lean start up workshop

8/2/2019 Lean Start Up Workshop

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STARTUPWORKSHOP

AGENDA

1. Intro

2. Overview of the bases of Lean Startup

1. Lean Manufacturing

2. Customer Development3. Agile Development

3. Entrepreneurship is Management

4. Validated Learning

5. Build - Measure – Learn

6. Innovation Accounting

WHAT IS A STARTUP?

• A startup is a human institution designed to deliver a newproduct or service under conditions of extremeuncertainty.

• Nothing to do with size of company, sector of theeconomy or industry

WHY DO STARTUPS

• 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 iterateenough 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 majoriterations will increase the likelihood of success.

• Speed is the Startup competitive advantage.

LEAN STARTUPS GO

FASTER

• Commodity technology stack, highly leveraged (free/open

Source, user‐generated content, SEM).

• Customer development – find out what customers want

before you build it.• Agile software development – but tuned to the startup

condition.

CUSTOMERDEVELOPME

NTBASES OF LEAN STARTUP

WHAT’S WRONG WITH

Customer Development in the High-Tech Enterprise

September 2008 9

Concept/Seed Round

Product Dev. Alpha/BetaTest

Launch/1st Ship

Product Development

- Create MarcomMaterials

- Create Positioning

- Hire PR Agency- Early Buzz

- Create Demand- Launch Event- “Branding”

Marketing

BUILD IT AND THEY

WILL COME

Only true for life and death products

• i.e. Biotech Cancer Cure

• Issues are development risks and distribution,not customer acceptance

Not true for most other products

• Software, Consumer, Web

• Issues are customer acceptance and market adoption

CUSTOMER

DISCOVERY: STEP 1

Stop selling, start listening

• There are no facts inside your building, so getoutside

Test your hypotheses

• Two are fundamental: problem and product concept

CustomerDiscovery

Customer Validation

CompanyBuilding

CustomerCreation

CUSTOMER

VALIDATION: STEP 2

• Develop a repeatable sales process

• Only earlyvangelists are crazy enough to buy

CustomerDiscovery

Customer Validation

CompanyBuilding

CustomerCreation

CREATION

STEP 3

• Creation comes after proof of sales

• Creation is where you “cross the chasm”

• It is a strategy not a tactic

CustomerDiscovery

Customer Validation

CompanyBuilding

CustomerCreation

COMPANY BUILDING:

STEP 4

• (Re)build your company’s organization &management

• Re look at your mission

CustomerDiscovery

Customer Validation

CompanyBuilding

CustomerCreation

GENCHI

GEMBUTSUGO AND SEE FOR YOURSELF

“GET OUT OF THE BUILDING” STEVE BLANK

LEANMANUFACT

URINGBASES OF LEAN STARTUP

JUST IN TIME

The right material

At the right time

At the right place

In the exactamount

STOP THE LINE

“stop and fix

problems as they

occur rather than

pushing them

down the line to be

resolved later ”

Jeffrey Liker andDavid Meier, ToyotaWay Fieldbook

THE ESSENCE OF LEAN IS ENGAGING

EVERYONE IN IDENTIFYING ANDSOLVING PROBLEMS

Un-Evenness

Overburden

Activities that donot

add value

workload that is

not balanced

work that creates burden forthe

team members or processes Picture Source – Toyota Motor Company Australia

REDUCE ALL FORMS

OF WASTE

8 WASTES

In LEAN 8 types of waste have been identified

Over-production

Waiting

Transport orConveyance

Rework

Motion

Stock &Materials

Over-processing

All of these 8 can be either

“Necessary Waste” or“Un-necessary Waste”

Depending on circumstance

Not using

PeopleResource

DEVELOPMENT

BASES OF LEAN STARTUP

AGILE DEVELOPMENT

COMMODITY

TECHNOLOGY STACK

• Leverage = for each ounce of effort you invest in yourproduct, you take advantage of the efforts of thousands ormillions of others.

• It’s easy to see how high‐leverage technology is driving

costs down.

• More important is its impact on speed.

• Time to bring a new product to market is falling rapidly. •

ENTREPRENEURSHIP 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 weignore?

VALIDATED

LEARNING

VALIDATED LEARNING

Focus energies on validated learning, learning where andwhen to invest energy results in saving time and money

To apply scientific method, we need to identify whichhypotheses to test.

MINIMIZE TOTAL TIME

THROUGH THE LOOP

CODEDATA

BUILDLEARN

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 learningWhat product needs to be built to run the experiment andmeasure?

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

• The Concierge MVP – Do it by hand, customer bycustomer

• Wizard of Oz MVP – 8 people behind a curtain

QUALITY IN

AN MVPIF WE DON’T KNOW WHO THE CUSTOMER

IS, WE DON’T KNOW WHAT QUALITY 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

MEASURE

BUILD MEASURE

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

INNOVATION

ACCOUNTING

1. Baseline - Use MVP to establish real data on where thecompany is right now

2. Tuning the engine - 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.e. conversion rates• Sign up and trial rates

• Customer lifetime value

TUNING THE ENGINE

• Work towards second learning milestones

• Every prod. Dev, marketing should be targeted atimproving one of the drivers of it’s growth model

PIVOT OR PERSEVERE

Schedule a regular meeting (every 6 weeks, for instance)

Startups that fails to converge to something like the ideal:time to pivot

FUNNEL METRICS

Behaviors critical to engine of Growth (specific to eachbusiness)

• 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

VANITY METRICS

• Gross Metrics

• Total Registered User

• Total Paying customers,

• etc

INSTEAD OF

VANITY

METRICSUSE 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 thateveryone understands them

• Auditable – Ensure data is credible

Structured Course Correction designed to test a newfundamental hypothesis about a product, strategy andengine of growth.

A pivot requires that we keep one foot rooted in what we’ve

learned so far, while making a fundamental change instrategy

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, low volume tolow margin high volume or vice versa

• Value Capture – Change the way company captures value

• Engine of Growth – change Viral, sticky or paid

• Channel – change sales channel

• Technology – deliver the same in different technology

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 thanindividual performance

ENGINE OFGROWTH

HOW CUSTOMERS

DRIVE GROWTH

1. Word of Mouth

2. Side effect of product usage

3. Funded Advertising

4. Repeat purchase or use

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 theproduct as a consequence of each new customer thatsigns up

• Viral coefficient higher than 1 = exponential growth

PAID ENGINE OF

GROWTH

• Revenue from customers fuels cost of acquiring newcustomers

• Customer lifetime value determines how much to spendper new customer

• Cost of Acquisition (CPA) – Money spent versus newcustomers that signed up

FIVE WHYS ROOT

CAUSE ANALYSIS

A technique for continuous Improvement of companyProcess.• Ask “why” five times when Something

unexpected happens.

• Make proportional investments in prevention at all five

levels of the hierarchy.

• Behind every supposed technical problem is usually a

human problem. Fix the cause, not just the symptom.

AN EXERCISE BMC

AN EXERCISE – BMC

OF TASK RABBIT

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