Introduction to Running Lean Startups

Introduction to

Running Lean Startups

Agile Egypt Meetup

Prepared by: Amr Medhat

Date: 21/2/2015

Introduction

Engineering vs Business

Manager vs Entrepreneur

Project vs Product

What's Lean?

Toyota Production System

Lean Principles1. Eliminate Waste

(waste = anything with no value to customer)

2. Amplify Learning / Create Knowledge

3. Decide as Late as Possible / Defer Commitment

4. Deliver as Fast as Possible / Deliver Fast

5. Empower the Team / Respect People

6. Build Integrity / Quality in

7. See / Optimize the Whole

Lean Meets Agile

Agile Values

1. Individuals and interactions over processes and tools

2. Working software over comprehensive documentation

3. Customer collaboration over contract negotiation

4. Responding to change over following a plan

What's a Startup?

Adventures of the Mini Entrepreneur

Institution designed to create new products under conditions of extreme uncertainty

Why Lean Startups?

Toyota productivity with lean increased 4

times than it competitors

Toyota quality reached 12 times better

While ..

90% of startups fail to launch their products

50% of first-time CEOs get fired by their

investors

Why Startups Fail?

You think your idea is brilliant?

=> Ideas are everywhere

Idea is nothing without implementation

=> You implemented the perfect solution, for whom?

A shiny business plan full of figures, speculations

& forecasting?

=> It's hard to predict the future without history

You love chaos &"just do it" hoping they'll come?

=> Agility and dynamism are still management

* Your excuse: a lesson leaned? but how?

Entrepreneurship is a kind of Management

Vision

Steer

Tune Engines

Pivot

Accelerate

Hypothesis not Faith

A Startup is an Experiment

Back to Agile and Lean Principles:

Eliminate anything with no value to customer

Value customer collaboration over contract negotiation

But where is the customer?

How to Start Lean?

GET OUT OF THE BUILDING

Product vs. Customer Development

Product Development

Customer Development

Concept Product A/B Test Launch

Customer

DiscoveryCustomer

Validation

Customer

Creation

Company

Building

From Plan A to a Plan that Works

2/3 of startups drastically changed 1st plan

2 stages to reach the right plan

Problem /

Solution

Fit

Product /

Market

Fit

Scale

Iterate

Validated Learning Growth

Experiment Optimize

it finally works

time to raise fund

Iterate: Build - Measure - Learn

Minimum Viable Product:anything that allows early adopters to give feedback and grasp product vision.

Idea

Build

MVP

Measure

Data

Learn

Plan: Lean Canvas

Cost Structure

Customer Acquisition costs

Distribution costs

Hosting

People, etc.

Revenue Streams

Revenue Model

Life Time Value

Revenue

Gross Margin

Problem

Top 3 problems

Existing alternatives

Solution

Top 3 features

Key Metrics

Key activities you

measure

Unique Value

Proposition

Single, clear,

compelling message

that states why you are

different and worth

paying attention

High-concept pitch

Unfair

Advantage

Can’t be easily copied

or bought

Channels

Path to customers

Customer

Segments

Target customers

Early adopters

Prioritize Where to Start

Split lean canvas per customer segments & rank

Identify riskiest part of your model Problem/Product, Customer/Channel, Market/Revenue

Uncertainty vs Risk

Falsifiable hypothesis

Maximize for: Speed, Learning, Focus

Validate Qualitatively 5 customer interviews (data to reduce uncertainty)

Verify Quantitatively (cohort analysis, split testing)

Iterate (identify, define, validate, verify)

Customer Interview Guidelines

No surveys

No focus groups

No pitching

Measure what they do, not what they want

Stick to a script

Start with people you know then ask them to introduce you to others

Neutral place - coffee shop

20 - 30 minutes

Document immediately don't record

30-60 people (or till you're able to predict their answers)

Problem Interview

Goal: Mitigate the following risks:

Product risk: What are you solving? (Problem)

How do customers rank the top three problems?

Customer risk: Who has the pain? (Customer Segments)

Is it a viable customer segment?

Market risk: Who is the competition? (Alternatives)

How do customers solve these problems today?

Solution Interview

Goal: Mitigate the following risks: Product risk: How will you solve these

problems? (Solution)

What is the minimum feature set needed to launch?

Customer risk: Who has the pain? (Early Adopters)

How do you identify early adopters?

Market risk: What is the pricing model? (Revenue Streams)

Will customers pay for a solution?

What price will they bear?

MVP Release 1.0

Justify the addition of each feature

Start with your number-one problem

Eliminate nice-to-haves and don’t-needs

Consider other customer feature requests

Charge from day one, but collect on day 30

Focus on learning, not optimization

Deploy continuously

Design Activation Flow

Activation Flow

Customer Lifecycle

MVP Interview

Goal: Mitigate the following risks:

Product risk: What is compelling about the product? (UVP)

Activation flow effectiveness

Customer risk: Do you have enough customers? (Channels)

Can you bring more customers?

Market risk: Is the price right? (Revenue Streams)

Do customers pay for your solution?

Innovation Accounting

Measure & validate your MVP learning

Use Actionable Metrics

Tie specific and repeatable actions to observed

results

Metrics are people first

Use cohort analysis: measure a group sharing a

common characteristic within a defined period

Adding Features to MVP

Features must be Pulled, not Pushed

Implement an 80/20 Rule

Minimize in-progress features

Process feature requests

Accelerate

4 Sources (fuel) of Sustainable Growth

Word of mouth

Side effect of product usage (fashion, paypal)

Funded ads (consumer products / services)

Repeat use (subscription)

3 Engines of Growth

Sticky (long term customer)

Viral (hotmail)

Paid (sales power)

Summary

MVP

Pivot

Grow

Reference Map

Customer

Development

Methodology

Agile

& Lean

Principles

Lean

Startup

Principles

Lean

Startup

Practices

Thank you!