1. Lean Startup 101 Tendayi Viki Follow Me: @tendayiviki

2. About Me: Academic: University of Kent Previous Startup: Tasksauce Current Company: bennelijacobs&co. Blog: http://www.tendayiviki.com/ 3. What is Lean Startup 101? 4. The Narrative 5. The Reality 6. Everyone wants to be. 7. The Challenge 8. Most new businesses and innovations fail: In some cases failure rates are over 70%. Most new product launches fail. Being part of a large company does not guarantee success. Having a lot of investment money from venture capital does not guarantee success. 9. Previous success does not guarantee future success (Frankish et al., 2012). Entrepreneurs dont really learn, they just claim they do! http://ow.ly/eR6Uh 10. What we learn in business school 11. Business planning can be problematic: Because it places too much emphasis on the value of the initial idea. 12. Do not place too much emphasis on the value of your initial business idea. (Or any other clever ideas you have floating in your head right now) People are terrible at predicting what other people will pay money for! 13. You probably think your baby/product is this cute 14. But this is what it looks like to your customers! 15. Great entrepreneurs are comfortable with killing their babies And pivoting to new ideas. 16. The Art of Imitation 17. New innovations also fail when people try to act like a large company too early. 18. Startups are NOT smaller versions of big companies! (Steve Blank & Bob Dorf, 2012) 19. Furthermore, no two startup situations are the same (Even in the same market as another company) 20. Rob Fitzpatrick and Salim Virani (2012) http://www.foundercentric.com/ 21. Each startup situation has its own topography. And its your job to systematically figure out the topology of your own startup 22. 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 23. 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 doesnt work when attacking unknown problems with untested solutions. Directly Quoted From: Martin Zwilling, Forbes.com http://ow.ly/6zlYL 24. Challenging Myths Money myth: Why having too much money leads to failure. The old saying that it takes money to make money isnt 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 25. A Startup is A Thesis 26. A Path for Searching: For a sustainable and profitable business model 27. A Startup is Really Like a Research Project: We should not be making business plans, we should make research proposals. 28. The Startup Team is a Research Team: All hands on deck, to learn what customers want And a sustainable/profitable way to deliver that value to them. 29. A Significant Contribution: The significant contribution of a startup is building something people want Upon achieving product-market fit, a startup graduates 30. The Lean Startup approach is not anti-planning! But the plan is to learn And use tools that allow us to learn from customers quickly 31. Eric Ries (2011) The Lean Startup http://lean.st 32. The Process 33. Ash Maurya (2012) Running Lean http://www.runningleanhq.com/ 34. Ash Maurya (2012) Running Lean http://www.spark59.com/ 35. Running Successful Experiments Document your Plan A Who are the customers? What problems do they have? What solution are you proposing? Ash Maurya (2012) Running Lean http://www.runningleanhq.com/ 36. Alexander Osterwalder (2012) http://www.businessmodelgeneration.com 37. Identify your riskiest assumptions. Transform these into falsifiable hypotheses. Say what exact behaviour you are assuming your customer will show. Then run experiments to test your assumptions. Running Successful Experiments 38. Business Model Design Document Your Plan A 39. Ash Maurya (2012) Running Lean http://www.runningleanhq.com/ 40. Your Product is NOT the Product It is important to realise that a product or service idea is not sufficient for success. You could have a good idea, but if you do not have a good business model to support it, then your business will fail. It is not enough to just have a good product, it must be delivered to customers in a manner that is sustainably profitable. A lot entrepreneurs focus too much on just the product. But the same amount of effort needs to be put into developing the business model. Ash Maurya (2012) Running Lean http://www.runningleanhq.com/ 41. What is the Difference? 42. http://www.businessmodelgeneration.com 43. http://www.businessmodelgeneration.com 44. Customer Segment This block defines the different groups of people or organizations that a company aims to reach and serve (Osterwalder & Pigneur, 2010). Mass Market Niche Market Segmented Market Diversified Market Multisided Market http://www.businessmodelgeneration.com 45. Value Propositions The value propositions block describes the product/service; and how it creates value for your customer segments (Osterwalder & Pigneur, 2010). Performance Price Design Brand/Status Convenience/Usability Risk Reduction http://www.businessmodelgeneration.com 46. Channels The channels block describes how a company reaches its target segments to deliver the value proposition(Osterwalder & Pigneur, 2010). http://www.businessmodelgeneration.com 47. Customer Relationships The customer relationships block describes the types of relationships a company establishes with their customers (Osterwalder & Pigneur, 2010). Personal Assistance Dedicated Personal Assistance Self Service Automated Service Communities Co-creation http://www.businessmodelgeneration.com 48. Revenue Streams The revenue streams block describes how the company generates revenues from its customer segments (Osterwalder & Pigneur, 2010). Asset Sale Usage Fee Subscription Fees Lending/Renting/Leasing Licensing Brokerage Fees Advertising