LEAN FROM THE START LEAN FROM THE START Lean is about solving - - PowerPoint PPT Presentation

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LEAN FROM THE START LEAN FROM THE START Lean is about solving - - PowerPoint PPT Presentation

Apr 22, 2023 286 likes •803 views

LEAN FROM THE START LEAN FROM THE START Lean is about solving problems through continuous experimentation. We ask: what is our purpose as an organization? What value to create or what problem are we trying to solve? Then, how do we

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LEAN FROM THE START

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LEAN FROM THE START

Lean is about solving problems through continuous experimentation. ▪ We ask: what is our purpose as an organization? What value to create or what problem are we trying to solve? ▪ Then, how do we improve the work and how do we develop the people? Do startups face problems that are different from those of established enterprises? ▪ More uncertainty? ▪ Greater risk? ▪ Fewer resources? Lean, Whether Startup or Established…

  • Engage Everyone in Problem Finding and Continuous Experimentation
  • Give Everyone Permission to Fail and Ability to Succeed
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WHAT IS LEAN THINKING?

Path to Lean ▪ Stanford, Harvard using lean (engineering, business schools) ▪ Created out of their experiences ▪ Builds on other management methods/tools (lean manufacturing, boot strapping, software development) ▪ Customer focused

  • Principle of “Just Enough”
  • Practice of Questioning and

Experimenting

  • A personal transformation
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WHAT IS LEAN THINKING?

Author Eric Ries (“Lean Startup”) ▪ Experienced team, strong market = failure ▪ Hypotheses about customers, markets, partners ▪ Build, measure, learn – feedback loop ▪ Experiment, multiple attempts, fast iterations Author Steven G. Blank (“Four Steps to the Epiphany”) ▪ Stanford/Berkeley ▪ Startup Handbook now out (apparently easier to read) Ries & Blank Rethink the Startup ▪ Human institution designed to deliver a new product or service under conditions of extreme uncertainty. (Ries) ▪ Nothing to do with size of company, sector of the economy, or industry

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WHAT IS A LEAN ENTERPRISE?

Transformation Questions

  • What’s the PURPOSE? What value? What problem to solve?
  • How to improve the work?
  • How to develop the people?
  • What leadership role and management system?
  • What’s the BASIC THINKING?

To Do

  • Define Your purpose
  • Improve the work
  • Develop the people

The product and customer are unknown. If truly innovative, even more uncertainty

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HOW TO BUILD A LEAN STARTUP

What is it about?

  • Idea
  • Sizing the Opportunity
  • Business Models
  • Customer Development

As a startup:

  • Understand the real world aspects of Entrepreneurship by getting out of the building
  • Analyze and assess an opportunity
  • Build the product
  • Get orders
  • Work with a team

Then:

  • Opportunity evaluation
  • Search for a Business Model
  • Customer Discovery and Validation
  • Operating and decision making in chaos with insufficient data
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HOW TO BUILD A LEAN STARTUP

Innovators use business models to sketch out quick and dirty conceptual prototypes of a business around the product (not just the product itself) in a format that is generally understandable and generates dialogue with others.

“Business models...are the managerial equivalent of the scientific method. You start with a hypothesis, which you then test in action and revise when necessary”. Magretta, Why Business Models Matter. Harvard Business Review, May 2002.

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HOW TO BUILD A LEAN STARTUP

  • Idea
  • Size Opportunity
  • Business Model
  • Customer Development
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HOW TO BUILD A LEAN STARTUP

Idea

Size of the Opportunity Business Model(s) Customer Discovery Customer Validation

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HOW TO BUILD A LEAN STARTUP

Idea

Size of the Opportunity Business Model(s) Customer Discovery Customer Validation

Theory Practice

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HOW TO BUILD A LEAN STARTUP

Idea

Size of the Opportunity Business Model(s) Customer Discovery Customer Validation

  • Web startups get the product in

front of customers earlier

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HOW TO BUILD A LEAN STARTUP

Idea

Size of the Opportunity Business Model(s) Customer Discovery Customer Validation

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What is Engineering about? ▪ Aren’t companies all about product? ▪ I have a great technology idea ▪ Teach me how to make a company around it ▪ Just like Facebook and Google (or Intel or Apple)

