lean innovation for investors

Norbert ZellerSchaan, 2. November 2017

Lean InnovationHow to increase the Success Rate of Startups

Introduction for

Lean Startup InvestorNur 1 von 10 Startups ist erfolgreich?!

Warum Lean Innovation – Warum Lean Startup Investor?Der Vorteil von “Lean Innovation” zeigt sich bereits, bevor ein Produkt fertig entwickelt ist. So werden Learnings schneller umgesetzt und dadurch der Erfolg massiv gesteigert.Investoren können damit das Risiko und das Potenzial eines Investments früher und kontinuierlich einschätzen.

2. November 2017

Norbert Zeller•Electrical & Computer Science Engineer, FH Winterthur•Master of Management, MZSG•Partner at Trivadis AG•Member of StartAngels Network (startangels.ch)•Agile executive coach at pragmatic-‐solutions.ch•Board Member equitypitcher.com•Board Member of a Lean Startups

32. November 2017 www.pragmatic-‐solutions.ch

agility accelerates ...

AGENDA

www.pragmatic-‐solutions.ch 4

Content•Part 1:•Introduction to the Lean Innovation Framework

•Part 2:•Lean Governance



INTRODUCTIONTO LEAN INNOVATION FRAMEWORK


Goal: To improve the success rate

Source: Ash Maurya «Running Lean»7

•66% of successful products/companies significantly change original business idea

•Develop products in half the time and at half the cost (GE)

•Reduce failure: “wrong” product and “premature” scaling

•"Using lean methods across a portfolio of start-‐ups will result in fewer failures than using traditional methods“.•Steve Blank: https://hbr.org/2013/05/why-‐the-‐lean-‐start-‐up-‐changes-‐everything

www.pragmatic-‐solutions.ch

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Why do startups fail?The vast majority of startups do NOT fail because they could not build a great product, but because no one wanted the product. Steve Blank


The majority of successful startups abandoned their initial plans and learned what would and would not work in the market. Clayton Christensen

Traditional versus lean approach

Source: Ash Maurya: Running Lean9www.pragmatic-‐solutions.ch

Core Lean PrincipleGet out of the building

1 2 3 4 5 6 7 8 9

Lean Innovation is …

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a company culture touching all aspects:Values, Leadership, Incentives, Empowerment, Organization, Accountability, …

not a collection of tools

A culture can not be copied easily !


Lean Innovation Framework

12www.pragmatic-‐solutions.ch


ScaleProduct Market

fit

Problem Solution

fit

Customer Discovery

Customer Validation

Customer Creation

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Each assumption is validated via an experiment with BML feedback loop

Is problem worth solving, are people willing to pay, is business model profitable, repeatable and scalable

Assumption of plan A, …



LEAN CANVAS


Lean Canvas (by Ash Maurya / adapted from Osterwalder)



Source: Ash Maurya: Running Lean


BUILD – MEASURE - LEARN FEEDBACK LOOP


Feedback loop

Design experiment

Minimum Viable ProductResults

Analyze results:-‐ persevere,-‐ pivot or-‐ quit?

weeks not years

Assumption/Hypothesis

Run experiment


Source: Eric Ries: The Lean Startup

BUILD: Design Experiment

We will know we have succeeded when [quantitative/measurable outcome] or [qualitative/observable outcome]

Janice Fraser

We believe that [customer type] have a need for [need/action/behavior]

The smallest thing we can do to prove that need is [experiment]



LEAN GOVERNANCE


Content - Agenda

• Risk Management• Validation of Business Model• Reporting progress• Governing Startups • Lean Investor• Lean Investment Process



RISK MANAGEMENT


Lean Canvas: Where is the risk?



Lean Canvas: Prioritise risks and …

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Source: Running Lean was developed by AshMaurya. The card deck was created by Miles Galliford.

