Introduction to Startups - BMG+CustDev+Lean

Introduction to Startups │ Puja Abbassi │

Business Model Generation, Customer Discovery, &Lean Startup Principles

Introduction to Startups


Researcher & PhD Candidate - University of Cologne▪Entrepreneurship & Venture Capital▪Diversity▪Cyber Security▪Supply Chain (& Food) Security

Work in and advise startups since 2004

Organizer, Speaker, Startup Mentor

Puja Abbassi http://pujaabbassi.com @puja108Who am I

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http://pujaabbassi.com/




A business organization, which sells a product or service in exchange for revenue and profit.

A company is executing a proven business model.

What is a Company?

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Quelle: Steve Blank – How to build a startup

Introduction to Startups │ Puja Abbassi │ 4

Not the smaller version of a big company!What is a Startup?

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Not the smaller version of a big company!

A temporary organization designed to search for a repeatable and scalable business model. These companies, generally newly created, are in a phase of development and research for markets.

Repeat!What is a Startup?

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▪Search for business model vs. Executing business model

▪Not a smaller version of a large company

▪Business Model Generation vs. Business Plans & Forecasts

▪Customer Development vs. Product Development

▪Agile Build-Measure-Learn vs. Waterfall Model

▪Organizational structures and roles are different

Startups vs. Company

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Startups...

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Quelle: Yevgeniy Brikman - Startup DNA


▪Co-Founders fight

▪Cannot build initial spec

▪No one will fund the idea

▪Too few people buy or use the product or service

▪Premature scaling (scaling organization before product/market or problem/solution fit is properly validated)

Why do Startups Fail?

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“Startups don’t fail because they lack a product; they fail because they lack customers and a profitable business model”

- Steve Blank

Why Startups Fail

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“No business plan ever survives first contact with a customer!”

- Steve Blank

Business Plans

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A business model describes the rationale of how an organization creates, delivers and captures value while delivering products or services to customers.

What is a Business Model?

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Quelle: Business Model Generation - Alexander Osterwalder & Yves Pigneur


Business Models – Bottom Line

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Source: Timmers (1998), Magretta (2002)

PURPOSE• Consequent, exact evaluation of a business idea• Attention to all relevant elements and their interconnection• Base for business plans and strategies

ANSWERS THE QUESTIONS• Who is the customer?• What does the customer value?• How do we make money in this business?• What is the underlying economic logic that explains how we can deliver

value to customers at an appropriate cost?

ORIENTATED AT A GENERIC VALUE CHAIN

Making something

Selling something


There are several frameworks that can be usedBusiness Model Frameworks

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Source: Dubosson-Torbay et al. (2001); Magretta (2002); Wirtz (2010); Business Model Foundry;

Decomposition into multiple parts is typical


KeyActivities

KeyResources

CostStructure

RevenueFlows

DistributionChannels

ClientSegments

PartnerNetwork

ClientRelationships

Source: What is a business model? Alex Osterwalder , 5-10-2005, http://business-model-design.blogspot.com/2005/11/what-is-business-model.html

ValueProposition

Business Model CanvasA business model is nothing else than a representation of how an organization makes (or intends to make) money. This can be nicely described through the 9 building blocks illustrated in the graphic below, which we call "business model canvas”.


„Business Model Generation“ - Alexander Osterwalder & Yves Pigneur (first chapter for free)• http://www.businessmodelgeneration.com/downloads/

businessmodelgeneration_preview.pdf

Online Course from Steve Blank on Udacity• http://www.udacity.com/view#Course/ep245/

Recommended Book and Video CourseBusiness Model Canvas

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▪No business plans survive first contact with customers

▪Business plans are static faith-based monoliths

▪Business Model Generation is a dynamic and iterative process to discover a fact-based repeatable and scalable business model

▪The BMC is a communication tool to help you think, talk and share about your business model

Business Model Generation vs. Business Plans

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Product/Market Fit

Being in a good marketwith a product that can satisfy that market.

