Market creation

NEWMARKET CREATIONKristian Luoma22.11.2012

DISRUPTIVE INNOVATION = MARKET CREATION

INCREMENTAL INNOVATION = INCUMBENTS RULE HERE

MARKET CREATION = BEST CHANCE FOR A STARTUP

Act of making something that is more useful, affordable or better

for someone - than existing alternatives

1 IDEOLOGY2 TOOLS3 WORKSHOP

3 PARTS:

1 IDEOLOGY

STARTUP DEFINITION

“STARTUP IS AN EXPERIMENT FOR CREATING A SUSTAINABLE BUSINESS”

STARTUP REDEFINED

“STARTUP IS A SERIES OF EXPERIMENTS FOR CREATING A SUSTAINABLE BUSINESS”

STARTUP SCORECARD - RECORD OF PROGRESSO

PERA

TIVE

CA

PAB

ILIT

Y

MARKET EVOLUTION

STARTUP SCORECARD - RECORD OF PROGRESSO

PERA

TIVE

CA

PAB

ILIT

Y

MARKET EVOLUTION

WHY?Grand Vision

HOW?Resources, culture and

skills

WHAT?Scalable

business model & Product-market fit

PRODUCT WITH A MARKET - DEFINITION

PRODUCT THAT SOLVES A PROBLEM FOR CUSTOMERS THAT ARE WILLING TO PAY FOR IT

PRODUCT WITH A MARKET - DEFINITION

PRODUCT THAT SOLVES A PROBLEM FOR CUSTOMERS THAT ARE WILLING TO PAY FOR IT

Complete,����������� ������������������  right����������� ������������������  features

Targeted

Relevant

Unique

Makes����������� ������������������  money

IS RELEVANT

IS UNIQUE

right����������� ������������������  features,packaging,����������� ������������������  easy����������� ������������������  to����������� ������������������  hire����������� ������������������  for����������� ������������������  a����������� ������������������  job

price����������� ������������������  point,����������� ������������������  channel,����������� ������������������  value����������� ������������������  proposition

Stuff����������� ������������������  I����������� ������������������  buy

Scarce resources needs to be managed.

PROBLEMS WE TRY TO SOLVE 1/3

Products are created too soon.

PROBLEMS WE TRY TO SOLVE 2/3

Products are created too late.

PROBLEMS WE TRY TO SOLVE 3/3

Want-button for Wantlet vs. Pinterest Pin-it-button

MOTIVATION EXAMPLE #1

Ubi Oulu

MOTIVATION EXAMPLE #2

Make every experiment count, when it counts.

GOAL

2 TOOLS

Find a Systematic Approach for Market Creation

MISSION

LEAN MOVEMENT by ERIC RIES

“SCIENTIFIC METHOD”

OBSERVE

QUESTION

HYPOTHESIZE

EXPERIMENT

CONCLUDE

STARTUP EVOLUTION: MARKET CREATION PERSPECTIVE

PROBLEM / SOLUTION

FIT

PRODUCT / MARKET FIT

SCALE

STARTUP EVOLUTION: MARKET CREATION PERSPECTIVE

PROBLEM / SOLUTION

FIT

PRODUCT / MARKET FIT

SCALE

VALIDATED LEARNING

via PIVOTSGROWTH via OPTIMIZE

Experiment-driven����������� ������������������  decisions

Fast, Recoverable and Explicit

PERFECT EXPERIMENT

STARTUP SCORECARD: RECORD OF PROOFO

PERA

TIVE

CA

PAB

ILIT

Y

MARKET EVOLUTION

PROBLEM / SOLUTION

FIT

PRODUCT / MARKET FIT

SCALE

GROWTH via OPTIMIZEVALIDATED LEARNING

via PIVOTS

#1 Lean Canvas #2 Progressive Learning BoardProduct Hacker Extras: “Jobs to be done”

TOOLS

#1: LEAN CANVAS by ASH MAURYA“FROM BUSINESS PLAN TO BUSINESS MODEL”

#3: LEAN CANVASPROBLEMS:

