Lean Startup Basics - Evidence Based Entrepreneurship
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Transcript of Lean Startup Basics - Evidence Based Entrepreneurship
Lean Startup Basics
© Are held by their respective owners, Eric Reis, Steve Blank, David Skok, Dave McClure and others
Evidence-Based EntrepreneurshipTM
By Kelly [email protected]
~Drew Houston, CEO Dropbox
Key Points
1. A Business Model, Not a Business Plan
2. Fast Learning Loops: Build-Measure-Learn
3. Business Model Validation:Get Out of the Building!
4. MVP - It’s Not What You Think
5. The Lean Startup Path
1. A Business Model, Not a Business Plan
No business plan
survives the first
customer contact
If you build it, they will not come.
9 Out of 10 Startups
Fail!
•Building on Invalid Assumptions
•Premature Scaling
•Lack of Customers and Markets
•Change Your Business Model at Scale
•Run Out of Money
The Path to Disaster
Discover a Business Model that works before you run out of Money and Time.
(Nail it, then Scale it.)
Your Job as an Entrepreneur:
Questions• Is this problem worth solving?
• Who’s problem are you solving?
• How are they solving it now?
• Does anyone care about your solution?
• Will they buy it?
• How do you create value for your customers?
• How will you grow?
• What’s your unfair advantage?
• What channels will you use to get to your customers?
• What are your acquisition costs per customer?
• What is the lifetime value of your customer?
• What’s your unit cost model? Unit revenue model?
Enter the Lean Startup
2. Fast Learning Loops
The “Lean Startup” Model
But this is still Chaotic!
• How can we organize these loops into an orderly process?
Business Model Canvas
http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf
Steve Blanks online course: udacity.com/course/ep245
3. Business Model Validation:
(Get Out of the Building)
The Lean Launchpad /I Corp Approach
Get Out of the Building
Go To The Source
Get Pupil Dilation
(Not surveys or focus groups, Talk to customers)
Validating Product/Market Fit
Key Partners
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we
acquiring from partners?
Which Key Activities do
partners perform?
Key Activities
What Key Activities do our Value Propositions
require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
Value Propositions
What value do we deliver to the
customer?
Which one of our customer’s
problems are we helping to solve?
What bundles of products and
services are we offering to each
Customer Segment?
Customer Relationship
s
What type of relationship does
each of our Customer
Segments expect us to establish and
maintain with them?
Customer Segments
For whom are we creating value?
Who are our most important
customers?
Key ResourcesDo our Value Propositions
require?Distribution Channels, Customer
Relationships,Revenue Streams?
Channel
Through which Channels do our
Customer Segments want to
be reached?
Cost Structure
What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?
Revenue Streams
For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay?How much does each Revenue Stream contribute to overall revenues?
Customer/Value Hypotheses
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Customer Interviews
• Customer Demographics (Discover Subsegments)
• Validate Their Top Three Problems
• Discover New Problems
• Rank the Problems
• How Do They Solve Them Now?
• Document existing workflow.
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How to do customer interviews videos: http://vimeo.com/groups/204136/videos/
Solution HypothesesKey Partners
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we
acquiring from partners?
Which Key Activities do
partners perform?
Key Activities
What Key Activities do our Value Propositions
require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
Value Propositions
What value do we deliver to the
customer?
Which one of our customer’s
problems are we helping to solve?
What bundles of products and
services are we offering to each
Customer Segment?
Customer Relationship
s
What type of relationship does
each of our Customer
Segments expect us to establish and
maintain with them?
Customer Segments
For whom are we creating value?
Who are our most important
customers?
Key ResourcesDo our Value Propositions
require?Distribution Channels, Customer
Relationships,Revenue Streams?
Channel
Through which Channels do our
Customer Segments want to
be reached?
Cost Structure
What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?
Revenue Streams
For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay?How much does each Revenue Stream contribute to overall revenues?
Online model tool http://canvanizer.com/new/business-model-canvas
Solution Design
Solution Interviews• Recap Demographics and
Problem
• Describe and Show Solution (don’t sell it!)
• Does it Resonate?
• What’s most important, what’s missing, what can you take away?
• How do they find out about solutions to this problem?
• Will they pay $X?
