Lean Startup Essentials
Lukas [email protected]
STARTup Live Hagenberg14th May 2011
Lean Startup Essentials
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
Part 1:Why? & Lean Canvas
Lean Startup Essentials #1
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
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
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
Most startups fail from a lack of (paying) customers.
#1: Lean StartupLean Startup Essentials
Startups are not just a small version of a big company.
#1: Lean StartupLean Startup Essentials
Startup: Temporary organization used to
search for a repeatable and scalable business model.As defined by Steve Blank.
#1: Lean StartupLean Startup Essentials
#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.
#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.
So, we need a languagein order to talk about your
startup.
#1: The BM CanvasLean Startup Essentials
Product is only one of the critical aspects that make your
company work.
#1: The BM CanvasLean Startup Essentials
The Business Model Canvas
#1: The BM CanvasLean Startup Essentials
Alex Osterwalder - Business Model Generation
#1: The BM CanvasLean Startup Essentials
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.
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/3.0/
or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
#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
#1: The BM CanvasLean Startup Essentials
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
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
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
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
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
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
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
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
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
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
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
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
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
Q&A
#1Lean Startup Essentials
Part 2:Customer Discovery
Lean Startup Essentials #2: Customer Discovery
You probably already had a product idea
And an implict assumption about your
market
Lean Startup Essentials #2: Customer Discovery
And now you’ve mapped out a rough
biz model
Now it’s time to focus on qualitative feedback
from the market
Lean Startup Essentials #2: Customer Discovery
Listen to what customers have to say - don’t execute a fabricated value proposition
Lean Startup Essentials #2: Customer Discovery
Customer DiscoveryMethods
Lean Startup Essentials #2: Customer Discovery
Customer Interviews
30 min in-person withyour prototypical customer
People like talking about their field - explore their worldview.
Lean Startup Essentials #2: Customer Discovery
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
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
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.
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
Q&A
#2Lean Startup Essentials
Part 3:Case Study
Lean Startup Essentials #3: Case Study
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
Rewind to Summer 2010
The idea back then:Heroku for Europe
Efficiency!
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”)
Pivot
• Marketing channels hard to build up
• Hosting is a local market
• Product & engineering-driven company much easier with B2B model
Pivot:License technology to
hosting companies
Positioning
Agencies SMBs Devs Startups Enterprises
Mass-Market Hosting Providers “Cloud” Providers
IaaS
PaaS
OnAppOpenStack
Cloud Foundry
Eucalyptus
?
Positioning
Agencies SMBs Devs Startups Enterprises
Mass-Market Hosting Providers “Cloud” Providers
Efficient Cloud
IaaS
PaaS
OnAppOpenStack
Cloud Foundry
Eucalyptus
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
Literature
Lean Startup Essentials Literature
Steve Blank - The Four Steps to the Epiphany
steveblank.com
Lean Startup Essentials Literature
Lean Startup Essentials Literature
Alex Osterwalder - Business Model Generation
businessmodelgeneration.com
Lean Startup Essentials Literature
Eric Ries - The Lean Startup
lean.st
Lean Startup Essentials Literature
Ash Maurya - Running Lean
book.runningleanhq.com
Neil Davidson - Don’t Just Roll the Dice
Lean Startup Essentials Literature
Top Related