Lean Startup Masterclass (3 day version, Digital HUB Aachen, September 2017)
These were the slides for the http://plusandersen.com "Lean Startup Masterclass", the three day educational workshops held for incubated early-stage startups at Digital HUB Aachen, Germany. Bookings: [email protected]
• BUSINESS MODEL FOUND • PRODUCT-MARKET FIT • REPEATABLE SALES MODEL • MANAGERS HIRED • CASH-FLOW BREAK-EVEN • PROFITABLE • RAPID SCALE • NEW SENIOR MANAGEMENT • AROUND 150 PEOPLE
OF LARGER COMPANIES • STARTUP IS TEMPORARY ORG, IN SEARCH OF SCALABLE REPEATABLE BUSINESS MODEL • NO BUSINESS PLAN EVER SURVIVES FIRST CONTACT WITH CUSTOMERS • BUSINESS MODEL CANVAS INSTEAD OF BUSINESS PLANS • CUSTOMER DISCOVERY INSTEAD OF EXECUTION • AGILE ENGINEERING PROCESSES INSTEAD OF WATERFALL • MINIMUM VIABLE PRODUCT INSTEAD OF BETAS • BUILD - MEASURE - LEARN: ITERATION AND SPEED OF THE ESSENCE
PRODUCT-MARKET FIT Test 1: Is this a problem Test 2: Is this the solution Test 3: Can we sell this solution Test 4: Can we repeat selling the solution Test 5: Can we scale our business
a real problem? Who are the customers we are solving it for? Can we find customer who has this problem and would pay us to solve it? Is this the right solution that would actually solve the problem of the customers we found that are ready to pay us for it? STEP 1 STEP 2
VISION BUILD MVPS ITERATE & PIVOT CUSTOMER NEEDS BUILD MVPS ITERATE & PIVOT 20TH CENTURY TECH STARTUP 21ST CENTURY LEAN STARTUP DESIGN THINKING • Launch-timing driven by Business Plan • Hire Sales Staff Good-Enough Data Launch-timing driven by Customer Validation Hire Sales Staff • Extensive Data • Launch Product • Hire Sales Staff NO BUSINESS MODEL FOCUS BUSINESS MODEL FOCUS
DESIGN THINKING ARE BOTH CUSTOMER DISCOVERY PROCESSES • CUSTOMER DEVELOPMENT STARTS WITH, “I HAVE A TECHNOLOGY/PRODUCT, NOW WHO DO I SELL IT TO?” • DESIGN THINKING STARTS WITH, “I NEED TO UNDERSTAND CUSTOMER NEEDS AND ITERATE PROTOTYPES UNTIL I FIND A TECHNOLOGY AND PRODUCT THAT SATISFIES THIS NEED” • CUSTOMER DEVELOPMENT IS OPTIMISED FOR SPEED AND “GOOD ENOUGH” DECISION MAKING WITH LIMITED TIME AND RESOURCES • DESIGN THINKING IS OPTIMISED FOR GETTING IT COMPLETELY RIGHT BEFORE MAKING BIG BETS • BOTH MODELS WORK FOR LARGE COMPANIES - BUT CUST DEV IS BETTER FOR STARTUPS
BUSINESS MODEL CANVAS (BMC). 2. GET OUT OF THE BUILDING AND TEST THESE HYPOTHESES USING CUSTOMER DEVELOPMENT. 3. VALIDATE LEARNINGS BY BUILDING MINIMUM VIABLE PRODUCTS AND GETTING THEM IN FRONT OF CUSTOMERS. 4. ITERATE (SMALL VARIATION, NO REAL CHANGE IN BMC) OR PIVOT (SOMETHING CHANGED IN THE BMC) AS NEEDED. 5. BUILD - MEASURE - LEARN (AKA RINSE, LATHER, REPEAT - BECAUSE THIS IS AN ITERATIVE AND CONTINUOUS PROCESS - YOU HAVE TO GET OUT OF THE BUILDING MORE THAN ONCE!) THE LEAN STARTUP TL;DR
BUSINESS MODEL CANVAS (BMC). 2. GET OUT OF THE BUILDING AND TEST THESE HYPOTHESES USING CUSTOMER DEVELOPMENT. 3. VALIDATE LEARNINGS BY BUILDING MINIMUM VIABLE PRODUCTS AND GETTING THEM IN FRONT OF CUSTOMERS. 4. ITERATE (SMALL VARIATION, NO REAL CHANGE IN BMC) OR PIVOT (SOMETHING CHANGED IN THE BMC) AS NEEDED. 5. BUILD - MEASURE - LEARN (AKA RINSE, LATHER, REPEAT - BECAUSE THIS IS AN ITERATIVE AND CONTINUOUS PROCESS - YOU HAVE TO GET OUT OF THE BUILDING MORE THAN ONCE!) THE LEAN STARTUP TL;DR
2. WHAT WAS THE HARDEST ABOUT THAT? 3. WHY WAS THAT HARD? 4. HOW DO YOU SOLVE IT NOW? 5. WHY IS THAT NOT SO GREAT? • LOOK FOR EMOTIONS • ASK WHY 5 TIMES B2C INTERVIEW SCRIPT http://customerdevlabs.com
NEED TO DEFINE THE SUCCESS AND FAIL CRITERIA IN ADVANCE TO KEEP YOU FROM FUDGING THE FINDINGS TO FIT YOUR BELIEFS AFTER THE FACT • IT NEEDS TO BE A QUANTITATIVE OR QUALITATIVE RESULT • +40% IS OFTEN USED AS THE SUCCESS LIMIT • A SAMPLING POOL OF 10 PEOPLE IS NOT A SAMPLING POOL - IT’S RANDOM NOISE
A NEED FOR OR PROBLEM DOING (Need / Action / Behaviour) AND I WILL KNOW THAT I HAVE SUCCEEDED WHEN (Quantitative / Measurable Outcome) OR (Qualitative / Observable Outcome) PASS/FAIL CRITERIA
