Product/Market fit



Validate• Left side of canvas

Hypotheses

Problem/Solution

Product/Market fit


Investment Readiness: Levels 9

Metrics That Matter

Hypotheses

Problem/Solution

Product/Market fit

Left side of the canvas


Technology Readiness Level

Problem/Solution

Hypotheses

Product/Market Fit

Validate Right side of Canvas

Validate Left side of Canvas

Metrics that Matter

InvestmentReadiness Level


Source: Link


Innovator’s DNAs

http://strategicorganizationdesign.com/the-innovator%E2%80%99s-dna-disruptive-research-disruptive-writing


Finding the Sweet Spot


http://www.ideo.com/images/uploads/news/pdfs/IDEO_HBR_Design_Thinking.pdf


Inspiration


what really countsmajor preoccupations, worries & aspirations

what friends saywhat boss sayswhat influences say

environmentfriendswhat the markets offers

attitude in publicappearancebehavior towards others

http://www.gogamestorm.com/?p=42http://www.slideshare.net/AdilsonJardim/empathy-map-poster-3201288

Empathy Empathy MapMap

GAIN“wants”/needs, measures of success, obstacles

PAINfears, frustrations, obstacles

Customer (user)Empathy Map


Inspiration


Ideation


Implementation


Quick Prototyping

• IDEO


Bagless Vacuum Cleaner

http://www.sciencefriday.com/playlist/#play/program/1716

Inventor James Dyson built 5,127 prototypes before completing his first bagless vacuum.

“Failures are interesting.”

Slogan "say goodbye to the bag"


Design Thinking Process by Stanford d.school / IDEO

• http://dschool.stanford.edu/dgift/• https://dschool.stanford.edu/groups/designresources/wiki/36873/attachments/8a846/ModeGuideBOOTCAMP2010.pdf

“To create meaningful innovations, you need to know your users. Empathize and care about their lives.”

“Framing the right problem is the only way to create the right solution.”

“It’s not about coming up with the ‘right’ idea, it’s about generating the broadest range of possibilities.”

“Build to think and test to learn.”

“Testing is an opportunity to learn about your solution and your user.”

IDEO: Inspiration Ideation Implementation


Design Thinking

ProcessProcess


Design for Growth (D4G) Process and Tools


Design BriefProjectDescription

What is the problem or opportunity?Describe the project in a few sentences, as you would in an “elevator pitch.”

Scope What is within the scope of the project and what is outside it?What efforts sit adjacent to this particular project?

Constraints What constraints do you need to work within?What requirements must a successful solution meet?

Target Users Who are you designing for?Try to be as specific as possible. Whom do you need to understand? Why are they important?

ExplorationQuestions

What key questions will you need to answer through your research?What are you curious to learn about your stakeholders and how they think and behave?These may include stakeholder needs to understand better, emerging technical possibilities and new business models.

Expected Outcomes What outcomes would you like to see?Success Metrics How will you measure success?


Concept Pitch


Suitcases on Wheels• Wheels on a suitcase? So convenient, they're an unremarkable essential for

today's traveler. But in 1970, Bernard Sadow had trouble selling his rolling suitcase idea.

• "I showed it to every department store in New York City and a lot of buying offices, and everybody said I was crazy. 'Nobody's going to pull a piece of luggage with wheels on it.' People just didn't think in those terms," Sadow said.

http://www.cnn.com/2010/TRAVEL/10/04/wheeled.luggage.anniversary/

Macy’s ads began promoting “the Luggage That Glides.”


Rollerboard• But it was also a time of huge change in the culture of travel, as a growing

number of people flew, airports became bigger and far more women began traveling alone, especially on business trips. It had taken a long time, but common sense and the quest for convenience prevailed. The suitcase acquired wheels; travelers no longer routinely needed porters and bellhops.

• The Rollaboard was invented in 1987 by Robert Plath, a Northwest Airlines 747 pilot and avid home workshop tinkerer, who affixed two wheels and a long handle to suitcases that rolled upright, rather than being towed flat like Mr. Sadow’s four-wheeled models.

http://www.nytimes.com/2010/10/05/business/05road.html?_r=0


Pitstop• Pitstop underway for Fernando Alonso at 2008 Chinese Grand Prix

Source: http://en.wikipedia.org/wiki/File:Alonso_Renault_Pitstop_Chinese_GP_2008.jpg


The Trick to Inventing a Better Ice Cream Scoop

The award-winning design for this "mouth-friendly" ice cream scoop came from observing that people tend to lick the utensil after use (you cannot learn about this by asking people only). by Zyliss, Swiss housewares company

Link

No sharp edges and no moving parts


PNC Virtual Money

• Design for Generation Y

Video


Tools in the Toolbox


Customer Journey MOTs : Netflix vs. Blockbuster


MeYouHealth.com


Personal Journal


Qualitative Data

• Healthways Well-Being Index based on quantitative data

– Emotional, physical, behavioral, work environmental, access to health resources, overall life outlook.


