lean startup - lecture and exercise at the european business school (ebs) - october 2014

Lean Startup@andreas_diehl

www.firstangel.co Guest lecture European Business School (EBS) Strascheg Institute for Innovation and Entrepreneurship (SIIE)

@andreas_diehl

About me• 14 years experience as a founder of tech

companies (web & mobile)

• Education: Business @ University of Cologne additional scholarship / executive education at University of St. Gallen “Managing growth in technology firms”

• Consulting companies building digital business and manage digital transformation

@andreas_diehl

My own stuffwww.startupready.org!

connecting corporates and startups

!

www.crunching.io!financial forecasting for startups

@andreas_diehl

Agenda• Introducing Lean Startup

• Lean Startup as management philosophy

• Why corporates should care about Lean Startup

• Impacts for business education

• Lean Startup Buzzword #1: MVP

• Applying Lean Startup as a founder

• Wrap-Up, Q & A

• Exercise: Building your own lean startup

@andreas_diehl

The Lean Startup• Published by Eric Ries in 2011

• Combines existing concepts of customer development and agile software development

• Provides a framework to deal with uncertainty and build better startups

#1 What is a startup?

!

“Startups are not smaller versions of

big companies.”!!

Steve Blank!

What you might think it is

What it really is

@andreas_diehl

Definition of a startupA startup is an organisation formed to search for

a repeatable and scalable business model.

- Steve Blank -

A startup is a human institution designed to deliver a new product or service under conditions

of extreme uncertainty.

- Eric Ries -

#2 Putting „lean“ into it …

Definition of Lean

!

“…. making obvious what adds value (to the customer) by reducing

everything else …”

• From 1950 on Toyota learned to build competitive advantages on manufacturing innovation

• In the 1980`s GM had to build small cars, but they were lousy and lost money. Toyota was facing import restrictions from the U.S. Congress. So they build a joint venture handing over the worst GM production facility to Toyota who made it the no. 1 facility wit the same workforce within 12 months.

• In 1988 the term „lean“ was born from an MIT article „Triumph of the Lean Production System“

(Hi)Story of Lean

#3 So, what is Lean Startup

about?

@andreas_diehl

Minimise total time through the loop …. by reducing everything that doesn`t contribute value to the customer (LEAN) in order to find a scalable business model before running out of money (STARTUP)

@andreas_diehl

Lean Startup = !

Customer Development +

Agile (Software) Development

@andreas_diehl

Customer Development

@andreas_diehl

Agile (Software) Development

@andreas_diehl

Lean Startup is not about• Cheap development

• Only for digital / tech startups

• Means bootstrapped startups

• Small startups

• A guarantee for building successful startups

@andreas_diehl

Lean Startup is about• Running experiments

• Validated learning

• Customer centricity

• Shorter and faster cycles

• Fast failing

• Not wasting (your) time and money

#4 Lean Startup as

innovation framework !

… or a game changing management philosophy

“It is not the strongest species that survive nor the most intelligent, but the ones most responsive to

change”. !

Charles Darwin

@andreas_diehl

Prepare for the change

@andreas_diehl

20th century success factors• Production facilities were costly

• Access to know-how was expensive

• Access to capital was limited (banks and a few big investors)

• Management itself was maybe one of the biggest innovations in 20th century

• Do the rights things!

• Do things right!

• Get things done with the right people!

@andreas_diehl

20th century management• Planning

• Thinking in causalities and linearity

• Hierarchies

• Processes

• Mass production

• Economies of scale / scope

@andreas_diehl

Todays world (1)• Production facilities are easily available

• especially in tech / digital world

• also disrupting lots of other industries (meantimes you can even have your own labor for 5 k; “Biohacking”)

• Access to know-how is free (thanks to Google and the internet)

• No limits accessing capital (crowd funding, angel investors, VC`s)

• Billions of people online (mobile and WEB)

@andreas_diehl

Todays world (2)• We are global and connected

• We live in a very complex and fast changing world

• You can`t manage complexity with traditional management (think of the financial crisis)

• Traditional value chains melt:

• Consumer become producers

• Producers become retailers

• etc.

#5 Why corporate executives

should care about Lean Startup

You can improve your crawling getting faster und faster …

… but standing up one day changes your life.

@andreas_diehl

Scaring a corp manager• Taking away his forecast plan and ask him to act

under high uncertainty

• Ask him to run experiments not having a clue on his ROI

• Build small / flexible teams instead of big one functional corporate silos

• Confronting him with failure as integral part of validated learning (remember: he is now a corp manager because he did the rights things faster than his colleagues)

@andreas_diehl

Leading vs trailing indicators• Corp executive measure trailing indicators:

revenue, ROI

• Focus on leading indicators: stickiness, retention, adaption rate.

