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1. Intro 2. Overview of the bases of Lean Startup 1. Lean Manufacturing 2. Customer Development 3. Agile Development 3. Entrepreneurship is Management 4. Validated Learning 5. Build - Measure – Learn 6. Innovation Accounting
sector of the economy or industry .WHAT IS A STARTUP? • A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. • Nothing to do with size of company.
WHY DO STARTUPS FAIL • Rarely fail because the product doesn’t work • Usually fail because there are no customers • Quality of the initial idea is not correlated with success • Startups that succeed are those that manage to iterate enough times before they run out of resources • Time between these iterations is fundamental .
THE LEAN STARTUP • Anything we can do to shrink the time between major iterations will increase the likelihood of success. . • Speed is the Startup competitive advantage.
SEM). • Agile software development – but tuned to the startup condition.LEAN STARTUPS GO FASTER • Commodity technology stack. . user‐generated content. • Customer development – find out what customers want before you build it. highly leveraged (free/open Source.
CUSTOMER DEVELOPME NT BASES OF LEAN STARTUP .
“Branding” Marketing .Create Positioning 9 Customer Development in the High-Tech Enterprise September 2008 .Create Demand .Launch Event . Alpha/Beta Test .Early Buzz Launch/ 1st Ship .WHAT’S WRONG WITH THIS? Product Development Concept/ Seed Round Product Dev.Hire PR Agency .Create Marcom Materials .
BUILD IT AND THEY WILL COME Only true for life and death products • i. Consumer.e. Biotech Cancer Cure • Issues are development risks and distribution. Web • Issues are customer acceptance and market adoption . not customer acceptance Not true for most other products • Software.
so get outside Test your hypotheses • Two are fundamental: problem and product concept . start listening • There are no facts inside your building.CUSTOMER DISCOVERY: STEP 1 Customer Discovery Customer Validation Customer Creation Company Building Stop selling.
CUSTOMER VALIDATION: STEP 2 Customer Discovery Customer Validation Customer Creation Company Building • Develop a repeatable sales process • Only earlyvangelists are crazy enough to buy .
CUSTOMER CREATION STEP 3 Customer Discovery Customer Validation Customer Creation Company Building • Creation comes after proof of sales • Creation is where you “cross the chasm” • It is a strategy not a tactic .
COMPANY BUILDING: STEP 4 Customer Discovery Customer Validation Customer Creation Company Building • • (Re)build your company’s organization & management Re look at your mission .
GENCHI GEMBUTSU GO AND SEE FOR YOURSELF “GET OUT OF THE BUILDING” STEVE BLANK .
LEAN MANUFACT URING BASES OF LEAN STARTUP .
JUST IN TIME
The right material At the right time At the right place In the exact amount
STOP THE LINE
“stop and fix
problems as they occur rather than pushing them down the line to be resolved later” Jeffrey Liker and David Meier, Toyota Way Fieldbook
THE ESSENCE OF LEAN IS ENGAGING EVERYONE IN IDENTIFYING AND SOLVING PROBLEMS
REDUCE ALL FORMS OF WASTE Waste Un-Evenness Activities that do not add value Overburden workload that is not balanced work that creates burden for the Picture Source – Toyota Motor Companyteam members or processes Australia .
8 WASTES In LEAN 8 types of waste have been identified Not using People Resource Waiting Overproduction All of these 8 can be either “Necessary Waste” or “Un-necessary Waste” Depending on circumstance Motion Transport or Conveyance Overprocessing Rework Stock & Materials .
AGILE DEVELOPMENT BASES OF LEAN STARTUP .
AGILE DEVELOPMENT Solution: Unknown .
you take advantage of the efforts of thousands or millions of others. • More important is its impact on speed.COMMODITY TECHNOLOGY STACK • Leverage = for each ounce of effort you invest in your product. • It’s easy to see how high‐leverage technology is driving costs down. • . • Time to bring a new product to market is falling rapidly.
ENTREPRENEUR SHIP IS MANAGEMENT THAT SOUNDS BORING .
BUSINESS PLAN VS JUST DO IT SCHOOL OF ENTREPRENEURSHIP • Business Plan • A business plan never survives a client first contact • A bad plan greatly executed = dead company • Just do it • Have you ever cut a chicken’s head? (you got the picture) .
STARTUP = EXPERIMENT .
VALUE OF A STARTUP = VALIDATED LEARNING • What products do customers really want? • How will the product grow? • Who is our customer? • Which customer should we listen to and which should we ignore? .
VALIDATED LEARNING .
VALIDATED LEARNING Focus energies on validated learning. we need to identify which hypotheses to test. learning where and when to invest energy results in saving time and money To apply scientific method. .
MINIMIZE TOTAL TIME THROUGH TOTAL J me through the loop THE LOOP Minimize IDEAS LEARN BUILD DATA CODE MEASURE .
