Lean Startup Essentials - STARTup Live Hagenberg

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Lean Startup Essentials Lukas Fittl lukas@fittl.com STARTup Live Hagenberg 14th May 2011 Lean Startup Essentials
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Saturday 14th May

Transcript of Lean Startup Essentials - STARTup Live Hagenberg

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Lean Startup Essentials

Lukas [email protected]

STARTup Live Hagenberg14th May 2011

Lean Startup Essentials

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Agenda

• 10 - 20min blocks, quick Q&A after each

• 1: Why? & The Canvas

• 2: Customer Discovery

• 3: Case Study

Lean Startup Essentials

Today’s focus: The early stage

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Part 1:Why? & Lean Canvas

Lean Startup Essentials #1

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About Me• 2nd time entrepreneur

• 2007-2010: Soup.io

• The Efficient Cloud“Heroku for Europe” to“PaaS technology for hosting providers”(Seedcamp 2011 company)

• Collaborated with Ash Mauryaon the Lean Canvas

#1: IntroductionLean Startup Essentials

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Whats the Lean Startup?

• A methodology on how to create order in the (unavoidable) chaos of a startup.

• Iterative approach to learning & building(as in: agile vs. waterfall)

• Summarization of entrepreneurial learnings.

#1: IntroductionLean Startup Essentials

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Where this all comes from

• Steve Blank - Customer Development

• Alex Osterwalder - Business Model Canvas

• Eric Ries - The Lean Startup

• Ash Maurya - Lean Canvas

#1: IntroductionLean Startup Essentials

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Most startups fail from a lack of (paying) customers.

#1: Lean StartupLean Startup Essentials

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Startups are not just a small version of a big company.

#1: Lean StartupLean Startup Essentials

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Startup: Temporary organization used to

search for a repeatable and scalable business model.As defined by Steve Blank.

#1: Lean StartupLean Startup Essentials

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#1: Lean StartupLean Startup Essentials

Your initial goal:Improve likely success rate of your venture,

and reduce risk of failure.

Enable yourself to actuallymake the jump into a full-time entrepreneur.

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#1: Lean StartupLean Startup Essentials

Your Process:Likely entirely chaotic.

No one implements the lean startupas a strict process.

Similar to agile adoption (e.g. Kan-ban)you need to make a slow transition

into more structured thinking.

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So, we need a languagein order to talk about your

startup.

#1: The BM CanvasLean Startup Essentials

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Product is only one of the critical aspects that make your

company work.

#1: The BM CanvasLean Startup Essentials

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The Business Model Canvas

#1: The BM CanvasLean Startup Essentials

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Alex Osterwalder - Business Model Generation

#1: The BM CanvasLean Startup Essentials

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What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

What type of relationship does each of our CustomerSegments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

Day Month Year

No.

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#1: The BM CanvasLean Startup Essentials

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Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

#1: The BM CanvasLean Startup Essentials

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Customer Segments

• Narrowly chosen group of people that buy/use your product

• Marketplace biz models =2 cust segmens (or more)

• Matching Value Proposition, Channels, Revenue Streams and Customer Relationships

#1: The BM CanvasLean Startup Essentials

Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

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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 BM CanvasLean Startup Essentials

Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

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Value Proposition

• What’s the problem you’re solving for the customer?

• These might be things they’ve already started building in house, because there is an active need

#1: The BM CanvasLean Startup Essentials

Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

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Revenue Streams

• How much is the problem worth to the customer?

• Not how much it costs you to implement the value proposition

• Avoid Free and Freemium! (marketing tactic, not rev model)

#1: The BM CanvasLean Startup Essentials

Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

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Customer Relationships

• How do you want to interact with your customers?

• Automated self-service vs.many in-person meetings

• Determines the scalability of your business model

#1: The BM CanvasLean Startup Essentials

Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

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Key Activities

• What are the people in your company doing day by day?

• Create the product: Software Development, DevOps, etc.

• Market the product

• Integrate the product, run webinars, create whitepapers, ...

#1: The BM CanvasLean Startup Essentials

Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

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Key Resources

• Which physical assets do you need for your company to work?(set of test hardware, etc.)

• Which other assets?(online platform, patents, etc.)

• Include/exclude HR, doesn’t really matter (duplicate info)

#1: The BM CanvasLean Startup Essentials

Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

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Cost Structure

• What are your HR costs?(rough estimate)

• Marketing channel costs

• Infrastructure costs

• It’s about Unit Economics, not your made-up 5 year plan

#1: The BM CanvasLean Startup Essentials

Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

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Key Partners

• Channel Partners

• Strategic Partners/Alliances

• Suppliers

• Especially Important for direct sales biz models

#1: The BM CanvasLean Startup Essentials

Key Partners Key Activities Value PropositionValue Proposition

CustomerRelationships

Customer Segments

Key Partners

Key Resources

Value PropositionValue Proposition

Channels

Customer Segments

Cost StructureCost StructureCost Structure Revenue StreamsRevenue StreamsRevenue Streams

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Key Partners

Herold / European Directories

Key Activities

Software Dev

SEO

Value Proposition

#1 Finding information, quality & location of a business

#2 Promoting a business, providing correct information to customers

Value Proposition

#1 Finding information, quality & location of a business

#2 Promoting a business, providing correct information to customers

CustomerRelationships

#1: Community

#2: Clear B2B Product

Customer Segments

#1 9-to-5 folks looking for lunch options, etc.