Persona• A persona is an archetype of

an organization’s typical customer, and is defined primarily by a customer’s goals when interacting with the products. They are not real people, but are used to represent real users during the design process.

• Products generally have a “cast” of personas, ranging from 3 to 8, one of which is considered the primary persona. These are best presented as narratives. Providing a persona with real characteristics:

• Name• Age• Photo• Candid quotes• Personal information• Work environment• Computer proficiency• Motivation for using the product• Information-seeking habits• Personal and professional goals

• Evokes a strong sense of empathy in the project team

• Eliminates the need to design for an abstract, elastic “user group” whose goals and needs are not fully understood

• Facilitates user-centered design – the focus is now on the goals of your typical customer rather than the project team

Source: The ABCs of Personas: Design for People, Design for Success


7 Different Personas and What Motivates Them• Aware & Achieving, Me-Time Impoverished, Validation

Seeker, Enlightened and Discovering, Idle, Excuse Maker, Enabled

• Monumental mobile app with gaming feature Daily Challenge


http://www.mynetdiary.com/


Design for Extreme Affordability • Problem: 15 M premature and underweight babies

and many died.

• Reasons: – Babies are so tiny they don’t have enough fat to

regulate their own body temperature.

– Traditional incubators can also cost as much as $20,000—each.

• Goal: Design low-cost infant incubator for developing world

• Field research:– Saw unused infant incubators in hospital in Nepal. Changing

design for hospitals and clinics to Rural mothers in their villages

– Heard mother is going to reduce temperature from 38oc to 30oc Changing the indicator to just OK

http://www.creativeconfidence.com/chapters/chapter-3


The Embrace Infant Warmer Is A Product With A Mission

http://embraceglobal.org/

ABC News 20/20 Video

Video from Embrace

$200

Paraffin (石蠟 )


Redesign MRI for Kids

• GE 18 billion Heathcare Division

• Multimillion-dollar magnetic resonance imaging (MRI) machines

• Problem: Children are frighten by the MRI machine and 80% has to be sedated before scanning.

• Action: Chief designer took “Human-Centered Design and Innovation” at Stanford d.school

• Solution: Designing MRI machine Redesign and humanize the experience for kids (getting young patients safely and willingly through an MRI scan)


GE’s “Adventure Series” MRI for Kids

GE's Adventure Series redesigns imaging equipment including MRIs, X-ray machines and CT scanners like the pirate-themed machine pictured here to make the procedures less scary for kids.

(Link)

Link


Swiffer – P&G and Contiuum• “There has got to be a better way to clean a floor.

Current mops are the cleaning equivalent of the horse drawn carriage – where’s the car?”

Procter & Gamble’s 2nd most popular consumer product.


Hire a Milkshake

• They were winning out over doughnuts, bagels, bananas, and boredom.

• If a company can discover a job-defined market, it will generally be much larger than one defined by product category.

“Finding the Right Job for Your Product.” MIT Sloan Management Review, Spring 2007, pp. 38–47


Listerine PocketPaks

• Addressing the consumer need for an easy-to-use, portable product that delivers a cleaner, healthier mouth -- a real solution, not a mask for bad breath.

• $150 Millions first year sales

• Original idea came from Japan


3M Masking Tapes• Drew wanted to test a new batch of

sandpaper, so he visited an auto body shop in St. Paul,

• Minn. When he entered the shop, he heard a group of workers cursing vehemently. He asked about the problem. Two-tone cars were popular then, but the effect required workers to mask certain parts of the auto body using a combination of heavy adhesive tape and butcher paper. After the paint dried, workers removed the tape – and often peeled away part of the new paint. Their labor was undone, and costs mounted for the customer.

• 3M gives employees 15% of their time to work on their personal projects.


Frictions & Pains

• 3M Post-it

• “I keep losing my place in my music!”

http://invention.smithsonian.org/centerpieces/iap/inventors_fry2.html


Ptototypes

• Eric Ries, author of The Lean Startup, calls such a prototype a minimum viable product, or MVP—representing the least amount of effort needed to run an experiment and get feedback.