CURRENT SOLUTIONS:

SOLUTION: UNIQUE VALUE PROPOSITION:UNIQUE VALUE PROPOSITION:

UNFAIR ADVANTAGE: CUSTOMER SEGMENTS:

EARLY ADOPTERS

PROBLEMS:

CURRENT SOLUTIONS:

METRICS:

UNIQUE VALUE PROPOSITION:UNIQUE VALUE PROPOSITION:

CHANNELS:

CUSTOMER SEGMENTS:

EARLY ADOPTERS

COSTS:COSTS:COSTS: REVENUE:REVENUE:REVENUE:

#3: LEAN CANVASPROBLEMS:

Top 3 Problems

CURRENT SOLUTIONS:

Competitive solutions for solving the problem

SOLUTION:

Top 3 Solutions

UNIQUE VALUE PROPOSITION:

Single, clear, compelling message that states way you are different and worth buying

UNIQUE VALUE PROPOSITION:

Single, clear, compelling message that states way you are different and worth buying

UNFAIR ADVANTAGE:

Can’t be easily bought or copied

CUSTOMER SEGMENTS:

Target customers

EARLY ADOPTERS:

Who’s the first to adapt to your solution?

PROBLEMS:

Top 3 Problems

CURRENT SOLUTIONS:

Competitive solutions for solving the problem METRICS:

Key activities you measure

UNIQUE VALUE PROPOSITION:

Single, clear, compelling message that states way you are different and worth buying

UNIQUE VALUE PROPOSITION:

Single, clear, compelling message that states way you are different and worth buying

CHANNELS:

Path to customers

CUSTOMER SEGMENTS:

Target customers

EARLY ADOPTERS:

Who’s the first to adapt to your solution?

COSTS:

Customer acquisition costsDistribution costsHostingPeople, etc.

COSTS:

Customer acquisition costsDistribution costsHostingPeople, etc.

COSTS:

Customer acquisition costsDistribution costsHostingPeople, etc.

REVENUE:

Revenue modelLife time valueRevenue Gross margin

REVENUE:

Revenue modelLife time valueRevenue Gross margin

REVENUE:

Revenue modelLife time valueRevenue Gross margin

#3: LEAN CANVAS (EXAMPLE: FACEBOOK)PROBLEMS:

Hard to reach specific people with specific demographics1. Hard to stay in touch with all friends at once2. How do I share my baby pictures?

CURRENT SOLUTIONS:Online ads e.g. GooglePostcards, Calls, ..

SOLUTION:

Targeted ads

Share, Like, Newsfeed, friends and profiles

UNIQUE VALUE PROPOSITION:

Targeted advertising

Connect to friends and family

UNIQUE VALUE PROPOSITION:

Targeted advertising

Connect to friends and family

UNFAIR ADVANTAGE:

1 Billion usersKnows everything

CUSTOMER SEGMENTS:

Marketers

Consumers at large

EARLY ADOPTERS

High schools

PROBLEMS:

Hard to reach specific people with specific demographics1. Hard to stay in touch with all friends at once2. How do I share my baby pictures?

CURRENT SOLUTIONS:Online ads e.g. GooglePostcards, Calls, ..

METRICS:

CPC/CPM avg. bid pricing# Served ads # of conversions

DAU

UNIQUE VALUE PROPOSITION:

Targeted advertising

Connect to friends and family

UNIQUE VALUE PROPOSITION:

Targeted advertising

Connect to friends and family

CHANNELS:

Media agencies Facebook merchant advertising program

Friend invitations (c2c, virality)Facebook like-partners

CUSTOMER SEGMENTS:

Marketers

Consumers at large

EARLY ADOPTERS

High schools

COSTS:

DevelopmentHostingLobbying

COSTS:

DevelopmentHostingLobbying

COSTS:

DevelopmentHostingLobbying

REVENUE:

Highly targeted - CPC/CPM advertising (“e.g. pay to display an ad to 25 yo old men, that like World of Warcraft in Oulu”)

