Promoting Lean Startup at Zhihu in 2012
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lean Startup
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A startup is a human institution designed to
create a new product or service under conditions of
extreme uncertainty.
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Product/Market FitIf you are asking ...
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What's our biggest RISK?
Leap-of-faith assumptions
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Entrepreneurship is a kind of management.
Could the success rate of innovative products be improved?
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The lean startup methods
Validated learning
Build - Measure - Learn
Innovative Accounting
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Lean Manufacturing
Knowledge and accountability of individual workers
The shrinking of batch sizes
Just-in-time production and inventory control
Acceleration of cycle times
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Validated learning
The most vital function of startup is learning
What does it cost to learn something
Positive improvements in core metrics
(false feedback)
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Experiment
Think big, Start small
For long-term change, experiment immediately
Break it down. Value/Growth hypothesis
An experiment is a product
Vision = hypothesis + prediction
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MVP
Minimum waste
Measure it's impact
Vanity/Actionable metrics
Pivot or Persevere
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FacebookValue and Growth
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Value & Growth
value-creating vs value-destroying
value vs waste
manufacture: profitability of each customer, cost of acquiring, repeat purchase
marketplace: network effect
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Engine of Growth
Paid: Customer Lifetime Value deducted by Cost per Acquisition
Sticky: Rate of Acquisition over Churn Rate
Viral: The Viral coefficient
“P.S. Get your free e-mail at Hotmail”
and the Feedback Loop behind it
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Get out of the buildingGenchi Gembutsu
Go and See for yourself
whether I was in manufacturing, product development, sales, distribution, or public affairs. You cannot be sure you really
understand any part of any business problem unless you go and see for yourself firsthand. It is unacceptable to take anything for
granted or to rely on the reports of others.
Case study: Scott Cook, Intuit, 1982.
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Go thru the feedback loop with minimum effort
Early adopter
Quality?
When in doubt, simplify!
Any thing beyond what is required to learning is a form of waste
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Case study:Food on the Table
An elaborate service
FotT's MVP
Inefficient? Or Progressing?
Automate the overhead
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The role of quality and design
High-quality exp - the principle
If t do not know who the customer is, we do not know what quality is.
To learn instead of to speculate
Surprise!
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Case study:IMVU
Problem: Moving around your 3D avatar.
They kind of "cheated"
Which version is low quality?
(natural selection)
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A Disciplined, Systematic Approach
Innovative accounting
What about traditional accounting
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3 steps of innovation accounting
Establish baseline (current status)
Tune the engine toward the ideal
Pivot or Persevere
Text
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MeasureWhat metrics(data) to use
and how to interpret
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Cohort Analysis(on $5 a day)
Day in and day out
Performance of indie groups
Funnel / Flow
Hard facts to learn
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Optimization vs LearningDownward spiral follows
energy that could have been invested to help build a sustainable business were used to resort to the usual
bag of success theater tricks: last-minute ad buys, channel stuffing, and whiz-bang demos, in a
desperate attempt to make the gross numbers look better.
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Caution: Vanity metrics
Isn't it exciting?
Driven by past initiatives
Irrelevant to the efficacy of the team
Gross numbers are misleading
Lack of cause-and-effect inferences
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Case study: Grockit
Lead by a visionary
Agile, process-oriented, disciplined
Efficiency, morale - learning culture
A/B tests on customer behavior reveal real customer needs
Hypothesis testing for lazy registration
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KanbanCapacity Constraint4 states: product backlog, actively being
built, done(from a technical perspective), or in the process of being validated
Get the hang of it
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Three A's of metrics
Actionable
Accessible
Auditable
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Pivot or PersevereA challenge everyone entrepreneur faces eventually
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Pivot or Persevere
Land of living dead
A sustainable business that creates value and drive growth
Improve human faulty judgement by subjecting to repeated tests
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Case: VotizenUSA.gov, social network of verified voters, attracted early adopters who love the concept, in the face of moderate
success, a series of pivot/persevere decisions
Customers would be interested enough to sign up
Able to verify them as registered voters
Verified voters would engage with Votizen's activism tools overtime
Engaged customer would recruit friends into civic causes
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Iterate
Initial MVP Optimization
Registration 5% 17%
Activation 17% 90%
Retention 5%
Referral 4%
Revenue n/a n/a
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Optimize
Before Opt. After Opt.
Registration 17% 17%
Activation 90% 90%
Retention 5% 8%
Referral 4% 6%
Revenue n/a n/a
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Success might be just around the corner
Leap-of-faith questions identified, tested, and with quantitative predictions made
Failing business behind positive metrics
“I always wanted to get more involved, this makes it so much easier”
“The fact that you prove I'm a voter matter”
“There's no one here, what's the point of coming back”
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Zoom In Pivot
Before Pivot After Pivot
E. of growth Sticky Paid
Registration 17% 42
Activation 90% 83
Retention 8% 21
Referral 6% 54
Revenue n/a < 1
Lifetime Value n/a Minimal
@2gov, social lobbying platform, translate twits into paper petitions
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Customer Segment Pivot
B2C > B2B: Political campaigning.
Companies/organizations showed extreme eager to use and pay.
Sales didn't materialize.
Hypothesis refuted.
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Platform Pivot
Before Pivot After Pivot
E. of growth Paid Viral
Registration 42 51
Activation 83 92
Retention 21 28
Referral 54 64
Revenue 1 11
Lifetime Value Minimal $.2 / message
Model based on Google Adwords, opinions of verified voters carried weight with elected officials,
high referral low marketing cost
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A startup's runway is the number of pivots it can
still makeRaise money or Cut costs
/ \Waste or Ability to B.M.L
Q: How to extend our runway?
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A catalog of Pivots
Zoom in
Zoom out
Customer segment
Customer need
Platform
Business architecture
Value capture
Channel
Engine of growth
Technology
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Pivot or Persevere meeting
Courage
A emotionally charged decision to make, so schedule it in advance
Failure to pivot
One foot rootedAcceleration
Success’ prerequisit