• Creativity requires cycling lots of ideas. The more you invest in your prototype and the closer to “final” it is, the harder it is to let go of a concept that’s not working.

• Prototyping quickly and cheaply also allows you to keep multiple concepts alive longer.

• Boyle’s Law (named after one of IDEO’s master prototypers, Dennis Boyle): never go to a meeting without a prototype.


Why Designers Should Never Go to a Meeting Without a Prototype

a project with Sesame Workshop to develop Elmo’s Monster Maker—an iPhone app that leads young children through the process of designing their own monster friend. They had an idea for a new dance feature in which kids could guide Elmo through different dance moves in sync with a simple music track.

Link


GUI and Mouse

• Doug Engelbart of the Augmentation Research Center in Palo Alto developed the computer mouse and graphical user interfaces.

http://www.newyorker.com/reporting/2011/05/16/110516fa_fact_gladwell


Xerox PARC and Apple Macintosh

• Following PARC the first GUI-centric computer operating model was the Xerox 8010 Star Information System in 1981, followed by the Apple Lisa (which presented the concept of menu bar as well as window controls) in 1983, the Apple Macintosh 128K in 1984, and the Atari ST and Commodore Amiga in 1985.


A Mighty Mouse• the Xerox mouse had three buttons, was complicated, cost

$300/$400 apiece, and didn’t roll around smoothly

• Jobs went to a local industrial design firm, Hovey-Kelley Design (i.e., IDEO now), and told one of its founders, Dean Hovey, that he wanted a simple single button model that cost $15, and he want to be able to use it on Formica and his blue jeans.

• “take a piece of technology developed by some of Silicon Valley’s greatest minds, dramatically improve its reliability and cut its price by more than 90 percent.”

http://www.stanfordalumni.org/news/magazine/2002/marapr/features/mouse.html

SRI had licensed the mouse patent to Apple for something like $40,000."


Design of the Mouse: IDEO

• The mouse, Hovey says, “had the right balance of – mechanical design,

– ergonomic design,

– software design

– and electronic design

• that really mapped well with the generalist, mini-da Vincis that Hovey-Kelley had. Even down to the tactile aspect of the click.”


Design via Prototyping

• Construction play

• Thinking with Your Hands

• Low-resolution prototype

Hovey estimated their consulting fee at thirty-five dollars an hour; the whole project cost perhaps a hundred thousand dollars.http://www.stanfordalumni.org/news/magazine/2002/marapr/features/mouse.html


Who Invented the Mouse?

• Creative Visionary: Doug Engelbart at SRI

• Inventor of New Products: Xerox PARC– A decentralized, bottom-up entrepreneurial culture

• Innovator for Commercial Market: Apple– Organizations with resource constraint and constant threat

http://www.newyorker.com/reporting/2011/05/16/110516fa_fact_gladwell?printable=truehttp://en.wikipedia.org/wiki/Douglas_Engelbart


Design with Intention

• Designers always act with intention. While others may unconsciously go with the default option, design thinkers make everything a conscious and original choice: from how they arrange their bookshelf to how they present their work.

• Steve Jobs never took the path of least resistance. He never accepted the world “as is.” He did everything with intentionality. No detail was too small to escape his attention.

• (Link)

• http://www.ideo.com/work/


Genius Bar• Best service experiences: Four Seasons or Ritz-

Carlton Hotel.

• Johnson sent his first five store managers through the Ritz-Carlton training program.

• Genius Bar: Replicating something between a concierge desk and a bar in a hotel.


Courtyard by Marriott Bistro Lobby Concept

Link Video


Five Guest-enabling Brand Principles

• Focus on working smarter and anticipating needs

• Instill pro-activity to let personality shine

• Enable guests to feel comfortable in public spaces using subtle gestures

• Provide options and a sense of control

• Aim to help guests feel refreshed, refueled, and recharged


Courtyard by Marriott Check-in Counter &GoBoard

http://www.ideo.com/work/redesigned-courtyard-lobby-experience


Four Core Principles of Successful Innovation

• PRINCIPLE 1: Build Innovations around Experiences

• PRINCIPLE 2: Think of Innovations as Systems

• PRINCIPLE 3: Cultivate an Innovation Culture

• PRINCIPLE 4: Adopt a Disciplined Innovation Process


System in Context


Collaborative Culture


Design-Driven Innovation

Desirability(Human)

Feasibility

(Technology)

Viability(Business)Connecting Connecting

the Dots …the Dots …

Customer Customer DevelopmentDevelopment


Design Process


Iterative Process

Lean Startup and Entrepreneurship

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