Lean Startup Essentials + Experiment Reports (Oct 2012)

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How to save time, money & headaches LUKAS FITTL @lﬁttl spark59.com LEAN STARTUP ESSENTIALS Lean Startup is trademarked by Eric Ries and used with permission. Business Model Canvas is created by Alex Osterwalder and licensed under CC-BY-SA.

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About Me •Entrepreneur (USERcycle, Ef cient Cloud, Soup.io) •Member of Spark59 (Lean Canvas, Running Lean) •http://founderswiki.com/

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What We’ll Do •What is Lean Startup? •Create our Lean Canvas •How can we test assumptions? •MVP Case Studies •De ne our First Experiment

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So, how do we start a company?

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Lean Startup Essentials Failed Startup Launch RISK TIME BUILD BUILD BUILD

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Lean Startup Essentials Lean Startup Launch RISK TIME Launch Launch Launch

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What is Lean Startup?

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Lean Startup Essentials Focus •Presenting to Investors & Press •Make Something People Want

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Lean Startup Essentials Focus •Presenting to Investors & Press •Make Something People Want

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Lean Startup Essentials Based on the work by these folks & many others

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Lean Startup Essentials Startup: Temporary organisation used to search for a repeatable and scalable business model. As de ned by Steve Blank.

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Lean Startup Essentials WOW! It works! o o $$$

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Lean Startup Essentials Years! $$$

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Lean Startup Essentials Why am I doing this? o o Years! $$$

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“The most consistent predictor of failure was startups engaging in premature scaling.” - Startup Genome Project

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“74% of high growth Internet startups fail due to premature scaling.” - Startup Genome Project

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Examples: Overspend on customer acquisition Hire too many employees Focus too much on engineering Raise too much money too early

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Lean Startup Essentials “Build the best services over the long term by quickly releasing and learning from smaller iterations rather than trying to get everything right all at once.” The Hacker Way - Facebook’s S-1

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So, how do we do that?

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Lean Startup Essentials Your Focus. What you do What you ignore

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Lean Startup Essentials You’re focused on your Solution.

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Lean Startup Essentials But: Who is your customer? How do you reach them? Why do they care?

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Lean Startup Essentials Don’t ignore your Customers.

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Lean Startup Essentials Find your Customers.

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Lean Startup Essentials Focus on your Customers.

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Lean Startup Essentials Understand Your Business Model #1: The Lean Canvas Lean Startup Essentials

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Lean Startup Essentials The Business Model Canvas #1: The Lean Canvas Alex Osterwalder - Business Model Generation http://businessmodelgeneration.com

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Lean Startup Essentials The Lean Canvas BM Canvas adjusted for early-stage #1: The Lean Canvas Ash Maurya - Running Lean http://book.runningleanhq.com

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Lean Startup Essentials #1: The Lean Canvas PROBLEM SOLUTION UNIQUE VALUE PROPOSITION UNIQUE VALUE PROPOSITION UNFAIR ADVANTAGE CUSTOMER SEGMENTS PROBLEM KEY METRICS UNIQUE VALUE PROPOSITION UNIQUE VALUE PROPOSITION CHANNELS CUSTOMER SEGMENTS COST STRUCTURE COST STRUCTURE COST STRUCTURE REVENUE STREAMS REVENUE STREAMS REVENUE STREAMS EXISTING ALTERNATIVES EARLY ADOPTERS

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Lean Startup Essentials

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Lean Startup Essentials Example: CRM Software for Business Development

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Lean Startup Essentials Customer Segments •Persona of your prototypical (early) customer •Narrow group of people that buy/ use your product •Marketing is easier if you have a narrow customer segment #1: The Lean Canvas Key Partners Key Activities Value Proposition Value Proposition Customer Relationships Customer Segments Key Partners Key Resources Value Proposition Value Proposition Channels Customer Segments Cost Structure Cost Structure Cost Structure Revenue Streams Revenue Streams Revenue Streams

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Lean Startup Essentials Customer Segments #1: The Lean Canvas CRM Example: BizDev People in BigCorp

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Lean Startup Essentials Problem •What is the use case? •What are the problems the customer is trying to solve? •These might be things they’ve already started building in house, because there is an active need #1: The Lean Canvas Problem Key Activities Value Proposition Value Proposition Customer Relationships Customer Segments Problem Key Resources Value Proposition Value Proposition Channels Customer Segments Cost Structure Cost Structure Cost Structure Revenue Streams Revenue Streams Revenue Streams

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Lean Startup Essentials Problem #1: The Lean Canvas CRM Example: 1. Getting Back In Touch With People 2. Identify Potential for Partnerships 3. Organising The Funnel

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Lean Startup Essentials Solution •Whats the Minimum viable product (MVP) ? •Minimal set of functionality to solve each problem of the customer #1: The Lean Canvas Key Partners Key Activities Value Proposition Value Proposition Customer Relationships Customer Segments Key Partners Key Resources Value Proposition Value Proposition Channels Customer Segments Cost Structure Cost Structure Cost Structure Revenue Streams Revenue Streams Revenue Streams

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Lean Startup Essentials Solution #1: The Lean Canvas CRM Example: Online CRM that is tightly integrated into Email and LinkedIn “Get-back-in-touch” list

