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LIGHTCASTLE LEAN STARTUP SERIES Date: October 25, 2013 Introduction & Objective: The day-long workshop will

be on "Lean Thinking Movement". The focus will be on understanding the Lean Startup Model and applying structured thinking techniques and tools like Business Model Canvass and developing Minimum Viability Prototypes from a practical perspective. At the end of the course, we expect the participants to enhance their negotiation and communication skills and learn how to prepare an investor pitch and raise funds for their startups. The session will start from 10 am and continue till 5 pm, inclusive of 1 hour lunch break. Ground Rules: The session will be comprised of 20 participants, divided in to 4 groups of 5 members each with diverse backgrounds (e.g. a mix of engineers and business graduates) and mixed gender. Each group needs to solve a common case, negotiate limited resources, create a Minimum Viability Prototype concept, depict their business model in a nut-shell through Business Model Canvas and finally present the MVP concept and business model to pseudo investors for fund raising. The performance of the day-long session will be judged upon the following criterions: Negotiation Resource Planning Team Work Structured Thinking BMC & MVP Concept Fund Raising Communication Feasibility Execution Overall Performance Venue: BYLC Headquarters

Key Concepts: Lean Startup Model: Originally developed in 2008 by Eric Ries with high-tech companies, "Lean Startup" is a method for developing businesses and products. Based on his previous experience working in several US startups, Ries claims that startups can shorten their product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and what he calls "validated learning". Ries' overall claim is that if startups invest their time into iteratively building products or services to meet the needs of early customers, they can reduce the market risks and sidestep the need for large amounts of initial project funding and expensive product launches and failures. After the beginning of this movement, the lean startup philosophy has since been expanded to apply to any individual, team, or company looking to introduce new products or services into the market. The lean startup philosophy is based on lean manufacturing, the streamlined production philosophy developed in the 1980s by Japanese auto manufacturers. The lean manufacturing system considers as waste the expenditure of resources for any goal other than the creation of value for the end customer, and thus a target for elimination. Similar to the precepts of lean management, Ries' lean startup philosophy seeks to eliminate wasteful practices and increase value producing practices during the product development phase so that startups can have a better chance of success without requiring large amounts of outside funding, elaborate business plans, or the perfect product. pg. 1

Ries believes that customer feedback during product development is integral to the lean startup process, and ensures that the producer does not invest time designing features or services that consumers do not want. This is done primarily through two processes, using key performance indicators and a continuous deployment process. Because startups typically cannot afford to have their entire investment depend upon the success of one single product launch, Ries maintains that by releasing a minimum viable product that is not yet finalized, the company can then make use of customer feedback to help further tailor their product to the specific needs of its customers. Some of the key concepts explained in the book Lean Startup are: Minimum viable product: A minimum viable product (MVP) is the version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort. The goal of a MVP is to test fundamental business hypotheses (or leap-of-faith assumptions) and to help entrepreneurs begin the learning process as quickly as possible. Continuous deployment: Continuous deployment is a process whereby all code that is written for an application is immediately deployed into production, which results in a reduction of cycle times. Split testing: A split or A/B test is an experiment in which different versions of a product are offered to customers at the same time. The goal of a split test is to observe changes in behavior between the two groups and to measure the impact of each version on an actionable metric. Actionable metrics: Actionable metrics can lead to informed business decisions and subsequent action. These are in contrast to 'vanity metrics' - measurements that give the rosiest picture possible but do not accurately reflect the key drivers of a business Pivoting: A pivot is a structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.

