Lean Startup PrinciplesThroughout Your Company Lifecycle

Hiten ShahStrata, New York • September, 2011

Introduce myself.

Founder of KISSmetrics

Our mission is to help businesses make better decisions.

8 years doing business on the web

Consulting companyCE only successful oneKM, venture backedTrying to be a jack of all trades :P

Failure attracted me to the Lean Startup

I’ve failed a lot and I want to fail faster and fail smarter.

You can’t succeed without trying a lot of things that don’t work.

The Lean Startup principles help you fail faster so you iterate to success.

Lean Startups are Built to Learn

Key idea is that we should be learning about customers ALL the time.Validated learnings from customers are fuel for your heat seeking missile.

Dave McClureSean Ellis Eric Ries

Lean Startup Heroes

Talking to one of these guys...

I won’t talk about them, since you all probably know of them.

Personally, I’ve learned a lot from them about startups and entrepreneurship.

At KISSmetrics we use various principles from all of these guys to drive our business.

The Startup PyramidThe Race to the Top

Product / Market Fit

Transition to Growth

Growth

Sean Ellis: Startup-Marketing.com

Sean Ellis and his 3 stages of a startup

We use the Startup Pyramid to remind us where we are and what our success metrics should be.

Product / Market Fit, Transition to Growth, Growth

1. ACQUISITIONCustomers come from various channels

3. RETENTIONCustomers come back multiple times

AARRR Created by Dave McClure - 500startups.com Designed by

4. REFERRALCustomers refer others

2. ACTIVATIONCustomers use product for first time

YOUR PRODUCT

5. REVENUECustomers make your business money

AARRR!!! Dave McClure’s pirate metrics.

Helps you frame key areas of your business based on a customer’s lifecycle.

We use this for idea generation.

Minimize TOTAL time through the loop

Eric Ries: StartupLessonsLearned.com

Learn Faster

Split TestsCustomer InterviewsCustomer DevelopmentFive Whys Root CauseAnalysisCustomer Advisory BoardFalsifiable HypothesesProduct OwnerAccountabilityCustomer ArchetypesCross-functional TeamsSemi-autonomous TeamsSmoke Tests

Split TestsClear Product OwnerContinuous DeploymentUsability TestsReal-time MonitoringCustomer Liaison

Build Faster

Unit TestsUsability Tests

Continuous IntegrationIncremental Deployment

Free & Open-Source Components

Cloud ComputingCluster Immune SystemJust-in-time Scalability

RefactoringDeveloper Sandbox

Minimum Viable Product

IDEAS

CODEDATA

LEARN BUILD

MEASUREMeasure Faster

Funnel AnalysisCohort Analysis

Net Promoter ScoreSearch Engine Marketing

Real-Time AlertingPredictive Monitoring

And of course, Eric’s lean startup graphic.

It’s about validated learnings about customers and increasing cycle time.

So we can build something a LOT of people want to buy.

Build Faster

• Test Driven Development (TDD / Unit Tests)• Continuous Deployment• Continuous Integration• Just-in-time Scalability (Amazon Web Services)

On average we deploy new code fifty times a day.”Timothy Fitz, IMVU

“

Have the ability to ship code all day, every day.

By doing this we are able to have many small releases, small batches of code which

Leads to faster, more measurable iterations...

• Poorly designed features• Inflexible, short-sighted code• Half-done features• Known bugs• Crappy code with major performance issues

We have purposefully deployed:

This has resulted in sub-par, sub-optimized code.

But our customers don’t care, in fact they are delighted by our daily iterations.

Customer’s don’t care how awful the code is and you shouldn’t either.

Remember, it’s about getting validated learnings...

Don’t build to scale from the start, build to learn first.

Measure Faster• Funnels & Cohort Analysis (KISSmetrics)• Feedback (NPS, Surveys, KISSinsights)• Usability Testing (UserTesting, Mockups, etc...)• Split Tests (A/B Testing) (KISSmetrics + Internal)

It's about changing customer behavior -- for the better.”Eric Ries, The Lean Startup

“

Here are some key areas and tools we use for measuring our business.

Idea is to focus on a few key pieces of data at any given time.

Be able to experiment faster.

Here is one way we do that...

“Measure the Macro” - Eric Ries

We came up with a model for our business.

We then established our actual baseline which became our macro metrics.

Find the riskiest assumptions in your macro metrics.

And attack them...

Learn Faster• Fake it till you make it (Smoke Tests)• Five Whys Root Cause Analysis• Falsifiable Hypotheses• Customer Development (Customer Interviews)

Customer Development will help you – force you – to make better decisions based on tested hypotheses, rather than untested assumptions.”The Entrepreneur’s Guide to Customer Development, CustDev.com

“

Learning is all about testing your assumptions.

Taking your customer hypotheses and actually test them.

There are so many ways to do that, from talking to actual customers to testing fake landing pages, etc...

Idea is to be able to do this efficiently.