Free for consumers

REVENUE:

Highly targeted - CPC/CPM advertising (“e.g. pay to display an ad to 25 yo old men, that like World of Warcraft in Oulu”)

Free for consumers

REVENUE:

Highly targeted - CPC/CPM advertising (“e.g. pay to display an ad to 25 yo old men, that like World of Warcraft in Oulu”)

Free for consumers

#3: LEAN CANVAS (FILL ORDER)PROBLEMS:

CURRENT SOLUTIONS:

SOLUTION: UNIQUE VALUE PROPOSITION:UNIQUE VALUE PROPOSITION:

UNFAIR ADVANTAGE: CUSTOMER SEGMENTS:

EARLY ADOPTERS:

PROBLEMS:

CURRENT SOLUTIONS:

METRICS:

UNIQUE VALUE PROPOSITION:UNIQUE VALUE PROPOSITION:

CHANNELS:

CUSTOMER SEGMENTS:

EARLY ADOPTERS:

COSTS:COSTS:COSTS: REVENUE:REVENUE:REVENUE:

12 34

5

67

8

9

#2: PROGRESSIVE LEARNING BOARD“DE-RISKING PRODUCT CREATION”

4 KINDS OF RISK IN MARKET EVOLUTION(NOT SOLVED LINEARLY, BUT KIND OF APPEAR CHRONOLOGICALLY)

PRODUCT RISK

GROWTH / SCALE RISK

MARKET RISK

COMPETITIVENESS AND PROFIT RISK

PRODUCT RISK

GROWTH / SCALE RISK

MARKET RISK

COMPETITIVENESS AND PROFIT RISK

Valu

atio

n

Time

(applied from Mark Suster)

PRODUCT RISK

How important is the problem for the customer?

Will your solution solve the problem? Can you build it?Does your solution deliver a unique value proposition?

MARKET RISK

How do they solve problems today?

Will they pay for the problem? If not, who will?

Who has the pain?

GROWTH AND SCALE RISK

How will you find customers?

How will customers find you (at scale)?

How will your growth engine operate (viral, paid, sticky, ..?)How will you scale to demand?

COMPETITIVENESS AND PROFIT RISK

Are you getting paid?

Do you have a viable business (LTV!)?

Do you have a way to build unfair advantage?

LEARNING/DE-RISKING ON LEAN CANVAS PROBLEMS:

CURRENT SOLUTIONS:

SOLUTION: UNIQUE VALUE PROPOSITION:UNIQUE VALUE PROPOSITION:

UNFAIR ADVANTAGE: CUSTOMER SEGMENTS:

EARLY ADOPTERS:

PROBLEMS:

CURRENT SOLUTIONS:

METRICS:

UNIQUE VALUE PROPOSITION:UNIQUE VALUE PROPOSITION:

CHANNELS:

CUSTOMER SEGMENTS:

EARLY ADOPTERS:

COSTS:COSTS:COSTS: REVENUE:REVENUE:REVENUE:

12 34

5

67

8

9PRODUCT

RISK:1

PRODUCT RISK:

2

PRODUCT RISK:

3 GROWTH RISK:

1

GROWTH RISK:

2MARKET RISK:

2

MARKET RISK: 3

COMPETITIVE &

PROFIT RISK: 1

MARKET RISK: 1

GROWTH RISK:

3

COMPETITIVE &

PROFIT RISK: 2

COMPETITIVE &

PROFIT RISK: 3

EXAMPLE: LEARNING IN LEAN IN PRACTICE

PROGRESSIVE LEARNING BOARD

Lean Canvas Module

Experiment 1: e.g. “Problem Interviews”

Experiment 2: e.g. Interviews

Experiment 3: e.g. Prototype Experiment 4: e.g. MVP

Experiment 5: e.g. v1.0

Problem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskThere is a customer segment with the problem CUSTOMERProblem is important to the customer segment

PROBLEMProduct delivers UVP (is unique and relevant to customer)

UVP

Product/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskThere is a way to build the product to solve the problem

