WHAT IS LEAN STARTUP? - SESSION 5

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WHAT IS LEAN STARTUP? SESSION 5 (out of 10)

LEAN ENTREPRENEURSHIP

This session is part of a 10-weeks course given to master students of the SOLVAY BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT by professor Olivier WITMEUR.

Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR 2

•  The importance of assumptions

•  How to test fast and cheap

•  What is the ‘lean’ movement? A revolution in entrepreneurship?

QUESTIONS AGENDA RESOURCES •  Back to Product-Market fit

•  Introduction to Lean entrepreneurship

•  Lean Canvas and dashboards

•  Limitations of lean

•  Why lean startup changes everything (HBR)

Desired Outcomes of the Session

Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR

PRODUCT MARKET FIT

#1


Customer – Value Canvas

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Looking for product-market fit? Focus! B. Cooper, 2013

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How to segment?

•  Different level pain or passion

•  Seek to solve problem differently

•  Require different marketing

•  Require different distribution

•  Require different sales

•  Not necessarily demographic-based

•  …

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Select your customer segment (Segment matrix)

Compare different segment in terms of

–  Depth of pain

–  Budget

–  Market size

–  Time to prototype

–  Easiness to reach

–  Fit with personal values

–  …

Rate: High/moderate/low

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What are your hypothesis?

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LEAN ENTREPRENEURSHIP

#2


Why so many startups fail?

•  Ignore customers

•  No market need

•  Need of business model

•  Poor product

•  Pricing issues

•  Failure to adapt their offering / business model

•  Rely to heavily on their (business) plan à Too much rigidity?

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Hot topic!

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The new Gurus

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STEVE BLANK

ERIC RIES

BRANT COOPER

ASH MAURYA


Lean Startup Movement Mindset

“Life’s too short to build something nobody wants” - Eric Ries

“Customers don’t care about your solution, they care about their problems” - Dave McClure

“Bind a solution to your problem as late as possible” - Ash Maurya

“It’s not the customer’s job to know what they want” - Steve Jobs

“Given the right context, customers can clearly articulate their problems, but it’s your job to come up with the

solution” - Ash Maurya

“Remove any feature, process or effort that does not contribute directly to the learning you seek” - Eric Ries

“A good design is one that changes customer behaviour for the better” - Eric Ries

“Real learning comes from facts and commitment, not opinions and promises” - Eric Ries

“Get out of the building” - Steve Blank

“Startups that succeed are those that manage to iterate enough times before running out of resources” - Eric

Ries

“While ideas are cheap, acting on them is quite expensive” - Ash Maurya

“Fail often and fail fast… in order to succeed soon.”

“You waste if you don’t learn.“

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What is Lean Startup?

Optimize efficiency in the discovery of customers and how to create value.

Eliminate non value-add activities.

Validated learning.

Influenced by lean management, bootstrapping, agile product development methods, design thinking,

qualitative market research methods…

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The Lean Startup Cycle

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BUILD

MEASURE

LEARN

IDEA

Value Creation & Business Model

Hypotheses

PRODUCT

•  Basic tests •  Minimum Viable

Product (MVP) •  Prototype •  Proof of Concept

DATA

Metrics

PERSEVERE or PIVOT?

* Adapted from E. Ries, Lean Startup, 2012

A pivot is a structured course correction designed to test a new fundamental hypothesis about the

product, business model and engine of growth. (E. Ries)


BUILD - Minimum Viable Product

“The minimum viable product is that version of a new product which allows a team to collect the maximum

amount of validated learning about customers with the least effort” - Eric Ries

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MVP vs. Prototype

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•  Validate the market assumptions

•  Can be different from the final product

•  Must show the features to the

potential customers and enables to

gather information from the market

•  Verify technical assumptions

•  Is a demonstration to potential

investors/customers but is not

launched on the market.

•  Nice if it can be built at minimum cost

MVP PROTOTYPE


Minimum Viable Product Types

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•  Open interviews

•  Pitch of a fake product:

email, call, face-to-face…

•  Low fidelity prototypes

•  Mock-up

•  Basic advertising campaign

•  Like on Facebook, sign-up

page…

•  Landing page with call-to-

action.