Fit are: 1. Finding Early Adopters for your product 2. Offer Testing: You can reach your Early Adopters 3. Currency Testing: Your Early Adopters will pay you 4. Utility Testing: You can satisfy your Early Adopters 5. Scaling to Fit: You can achieve Product-Market Fit THE 5 PHASES OF PRODUCT-MARKET FIT THE “FOCUS” FRAMEWORK https://thefocusframework.com/
people actively trying to solve the problem your product will solve for them – these are the people we refer to as your Early Adopters. In particular, your goal during this phase of testing is to validate: • Are there people already trying to solve the problem (Early Adopters)? • Do you know how they describe the problem? • Do you know the emotions they experience associated with the problem? • Do you know where/how to reach them? • Do you know the deficiencies of their current solution? Experiment to Run: The best technique for validating these assumptions is the customer discovery interview. Interviews will answer any questions you have regarding the assumptions above, and set you up for success in validating the rest of your assumptions. Metric to Measure: What percentage of customers you interview report taking steps to solve the same problem within the last 6 months? Once 60% of your last 10 interviewees report actively trying to solve the same problem you are on the right way. 1. FINDING EARLY ADOPTERS FOR YOUR PRODUCT
to reach other Early Adopters. Your goal in this phase is to validate what they told you. In other words, you’re testing that you can find more Early Adopters, you know what to say to them when you find them, and that they’re eager enough for a solution to the problem that they ask you for more information. Experiment to Run: To validate this assumption, you’re going to test a combination of marketing channels and marketing messages based on the results of your interviews. Potential Validation Experiment: • Ad campaigns • Cold email outreach • Cold calling campaigns • Becoming member of forums/communities • Social media outreach • Attending conferences, meetups, etc Metric to Measure: Once your Early Adopters’ response rate to your “Solution Offer” (i.e. click on your ads, respond to your emails, etc.) is high enough that you can clearly see a path to Product-Market Fit, you’re ready to test the next assumption. 2. OFFER TESTING: YOU CAN REACH YOUR EARLY ADOPTERS
need to test if they’ll “pay” you sufficiently to solve the problem. In this case “payment” can be in the form of actual cash, or it can be something else that leads directly to your Product-Market Fit (e.g. usage of your product, personal data, etc.) depending on your business model. Experiment to Run: To validate this assumption you’re going to actually ask for “payment.” While you won’t usually take the payment (because your product hasn’t been built yet), you’re going to ask for it and measure how many Early Adopters try to pay you. Examples include: • Landing page with pre-order functionality • Requesting a Letter of Intent after a solution interview • Asking for a cash payment after a solution interview • A mobile app w/ just enough functionality to measure the number of downloads and opens Metric to Measure: Once your Early Adopters “payment” conversion rate is high enough that you can clearly see a path to Product-Market Fit, you’re ready to test whether you can start solving the problem. 3. CURRENCY TESTING: YOUR EARLY ADOPTERS WILL PAY YOU
your Early Adopters’ problems. While it can be tempting to automate your first couple attempts at a solution, there’s usually a more efficient way to to test this assumption. MVP to Build: Manual solutions are the best way to test whether you can solve an Early Adopter’s problem. While they make take more of your time to solve a customer’s problem, manual solutions are much faster to build, and even faster to iterate on, than automated (i.e. software) solutions. “At first, do what doesn’t scale.” Examples include: • Concierge MVP • Wizard of OZ MVP Metric to Measure: Once you’re solving the problem sufficiently well that your Customer Lifetime Value and your Viral Co-Efficient are high enough that you’re tracking towards Product-Market Fit, you’re ready to start scaling your solution. 4. UTILITY TESTING: YOU CAN SATISFY YOUR EARLY ADOPTERS