• Example:

• Adaption rate at a new campus 2 weeks

• Daily Activity rate 50%

@andreas_diehl

Take aways for managers• Learn to experiment instead of writing business plans

• Play little bets instead of preparing forecasts

• Overcome ROI thinking accepting uncertainty (which doesn`t mean that you can have clear expectations)

• Accept failure as integral part of learning

• Build cross functional small teams and give them accountability, responsibility, ownership and credit

• Replace reporting templates with the question “What have you learned?”

• Bet on leading not trailing indicators

#6 What Lean Startup means

for business education

@andreas_diehl

Business Education• Kill business plan lectures

• Prepare people for failure, change and adaption

• Teach evidence based entrepreneurship / Lean Startup methodologies

• Teach students in the art of listening, teach social and behavioural aspects

• Teach students in running experiments

• Data analytics (qualitative and quantitative), learning to differentiate leading vs trailing indicators

@andreas_diehl

Replace business planning

#7 Lean Startup buzzword bingo:

The minimum viable product (MVP)

@andreas_diehl

Want to become a hockey PRO?

!

“Put something in users hand and get

real feedback ASAP.”!

!Drew Houston, Dropbox!

@andreas_diehl

!

“Build your first product the most

shittiest way possible.”!

!Dave McClure, 500 Startups!

#8 What Lean Startup teaches

you for your own venture

!

“Entrepreneurship is not a cookbook or a checklist. At the

end of the day, founders are artists.”!

!

@andreas_diehl

1. Make something people want -> Identify a problem worth solving

2. Don`t mix up coolness and enthusiasm with usefulness

3. Start a business not a start-up

4. Market = f (customer, price)

5. You don`t need as much as you think to start

6. Care about profit from day 1

7. Commitment instead of an exist strategy

8. Get a (paying) customer (most startups fail because of customers not because of technology)

9. Be prepared that your idea (for a solution) sucks

10.Launch today (nobody cares anyway) and iterate

11.The stuff you leave out matters (think about curators in museums, how many pictures are there you do not see?)

12.Focus on the EPI center ... If i would take this away, would you still have a business?

13.Write down your hypothesis (using the business model canvas)

14.Validate your beliefs and hypothesis with interviews and small experiments

15.Find the right people to join you

Personal mash up advise

!

"At the end of the day your business

isn`t about your opinion.“!

!Steve Blank!

Wrap Up

@andreas_diehl

@andreas_diehl

Key take aways• We live in a world of deep transformation and

ongoing change

• Lean Startup provides a framework to deal with constant change, provides a mindset for better innovation and a framework to kick off new ventures

• Lean Startup can and should be applied by corporate managers

• Lean Startup might be counter intuitive for traditional business education and thinking

@andreas_diehl

You should read

• http://hbr.org/2013/05/why-the-lean-start-up-changes-everything/

It`s just big enough … let`s exercise !

Andreas Diehl www.firstangel.co

andreas@firstangel.co 0163 - 8040552

Exercise

@andreas_diehl

Overview1.Big idea

2.Problem

3.Alternatives

4.Customer

5.Solution

6.Market

7.Competition

8.MVP

9.Metrics

10.Revenues

11.Channels

12.Why now

@andreas_diehl

# 1• Describe your big idea in a tweet

@andreas_diehl

# 2• Identify and describe the

problem you want to solve

• Is it worth solving?

@andreas_diehl

# 3• What existing alternatives does the customer have

by today?

@andreas_diehl

@andreas_diehl

# 4• Who is the customer. Describe him by using 5

attributes

@ReferralCandy

@andreas_diehl

# 5• Describe your solution

• Explain why this is better than existing alternatives

@andreas_diehl

# 6• What market are your serving?

• What is your market type (re-segment a market, same but better, new market)

@andreas_diehl

• What market are your serving?

• What is your market type (re-segment a market, same but better, new market)

@andreas_diehl

# 7• Who is your competition?

@andreas_diehl

# 8• Describe your MVP: if there is competition, what is

better in your MVP?

@andreas_diehl

# 9• Metrics: How do you measure your own and your

customers success?

@andreas_diehl

# 10• How do you want to make money?

@andreas_diehl

# 11• How you you want to reach your customers and

what costs occur for acquiring them?

@andreas_diehl

# 12• Why now? What technological, economical and

social forces drive your idea. Why should you (and maybe your investors) care now and today?

@andreas_diehl

# Bonus: 1 Minute pitch