When to use Problem known / solution known Waterfall Problem known / solution unknown Agile Problem unknown / solution unknown Lean
Pillars of the lean startup 1. Entrepreneurs are everywhere 2. Entrepreneurship is management 3. Validated learning 4. Build-measure-learn loop 5. Innovation accounting
Part 1: Vision
Define A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth. Paul Graham
Define A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty. Entrepreneurship is management.
Learn If the fundamental goal of entrepreneurship is to engage in organization building under conditions of extreme uncertainty, its most vital function is learning. Unfortunately, learning is the oldest excuse in the book for a failure of execution.
Learn Adopt the view that your job is to find a synthesis between your vision and what customers would accept; it isnt to capitulate to what customers think they want or to tell customers what they ought to want.
Learn The point is not to find the average customer but to find early adopters: the customers who feel the need for the product most acutely.
Learn It is often easier to raise money or acquire other resources when you have zero revenue, zero customers, and zero traction than when you have a small amount. This phenomenon creates a brutal incentive: postpone getting any data until you are certain of success.
Learn Can we build a sustainable business around this set of products and services?
Experiment Think big, start small. Build a minimum viable product to test your hypothesis relying on the scientific method.
Experiment Break down the grand vision into its component parts. The two most important assumptions entrepreneurs make are the value hypothesis and the growth hypothesis.
Experiment Planning is a tool that only works in the presence of a long and stable operating history.
Part 2: Steer
Leap Your goal is to validate your value and growth hypothesis.
Leap Genchi Gembutsu: "go and see for yourself" You cannot be sure you really understand any part of any business problem unless you go and see for yourself firsthand. "If you don't go, you don't know"
Leap Lean UX recognizes that the customer archetype is a hypothesis, not a fact. The customer profile should be considered provisional until the strategy has shown via validated learning that we can serve this type of customer in a sustainable way.
Leap Avoid the dangers of the two extremes: just do it vs analysis paralysis.
Test The fastest way to get through the Build- Measure-Learn feedback loop with the minimum amount of effort is via a MVP. The goal of the MVP is to begin the process of learning, not end it.
Test Before new products can be sold successfully to the mass market, they have to be sold to early adopters. These people are a special breed of customer. They acceptin fact preferan 80 percent solution; you dont need a perfect solution to capture their interest.
Test The lesson of the MVP is that any additional work beyond what was required to start learning is waste, no matter how important it might have seemed at the time.
Test Examples of MVPs Video Landing page Concierge Wizard of Oz.
Test If we do not know who the customer is, we do not know what quality is.
Measure Innovation accounting enables startups to prove objectively that they are learning how to grow a sustainable business.
Measure: Innovation accounting 1. Establish the baseline a. Build an MVP b. Measure how customers behave right now 2. Tune the engine a. Experiment to see if we can improve metrics from the baseline towards the ideal 3. Pivot or persevere a. When experiments reach diminishing returns, it is time to pivot
Measure Metrics must be: Actionable Accessible Auditable
Measure This is the pattern: poor quantitative results force us to declare failure and create the motivation, context, and space for more qualitative research.
Measure: Using kanban Stories could be cataloged as being in one of four states of development: in the product backlog, actively being built, done (feature complete from a technical point of view), or in the process of being validated. Validated was defined as knowing whether the story was a good idea to have been done in the first place.
Pivot Pivot is to change direction while keeping a foot on sure ground. A pivot is better understood as a new strategic hypothesis that will require a new MVP to test. A startup's runway is the number of pivots it can still make.
Pivot The more money, time, and creative energy that has been sunk into an idea, the harder it is to pivot. Remember, if we're building something that nobody wants, it doesn't much matter if we're doing it on time and on budget.
Pivot: Kinds Zoom in Zoom out Customer segment Customer need Bussiness architecture Value capture Engine of growth Channel Technology
Part 3: Accelerate
Batch Working in small batches ensures that a startup can minimize the expenditure of time, money, and effort that ultimately turns out to have been wasted.
Batch By reducing batch size, we can get through the Build-Measure-Learn feedback loop more quickly than our competitors can. The ability to learn faster from customers is the essential competitive advantage that startups must possess.
Large-batch death spiral: the larger the batch, the higher the pressure to deliver a high-quality version of the product. In light of how long the product has been in development, why not fix one more bug or add one more feature? Who really wants to be the manager who risked the success of this huge release by failing to address a potentially critical flaw? Batch
Batch Pull, don't push: avoid stockpiled Work In Progress. Experiments should pull the development. Build-Measure-Learn => Learn-Measure-Build
Grow Sustainable growth: New customers come from the actions of past customers. Word of mouth Side effect of product usage Funded advertising Repeat purchase or use
Grow: Engines of growth Sticky Relies on high customer retention rate. Key is for new customer acquisition exceed churn rate.
Viral Many viral product do not charge customers directly but rely on indirect sources of revenue such as advertising. Customers are not intentionally acting as evangelists, growth happens automatically as a side effect of customers using the product. Grow: Engines of growth
Grow: Engines of growth Paid Marginal profit, the margin between LTV (customer lifetime value) and CPA (cost per acquisition) Relies on paid advertising
Adapt Build a company that can adapt and change as fast as possible.