Introduction to Lean Startups with Steve Guengrich

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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

    weve 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 Im 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

    Cant 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

    Cant 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

    Cant 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

    Cant 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

    Cant 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 cant 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 dont 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

    Cant 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 investors goal: Growth

    Your goal: Growth Your investors goal: Growth

    Ideal time to raise funding

  • Leverage your advisors for good advice but dont follow it, apply it.

    Advice judgment or validation

    Advice = identifying and prioritizing risk

  • Thanks!

    Steve Guengerich @sguengerich 703-957-0797