- Marc Andreessen

Startups are Looking for Product/Market Fit

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Customer Development

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Quelle: Steve Blank


Value Proposition + Customer Segment = Product/Market Fit

Value Proposition CanvasRemember this one thing!

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Quelle: Business Model Generation


Market Size and Competition are missing!Business Model Canvas

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Market Size Competition


Total Available Market (TAM)▪Theoretical total market size or

customer mass with problem Serviceable Available Market (SAM)▪Theoretical total market size or

customer mass that can use your solution

Serviceable Obtainable Market (SOM)▪Your target market cap or

customer base for the next 2-3 years

Market Size

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▪There is no such thing as “I have no competitors”

▪Anything or anyone standing in between the money and you is a competitor

Competition

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▪Customers want to "hire" a product to do a job▪ "People don't want to buy a quarter-inch drill. They want a

quarter-inch hole!“ - Theodore Levitt (HBS)▪The job, not the customer, is the fundamental unit of

analysis

▪Framework for practice:1. What are the high-level jobs-to-be-done?2. What are the current approaches and what pain

points result?3. What benchmarks exist in the full range of competing

offerings and analogies?4. What performance criteria do customers use?5. What prevents new solutions from being adopted?6. What value would success create for customers?

Clayton M. ChristensenJobs to be done

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Video: http://www.youtube.com/watch?v=KYVdf5xyD8I


Simon Sinek – The Golden CircleStart with the Why

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Quelle: http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.html


Get-Keep-GrowCustomer Relationships

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Customer Lifecycle: 5 Steps to SuccessStartup Metrics for Pirates: AARRR

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Quelle: http://slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version

Acquisition: users come to the site from various channels

Activation: users enjoy 1st visit: "happy" user experience

Retention: users come back, visit site multiple times

Referral: users like product enough to refer others

Revenue: users conduct some monetization behaviorAARRR!


Draw the DiagramRevenue Model

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Quelle: https://www.udacity.com/course/viewer#!/c-ep245/l-48730232/m-48624673


▪The discovery process of validating the product/market fit by conducting customer interviews

▪Requires you to get out of the building and find the facts, because inside there’s only faith and opinions

Customer Development

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1. Define your hypothesis: map out your guesses about your business model using a Business Model Canvas as your communication and tracking tool

2. Test the problem you think you are solving by getting out of the building and talking to and listening to potential customers, partners and resources – real people

Test the ProblemCustomery Discovery

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▪No Selling Allowed - Ever! Listen, listen, listen.

▪Frequency - You need to do at least 15-20 customer interviews a week, 50-150 in total to notice meaningful patterns

▪No friends, colleagues or family - only real potential customers

▪You must define pass/fail tests in advance, results cannot just be anecdotes and after-the-fact feel-good fakery

▪Your goal is: Test for the problem, not for the details

Customer Discovery Interview Dos & Don’ts

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1. Test the solution you think solves the problem to a known set of customers by building a minimum viable product (MVP) containing just the minimum features needed to allow you to start learning, to start an iterative build-measure-learn cycle

2. Iterate or pivot your business model repeating the steps until you have validated it

Test the SolutionCustomer Validation

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Innovation Accounting: ▪Build a Minimal Viable Product, the minimal thing you need to have to get

real data, start validating learning and to start the build-measure-learn cycle

▪Using metrics, measure the right and important things, not randomness. How do we know that the changes we’ve made are related to the results we’re seeing?

▪Move the product from the baseline to the ideal, set a path to a sustainable product to reach a decision point

▪Pivot or persevere? Continue doing the same or trying something else.

Key ConceptsThe Lean Startup – Eric Ries

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▪A Pivot is when you fundamentally change one or more element(s) in your Business Model Canvas

▪ It is not a minor change or iteration of existing element(s)

The Pivot

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Waterfall is not for Startups

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Lean and Agile are for Startups

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Build – Measure – Learn

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Internet

Introduction to Startups - BMG+CustDev+Lean