Practicing Lean for Startups (Part II)

ByMohamed Fouad El Nawawy, M.Sc.

Build-Measure-Learn Feedback Loop• Total time through this feedback loop should be minimized• Startup’s plan based on leap-of-faith assumptions where the two

most important are value hypothesis and growth hypothesis• Build a minimum viable product (MVP) or a prototype• Measure through quantitative techniques whether product

development leads to real progress and allows for creating learning milestones• Finally, pivot or persevere the original strategy• Creates less waste of time and money

Strategies based on Analog-Antilog• Basing strategy on comparisons to other industries• Walkman is an example of Analog for asking whether people would

listen to music using earphones• Napster is an example of Antilog for showing that people weren’t

willing to pay for downloading music

Value destroying growth• Growth from fundraising and expensive advertising but no real value

product

Firsthand strategic decisions• genchi gembustu (go and see for yourself)• People are an important kind of metrics• Customer archetype is a document to understand potential customers• Neither jump to get started and building nor get stuck in analysis and

reports• Begin selling to early adopters as it’s easy to capture their interest• Quality comes after understanding customer• However defects make it more difficult for product evolution• You should learn faster in order to win

Cohort Analysis • An important tool of startup analytics• Studies the performance of each group of customers (Customer

Flows) towards the product independently rather than studying gross numbers• Allows for a quantitative understanding of business

Split Test• Different versions of a product are evaluated by customers at the

same time and examining the behavior of the two groups to understand effect of variations

Three A’s of metrics• Actionable: shows clear cause and effect• Accessible: as simple as possible for everyone to understand• Auditable: Data is credible to employees

Pivot (change of strategy)• Zoom-in pivot: a single feature in a product becomes the whole product• Zoom-out pivot: The whole product becomes a single feature in a larger product• Customer segment pivot: Changing type of customer or customer segment• Customer need pivot: change the line of business according to customer needs• Platform pivot: change from an application to a platform or vice versa• Business architecture pivot: Business to Business, consumer products• Channel pivot: distribution channel through which company delivers its product

to customers• Technology pivot: Same solution using different technology

Small Batches• In Lean to learn how to develop a sustainable business is more

important than mass efficient production

Growth due to customer spread• Word of mouth• Product usage e.g. Fashion• Funded advertising (must be paid out of revenue)• Repeated purchase e.g. subscription

Engines of growth• The sticky engine of growth (focus on existing customers)• The viral engine of growth (driven by a viral loop where a customer

leads to other customers whose number is measured by a viral coefficient)• The paid engine of growth (increase revenue from each customer or

decrease cost of acquiring new customer)• They determine product-market fit where a widespread set of

customers use the product• Every engine of growth has a lifetime so when running shouldn’t

mislead company about real product value

References• Eric Ries, “The Lean Startup,” 2011