#1 Long-tail mainstream

#2 Business owners (restaurants, etc.)

Key Partners

Herold / European Directories

Key Resources

Data about businesses

Value Proposition

#1 Finding information, quality & location of a business

#2 Promoting a business, providing correct information to customers

Value Proposition

#1 Finding information, quality & location of a business

#2 Promoting a business, providing correct information to customers

Channels

#1 Long-tail SEO

#2 Direct Sales

Customer Segments

#1 9-to-5 folks looking for lunch options, etc.

#1 Long-tail mainstream

#2 Business owners (restaurants, etc.)

Cost Structure

HR (15 people)Infrastructure (4 servers)

Business Data

Cost Structure

HR (15 people)Infrastructure (4 servers)

Business Data

Cost Structure

HR (15 people)Infrastructure (4 servers)

Business Data

Revenue Streams

#1 Free

#2 Hundreds/Thousands of EUR (recurring)

Revenue Streams

#1 Free

#2 Hundreds/Thousands of EUR (recurring)

Revenue Streams

#1 Free

#2 Hundreds/Thousands of EUR (recurring)

Example: TupaloLean Startup Essentials #1: The BM Canvas

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Key Partners Key Activities

Software Dev

Marketing/Copywriting

Value Proposition

Tracking time precisely without effort

Easily invoice clients with good report on performed work

Value Proposition

Tracking time precisely without effort

Easily invoice clients with good report on performed work

CustomerRelationships

Tribe-like interaction

Customer Segments

Freelancers

Agencies

Key Partners

Key Resources

Existing audience: Mailinglists, Twitter, etc.

Value Proposition

Tracking time precisely without effort

Easily invoice clients with good report on performed work

Value Proposition

Tracking time precisely without effort

Easily invoice clients with good report on performed work

Channels

- Word of mouth- Cross-sales- Freebies - Existing audience

Customer Segments

Freelancers

Agencies

Cost Structure

HR (2 people)Hosting (1 server)

Cost Structure

HR (2 people)Hosting (1 server)

Cost Structure

HR (2 people)Hosting (1 server)

Revenue Streams

12-50 USD / month (dep. on company size)

Revenue Streams

12-50 USD / month (dep. on company size)

Revenue Streams

12-50 USD / month (dep. on company size)

Example: FreckleLean Startup Essentials #1: The BM Canvas

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Key Partners

Marketing Partners!

Fashion schools

Key Activities

Marketing

Biz Dev

Software Dev

Value Proposition

#1 Mass-producing a fashion garment

#1 Build up your fashion brand

#2 Buy trendy clothes

Value Proposition

#1 Mass-producing a fashion garment

#1 Build up your fashion brand

#2 Buy trendy clothes

CustomerRelationships

#1 Structured work together

#2 Online Shop

Customer Segments

#1 Fashion designers

#2 Trend-chasing hipsters

Key Partners

Marketing Partners!

Fashion schools

Key Resources

Production Factory

Value Proposition

#1 Mass-producing a fashion garment

#1 Build up your fashion brand

#2 Buy trendy clothes

Value Proposition

#1 Mass-producing a fashion garment

#1 Build up your fashion brand

#2 Buy trendy clothes

Channels

Fashion blogsPartnerships#1 Fashion schools#1 Fashion events#2 Word of mouth / strong brand

Customer Segments

#1 Fashion designers

#2 Trend-chasing hipsters

Cost Structure

Production! (super expensive)PrototypingPayout to designer

Cost Structure

Production! (super expensive)PrototypingPayout to designer

Cost Structure

Production! (super expensive)PrototypingPayout to designer

Revenue Streams

#2 100 EUR / piece

Revenue Streams

#2 100 EUR / piece

Revenue Streams

#2 100 EUR / piece

Example: GarmzLean Startup Essentials #1: The BM Canvas

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Live Example

Someone from the audience:Pitch us your business

4 other people:What’s the customer segment?

What are the channels?What’s the value proposition?What’s the revenue model?

Lean Startup Essentials #1: The BM Canvas

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Q&A

#1Lean Startup Essentials

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Part 2:Customer Discovery

Lean Startup Essentials #2: Customer Discovery

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You probably already had a product idea

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And an implict assumption about your

market

Lean Startup Essentials #2: Customer Discovery

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And now you’ve mapped out a rough

biz model

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Now it’s time to focus on qualitative feedback

from the market

Lean Startup Essentials #2: Customer Discovery

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Listen to what customers have to say - don’t execute a fabricated value proposition

Lean Startup Essentials #2: Customer Discovery

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Customer DiscoveryMethods

Lean Startup Essentials #2: Customer Discovery

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Customer Interviews

30 min in-person withyour prototypical customer

People like talking about their field - explore their worldview.

