Launching a Startup:

A Scientific Exploration

The Scientific ExplorationAsk a

Question or Address a Problem

Research

Experiment

Hypothesis

AnalysisConclusion

The Lean Startup Approach Provides a scientific approach to creating and managing

startups and get a desired product to customers' hands faster

A principled approach to new product development

Too many startups begin with an idea for a product that they think people want

They then spend months, sometimes years, perfecting that product without ever showing the product, even in a very rudimentary form, to the prospective customer

When they fail to reach broad uptake from customers, it is often because they never spoke to prospective customers and determined whether or not the product was interesting

When customers ultimately communicate, through their indifference, that they don't care about the idea, the startup fails

Work Smarter Not Harder The Lean Startup methodology has as a premise that every startup is a

grand experiment that attempts to answer a question.

The question is not "Can this product be built?"

Instead, the questions are:

"Should this product be built?" and

"Can we build a sustainable business around this set of products and services?"

This experiment is more than just theoretical inquiry; it is a first product.

If it is successful, it allows the founder to get started with his or her campaign: enlisting early adopters, adding employees to each further experiment or iteration, and eventually starting to build a product.

By the time that product is ready to be distributed widely, it will already have established customers.

It will have solved real problems and offer detailed specifications for what needs to be built.

A start-up is a human institution designed to create a new product or service under conditions of extreme uncertainty

Lean isn't simply about spending less money.

Lean isn't just about failing fast, failing cheap.

It is about putting a process, a methodology around the development of a product.

Must be done most

economically

Get Stakeholders

on Board

Launch Commercial Operations

Validated Learning Progress in manufacturing is measured by the production

of high quality goods.

The unit of progress for Lean Startups is validated learning-a rigorous method for demonstrating progress when one is embedded in the soil of extreme uncertainty.

Once entrepreneurs embrace validated learning, the development process can shrink substantially.

When you focus on figuring the right thing to build-the thing customers want and will pay for-you need not spend months waiting for a product beta launch to change the company's direction.

Instead, entrepreneurs can adapt their plans incrementally, inch by inch, minute by minute.

Business Model Canvas

Who will help you?

How do you do it?

What do you need?

What do you do?

How do you interact?

How do you reach them?

Who do you help?

What will it cost? How much will you make?

Key partnersWho are your key partners/suppliers?What are the motivations for the partnerships?

Key activitiesWhat key activities does your value proposition require?What activities are important the most in distribution channels, customer relationships, revenue stream…?

Value PropositionWhat core value do you deliver to the customer?Which customer needs are you satisfying?

Customer RelationshipWhat relationship that the target customer expects you to establish?How can you integrate that into your business in terms of cost and format?

Customer SegmentWhich classes are you creating values for?Who is your most important customer?

Business Model Canvas

Key ResourceWhat key resources does your value proposition require?What resources are most important in the distribution channels, customer relationships, revenue stream…?

Distribution ChannelThrough which channels that your customers want to be reached?Which channels work best? How much do they cost? How can they be integrated into your and your customers’ routines?

Cost StructureWhat are the most important cost factors in your business?Which key resources/ activities are most expensive?

Revenue StreamFor what value are your customers willing to pay?What and how do they recently pay? How would they prefer to pay?How much does every revenue stream contribute to the overall revenues?

Business Model Canvas

SO… WHAT IS A VALUE PROPOSITION?

Part of a firm’s business model

An element of strategy

A reflection of the value a firm offers its customers

And finally… A carefully crafted marketing message

Communicates a clear point of differentiation

Is highly persuasive

Supports lead generation and sales

A Value Proposition Is…

In its simplest terms, a value proposition is a positioning statementthat explains what benefit you provide for who and how you do ituniquely well. It describes your target buyer, the problem you solve,and why you’re distinctly better than the alternatives

Key Characteristics Your Value Proposition is: a statement that includes your important

customer and market

Need along with your new, compelling, and defensible

Approach to address that need with superior

Benefits per costs when compared to the

Competition and/or other alternatives

Successful Value Propositions are quantitative and easy to

understand and remember

The four parts of your value proposition are the fundamentals: they

must always be answered

Key Characteristics Your Value Proposition is: a statement that includes your important

customer and market

Need along with your new, compelling, and defensible

Approach to address that need with superior

Benefits per costs when compared to the

Competition and/or other alternatives

Successful Value Propositions are quantitative and easy to

understand and remember

The four parts of your value proposition are the fundamentals: they

must always be answered

"Why should I buy this specific product or idea?" asks your customer: And your value proposition must answer this, in a compelling way. In creating a good value proposition, the trick is to know your product or idea well, know how it compares with those of your competitors and, very importantly, put yourself in your customer's shoes to find the answers.Your value proposition can be created step-by-step, by answering a series of questions. Once you answer these, you have the ingredients to create a value proposition that answers your customer's question: "Why should I buy this product or idea?"

