The lean start-up

G. Tendayi VikiSchool of Psychology

University of Kent

twitter: @gtviki

The Lean Thinkers

Steve Blank (http://steveblank.com/)

Brant Copper & Patrick Vlaskovits(http://market-by-numbers.com/)

The Lean Thinkers

Alexander Osterwalder(http://www.businessmodelgeneration.com/)

Ash Maurya http://www.ashmaurya.com/

The Lean Thinkers

Eric Ries (http://

www.startuplessonslearned.com)

Entrepreneurship is a Great Calling

Your Business Idea SUCKS

Your Start-Up Will Fail

p<.05

At launch...

Everybody Wants To Be…

What is the Difference?

The Difference Is….

Most start-ups fail because they don’t have a sustainable business model… Building something nobody wants! There is no amount of leadership, team work and

marketing that can save a start-up selling stuff that nobody wants!

Engineers can sometimes can too focused on how cool their ideas/inventions are:

In a technological, rather than commercial sense

The Difference Is…

Sometimes it is because of bad technology (only 10%). But often there is no

sustainable business model (90%).

Most Websites on the Internet….

Established Business vs. Start-Up

Known Problem Known Solution Known Customer.

Unknown Problem Unknown Solution Unknown

Customer

Established Business Start-Up

A Start-up Is An Experiment

This means a start-up is an experiment: The founders’ vision is the hypothesis. Validating this hypothesis is the task for

a start-up. The goal is to find a sustainable business

model. Only when the business model is

validated, should money be invested in scaling the start-up.

A Start-up Is An Experiment

In other words….

A Start-up Is An Experiment

The business plan, in its conventional form is not a good idea for start-ups. Remember, a Start-Up is:

Unknown problem, Unknown Solution, Unknown Customer.

So lets just call it what it is…

A Business Guess!

A Start-up Is An Experiment

Interestingly, most start-ups follow the canonical product development model:

Build in stealth until the launch party! Executing the business plan…

Achieving failure!

Is there a better way?

Start-ups need different management principles from established businesses.

What if we made it explicit that your business idea is a guess?

Then developed a rigorous method for testing this.

This is what the Lean Startup is about:

It is a method for iterating from Plan A, to a plan that works.

After Customer Development

Customer Development

Document your Plan A This is NOT a Business Plan. It is a way to capture your businesses

hypotheses. Who are the customers, what problems do they

have, what solution are you proposing? What is the path to your customers, marketing

channels, what is your revenue model and cost structure?

What key metrics are you going to use to measure success?

All these are hypotheses that will need to be tested and validated.

Customer Development

You then systematically test this plan.

You have to leave the building. The founders have to do this!

Some of us love coding too much! Please just let me add one more feature!

Customer Development

1) Problem/Solution Fit Do you have a problem worth solving?

Before you build a product, first find out if there is sufficient pain in your customer base to make your business viable.

This is where you find out if people are going to want what you are proposing to build.

It is also a chance to discover a minimal feature set.

Nail the Pain!

Crossing the Chasm (Moore, 1995)

Customer Development

2a) Product/Market Fit Have you built something people want?

Once you have a problem worth solving, you can start building the product.

You have to take this product, as you are building it, to customers for their feedback.

It is recommended that you build an MVP. Not the bells and whistles version.

Nail the solution!!

Customer Development

2b) Product/Market Fit This is the time to also test whether your path

to customers is scalable. This is also the point to test pricing, and

actually ask customer to pay for the product. Nail the go-to-market strategy

Nail the business model!

Problems

Remember that at any point in customer development you might run into problems. People don’t have the problem you were

hypothesising. People don’t like the solution you built. People don’t want to pay for the solution you

developed. People use the product once and don’t come

back.

The Pivot

If you run into any of these problems you don’t quit!

Also don’t just persevere “the plane into the ground”.

You can do a PIVOT. Keep one foot in what you have learnt and then

change one other thing and test again! This is why the companies that can run these

tests quickly and get to a plan that works quickly, are more likely to succeed.

Challenging Myths

Hero myth: Believing in your product can lead to failure. 

All too often, founders fall in love with their products or technology, ignore negative feedback from customers, and spend years building a product based on a vision that no one else shares.

Directly Quoted From:Martin Zwilling, Forbes.com

http://ow.ly/6zlYL

Challenging Myths

Process myth: Why building a product leads to failure. 

Conventional wisdom is that after a great idea, the next steps are raise some money, build a product, then go sell the product.

This doesn’t work when attacking unknown problems with untested solutions.

Directly Quoted From:Martin Zwilling, Forbes.com

http://ow.ly/6zlYL

Challenging Myths

Money myth: Why having too much money leads to

failure.  The old saying that “it takes money to make

money” isn’t so simple. Money allows entrepreneurs to execute a flawed

business plan far too long, rather than stay focused on the market and adapt.

Directly Quoted From:Martin Zwilling, Forbes.com

http://ow.ly/6zlYL

What About Vision?

So are we saying vision is unnecessary? Vision is actually critical…

Customers often don’t know what they what. Entrepreneurship should be based on

vision. Don’t just ship and see what happens… You must make explicit your initial

assumptions. But these have to be validated, before vast

resources are poured into scaling.

What About Vision?

Methods of validation should be business relevant. Get customers to use the product and see what

they struggle with. It doesn’t have to be perfect before you show it to

customers.

Avoid vanity metrics… The number one test is get customers to start

paying you for the solution. This is when you find out if you really have a

business!

Designing Good Research

Implementing lean methodology is not simple/easy: Design good research questions. Analysing and interpreting data. Choosing your pivots.

This is where I think social scientists can add value: The School of Psychology has expertise on

this. Research Methods Statistical Analyses

Thank you!Q&A

twitter: @gtviki

The Places to Get More…

Steve Blank (http://steveblank.com/)

Eric Ries (http://www.startuplessonslearned.com)

Ash Maurya http://www.ashmaurya.com/

Brant Copper(http://market-by-numbers.com/)

Alexander Osterwalder(http://

www.businessmodelgeneration.com/)