Lean Startup 301

Welcome to Lean Startup 301

Aubrey SmithNovember 16, 2015

Sponsored by:

Agenda

1. Who is in the room?

2. How will this be valuable?

3. What will we cover?

4. How to participate?

5. What should I do next?

Who is in the room?• Founders• 1st Time Entrepreneurs• Serial Entrepreneurs• Intrapraneurs• Designers• Developers• Newbies• Book Readers

How will this be valuable?

This Session Is• Practical• Clear• Direct• Simple• Introductory• Wisdom sharing• Hands-on

This Session Is Not• Book review• Brainstorming

session• Full of jargon

How will this be valuable?

Addressing the Main Questions• What is it?• Why does it work?• How does it work?• Why does it matter?• How can I get started?• How can I apply this to my company?

What will we cover?

What we will cover today• Deep dive into MVPs, experiments• Discussion of Advanced Topics

• Live Case Studies• Exercise: Design an Experiment

Innovation Accounting Governance

Application in the

Enterprise

Regulated Markets

How to participate?

ExperimentExercise

Live Case Studies• Listen• Share• Please, ask questions!

• Need Volunteers • Group Participation• Sharing

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2

What is the Lean Startup?

Key Areas to Discuss

HistoryBasic Terminology / DefinitionsApplication / ApplicabilityAdvanced Topics

What is the Lean Startup?

History

• Robert Deming• Toyota Lean Manufacturing

• Agile Software Development• Lean Startup

• Steve Blank• Eric Ries

• Alexander Osterwalder• Lean Startup Community

What is the Lean Startup? A method to systematically address uncertainty through rapid iteration and market learning.

Core Principles

Entrepreneurs are everywhere

Entrepreneurship is management

Validated Learning

Build-Measure-Learn Loop

Innovation Accounting

What is the Lean Startup?

Common Purpose We share a vision for the kind of company we want to create:

A company that continuously creates new sources of growth.

The Lean Startup is…Everywhere.

Who’s accountable?

• Jack Stack: The Great Game of Business

Build a culture of ownership

• Key ParallelsLean Startup capability and accountability should be the job of everyone at the companyGovernance will varyCustomer learning trumps internal feedback loops and decisions about products/features

Case 1: Lean Startup at GE?What is FastWorks?

- Organizational change- Teams to Growth Boards- 500 projects, 500 coaches

What are GE Beliefs?- Customers Determine our Success- Stay Lean to Go Fast- Learn and Adapt to Win- Empower and Inspire Each other- Deliver Results in an Uncertain

World

Key Areas to Discuss

HistoryBasic Terminology / DefinitionsApplication / ApplicabilityAdvanced Topics

What is the Lean Startup?

What is The Lean Startup?

Terminology / Definitions• Entrepreneurs• Startups• Uncertainty • Vision• Assumptions• Hypotheses• Minimum Viable Product• Validated Learning• Pivots

Your Vision

What business do you want to create?And, why?

What will you not pursue?And, why?

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2

Now, get the facts...• Biggest mistake you can make is to not test

the underlying assumptions of your business plan

• Leap of Faith Assumptions:If you prove your Leap of Faith assumptions false, your business plan falls apart

Isolating critical assumptions

What is the riskiest element of your business plan?

Impact

Time horizon

OR

Will kill

Won’t kill

Customer Problem

Solution

Business Model

Scale / Growth

Types of Assumptions

• “If then” statements that help design tests for an assumptionPaypal - If people can easily transact across multiple

devices, they will be more frequent users of the service

• Clarifies your current understanding of what uncertainty you seek to resolve

Paypal - Specific action? Timing? Value/amount

Draft your Hypothesis

Minimum Viable Product• Experiment that helps you validate (or

invalidate) hypotheses about the value or growth potential for a new product

• An MVP helps you answer a specific question about one or a few of your critical assumptions

Case 2: Testing @ AirBnbTest:

• Photography Concierge MVP

• 20 Photographers in the field

Critical Hypothesis:

“Professional photographed listings get 2-3 times more business (and host don’t turn down free professional photography.” (SXSX, Airbnb)

Case 2: Testing @ AirBnb

MVP: Expert Tip

The MVP begins the process of validated learning…

• This is an experiment, not a product• No such thing as “an MVP” • The smallest possible product we can

imagine to achieve maximum learning about our hypothesis

Build, Measure, Learn Loop

Minimum Viable Product

Translate your critical assumptions into an experiment:

Validated Learning

1. Isolate critical assumptions for testing

2. Draft your hypothesis to be tested

3. Build an experiment4. Measure the results5. Collect the data and

learning in a systematic

1. What artifact will you use?

2. How will you use/test it?

3. Who will you test with (segments)

Minimum Viable Product

Translate your critical assumptions into an experiment:

Validated Learning

1. Isolate critical assumptions for testing

2. Draft your hypothesis to be tested

3. Build an experiment4. Measure the results5. Collect the data and

learning in a systematic

1. What artifact will you use?

2. How will you use/test it?

3. Who will you test with (segments)

Fears

• Change in direction without a change in vision

• OR

• Persevere: A team’s decision to test the next most important hypothesis

Pivot

Innovation Accounting

• The problem with Vanity Metrics• Quantitative vs. Qualitative Data• Leading vs. Lagging Indicators

Key Areas to Discuss

HistoryBasic Terminology / DefinitionsApplication / ApplicabilityAdvanced Topics

What is the Lean Startup?