LEARNING MILESTONES Planned the opposite way: • What do we need to learn? • Use Innovation accounting to figure out what needs to be measured to know if we are gaining validated learning What product needs to be built to run the experiment and measure? .
MINIMUM VIABLE PRODUCT If you say this feature “should” be there. it doesn’t belong in your MVP • Video MVP – Make a video how it works as if it’s already done • The Concierge MVP – Do it by hand. customer by customer • Wizard of Oz MVP – 8 people behind a curtain .
WE DON’T KNOW WHAT QUALITY IS .QUALITY IN AN MVP IF WE DON’T KNOW WHO THE CUSTOMER IS.
STARTUP’S JOB • Measure where it right and wrong • Confronting hard truths • Devise Experiments to learn how to move the real numbers closer to the ideal reflected in the business plan .
BUILD MEASURE LEARN .
BUILD MEASURE LEARN .
EXPERIMENTS • Do them with early adopters. not average customers • GOAL: Measure what customers did (unlike focus groups) • An experiment is a PRODUCT .
YOUR TWO MOST IMPORTANT ASSUMPTIONS • Value Hypothesis • Growth Hypothesis .
INNOVATION ACCOUNTING .
Tuning the engine .INNOVATION ACCOUNTING 1.Use MVP to establish real data on where the company is right now 2. Baseline .Fine tune from baseline towards ideal 3. Pivot or persevere .
BASELINE • Test riskiest assumptions first • Careful with vanity metrics (up and to the right) • Use Learning milestones • P. conversion rates • Sign up and trial rates • Customer lifetime value .e.
Dev.TUNING THE ENGINE • Work towards second learning milestones • Every prod. marketing should be targeted at improving one of the drivers of it’s growth model .
for instance) Startups that fails to converge to something like the ideal: time to pivot .PIVOT OR PERSEVERE Schedule a regular meeting (every 6 weeks.
FUNNEL METRICS Behaviors critical to engine of Growth (specific to each business) • Customer registration • Downloads • Trials • Repeat Usage • Purchase .
COHORT ANALYSIS • One of the most important tools of Startup Analysis • Don’t look at cumulative totals or gross numbers like total revenue and total number of customers • Look at performance of each group of customers • Each group is called a Cohort .
• etc .VANITY METRICS • Gross Metrics • Total Registered User • Total Paying customers.
INSTEAD OF VANITY METRICS USE COHORT ANALYSIS AND SPLIT TESTS .
THE 3 AAA OF METRICS • Actionable – Must demonstrate clear cause and effect • Accessible – Make reports as simple as possible so that everyone understands them • Auditable – Ensure data is credible .
A pivot requires that we keep one foot rooted in what we’ve learned so far. strategy and engine of growth. while making a fundamental change in strategy .PIVOT Structured Course Correction designed to test a new fundamental hypothesis about a product.
sticky or paid • Channel – change sales channel • Technology – deliver the same in different technology . low volume to low margin high volume or vice versa • Value Capture – Change the way company captures value • Engine of Growth – change Viral.CATALOG OF PIVOTS • Zoom-in – refocus on what was before a feature • Zoom-out – what was once the product becomes a feature • Customer Segment – changing the target audience • Customer need – change to a higher customer need • Platform – from product to platform and viceversa • Business Architecture – From high margin.
BATCH A CAUTIONARY TALE ABOUT LETTERS .
SINGLE PIECE FLOW FASTER THAN BATCH • No sorting/stack/move around • Batch more efficient per step but less as a system • Faster to catch mistakes with little to no impact • Overall performance of system more important than individual performance .
ENGINE OF GROWTH .
Repeat purchase or use .HOW CUSTOMERS DRIVE GROWTH 1. Word of Mouth 2. Funded Advertising 4. Side effect of product usage 3.
STICKY ENGINE OF GROWTH • Designed to attract and retain customers for the long term • Relies on having a high customer retention rate • Tracks churn rates very carefully .
VIRAL ENGINE OF GROWTH • Quantified by viral loop • Speed determined by viral coefficient • Viral Coefficient = how many new customers will use the product as a consequence of each new customer that signs up • Viral coefficient higher than 1 = exponential growth .
PAID ENGINE OF GROWTH • Revenue from customers fuels cost of acquiring new customers • Customer lifetime value determines how much to spend per new customer • Cost of Acquisition (CPA) – Money spent versus new customers that signed up .
• Behind every supposed technical problem is usually a human problem. • Make proportional investments in prevention at all five levels of the hierarchy. not just the symptom.• Ask “why” five times when Something unexpected happens. Fix the cause.FIVE WHYS ROOT CAUSE ANALYSIS A technique for continuous Improvement of company Process. .
AN EXERCISE – BMC OF TASK RABBIT .
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