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Problem/ Solution Validation
Drill down to Minimum Viable Product
(MVP)1
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5
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4. MVP - It’s Not What You Think!
More on MVP• Not one snapshot, but a progression of experiments
• Early experiments have no product.
• At some point, you need to start development. That’s where Agile comes in
Groupon: Wordpress Blog, Widget from The Point, PDF Coupons via email.
Foursquare used Google Docs to collect customer feedback. No code, no maintenance.
Grockit puts up a notify-me-when-you-release form on steroids.
Auto e-commerce site uses manualation and flintstoning for their backend.
Allicator uses Facebook ads: “Ditch Digger? Feeling spread thin? Click here to complete a survey and tell us about it.”
ManyWheels uses Microsoft Visio to build clickable web demos for prospective customers.
Cloudfire uses a classic customer development problem presentation.
Example MVPs
Key Partners
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we
acquiring from partners?
Which Key Activities do
partners perform?
Key Activities
What Key Activities do our Value Propositions
require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
Value Propositions
What value do we deliver to the
customer?
Which one of our customer’s
problems are we helping to solve?
What bundles of products and
services are we offering to each
Customer Segment?
Customer Relationship
s
What type of relationship does
each of our Customer
Segments expect us to establish and
maintain with them?
Customer Segments
For whom are we creating value?
Who are our most important
customers?
Key ResourcesDo our Value Propositions
require?Distribution Channels, Customer
Relationships,Revenue Streams?
Channel
Through which Channels do our
Customer Segments want to
be reached?
Cost Structure
What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?
Revenue Streams
For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay?How much does each Revenue Stream contribute to overall revenues?
Continue Validating Hypotheses
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Use Canvas As a Weekly Scorecard
Week 3
Week 2
Week 1
Useful tool for tracking weekly updates: https://www.launchpadcentral.com/
5. The Lean Startup Path
Lean Startup: Two Fast Feedback Loops
Launch?
Validate Business Model
You Need to Get Here!Replicable/Scalable Fit:
LTV/3 >= CAC
You Are Here
You’ve only just begun
Metrics that Matter
Post Launch Goal:Decrease CAC and Increase LTV
Post Launch Fast Feedback Loops
You have real users and precise usage data - Analyze it! (By cohort)
Make small changes fast (hours, not weeks to get into production)
When you make changes - A/B test (or multivariate w/ traffic.)
Get/Keep/Grow – Customer Relationships
Web/Mobile Products
Metrics that Matter
Investment Readiness Level
Mkt Size/Competitive analysis
Complete first-pass canvas
Problem/Solution Validation
Low Fidelity MVP Experiments
Validate Product/Market fit
Validate right side of canvas
Prototype High-Fidelity MVP
Validate left-side of canvas
Validate metrics that matter
Friends and Family
Angel investors
Venture Capital
None
Validation Stage Investment Type
$1B+ Market? Scalable Solution? Recurring Revenue?Past Successes? Full team? (Hipster, Hacker, Hustler)Traction?
Investment Interest Level
What Does Traction Look Like?
*cost of acquisition is less than 1/3 lifetime value; $1 in, $3+ out
Typical AngelList Investments $1M raise (2013)
• Enterprise: 1000 seats @ $10/seat/mo.,
• Big Enterprise: 2 pilot contracts and some $
• Social: 100,000 downloads/signups
• Marketplace: $50,000 revenue/mo.
• E-Commerce: $50,000 revenue/mo.
LTV > 3X CAC?
Common Mistakes• Too Broad a Segment
• Not a Big Enough Problem
• Surveys Instead of Interviews
• Conflate Problems and Solutions
• Confuse Users and Customers
• Build Too Much (Fat Experiments)
• Don’t Test Revenue Model Early Enough
• Stop Experimenting When You Have Customers (No Metrics)
• No UX and No Agile
Summary
1. A Business Model, Not a Business Plan
2. Fast Learning Loops: Build-Measure-Learn
3. Get Out of the Building!
4. MVP - It’s Not What You Think
5. The Lean Startup Path
Questions?
slideshare.net/[email protected]
Resources
steveblank.comudacity.com/course/ep245
Customer DevelopmentSearch Execution
Get/Keep/Grow – Customer Relationships
Physical Products