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Lean Startup, Customer Development &

Business Model GenerationStartup Day - University of Cologne - June 29th 2013

vidarandersen.com@blacktar

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I’m Vidar @blacktar Andersen

Norwegian living in Cologne, Germany

16+ years professional experience creating enterprise software for F500 and GOs

Startup Founder (hits & misses)

Corporate Entrepreneurship Consultant to F100 Corps

Educator (SW NEXT Instructor, University Lecturer on Startup Entrepreneurship)

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I’ve Been Around :)

vidarandersen.comPITCHCADEMY.COM

Andersen Dierick & Associates

I’ve Founded a Few

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What We Now KnowStartups vs Corporations - Search vs Execute

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BONUS MATERIAL!

Take this FREE and AWESOME course with Steve Blank taught at Stanford, Berkeley and Colombia

https://www.udacity.com/course/ep245

(A much better investment of your time than reading this presentation!)

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Startup vs CorporationSo what’s the difference?

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A Startup is NOT a smaller version of a large Company!

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So What’s a Startup?A Definition

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“A STARTUP is a TEMPORARY organizatio in SEARCH of a SCALABLE

and REPEATABLE business model”

Everybody, Repeat After Me:

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“If you can take your business plan to a bank and not get laughed at

and thrown out,you’re NOT a STARTUP”

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Why is this Important?Discussion

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Startup vs CompanySEARCH for business model VS EXECUTING business model

NOT a smaller version of a large company

Business Model Generation vs Business Plans & Forecasts

Customer Development vs Product Development

Agile Build-Measure-Learn vs Waterfall Model

Organizational structures and roles are different

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Why Do Most Startups #FAIL?

The Most Common Reasons

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Why do Startups #FAIL?

Co-Founders fight

Cannot build initial spec

No one will fund the idea

Too few people buy or use the product or service

Premature scaling (scaling organization before product-market or problem-solution fit is properly validated)

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Business Model Generation Instead of Business Plans

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“No Business Plan Ever Survives First

Contact With a Customer!”

- Steve Blank

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Business Model Generationvs Business Plans

No business plans survive first contact with customers

Business Plans are static faith-based monoliths

Business Model Generation is a dynamic and iterative process to discover a fact-based repeatable and scalable business model

The BMC is a COMMUNICATION TOOL to help you think, talk and share about your business model

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Value Proposition+

Customer Segment=

Product-Market FitIf you are only going to remember one thing, this is it

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BMC WorkshopModel the BMC for the Nespresso Company

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Market Size & CompetitionAre Both Missing from the Business Model Canvas - Do

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Market Size• Total Available Market (TAM)

Theoretical total market size orcustomer mass with problem

• Serviceable Available Market (SAM)Theoretical total market size orcustomer mass that can use yoursolution

• Serviceable Obtainable Market (SOM)Your target market cap or customerbase for the next 2-3 years

20

TAM

SAM

SOM

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CompetitionThere is no such thing as “I have no competitors”

- Anything or anyone standing in between the money and you is a competitor

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Customer DevelopmentYou ain’t a Lean Startup if you ain’t doing this

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The discovery process of validating the product-market fit by conducting customer interviews

Requires you to get out of the building and find the facts, because inside there’s only faith and opinions

Customer Development

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CustDev SummaryA) Customer Discovery – Test the Problem

1. Define your hypothesis: map out your guesses about your business model using a Business Model Canvas as your communication and tracking tool

2. Test the problem you think you are solving by getting out of the building and talking to and listening to potential customers, partners and resources – real people

B) Customer Validation – Test the Solution

1. Test the solution you think solves the problem to a known set of customers by building a minimum viable product (MVP) containing just the minimum features needed to allow you to start learning, to start an iterative build-measure-learn cycle

2. Iterate or pivot your business model repeating the steps until you have validated it

Once you’ve validated your business model, you move on to the “execute” component which is also divided into two sub-parts, Customer Creation and Company Building, which consist of creating user demand and building the organization to scale.

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Customer InterviewsThe Do’s and Don’ts of Customer Interviews

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Customer Discovery Interview Dos & Don’ts

NO SELLING ALLOWED - EVER! Listen, listen, listen.

FREQUENCY - You need to do at least 15-20 customer interviews a week, 50-150 in total to notice meaningful patterns

NO friends, colleagues or family - only real potential customers

You MUST define pass/fail tests IN ADVANCE, results cannot just be anecdotes and after-the-fact feel-good fakery

Your GOAL is: Test for the problem, not for the details

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We believe that people like ___ (customer type)_____ have a need for (or problems doing) ____ (need/

action/behavior)___.We will know we have succeeded when

____(quantitative/measurable outcome)___, or _____(qualitative/observable outcome)__, which will

contribute to ______(KPI)____.

Test Criteria Example

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The Lean ProcessThe Lean Startup by Eric Ries

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Key Lean ConceptsInnovation Accounting:

Build a Minimal Viable Product, the minimal thing you need to have to get real data, start validating learning and to start the build-measure-learn cycle

Using metrics, measure the right and important things, not randomness. How do we know that the changes we’ve made are related to the results we’re seeing?

Move the product from the baseline to the ideal, set a path to a sustainable product to reach a decision point

Pivot or persevere? Continue doing the same or trying something else.

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The PivotA PIVOT is when you fundamentally change one or more element(s) in your Business Model Canvas

It is NOT a minor change or iteration of existing element(s)

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The Iteration Cycle

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What’s NEXT?Five week, compressed Lean Launchpad program, 1 evening meet-up per week:

http://swnext.co

“Flipped Classroom”, peer + mentor driven

Steve Blank on tap, video lectures, books

As taught at Stanford and Berkeley for fraction of cost!

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vidarandersen.comGet Out Of The Building!