SOLUTIONThere is a way to connect with early-adopters CUSTOMERCustomers are willing to pay for the solution to the problem

REVENUE

Growth / Scale RiskGrowth / Scale RiskGrowth / Scale RiskGrowth / Scale RiskGrowth / Scale RiskGrowth / Scale RiskGrowth / Scale Risk

We are able find customers CHANNEL

Customers are able to find us CHANNELEngine of growth is operative (viral, sticky or paid)

CHANNEL / REVENUE

We are able to scale on demand SOLUTION / COST / METRIC

Market / Monetization RiskMarket / Monetization RiskMarket / Monetization RiskMarket / Monetization RiskMarket / Monetization RiskMarket / Monetization RiskMarket / Monetization Risk

We are getting paid REVENUEWe are able to generate revenue from each customer

REVENUE / COST

We have an unfair advantage UNFAIR ADVANTAGE

Before each experiment: Define your hypothesis and ways you

validate learning

Choose the fastest way to test as an

experiment

PRODUCT HACKER EXTRAS: JOBS-TO-BE-DONEby CLAYTON CHRISTENSEN

STORY ABOUT A MILKSHAKE:WHAT JOB DO YOU HIRE A MILKSHAKE FOR?

JOBS TO BE DONEEXPERIENCES COMPLEMENTINGINTEGRATED SERVICES OFFERING

RECOMMENDATIONS:READ-WORTHY LITERATURE

3 WORKSHOP

#3: LEAN CANVAS (FILL ORDER)PROBLEMS:

CURRENT SOLUTIONS:

SOLUTION: UNIQUE VALUE PROPOSITION:UNIQUE VALUE PROPOSITION:

UNFAIR ADVANTAGE: CUSTOMER SEGMENTS:

EARLY ADOPTERS:

PROBLEMS:

CURRENT SOLUTIONS:

METRICS:

UNIQUE VALUE PROPOSITION:UNIQUE VALUE PROPOSITION:

CHANNELS:

CUSTOMER SEGMENTS:

EARLY ADOPTERS:

COSTS:COSTS:COSTS: REVENUE:REVENUE:REVENUE:

12 34

5

67

8

9

CURRENT HYPOTHESIS & PLAN TO EXPERIMENTBUSINESS MODEL AREA PRIORITY CURRENT HYPOTHESIS PLANNED EXPERIMENT

PROGRESSIVE LEARNING BOARD

Lean Canvas Module

Experiment 1: e.g. “Problem Interviews”

Experiment 2: e.g. Interviews

Experiment 3: e.g. Prototype Experiment 4: e.g. MVP

Experiment 5: e.g. v1.0

Problem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskProblem/Solution Fit - Product RiskThere is a customer segment with the problem CUSTOMERProblem is important to the customer segment

PROBLEMProduct delivers UVP (is unique and relevant to customer)

UVP

Product/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskProduct/Market Fit - Market RiskThere is a way to build the product to solve the problem

SOLUTIONThere is a way to connect with early-adopters CUSTOMERCustomers are willing to pay for the solution to the problem

REVENUE

Growth / Scale RiskGrowth / Scale RiskGrowth / Scale RiskGrowth / Scale RiskGrowth / Scale RiskGrowth / Scale RiskGrowth / Scale Risk

We are able find customers CHANNEL

Customers are able to find us CHANNELEngine of growth is operative (viral, sticky or paid)

CHANNEL / REVENUE

We are able to scale on demand SOLUTION / COST / METRIC

Market / Monetization RiskMarket / Monetization RiskMarket / Monetization RiskMarket / Monetization RiskMarket / Monetization RiskMarket / Monetization RiskMarket / Monetization Risk

We are getting paid REVENUEWe are able to generate revenue from each customer

REVENUE / COST

We have an unfair advantage UNFAIR ADVANTAGE

Before each experiment: Define your hypothesis and ways you

validate learning

Choose the fastest way to test as an

experiment

THANKS!kristian.luoma@gmail.com@kluoma

MISTAKES ARE PROOF THAT YOU’RE TRYING.