them, they’ll pay you, and you can solve their problems sufficiently, the only assumption left is that you can scale until you achieve Product-Market Fit. MVP to Build: Now is the time you get to automate your solution, scale to multiple marketing channels, and branch out to your second and third customer segments. Examples include: • Beta version of your software • Single-feature MVP • Software-based pilot for a large customer • Running outreach campaigns in multiple channels simultaneously • Multiple, simultaneous, landing page test targeting different customers Metric to Measure: At this point you’re measuring that all your previous metrics (e.g. response rate, conversion rate, Lifetime Value and Viral Co-Efficient) are all still tracking towards you achieving Product-Market Fit. 5. SCALING TO FIT YOU CAN ACHIEVE PRODUCT-MARKET FIT
PRODUCT-MARKET FIT Test 1: Is this a problem Test 2: Is this the solution Test 3: Can we sell this solution Test 4: Can we repeat selling the solution Test 5: Can we scale our business
A NEED FOR OR PROBLEM DOING (Need / Action / Behaviour) AND I WILL KNOW THAT I HAVE SUCCEEDED WHEN (Quantitative / Measurable Outcome) OR (Qualitative / Observable Outcome) DEFINE PASS/FAIL CRITERIA
ASK QUESTIONS & LISTEN • NO SELLING ALLOWED • ASK 5-WHYS • ASK ONLY ABOUT PAST OR TODAY • WALK ME THROUGH IT • CURRENCY TEST: TIME, REPUTATION OR MONEY PREPARE CUSTOMER INTERVIEWS
BUSINESS MODEL CANVAS (BMC). 2. GET OUT OF THE BUILDING AND TEST THESE HYPOTHESES USING CUSTOMER DEVELOPMENT. 3. VALIDATE LEARNINGS BY BUILDING MINIMUM VIABLE PRODUCTS AND GETTING THEM IN FRONT OF CUSTOMERS. 4. ITERATE (SMALL VARIATION, NO REAL CHANGE IN BMC) OR PIVOT (SOMETHING CHANGED IN THE BMC) AS NEEDED. 5. BUILD - MEASURE - LEARN (AKA RINSE, LATHER, REPEAT - BECAUSE THIS IS AN ITERATIVE AND CONTINUOUS PROCESS - YOU HAVE TO GET OUT OF THE BUILDING MORE THAN ONCE!) THE LEAN STARTUP TL;DR
A NEED FOR OR PROBLEM DOING (need / action / behaviour) AND I WILL KNOW THAT I HAVE SUCCEEDED WHEN (quantitative / measurable outcome) OR (qualitative / observable outcome) DEFINE PASS/FAIL CRITERIA
ASK QUESTIONS & LISTEN • NO SELLING ALLOWED • ASK 5-WHYS • ASK ONLY ABOUT PAST OR TODAY • WALK ME THROUGH IT • CURRENCY TEST: TIME, REPUTATION OR MONEY PREPARE CUSTOMER INTERVIEWS
BUSINESS MODEL CANVAS (BMC). 2. GET OUT OF THE BUILDING AND TEST THESE HYPOTHESES USING CUSTOMER DEVELOPMENT. 3. VALIDATE LEARNINGS BY BUILDING MINIMUM VIABLE PRODUCTS AND GETTING THEM IN FRONT OF CUSTOMERS. 4. ITERATE (SMALL VARIATION, NO REAL CHANGE IN BMC) OR PIVOT (SOMETHING CHANGED IN THE BMC) AS NEEDED. 5. BUILD - MEASURE - LEARN (AKA RINSE, LATHER, REPEAT - BECAUSE THIS IS AN ITERATIVE AND CONTINUOUS PROCESS - YOU HAVE TO GET OUT OF THE BUILDING MORE THAN ONCE!) THE LEAN STARTUP TL;DR
software over comprehensive documentation • Customer collaboration over contract negotiation • Responding to change over following a plan http://agilemanifesto.org PLUS 12 PRINCIPLES
BUILD-MEASURE-LEARN ITERATIONS IN SMALL BATCHES INSTEAD OF VERSION COMPLETE & WATERFALL PROCESS • GOOD ENOUGH VS PERFECT - SPEED IS OF THE ESSENCE • DATA / TEST DRIVEN DESIGN - HYPOTHESIS TESTING • AUTOMATED ACCEPTANCE TESTING + USER STORIES / SCENARIOS DESCRIBE WHAT WE WANT TO SEE THE SOFTWARE DO, THEN AUTOMATE THE VERIFICATION THAT THE SOFTWARE ACTUALLY DOES IT • CONTINUOUS DEPLOYMENT, MULTIVARIABLE A/B TESTING, PAIR PROGRAMMING (XP), SCRUM & KANBAN
Landing Page (Everyone - remember how to get currency) • Wizard of Oz MVP (Zappos) • Concierge MVP (Food on the Table) • Piecemeal MVP (Wizard of Oz + Concierge) • Crowd Funding (Sell and test demand before you build) • A / B Testing (P&G - data talks, bs walks) • Single-Feature MVP (google) • Your imagination is the limit…
