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Introduction to Lean Startups
Steve Guengerich
May 22, 2014
You are here
How many know or would identify themselves as a Lean Startup
new product ideas to get 1 successful product
58
change their original plans drastically
66%
Not a better Plan A
But a path to a plan that works.
Lean Startup is a rigorous process for iterating from a Plan A to a plan that works
Agenda
1. What is a Lean Startup?
2. What does a Lean Startup look like?
3. How can you use Lean to define and measure progress?
New Idea “Stages of Adoption”
• Ignored
• Misunderstood
• Obvious – now and before
We are Lean because…
• we got a great deal on our furniture…
We are Lean because…
• we got a great deal on our furniture…
• we surveyed all our customers and found that…
We are Lean because…
• we got a great deal on our furniture…
• we surveyed all our customers and found that…
• we’ve implemented continuous deployment…
A Lean Startup is about speed
Startups that succeed are those that manage to iterate enough times before running out of resources.
- Eric Ries
A Lean Startup is about focus
Focus on the right actions that are important to the startup, and ignore the rest.
Characteristics of a Lean Startup
Business Model vs. Business Plan
Business model hypothesis
1. What is the problem I’m solving?
2. Who is the customer?
3. How – business model
Business Model Canvas (lean edition)
Problem Solution Unique Value Proposition
Unfair Advantage
Customer Segments
Key Activity
Channels
Cost Structure Revenue Streams
Top 3 problems Top 3 features
Single, compelling clear message that states why you are different and worth buying
Can’t be easily copied or bought
Target customers
Activity that drives retention/ revenue
Path to customers
Customer acquisition costs Distribution costs Hosting People, etc.
Revenue model Life time value Revenue Gross margin
Business Model Canvas (nonprofit & lean edition)
Problem Solution Unique Value Proposition
Competitive Advantage
Customer Segments
Key Activity
Channels
Cost Structure Revenue/Outcome Streams
Top 3 problems you are trying to solve
Top 3 features of your solution
Single, compelling clear message that states why you are different and worth buying or investing in
Can’t be easily copied or bought
Target customers, clients, and stakeholders served
Activity(ies) that drives revenue / success
Path(s) to reaching/serving customers
Customer acquisition costs Distribution costs Hosting People, etc.
1. Financial outcomes • Revenue model • Lifetime value • Revenue • Gross margin
2. Non-financial outcomes • Social impact • Mission-related objectives • Behavior changes
Key Resources & Internal Alignment
• Degree of board and other critical path stakeholder buy-in • Physical resources needed • People resources needed • Intellectual resources needed
Validate Problem / Solution Fit
Do I have a problem worth solving?
Problem/solution fit
Product/market fit
Scale
Problem/Solution Fit - Lean Canvas
P S UVP UA CS
KA CH
C$ R$
Top 3 problems Top 3 features Single, compelling clear message that states why you are different and worth buying
Can’t be easily copied or bought
Target customers
Activity that drives retention/ revenue
Path to customers
Customer acquisition costs Distribution costs Hosting People, etc.
Revenue model Life time value Revenue Gross margin
Achieve Product / Market Fit
Have I built something people want?
Problem/solution fit
Product/market fit
Scale
Product development gets in the way of learning
Very little learning
Requirements Development QA Release
Some learning
Most learning happens here
Involve customers throughout product dev
Requirements Continuous Deployment
Release
Customer Validation
Customer Discovery
Product/Market Fit - Lean Canvas
P S UVP UA CS
KA CH
C$ R$
Top 3 problems Top 3 features Single, compelling clear message that states why you are different and worth buying
Can’t be easily copied or bought
Target customers
Activity that drives revenue/ retention
Path to customers
Customer acquisition costs Distribution costs Hosting People, etc.
Revenue model Life time value Revenue Gross margin
Scale - Lean Canvas
P S UVP UA CS
KA CH
C$ R$
Top 3 problems Top 3 features Single, compelling clear message that states why you are different and worth buying
Can’t be easily copied / bought
Target customers
Activity that drives revenue/ retention
Path to customers
Customer acquisition costs Distribution costs Hosting People, etc.
Revenue model Life time value Revenue Gross margin
After Product / Market Fit
Problem/solution fit
Product/market fit
Scale
Validated learning
Pivots
Growth
Optimizations
Start with what matters
P S UVP UA CS
KA CH
C$ R$
Problem #1 Problem #2 Problem #3
Feature #1 Feature #2 Feature #3
Founders Marketers
But also tackle the riskiest part
P S UVP UA CS
KA CH
C$ R$
Problem #1 Problem #2 Problem #3
Feature #1 Feature #2 Feature #3
Founders Marketers
Something that can’t be copied or bought
Personal authority Website
Subscription model: $49 / mo.
Formulate falsifiable hypotheses
Leap of Faith: Being known as an “expert” will drive early adopters
Hypothesis: Blog post will drive > 100 early sign-ups
Build accessible dashboards
Hypothesis Metrics Week 1 Week 2
Hypothesis Metrics Week 1 Week 2
Hypothesis Metrics Week 1 Week 2
CH
CS
P
Personal authority will drive early adopters
Early adopters will primarily be pre-product/market fit companies
Problem fit
Blog post will drive > 100 early sign-ups Number of teaser 72 20 page sign-ups
Conduct 30-50 customer interviews within Number of customer 5 9 4 weeks interviews
80% of early adopters will be founders Percentage of 4/5 6/9 interviewees that fit this description
80% of early adopters will vote problem Number of must- 3/3 7/9 as must-have have votes from customer interviews
Make the results auditable
Run board meetings in a lessons learned format
Scale vs. product/market fit
Problem/solution fit
Product/market fit
Scale
Validated learning
Pivots
Growth
Optimizations
After product/market fit, some level of success is almost always guaranteed.
True False
False True
Revenue
No Yes
No
Usage
Yes
Beware the “false positives”
Pivots are about finding a plan that works
Optimizations are about accelerating that plan
Pivots
Experiments: Validate
Goal: Course correction
Optimization
Experiments: Refine
Goal: Efficiency
You stand to learn the most when the probability of the expected outcome is 50%; that is, when you don’t know what to expect.
Scale - Lean Canvas
P S UVP UA CS
KA CH
C$ R$
Top 3 problems Top 3 features Single, compelling clear message that states why you are different and worth buying
Can’t be easily copied / bought
Target customers
Activity that drives revenue/ retention
Path to customers
Customer acquisition costs Distribution costs Hosting People, etc.
Revenue model Life time value Revenue Gross margin
While revenue is the first form of validation, retention is the ultimate form of validation
Every process works until you add people; key is balancing your hiring with equal number of
Experimenters
Specialists
Problem/solution fit
Product/market fit
Scale
Your goal: Learning Your investor’s goal: Growth
Your goal: Growth Your investor’s goal: Growth
Ideal time to raise funding
Leverage your advisors for good advice but don’t follow it, apply it.
Advice <> judgment or validation
Advice = identifying and prioritizing risk
Thanks!
Steve Guengerich @sguengerich 703-957-0797