Sources of Startup Ideas:

  • Technology shifts

– Moore’s Law – Disruptive tech – Research

  • Market changes

– Value chain disruption – Deregulation

  • Societal changes

– Changes in ways we live, learn, work, etc. – The world is flat (outsourcing)

  • Dinosaur factor

– Arrogance – Deadened reflexes

HOW TO BUILD A LEAN STARTUP

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▪ Not all startups are designed to scale ▪ Small business startups have different goals ▪ They are done by normal people ▪ Scalable startups are designed to grow big ▪ Typically require venture capital ▪ This means the size of the opportunity needs to be $100’s of millions to billions

SCALABILITY

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Small Business Startup

  • Business Model found
  • Profitable business
  • Existing team

< $1M in revenue

SMALL BUSINESS STARTUPS

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Small Business Startup

  • Business Model found
  • Profitable business
  • Existing team

< $10M in revenue

  • 5.7 million small businesses in the U.S. <500 employees
  • 99.7% of all companies
  • ~ 50% of total U.S. workers

http://www.sba.gov/advo/stats/sbfaq.pdf

SMALL BUSINESS STARTUPS

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Scalable Startup Large Company

>$100M/year

  • Total Available Market > $500m
  • Company can grow to $100m/year
  • Business model found
  • Focused on execution and process

SCALABLE STARTUP

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Scalable Startup Large Company

>$100M/year

  • Total Available Market > $500m
  • Company can grow to $100m/year
  • Business model found
  • Focused on execution and process
  • Typically requires “risk capital”
  • In contrast a scalable startup is designed to grow big
  • Typically needs risk capital
  • What Silicon Valley means when they say “Startup”

SCALABLE STARTUP

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Small Business Startup

  • Business Model found
  • Profitable business
  • Existing team

< $10M

Scalable Startup Large Company

  • Total Available Market > $500m
  • Company can grow to $100m/year
  • Business model found
  • Focused on execution and process
  • Typically requires “risk capital”

VERY DIFFERENT STARTUP GOALS

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Small Business Startup

Scalable Startup Large Company

VENTURE FIRMS INVEST IN SCALABLE STARTUPS

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How Big is It?: Market/Opportunity Analysis

▪ Identify a Customer and Market Need ▪ Size the Market ▪ Competitors ▪ Growth Potential

MARKET/OPPORTUNITY ANALYSIS

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HOW BIG IS THE PIE? TOTAL AVAILABLE MARKET

  • How many people would want/need

the product?

  • How large is the market be

(in $’s) if they all bought?

  • How many units would that be?

How Do I Find Out?

  • Industry Analysts – Gartner, Forrester
  • Wall Street Analysts – Goldman, Morgan

Total available market

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HOW BIG IS MY SLICE? SERVED AVAILABLE MARKET

  • How many people need/can use

product?

  • How many people have the

money to buy the product

  • How large would the market be

(in $’s) if they all bought?

  • How many units would that be?

How Do I Find Out?

  • Talk to potential customers

Served Available Market

Total Available Market

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HOW MUCH CAN I EAT? TARGET MARKET

  • Who am I going to sell to in year 1,

2 & 3?

  • How many customers is that?
  • How large is the market be

(in $’s) if they all bought?

  • How many units would that be?

How Do I Find Out?

  • Talk to potential customers
  • Identify and talk to channel

partners

  • Identify and talk to competitors

Total Available Market

Target Market

Served Available Market

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Total Available Market

SEGMENTATION – IDENTIFICATION OF GROUPS MOST LIKELY TO BUY

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Served Available Market Target Market

  • Geographic
  • Demographic
  • Psychographic variables
  • Behavioral variables
  • Channel
  • etc…
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▪ Market Size Questions:

▪ How big can this market be? ▪ How much of it can we get? ▪ Market growth rate ▪ Market structure (Mature or in flux?)