2x2 matrix: Based on this, if we have a clear hypothesis of who our customer is and what we think they will pay for, we can conduct an Evaluative Market Experiment such as a smoke test. If we don’t have a clear idea of who our customer is, we can do Generative Market Research like data mining. Similarly, if we have a clear hypothesis of which features will solve the customer’s problems, we can do an Evaluative Product Experiment such as Wizard of Oz testing. If we do not know which features will lead to an acceptable solution, we can do Generative Product Research such as a Concierge Product to try and come up with new ideas. Any framework is an oversimplification of reality: This Index is a quick way to navigate to the correct method, but doesn’t mean you don’t need to think. 1. Do we need to learn about the market or the product? 2. Do we have a clear hypothesis to evaluate or do we need to generate a clear idea?
are their pains? • What job needs to be done? • How are they doing this job today? • Does the customer segment already have a solution to this pain? • Is this customer segment really willing to pay for a better solution for this job? • Is our customer segment too broad? • How do we find them? • How much will this customer segment pay? • How do we convince this customer segment to buy? • What is the cost to acquire a customer in this customer segment? • How can we solve this problem? • What form should this take? • How important is the design? • What’s the quickest solution? • What is the minimum feature set? • How should we prioritise? • Is this solution working? • Are people using it? • Which solution is better? • How should we optimise this? • What do people like / dislike? • Why do they do that? • Why do prospects buy from us? • Why do prospects not buy from us?
the right side of the canvas including: Customer, Channel, Relationship, & Revenue “Product” questions are those about the Value Proposition and everything left of it including: Key Activities, Key Resources, Key Partners, & Costs
Fit are: 1. Finding Early Adopters for your product 2. Offer Testing: You can reach your Early Adopters 3. Currency Testing: Your Early Adopters will pay you 4. Utility Testing: You can satisfy your Early Adopters 5. Scaling to Fit: You can achieve Product-Market Fit THE 5 PHASES OF PRODUCT-MARKET FIT THE “FOCUS” FRAMEWORK
people actively trying to solve the problem your product will solve for them – these are the people we refer to as your Early Adopters. In particular, your goal during this phase of testing is to validate: • Are there people already trying to solve the problem (Early Adopters)? • Do you know how they describe the problem? • Do you know the emotions they experience associated with the problem? • Do you know where/how to reach them? • Do you know the deficiencies of their current solution? Experiment to Run: The best technique for validating these assumptions is the customer discovery interview. Interviews will answer any questions you have regarding the assumptions above, and set you up for success in validating the rest of your assumptions. Metric to Measure: What percentage of customers you interview report taking steps to solve the same problem within the last 6 months? Once 60% of your last 10 interviewees report actively trying to solve the same problem you are on the right way. 1. FINDING EARLY ADOPTERS FOR YOUR PRODUCT
to reach other Early Adopters. Your goal in this phase is to validate what they told you. In other words, you’re testing that you can find more Early Adopters, you know what to say to them when you find them, and that they’re eager enough for a solution to the problem that they ask you for more information. Experiment to Run: To validate this assumption, you’re going to test a combination of marketing channels and marketing messages based on the results of your interviews. Potential Validation Experiment: • Ad campaigns • Cold email outreach • Cold calling campaigns • Becoming member of forums/communities • Social media outreach • Attending conferences, meetups, etc Metric to Measure: Once your Early Adopters’ response rate to your “Solution Offer” (i.e. click on your ads, respond to your emails, etc.) is high enough that you can clearly see a path to Product-Market Fit, you’re ready to test the next assumption. 2. OFFER TESTING: YOU CAN REACH YOUR EARLY ADOPTERS