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Lean Startup Essentials Channels •How does the customer learn about your product? •B2B and B2C vastly different! •SEM, SEO, Friend Invites, Social Media, Direct Sales, Tradeshows, PR, Content Marketing, etc. #1: The Lean Canvas Key Partners Key Activities Value Proposition Value Proposition Customer Relationships Customer Segments Key Partners Key Resources Value Proposition Value Proposition Channels Customer Segments Cost Structure Cost Structure Cost Structure Revenue Streams Revenue Streams Revenue Streams

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Lean Startup Essentials #1: The Lean Canvas CRM Example: Content Marketing Partnerships Af liate Marketing Channels

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Lean Startup Essentials Revenue Streams •How much is the problem worth to the customer? •Not how much it costs you to implement the solution •Avoid Free and Freemium Its just a marketing tactic! #1: The Lean Canvas Key Partners Key Activities Value Proposition Value Proposition Customer Relationships Customer Segments Key Partners Key Resources Value Proposition Value Proposition Channels Customer Segments Cost Structure Cost Structure Cost Structure Revenue Streams Revenue Streams Revenue Streams

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Lean Startup Essentials #1: The Lean Canvas CRM Example: Subscription: $29/month per user Revenue Streams

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Lean Startup Essentials This document is alive and easy to update (not like your rusty old business plan) #1: The Lean Canvas

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Questions?

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What is an Experiment?

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Lean Startup Essentials Build-Measure-Learn #2: Run Experiments IDEAS PRODUCT DATA MEASURE BUILD LEARN Experiment

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Lean Startup Essentials IDEAS PRODUCT DATA MEASURE BUILD LEARN Launch = First iteration #2: Run Experiments

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Lean Startup Essentials Speed of iteration beats Quality of iteration #2: Run Experiments

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Lean Startup Essentials How can you experiment faster? #2: Run Experiments

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Lean Startup Essentials Instead of “Will it work?” ask “Do customers care?” #2: Run Experiments

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Lean Startup Essentials IDEAS PRODUCT DATA MEASURE BUILD LEARN Feature-complete Product Customer Interviews Teaser Pages Concierge MVP Wizard of Oz MVP Ask Smaller Questions

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Lean Startup Essentials Reduce Scope to Learn Faster.

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Lean Startup Essentials Examples of Experiments

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Understand Problem: Explorative Customer Interviews De ne Solution: User Testing With Prototypes Validate Qualitatively: Release MVP and hand-collect feedback 10s to 100s of customers Verify Quantitatively: Partial Rollout or Split Test and measure improvement 100s to 10,000s of customers

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Lean Startup Essentials Customer Interviews 30 minutes in-person with your prototypical customer People like talking about their eld - explore their worldview. #2: Run Experiments

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Lean Startup Essentials Send Targeted Traf c To Teaser Page with “Signup to be noti ed when we launch” “Can we call you to ask a couple of Qs?” Lean Startup Essentials #2: Run Experiments

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Blog post Teaser Page

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Lean Startup Essentials MVP: Minimum Viable Product #2: Run Experiments

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Lean Startup Essentials Idealab’s CarsDirect #2: Run Experiments Wizard of Oz MVP

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Lean Startup Essentials mjam.at #2: Run Experiments Concierge MVP

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Lean Startup Essentials Or: Setup a Live Usability Lab http://ux.red-gate.com/running-a-live-lab-at-a-tradeshow

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Lets De ne an Experiment!

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Lean Startup Essentials Formulate our hypothesis (= write down assumptions)

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Results Validated Learning Experiment Scope Minimum Build Learning Goal Falsi able Hypotheses LEARN BUILD MEASURE

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Learning Goal What are you trying to learn or achieve?

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CRM Example: Test our Solution with a mockup, and get people to commit to buy with a letter of intent

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Learning Goal What are you trying to learn or achieve? Your Turn!

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Experiment Scope How many and/or how long will the experiment last?

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CRM Example: End the experiment after 20 conversations or 4 weeks

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Experiment Scope How many and/or how long will the experiment last? Your Turn!

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Minimum Build Plan List the build plan step by step to get your measurement and experiment.

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CRM Example: 1. Create Quick Mockups 2. Setup Invitation Form 3. Create Letter of Intent 4. Email People

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Minimum Build Plan List the build plan step by step to get your measurement and experiment. Your Turn!

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Falsi able Hypothesis [Speci c Repeatable Action] will [Expected Measurable Outcome]

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CRM Example: Emailing Our Network will result in 20 conversations Our conversations will lead to 5 signed letter-of-intents (on the spot)

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Falsi able Hypothesis [Speci c Repeatable Action] will [Expected Measurable Outcome] Your Turn!

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Results Enter the data.

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CRM Example: Setup 15 conversations within timeframe Got 1 commitment (LOI), people liked it, but hard to reach actual BizDev people

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Validated Learning Summarise your Learning & Validate/Invalidate.

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CRM Example: INCONCLUSIVE We didn’t get enough commitments, we should do a shorter cycle with fresh mockups.

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Questions?

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Questions? Email me at lukas@spark59.com anytime!