▪ Most important: Talk to Customers and Sales Channel ▪ Next important: Market size by competitive approximation

▪ Wall Street analyst reports are great

▪ And : Market research firms Like Forester, Gartner

MARKET SIZE: SUMMARY

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▪ Diagram of flows between company and customers ▪ Scorecard of hypotheses testing ▪ Rapid change with each iteration and pivot ▪ Founder-driven à Hands-on Planning: 9 Building Blocks of the Business Model Canvas

WHAT IS A BUSINESS MODEL?

* Alex Osterwalder

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CUSTOMER SEGMENTS

which customers and users are you serving? which jobs do they really want to get done?

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VALUE PROPOSITIONS

what are you offering them? what is that getting done for them? do they care?

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CHANNELS

how does each customer segment want to be reached? through which interaction points?

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CUSTOMER RELATIONSHIPS

what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?

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REVENUE STREAMS

what are customers really willing to pay for? how? are you generating transactional or recurring revenues?

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KEY RESOURCES

which resources underpin your business model? which assets are essential?

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KEY ACTIVITIES

which activities do you need to perform well in your business model? what is crucial?

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KEY PARTNERS

which partners and suppliers leverage your model? who do you need to rely on?

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COST STRUCTURE

what is the resulting cost structure? which key elements drive your costs?

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customer segments key partners cost structure revenue streams channels customer relationships key activities key resources value proposition

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SKETCH OUT YOUR BUSINESS MODEL

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SKETCH OUT YOUR BUSINESS MODEL

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HOW DO STARTUPS SEARCH FOR A BUSINESS MODEL

  • The Search is called Customer Development
  • The Implementation is called Agile Development

à More startups fail from a lack of customers than from a failure of product development (focus on “who” more than “what”)

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Customer Development Solving For Customer Risk

HOW DO STARTUPS SEARCH FOR A BUSINESS MODEL?

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Concept/

  • Bus. Plan

Product Dev. Alpha/Beta Test Launch/1st Ship

Product Introduction Model

Customer Development

Company Building Customer Discovery Customer Validation Customer Creation

Pivot

CUSTOMER DEVELOPMENT

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▪ Stop selling, start listening ▪ Test your hypotheses ▪ Continuous Discovery ▪ Done by founders

CUSTOMER DISCOVERY

Customer Discovery Customer Validation Company Building Customer Creation

Pivot

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Test Hypotheses:

  • Product
  • Market Type
  • Competition

TURNING HYPOTHESES TO FACTS

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Test Hypotheses:

  • Problem
  • Customer
  • User
  • Payer

TURNING HYPOTHESES TO FACTS

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Test Hypotheses:

  • Channel

TURNING HYPOTHESES TO FACTS

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Test Hypotheses:

  • Problem
  • Customer
  • User
  • Payer

Test Hypotheses:

  • Demand

Creation Test Hypotheses:

  • Channel

Test Hypotheses: Product Market Type Competitive Test Hypotheses:

  • Pricing Model / Pricing

Test Hypotheses:

  • Size of Opportunity/Market
  • Validate Business Model

Test Hypotheses:

  • Channel
  • (Customer)
  • (Problem)

TURNING HYPOTHESES TO FACTS

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Customer Development Team Agile Development Test Hypotheses:

  • Problem
  • Customer
  • User
  • Payer

Test Hypotheses:

  • Demand

Creation Test Hypotheses:

  • Channel

Test Hypotheses: Product Market Type Competitive Test Hypotheses:

  • Pricing Model / Pricing

Test Hypotheses:

  • Size of Opportunity/Market
  • Validate Business Model

Test Hypotheses:

  • Channel
  • (Customer)
  • (Problem)

TURNING HYPOTHESES TO FACTS

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THE PIVOT

  • The heart of Customer Development
  • Iteration without crisis
  • Fast, agile and opportunistic
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THANK YOU VERY MUCH FOR YOUR ATTENTION!