•  Video, 3D, pictures …

NEEDS / DEMAND PROOF OF CONCEPT VALUES / DRIVERS

•  Wizard of Oz, Concierge…

•  Interactive mock-up

•  Video demo

•  Actual prototype, Beta

version …

•  Partly implemented solution

•  Full offering presentation:

website, folder,

PowerPoint…

•  Letter of intent, pre-order…

from customers

•  Crowd funding campaign

•  Offering, quote … from

suppliers

•  A/B testing, incl. for pricing

strategy test, conversion

rate…

•  Real life marketing

campaign

Desirability Feasibility Sustainability

* Adapted from S. Montreuil, E&I 2013


MEASURE - Metrics

Example of key assumptions –  Problem hypothesis: test if the product really create value to customers

–  Customer hypothesis: test who is the customer and how he/she (re)act

–  Growth hypothesis: test how new customers will discover the product, incl. funnel metrics

Vanity vs. actionable metrics –  Vanity metrics: “good for feeling awesome”

–  Actionable metrics: “the only metrics that entrepreneurs should invest energy in collecting are those that help them make decisions”

3 A’s of metrics •  Actionable

•  Accessible

•  Auditable

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LEARN - Persevere, Pivot or Abandon

“A pivot is a structured course correction designed to test a new fundamental hypothesis about the product,

business model and engine of growth” – Eric Ries

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Run test

Building a Business with the Lean Approach

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Prioritize

Hyp. validated

Hyp. rejected

SCALE-UP STOP

PERSEVERE

Envision

PIVOT

Revision Set vision

* Adapted from Eisenmann & al., HBS, 2013.

Create test - MVP / Experience - Market research - …

Define hypotheses

- Value proposition - Market sizing - Channels - Partnerships - …


MVP Examples

Dropbox 2008

Lockitron (First 1000)

Your case … from idea to real product

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LEAN CANVAS AND DASHBOARDS

#3


Validation canvas (To be compared with your entrepreneurial course journal)

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Lean Canvas Ash Maurya, 2012

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Solution((S)Top$3$features

Unfair(Advantage((UA)Can't$be$easily$copied$or$bought

Key(Metric((KM)Key$activity$you$measure$

Channels((CH)Path$to$customers

Problem((P)Top$3$problems

Unique(Value(Propistion((UVP)Single,$clear,$compelling$message$that$states$why$you$are$different$and$worth$buying

Customer(segments((CS)Target$custmers$(early$adopters)

Cost(Structure((C$)Customer$acquisition$costDistribution$costsHostingPeople,$etc.

Revenu(Streams((R$)Revenu$ModelLife$Time$ValueRevenueGross$Margin


Lean Dashboard Spark59.com

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Customer Development Brant Cooper / Steve Blank

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Lean Launchpad Steve Blank

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LIMITATIONS OF LEAN

#4


Lean is good… but not magic. Beware the fad.

•  In the past, it was called qualitative ‘market research’

•  Test with the customer… but who is the customer. Is she/he ready to play the game?

•  Time consuming. Too much tests?

•  Ability to build MVP? Costs?

•  OK when you have many customer (mass market) but how to deal with very small market

•  Reputation risk (with ‘crappy’ MVP)

•  Confidentiality issues

•  Pivot is trendy … but not a recipe for success.

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The main steps towards your final project.

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VALUE PROPOSITION

BUSINESS MODEL ROADMAP

Key activities, resources & partners Revenues model & costs structure

Problem-Solution fit Product-Market fit Market sizing Competition

Stages & milestones Get-Keep-Grow Risks & scenario

FINANCE

P&L, cash and balance sheet Financing

CREATE

TEST =

BUILD MEASURE

LEARN

YOU

Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR 32

NEVER STOP WONDERING

& ASKING!


A real passion for entrepreneurship education and entrepreneurs.

•  Student entrepreneurs: 2x

•  Full time entrepreneur: once, in a team of 5

•  Coach: 500+ projects over the last 20 years

•  (Advisory) Board member in multiple new ventures

•  Policy making: 2x

•  Director of Solvay Entrepreneurs

•  PhD in entrepreneurship in 2008

•  … never as an investor

My wife (as Colombo), no kids, one dog (Vicky).

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Olivier Witmeur (Belgian, 46)


Solvay entrepreneurs is the entrepreneurship center of the Université Libre de Bruxelles. We support entrepreneurs through the development of their venture, from an idea to a successful and sustainable business.

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Solvay Entrepreneurs


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WHAT IS LEAN STARTUP? - SESSION 5

Business

minimum viable

fundamental

2014 olivier

correction

lean startup

validated

business model

eric ries