Minimum Viable Product

Translate your critical assumptions into an experiment:

Validated Learning

1. Isolate critical assumptions for testing

2. Draft your hypothesis to be tested

3. Build an experiment4. Measure the results5. Collect the data and

learning in a systematic

1. Who will you test with (segments)

2. What artifact will you use?

3. How will you use/test it?

Culture of Testing1. Experiment design is important2. But, recording and evaluating the learning is

more important

1. Experiment design is important2. But, recording and evaluating the learning is

more important• Establish an organization that learns together

• Only step up to the sophistication of the experiment and innovation accounting when you are ready to do so as a team

• Team learning is the most important outcome

Culture of Testing

Discipline of Testing1. Focus the learning 2. Establish the baseline 3. Track MVPs on a dashboard4. Employ the right cadence of testing

1. Focus the learning 2. Establish the baseline 3. Track MVPs on a dashboard4. Employ the right cadence of testing

• Only as sophisticated as your organization is ready to handle

• Remember: A well-designed experiment will inform what your next experiment will be

• Parallel path testing should only be employed if you have available resources

Discipline of Testing

Minimum Viable Product

Translate your critical assumptions into an experiment:

Validated Learning

1. Isolate critical assumptions for testing

2. Draft your hypothesis to be tested

3. Build an experiment4. Measure the results5. Collect the data and

learning in a systematic

1. Who will you test with (segments)

2. What artifact will you use?

3. How will you use/test it?

• Customers do not always do what they say they will

• Avoid “Voice of Customer”• Measure conversion on the path to

purchase (ex. Funnel metrics)• “Purchase intent” may require a ‘new’ rung

in the funnel

Exchange of Value

Identify “Early Adopters”• What customers have this problem/need?• Who uses a ‘workaround’ today?• Who values this solution for a unique reason?• How would we classify segments?

• Innovations may cut across traditional segmentation

• Dig for segmentation variables (time, cost)

A. Build – What segments?

A. Build – What artifact?Begin with a low fidelity artifact

• Paper brochure• PowerPoint• Landing page• Website• Clickable Mobile App• 3d CAD Rendering• Video

A. Build – What test?Pick a test

• Interviews (Face-to-face, phone, video)• Digital Campaign• Google Adwords• U/X in-person Test• Email• Live Demonstration

Test Problem/Solution Fit• Bring bare bones “artifact”• Set Context• Focus on hypotheses to be tested

• Begin with direct statements (“We believe”)

• Allow customers to hint/point you to what pain / need they do have

• Seek an “exchange of value”

c

The Interview

A. BuildAdvanced Concepts

• Concierge MVP (“Man behind the curtain”)• A/B Split Test

A. BuildAdvanced Concepts

• Concierge MVP (“Man behind the curtain”)• A/B Split Test

• Helps you obtain statistically significant information about your potential offering

• Allows you to see what customers do with your product / service / site

• Gives you information to make decisions – such as, which features to cut / build

Experiment Example[software]

❶ MVP #1

Display non-working prototype at a showroom

❷ MVP #2

Build full-scale driving prototype to verify technology

Avg. down-payment

Pre-order rate

Prototype

• Driving prototype (MVP2) improved which indicates strategy effectiveness

• MVP #2 validated technical feasibility assumptions

Learning

↗

↗

• Purchase intent was validated by innovation metrics: Pre-order rate & avg. down payment

Case 3: Lit Motors Test

Exercise – Part I

Please see White Board

Live Case

Ursula Shekufendeh AppFolio

Live Case: AppFolioAbout AppFolio

• Web-based real estate property management software

• Property managers can market & manage property portfolio

Testable Hypothesis:“If we build a tenant screening service that landlords can subscribe to, then we can sell a service to 80% of RentApp users (and, quickly reach profitability).”

Exercise – Part II

Please see White Board

B. Measure Results• One metric that matters, OR• Simple Dashboard / Excel Spreadsheets, AND• “Exchange of Value”

• Customers say and do different things

• Avoid “Voice of Customer”

• Measure conversion on the path to purchase (ex. Funnel metrics)

• Create “proxy” in funnel, if needed

Sample Dashboard❷

✓

✓

✗

→

❸

• Pivot vs. Persevere• Continuous Deployment

Tips:• Pivoting is a team sport• Ground decisions entirely in the learning• Learning is cumulative• Good experiments should teach you what

experiment to do next

C. Commit to Learning

Key Areas to Discuss

HistoryBasic Terminology / DefinitionsApplication / ApplicabilityAdvanced Topics

What is the Lean Startup?

Innovation Accounting

• Actionable• Must demonstrate cause and effect

• Removes bias to report / overvalue “numbers that go up”

• Accessible• Simple, easy for the team to understand

• Should not require retraining team to read reports

• Auditable• Credible data reduces the ability to place blame

• The growth operating system requires new management principles

• No “one size fits all” Lean Startup Process

• Start small to get big

• Small, honest success cases will bring leaders into the fold

• Sophistication should be aligned with team capability and resources

Lean Startup in Enterprise

Live CaseChris BrownVodafone Global Enterprise

Questions?

Aubrey SmithSparked Advisory

(202) 907-3993

Heather McGoughCo-Founder, Lean Startup Company(415) 830-2479Heather@LeanStartup.co

Appendix

• Vision -> Strategy -> Team

• Strategy is leadership-led:

Governance

PortfolioTeam Company

Startup approach opens market opportunities

Important Themes:

• Dialogue is critical• Layering regulation improves impact

Regulated Markets

Prioritize Assumptions• Focuses you, your team• Draws a line in the sand • Introduces accountability• Saves time• Introduces culture of “learning”

Eric’s Point of View