http://www.businessmodelgeneration.com 49. Key Resources The key resources block describes the most important assets required to make your business model work (Osterwalder & Pigneur, 2010). Physical Intellectual Human Financial http://www.businessmodelgeneration.com 50. Key Activities The key activities block describes the most important things a company must do to make its business model work (Osterwalder & Pigneur, 2010). Production Problem Solving Platform/Network http://www.businessmodelgeneration.com 51. Key Partnerships The key partnerships block describes the network of suppliers and partners that make your business model work (Osterwalder & Pigneur, 2010). Optimization and economies of scale Reduction of risk and uncertainty Acquisition of resources and activities http://www.businessmodelgeneration.com 52. Cost Structure The cost structure describes all the costs that are incurred to operate a business model (Osterwalder & Pigneur, 2010). Cost Driven Value Driven Fixed and Variable Costs Economies of Scale and Scope http://www.businessmodelgeneration.com 53. http://www.businessmodelgeneration.com 54. http://www.businessmodelgeneration.com 55. The canvas can be used as a prototyping tool. 56. http://www.businessmodelgeneration.com/ 57. Canvas Rules You dont write on the canvas (use post- its). Everyone writes (no team boss). One idea per post-it note (no lists!). Be concise and think in the present. Quantity over quality (no self-censoring). For double sided market use different colour post-its. Rob Fitzpatrick and Salim Virani (2012) http://www.foundercentric.com/ 58. Now what? 59. In the past, you would now be encouraged to turn your business models, into business plans. 60. But this workshop, is different. 61. http://www.businessmodelgeneration.com Alexander Osterwalder (2012) 62. All these hypotheses have to be tested and validated with customers. 63. Customer Development 77 64. Ash Maurya (2012) Running Lean http://www.runningleanhq.com/ 65. Ash Maurya (2012) Running Lean http://www.runningleanhq.com/ 66. The Scientific Method 67. Customer development is not the same as market research or focus groups! 68. Introspection Market research methods are based on one major premise: If you want people to tell you what they think, just ask them! 69. Introspection This premise is based on one major problematic assumption: People are able to introspect and gain access into how they feel and communicate it to researchers. 70. Introspection People often dont know what drives their thoughts and actions. But if you ask them, they often have something to say. Psychologists call this confabulation. 71. To Fully Understand Your Customers You Have to Go Beyond the Focus Group 72. Specify who you are going to be talking to from the beginning. Be specific about your target sample. If you talk to anyone who will talk to you: It becomes hard to distinguish signal from noise. Running Successful Experiments 73. Specify exactly what you would expect to find if your assumptions are correct. Hypotheses MUST be falsifiable. Set minimum success criteria. Otherwise, there is no way to know if you have learned anything. Running Successful Experiments 74. Running Successful Experiments Ash Maurya http://www.ashmaurya.com/2010/09/lean- startup-is-a-rigorous-process// 75. Capture reliable data. Do not try to fudge the data. Avoid the confirmation bias. Running Successful Experiments 76. 90 @robfitz http://momtestbook.com// 77. Anybody will say you product is good if you bug them for long enough. People also often dont know the factors motivating their own behaviour. / @robfitz http://momtestbook.com// The Mom Test 78. @padday http://insideintercom.io// 79. Never ask for opinions Ask about specific things in their life. Ask about specific things they have done in the past. Only ask questions that even your mom would tell you the truth about / @robfitz http://momtestbook.com// The Mom Test 80. Do you think this is a good idea? Would you enjoying using this product? How many times would you buy such a product? Would you buy this product? How much would you pay for this? / Examples of Bad Questions @robfitz http://momtestbook.com// 81. How do you currently solve this problem? Tell me about the last time you solved this problem? How much money does this problem cost you? How much are you currently paying to solve this problem? / Examples of Good Questions @robfitz http://momtestbook.com// 82. The Process 83. Alexander Osterwalder (2012) http://www.businessmodelgeneration.com/ 84. Talk about your business model. Identify the riskiest assumption. Describe one main problem. Transform that into a falsifiable problem hypothesis. Develop two-three customer development questions? GET OUT OF THE BUILDING!! Riskiest Assumption 85. Ash Maurya (2012) Running Lean http://www.runningleanhq.com/ 86. 106 The Minimum Viable Product 87. In a Lean Startup, we dont build products with the goal of selling: It is always with the goal of learning. That is why we build minimum viable products (MVP). The minimal product we need to build to maximise learning. The main goal here is to test our solution hypothesis. Remember that we dont ask the customers. We develop the solution based on our understanding of the problem. The Minimum Viable Product 88. In other words: MVP = Experiment / The Minimum Viable Product 89. The hypothesis/objective you are trying to learn. from the target market segment you are trying to learn about. and the form it takes to achieve that learning. Patrick Vlaskovitz (2012) http://vlaskovits.com/2012/09/apple-maps-debacle-and-minimum-viable- A Great MVP 90. In science, the process is called operationalization: Taking an abstract notion and concretising it! The products you build as an MVP must be a concretised test of your hypotheses about customers. A Great MVP 91. MVP Examples 92. Doppelganger Source: @ryanmaccarrigan 93. Conversation Starter 94. Source: Trevor Owens (@to2 95. Concierge MVP 96. Product Pitch MVP 97. Paper Prototype 98. Mechanical Turk 99. Source: @ryanmaccarriga 100. Video MVP 101. http://www.youtube.com/watch?feature=player_embedded&v=7QmCUDHpNzE 102. No one is going to steal your idea 103. Remember, there is very little value in the initial idea itself. It is just a seed that forms the basis for learning. 