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Business Model Canvas: The Business Model Canvas is a strategic management template for developing new or documenting existing business models. It is a visual chart with elements describing a firm's value proposition, infrastructure, customers, and finances. It assists firms in aligning their activities by illustrating potential trade-offs. Formal descriptions of the business become the building blocks for its activities. Many different business conceptualizations exist; Osterwalder's work and thesis (2010, 2004) propose a single reference model based on the similarities of a wide range of business model conceptualizations. With his business model design template, an enterprise can easily describe their business model

Infrastructure Key Activities: The most important activities in executing a company's value proposition. Key Resources: The resources that are necessary to create value for the customer. They are considered an asset to a company, which are needed in order to sustain and support the business. These resources could be human, financial, physical and intellectual. Partner Network: In order to optimize operations and reduce risks of a business model, organization usually cultivate buyer-supplier relationships so they can focus on their core activity. Complementary business alliances also can be considered through joint ventures, strategic alliances between competitors or non-competitors. Offering Value Proposition: The collection of products and services a business offers to meet the needs of its customers. According to Osterwalder, a company's value proposition is what distinguishes itself from its competitors. The value proposition provides value through various elements such as newness, performance, customization, "getting the job done", design, brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability. pg. 3

The value propositions may be: Quantitative- price and efficiency Qualitative- overall customer experience and outcome

Customers Customer Segments: To build an effective business model, a company must identify which customers it tries to serve. Various set of customers can be segmented based on the different needs and attributes to ensure appropriate implementation of corporate strategy meets the characteristics of selected group of clients. The different types of customer segments include: Mass Market: There is no specific segmentation for a company that follows the Mass Market element as the organization displays a wide view of potential clients. Niche Market: Customer segmentation based on specialized needs and characteristics of its clients. Segmented: A company applies additional segmentation within existing customer segment. In the segmented situation, the business may further distinguish its clients based on gender, age, and/or income. Diversify: A business serves multiple customer segments with different needs and characteristics. Multi-Sided Platform / Market: For a smooth day to day business operation, some companies will serve mutually dependent customer segment. A credit card company will provide services to credit card holders while simultaneously assisting merchants who accept those credit cards.

Channels: A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a companys value proposition in ways that are fast, efficient and cost effective. An organization can reach its clients either through its own channels (store front), partner channels (major distributors), or a combination of both. Customer Relationship: To ensure the survival and success of any businesses, companies must identify the type of relationship they want to create with their customer segments. Various forms of customer relationships include: Personal Assistance: Assistance in a form of employee-customer interaction. Such assistance is performed either during sales, after sales, and/or both. Dedicated Personal Assistance: The most intimate and hands on personal assistance where a sales representative is assigned to handle all the needs and questions of a special set of clients. Self Service: The type of relationship that translates from the indirect interaction between the company and the clients. Here, an organization provides the tools needed for the customers to serve themselves easily and effectively. Automated Services: A system similar to self-service but more personalized as it has the ability to identify individual customers and his/her preferences. An example of this would be Amazon.com making book suggestion based on the characteristics of the previous book purchased. Communities: Creating a community allows for a direct interaction among different clients and the company. The community platform produces a scenario where knowledge can be shared and problems are solved between different clients. Co-creation: A personal relationship is created through the customers direct input in the final outcome of the companys products/services.

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Finances Cost Structure: This describes the most important monetary consequences while operating under different business models. A company's DOC. Classes of Business Structures: o Cost-Driven - This business model focuses on minimizing all costs and having no frills. i.e. SouthWest o Value-Driven - Less concerned with cost, this business model focuses on creating value for their products and services. i.e. Louis Vuitton, Rolex Characteristics of Cost Structures: o Fixed Costs - Costs are unchanged across different applications. i.e. salary, rent o Variable Costs - These costs vary depending on the amount of production of goods or services. i.e. music festivals o Economies of Scale - Costs go down as the amount of good are ordered or produced. o Economies of Scope - Costs go down due to incorporating other businesses which have a direct relation to the original product.

Revenue Streams: The way a company makes income from each customer segment. Several ways to generate a revenue stream: Asset Sale - (the most common type) Selling ownership rights to a physical good. i.e. Wal-Mart Usage Fee - Money generated from the use of a particular service i.e. UPS Subscription Fees - Revenue generated by selling a continuous service. i.e. Netflix Lending/Leasing/Renting - Giving exclusive right to an asset for a particular period of time. i.e. Leasing a Car Licensing - Revenue generated from charging for the use of a protected intellectual property. Brokerage Fees - Revenue generated from an intermediate service between 2 parties. i.e.Broker selling a house for commission Advertising - Revenue generated from charging fees for product advertising.

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