De-risking with BML Feedback loop

Build experiment

Measure your Metric

Hypothesis + Success Metric + Goal


Compare result against forecast.Is the hypothesistrue or false?

Measure

Experiment Report

Why is it relevant?

Quantify your goalsset scope/timebox

Plan how to execute experiment

Results = Data

Document the learning (validated, invalidated or inconclusive)

Test value and growth hypothesis first

Move to next experiment

Build Learn


Advantage of Validated Learning

Its all about facts and not opinions.

Build a culture of •generating facts instead of debating opinions•learning instead of being right


?!


VALIDATION OF BUSINESS MODEL


Measure progress without sales?

See: http://practicetrumpstheory.com/2012/02/why-‐lean-‐canvas/


How?

ScaleProduct Market

fit

Problem Solution

fit

Qualitative Validation

Quantitative Validation

Is Business Model profitable, repeatable and scalable?


By iterating Lean Canvas Ideas with Build-‐Measure-‐Learn Feedback Loop through 3 stages until we reach:


REPORTING PROGRESS


Goal: Problem Solution Fit => ValueProblem Solution FitYou validated with MVP and prospects that a specific solution will solve a know problem to such a degree that customer will buy it.

Brant Cooper

Value assumption – test whether a product or service really delivers value to specific customers once using it.

ScaleProduct Market

fit

Problem Solution

fit

Customer Discovery

Customer Validation

Customer Creation

Is the identified problem real? Will the target customer pay? Can the problem be solved?


The growth assumption – test how new customers will discover a product or service. Through what engine will you acquire new customers at affordable cost.

Goal: Product Market Fit => GrowthProduct Market FitCustomer is willing to pay. Cost of acquiring new customers is smaller than profit. Evidence that market is large enough

Brant Cooper

ScaleProduct Market

fit

Problem Solution

fit

Customer Discovery

Customer Validation

Customer Creation


Measure

Experiment Report

Why is it relevant?

Quantify your goalsset scope/timebox

Plan how to execute experiment

Results = Data

Document the learning (validated, invalidated or inconclusive)

Test value and growth hypothesis first

Move to next experiment

Build Learn



GOVERNING STARTUPS


Lean Dash Board (Lean Stack)

Flow


Lean Dash Board: Example

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Customer Example:Insurance Company



THE LEAN INVESTOR:MAKE LOTS OF LITTLE BETS. EXPECT MOST TO FAIL.


Dave Mc Clure @http://500.co

• Silicon Valley VC fund + startup accelerator• 40 people / 15 investing partners• 2000+ founders / 200+ mentors• 900+ Portfolio Co’s:•Wildfire USD 350•MakerBot USD 400•


Lean Innovation Investment Process

Source: Hans Däpp, StartAngels Networkwww.pragmatic-‐solutions.ch 49

Assumption/Goal: Halving & Slicing of Angel Investments

FFFFLean Canvas V12, Problem Solution fit & Product Market fit & Dash Board Re

sults &

Bus.C

anv.

V X

tMileston

e 1

Lean Investmen

twhe

n?

Investmen

ttoday

Busin

ess

Plan V 1.0

EffortManpower (%) 1 10 80Elapsed time (month) 1 -‐ 3 2 -‐ 3 18 -‐…

Public BPcoursemachine still running

No/few public Lean InnovationTrainingsavailable

Lean Innovationis part of BAinvestment(= risk insurance)

Goal:On portfolio basis toGet higher Success Rate & less get funds & more quits


SUMMARY: BENEFITS


Savings Potentials with Lean

• Lean Canvas instead of Business Plan• Identification & priorisation of risks instead oftesting the whole Business Model• Solution interviews instead of Market Research• Pretotype/MVP instead of perfect Product• Speed has biggest impact on profit



DISCUSSION


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Feedback Door1. How likely is it that you would recommend thisintroduction to a friend or colleague?


Source: NetPromoter Score

2. What changes would we have to make for you to give us one point more?

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THE END