104. The Process 105. Alexander Osterwalder (2012) http://www.businessmodelgeneration.com/ 106. Talk about your business model and your findings from customer development. Identify your assumptions about the solution customers want. Describe one main solution. Transform that into a falsifiable solution hypothesis. Develop two-three customer development questions? GET OUT OF THE BUILDING!! Riskiest Assumption 107. This is just one example Dont just make a landing page for the sake of it. Remember we are taking an abstract notion and concretising it! The MVP you build MUST be a concretised test of your hypotheses about customers. A Great MVP 108. Engines of Growth and Lean Analytics 109. Word of Mouth: When people love your product, theyll tell other people about it. A Side Effect of Using the Product: By using your product, a customer advertises your product to the people around them. Paid Advertising: People hear about your product through advertisements and paid promotion. Repeat Use: Customers keep coming back to use your product (e.g. subscription or repeat purchases). Engine of Growth Eric Ries (2011) The Lean Startup http://lean.st 110. The Sticky Engine of Growth If your focus is retaining customers, then you need to focus on churn rate. If you lose more customers than you gain then your engine is not working. If you have a low attrition rate, then you can grow by gaining a few new customers at a time. Viral Engine of Growth This is growth by word of mouth or just by having your customers use the product. Here your focus must be on your viral co-efficient. If the viral co-efficient is larger than 1.0; then you are okay. Paid Engine of Growth In this case, you need to be making enough money per customer to cover the acquisition costs of paid advertising. Engine of Growth Eric Ries (2011) The Lean Startup http://lean.st 111. Source: http://blog.kissmetrics.com/throw-away-vanity-metric 112. Source: http://blog.kissmetrics.com/throw-away-vanity-metric 113. Source: http://customerdevlabs.com 114. Source: http://www.expertprogrammanagement.com/2011/11/the-viral-growth-curve/ 115. Dave McClure: http://500hats.typepad.com/500blogs/2007/06/internet-market.html 116. The Anatomy Of A Pivot 117. You have done some customer development. Remember that at any point during this process you might run into challenges. People dont have the problem you were hypothesising. People dont like the solution you built. People dont want to pay for the solution you developed. People use the product once and dont come back. 118. If you run into any of these problems, you dont give up on your idea. However, you dont 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. 119. Different Types of Pivots 120. Zoom-in Pivot What was previously a single feature in a product becomes the whole product. This is usually based on customer usage data. Eric Ries (2011) The Lean Startup http://lean.st 121. Zoom-out Pivot This is when a single feature is not sufficient. So what was once the product, becomes a single feature of a much larger product. Eric Ries (2011) The Lean Startup http://lean.st 122. Customer Segment Pivot This is when the company realises that their product serves a real customer need: But for a different customer segment to what they originally thought. Eric Ries (2011) The Lean Startup http://lean.st 123. Customer Need Pivot This is when the company realises that the customer need they were planning to serve is not real: But from talking to customers they realise that there is another important need they can serve for that customer. Eric Ries (2011) The Lean Startup http://lean.st 124. Platform Pivot This represents a change in strategy from an application to a platform and vice-versa. Usually starts as an application and then becomes a platform (e.g. Twitter and Facebook). Eric Ries (2011) The Lean Startup http://lean.st 125. Business Architecture Pivot This represents a change in strategy from a sales to a marketing business model, or vice versa. Low Margin, High Volume (Consumer) High Margin, Low Volume (B2B) Eric Ries (2011) The Lean Startup http://lean.st 126. Value Capture Pivot This represents a change in the way the company captures value from its customers. Such changes in your revenue model can have a significant impact on the rest of the business model. Eric Ries (2011) The Lean Startup http://lean.st 127. Engine of Growth Pivot This represents a change in the companies growth strategy. Sticky Viral Paid Eric Ries (2011) The Lean Startup http://lean.st 128. Channel Pivot This represents a change in the way you reach your customers to deliver the value proposition. For example, you could change from brick and mortar to exclusively online. Eric Ries (2011) The Lean Startup http://lean.st 129. Technology Pivot This is when a company discovers a new way to deliver the same value using a different technology. This is more likely in established businesses. For example, newspapers are moving from print to online outlets (e.g. tablets). Eric Ries (2011) The Lean Startup http://lean.st 130. A Pivot is: It still needs to be tested... NEW 131. Good Luck!