need to test if they’ll “pay” you sufficiently to solve the problem. In this case “payment” can be in the form of actual cash, or it can be something else that leads directly to your Product-Market Fit (e.g. usage of your product, personal data, etc.) depending on your business model. Experiment to Run: To validate this assumption you’re going to actually ask for “payment.” While you won’t usually take the payment (because your product hasn’t been built yet), you’re going to ask for it and measure how many Early Adopters try to pay you. Examples include: • Landing page with pre-order functionality • Requesting a Letter of Intent after a solution interview • Asking for a cash payment after a solution interview • A mobile app w/ just enough functionality to measure the number of downloads and opens Metric to Measure: Once your Early Adopters “payment” conversion rate is high enough that you can clearly see a path to Product-Market Fit, you’re ready to test whether you can start solving the problem. 3. CURRENCY TESTING: YOUR EARLY ADOPTERS WILL PAY YOU
your Early Adopters’ problems. While it can be tempting to automate your first couple attempts at a solution, there’s usually a more efficient way to to test this assumption. MVP to Build: Manual solutions are the best way to test whether you can solve an Early Adopter’s problem. While they make take more of your time to solve a customer’s problem, manual solutions are much faster to build, and even faster to iterate on, than automated (i.e. software) solutions. Examples include: • Concierge MVP • Wizard of Oz MVP Metric to Measure: Once you’re solving the problem sufficiently well that your Customer Lifetime Value and your Viral Co-Efficient are high enough that you’re tracking towards Product-Market Fit, you’re ready to start scaling your solution. 4. UTILITY TESTING: YOU CAN SATISFY YOUR EARLY ADOPTERS
them, they’ll pay you, and you can solve their problems sufficiently, the only assumption left is that you can scale until you achieve Product-Market Fit. MVP to Build: Now is the time you get to automate your solution, scale to multiple marketing channels, and branch out to your second and third customer segments. Examples include: • Beta version of your software • Single-feature MVP • Software-based pilot for a large customer • Running outreach campaigns in multiple channels simultaneously • Multiple, simultaneous, landing page test targeting different customers Metric to Measure: At this point you’re measuring that all your previous metrics (e.g. response rate, conversion rate, Lifetime Value and Viral Co-Efficient) are all still tracking towards you achieving Product-Market Fit. 5. SCALING TO FIT YOU CAN ACHIEVE PRODUCT-MARKET FIT
MOST CRITICAL ASSUMPTION(S) WITH DATA RELEASED IN SMALL BATCHES IN BUILD-MEASURE-LEARN CYCLES ITERATE OR PIVOT AS NEEDED BASED ON DATA FROM MVP + CUSTOMER INTERVIEWS
agency that supports fundamental research and education in all the non-medical fields of science and engineering. They decide which public scientific research PROJECTS will get FEDERAL funding for commercialisation in the US. BUDGET: $7B ANNUALLY LLP CASE STUDY
+60% funding rate of projects after requiring applicants to take the Lean Launchpad (LLP) program as a prerequisite for applying for funding. LLP CASE STUDY 50X FASTER INNOVATION WITH THE LLP
WRITTEN MATERIAL CUSTOMER INTERVIEWS EXPERIENCE-BASED DISCUSSIONS - INSIGHTS ADDITIONAL LECTURES ACCOUNTABILITY FEEDBACK, PEER REVIEW DURING MEETUPS BETWEEN MEETUPS WITH EXPERIENCED ENTREPRENEURS
THEM 2. YOUR RESULTS (NUMBER OF INTERVIEWS AND % PASS/FAIL) 3. WHAT YOU LEARN / CHANGE IN THE BMC AND WHY YOU THINK SO 4. YOUR CURRENT BIGGEST CHALLENGE(S) 5. THE CONCRETE NEXT 5 THINGS YOU WILL HAVE DONE UNTIL NEXT WEEK THE WEEKLY REPORT THE LEAN LAUNCHPAD REPORT FORMAT
LEARNING JOURNEY LEARNING KEYNOTE KILL YOUR COMPANY INNOVATOR MASTERCLASS INNOVATOR BOOTCAMP LEAN LAUNCHPAD MVP AS A SERVICE INNOVATION OUTPOSTS DEMO DAY PITCHING MASTERCLASS EXPERTS AS A SERVICE MENTORS AS A SERVICE TRAIN THE TRAINER SPINNING OUT +ANDERSEN PROGRAMS AT ALL STAGES
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