• Coined by Eric Ries as part of The Lean Startup• Lean Startups are a series of MVP’s• Each designed to answer a specific question (hypothesis)

Minimum Viable Product

The minimum viable product (MVP) is often an ad on Google. Or a PowerPoint slide. Or a dialog box. Or a landing page. You can often build it in a day or a week.”Nivi, Venture Hacks

“

Bloomspot

If Apple can launch a smartphone without Find or Cut-and-Paste, what can you cut out of your product requirements?”Lance Glasser, former CTO KLA-Tencor

“

The first version of Gmail was literally written in a day”Paul Buchheit, Google / Friendfeed / Facebook

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PivotThe idea that successful startups change directions but stay grounded in what they've learned.”Eric Ries, The Lean Startup

“

Early on capital efficiencyGoal is to attract earlyvangelistsStart with customer discovery and customer validationNext create a minimum viable product and pivot as necessary

YouTube - Customer Need Pivot

YouTube - Dating siteCustomer need pivot - same customers, different needFocused on video sharing.

PayPal - Feature Pivot

PayPal - Beam money via Palm PilotsFeature pivot - pick a feature and reorient around itFocused on sending money via email.

Facebook - Platform Pivot

Facebook - Platform, Facebook ConnectPlatform pivot - open up an application to third parties to become a platform

Our hypothesis is that ________________________________ people have a problem doing _______________________

Our hypothesis is that product manager typepeople have a problem doing effective customer research

Start with a Hypothesis

Everything should start with a hypothesisFocus on the type of person and the problem they have

Turned into a on-page customer feedback tool

Our hypothesis is that product manager type people have a problem doing fast/effective/frequent customer research.”

“

Original Hypothesis for KISSinsights

“Our hypothesis is that product manager type people have a problem doing fast/effective/frequent customer research.”

Question: Is this hypothesis in fact true or not?!

Take the least amount of effort to find out...

We did everything from customer interviews, fake landing pages, building a minimum viable product, pivoting and now have reach product / market fit and are optimizing the business.

• What are they doing now?• What are other tools leaving on the table?• Who is involved?• How frequent / severe is the pain?• What else are customers complaining about?

What we wanted to learn...

Ask questions like this to learn.These questions can work for you too for SaaS B2B apps.

• ~20 phone interviews (15 - 20 minutes each)• 3 in-person user tests with paper prototypes• 2 landing pages• Hacky MVP on KISSmetrics.com• 8 “alpha testers”

How we learned

Many ways to learn, phone interviews, in-person, landing pages, MVPs, etc...

What we learned

• People are not doing customer research.• They want private feedback and targeting.• It requires developer involvement.• It is a constant pain.

Specific high-level things we learned with our process...Took many interviews to narrow it down to these things.

What we built

• A freemium on-site customer feedback tool• That involves an easy one-time install• Which provides private customer feedback• And easy to understand reporting.

Built in 2 months based on what we learned.What is KISSinsights?Response rates higher than normal surveysTurned into a valuable tool, Google uses it!

Lean Startup Process

The principles of build, measure, learn help us think about how to get answers.

The methods and process of communication and information exchange are much different in a lean startup.

The tactical stuff to build, measure and learn faster is one side of things.

Now I’m going to talk about the business processes and what we have learned trying to apply them.

Before continuing...clarify business process for a startup.

? ☼Problem Team Solution Team

No Departments, Just Two Teams

What are the most important

problems to solve?

Find theminimum solution

for a given problem.

Company is divided into two teams. No sales, marketing, etc...

Problem team identifies the most important problems to solve.

Solution team finds the minimum solution for each problem.

Problem team is more non-technical, solution team is more technical / “makers”. There are cross-functional folks too.

15 - 45 minute team meetings (M,W,F)

3 team meetings every weekMonday - Team meeting to describe most important problems and goals for the week. Metrics + Few tasks, determine if solution team has input and let deadline for ideas on Tuesday.

Wednesday - Check in on how are we doing, solutions already getting implemented? What have we learned so far?

Friday - Postmortem on learning and peek into next week from the Problem Team.Problem team is 1-week ahead.

“Your Focus Needs More Focus”

To do this effectively we built a tool we are internally call KISSfocus.

A tool we built to increase autonomy and communication, focused on our validated learnings driven process.

5 tasks per person, only 1 is active (green-lighted), not in KF then not exist, backlog.

We set weekly goal and metrics based on most important problems.

Whole team has visibility across all tasks, keeps solution team focused on most important problems.

Lean Startup Lessons Learned

We’ve learned some lessons in our efforts to apply lean startup principles.It hasn’t been easy since this stuff is new and we’re still learning ourselves.Here are three key ones.

Speeding can lead to crashes

Optimizing one area in the Build Measure Learn loop causes bottlenecks in others.

Once we implemented the infrastructure to build faster, we then increased our ability to discover customer problems.

But we didn’t have a good process for organizing and finding solutions.

So we created KISSfocus to help us.

Once we had that, we started discovering a lot about our team...

The only path to perfection is iteration

The only path to perfection is iteration - Quote from our CTO, John.

This was a really hard realization, because we are a team of perfectionists!

It takes a lot of discipline to stay focused on validated learnings.

We now focus on iteration based on validated learnings instead ofperfection.

that f*cking green light next to a task for 7 days is really depressing.”KISSmetrics Engineer

“

The team becomes more accountable

But once we applied this process everyone became more accountable.

Team members started “policing” themselves.

One of our engineers likes to get himself in a hole and just code for days without coming up for air.

Doesn’t come up for air and only 50% of time does he produce fantastic results.

He emailed the team and said: “that f’ing green light next to a task for 7 days is really depressing.”

Our process helped him catch himself and in fact stop before he went on for a really long time.

Ultimately, applying lean principles has led us to find all types of bottlenecks in our startup business processes and start plugging them fast. That result has been priceless.

Thank You!hshah@kissmetrics.com