Lean Startup Essentials #2: Customer Discovery

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How to conduct an interview

1. Set context & tell your story2. Tell your problem hypothesis

3. Listen to their worldview4. Ask for follow up / references

Lean Startup Essentials #2: Customer Discovery

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Online Market Tests:

Google AdwordsFake Landing Page with

“Signup to be notified when we launch”“Can we call you to ask a couple of Qs?”

Lean Startup Essentials #2: Customer Discovery

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User Groups & Conferences:

Hand out cards with invite codes - landing page with “join our soon-to-

launch beta programme”

Lean Startup Essentials #2: Customer Discovery

Your private beta access code: OEWO8C

SolidRailsEuropean VPS cloud. Fully-integrated Rails hosting.

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Amy Hoy’sSales Safari:

Lurk in online forums of your customer segment, learn how they

talk about products & benefits

Lean Startup Essentials #2: Customer Discovery

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Q&A

#2Lean Startup Essentials

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Part 3:Case Study

Lean Startup Essentials #3: Case Study

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Recap: What’s PaaS?

• The role model: Heroku

• Fully-integrated hosting forRails/Java/Django/etc.

• Many US clones popping up

• VMware’s Cloud Foundry - OSS PaaS

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Rewind to Summer 2010

The idea back then:Heroku for Europe

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Efficiency!

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Market Testing

• Invite codes at conferences & user meetups

• Google Adwords testing, e.g. RailsHosting.in

• Interviews with hosting providers

• Open ears to what the end-users want, and what the industry currently sells (“cloud hosting”)

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Pivot

• Marketing channels hard to build up

• Hosting is a local market

• Product & engineering-driven company much easier with B2B model

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Pivot:License technology to

hosting companies

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Positioning

Agencies SMBs Devs Startups Enterprises

Mass-Market Hosting Providers “Cloud” Providers

IaaS

PaaS

OnAppOpenStack

Cloud Foundry

Eucalyptus

?

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Positioning

Agencies SMBs Devs Startups Enterprises

Mass-Market Hosting Providers “Cloud” Providers

Efficient Cloud

IaaS

PaaS

OnAppOpenStack

Cloud Foundry

Eucalyptus

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Key Partners

System Integrators

Key Activities

Software Dev

Sales

Value Proposition

Offer Platform-as-a-Service hosting products for Rails, Java, ..

Have high margins for mass-market customers

Value Proposition

Offer Platform-as-a-Service hosting products for Rails, Java, ..

Have high margins for mass-market customers

CustomerRelationships

Self-service Linux distribution

Customer Segments

#1 Mass-market hosting providers (less than 50 ppl)

#1 Mass-market hosting providers (50+ ppl)

#1 Enterprises

#2 Developers

Key Partners

System Integrators

Key Resources

EfficiencyTrade Secret

Value Proposition

Offer Platform-as-a-Service hosting products for Rails, Java, ..

Have high margins for mass-market customers

Value Proposition

Offer Platform-as-a-Service hosting products for Rails, Java, ..

Have high margins for mass-market customers

Channels

Direct Sales, Tradeshows, Conferences

Open-Source

Customer Segments

#1 Mass-market hosting providers (less than 50 ppl)

#1 Mass-market hosting providers (50+ ppl)

#1 Enterprises

#2 Developers

Cost Structure

HR (5 people)Test Infrastructure (6 servers)

Cost Structure

HR (5 people)Test Infrastructure (6 servers)

Cost Structure

HR (5 people)Test Infrastructure (6 servers)

Revenue Streams

Initial Iicense fee + monthly fee for updatesVar. 1: Per end-user, tiered by retail priceVar. 2: Per server / CPU cores

OSS “community edition” - Free

Revenue Streams

Initial Iicense fee + monthly fee for updatesVar. 1: Per end-user, tiered by retail priceVar. 2: Per server / CPU cores

OSS “community edition” - Free

Revenue Streams

Initial Iicense fee + monthly fee for updatesVar. 1: Per end-user, tiered by retail priceVar. 2: Per server / CPU cores

OSS “community edition” - Free

Example: Efficient CloudLean Startup Essentials #1: The BM Canvas

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Literature

Lean Startup Essentials Literature

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Steve Blank - The Four Steps to the Epiphany

steveblank.com

Lean Startup Essentials Literature

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Lean Startup Essentials Literature

Alex Osterwalder - Business Model Generation

businessmodelgeneration.com

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Lean Startup Essentials Literature

Eric Ries - The Lean Startup

lean.st

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Lean Startup Essentials Literature

Ash Maurya - Running Lean

book.runningleanhq.com

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Neil Davidson - Don’t Just Roll the Dice

Lean Startup Essentials Literature

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Thanks!

Lean Startup Essentials

Lukas [email protected]