Need

• Not: The market is growing fast

• Rather: Our market segment is $2B/yr and growing at 20%/yr

Approach

• Not: We have a clever design

• Rather: We have created a patent-protected, one-step process that replaces the current two-step process with the same quality

Benefits

• Not: The ROI is excellent

• Rather: Our one-step process reduces costs by 50% and results in an expected ROI of 50% per year with a profit of $30M in year 3

Competition

• Not: We are better than our competitors

• Rather: Our competitors are Evergreen Corporation and Bigway, which use the current two-step process

Benefits

Fears

Needs

Experience

Wants

Features

Substitutes

Benefits

Fears

Needs

Experience

Wants

Features

Substitutes

For: Small scale rural farmers using surface irrigation

Who: Lose over 50% of usable water to surface runoff annually

The: SoilSense

That: Inexpensively and completely eliminates water loss from surface irrigation

Unlike:Currently used, expensive and

Large-scale drip systems

Our: Product is a customized, modular and scalable system that consistently reduces water loss and increases farmers’ yields

For: List target customers or beneficiaries.

Who: Define the need or opportunity, i.e. what critical issue for customer or beneficiary?

The: Name the product or service or concept and place the product, service, or concept into a generally understood category.

That: Quantify the benefits of the product, service, or concept. Identify the single most compelling benefit

Unlike: List the competitors and competitive alternatives

Our: The primary differentiation of the product, service, or concept.

Customer Defines the Value A value proposition is a clear statement about the

outcomes that an individual or an organization can realize from using your product, service or solution.

The key word is OUTCOMES!

Have you talked to your clients about the results they get when using your offering?

You need to! What you learn will help you sell.

A value proposition describes why a customer should buy a product or service

It targets a well defined customer segment

It convinces prospective customers that a particular product or service will add more value or better solve a problem than competitive products or services

Creating Value for Customers Accessibility

Make products and services available to people who have no prior access to them

Can be through innovations in business models or technology

Examples

ZipCar – Car sharing service (wheels when you want them)

Progressive Insurance – Car insurance for high risk drivers

Creating Value for Customers

Performance

Improving the performance of products or services

Examples

PCs: Increased disk storage and speed

Digital cameras: increased pixels and resolution, more powerful zoom

Apple’s iPod Hypothesis

Apple’s iPod Hypothesis

People will pay to download music to listen to in public = Profit

Assumption A: Risky Assumption

People will pay to download music to listen to in public = Profit

Assumption B: Validated by Napster

Assumption C: Validated by Walkman

Assumption A needs testing

SEGWAY: What Happened? Cover more ground. Be more productive. Move more intelligently.

Revolutionary/disruptive transportation device with serious “cool factor” never reaches its expected potential

It’s value proposition didn’t resonate:

Failure to properly segment the market: they targeted basically everyone

The problem they were solving was vague: “need” was missing

The product couldn’t change behavior: People are hooked on cars

At $5,000 priced too high for most

Which Customers?B2B markets by:

Type of business (manufacturer, retailer, wholesaler, service provider)

Size of Business

Financial Strength

Number of Employees

Location

Structure

Sales Level

Consumer markets can be segmented by:

Demographics

Geography

Psychographics

Behavioral

Sociocultural

Hybrids of the above

CCom

Scale Organization

Proposed Funnel(s)

Sales Execution

Scale Operations

Proposed MVP

Problem-Solution Fit

Business Model

Product Market Fit

Sales & Marketing Roadmap

Company Creation

Company Building

Pivot

The Lean Start-Up Approach

Customer Discovery

Customer Validation

Step 1: Know your customer

Tip: If you don't know, askStep 2: Know your

product, service or ideaTip: Include numbers and

percentagesStep 3: Know your

competitorsTip: This can be quite

difficult. Step 4: Distill the

customer-oriented proposition

Step 5: Pull it all together

Develop An MVP A core component of Lean Startup methodology is the build-measure-

learn feedback loop.

The first step is figuring out the problem that needs to be solved and then developing a Minimum Viable Product (MVP) to begin the process of learning as quickly as possible.

Once the MVP is established, a startup can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect question.

The startup will also utilize an investigative development method called the "Five Whys"-asking simple questions to study and solve problems along the way.

When this process of measuring and learning is done correctly, it will be clear that a company is either moving the drivers of the business model or not.

If not, it is a sign that it is time to pivot or make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth.

Hypothesis Template

We believe that people like

_(customer type)_ have a need for

doing _(need/action/behaviour)_.

We will have succeeded when

_(measurable outcome)_ , or _(observable outcome)_

Which will contribute to

_(KPI)_has been achieved.

Components for a Powerful VP Business Driver

Related to an important objective that your prospect is measured on:

Profitability, quality, turn around time, returns, cost of goods sold

Movement

People only change if a new option is better

Eliminate, speed up, raise, minimize

Metrics

Value, timeframe, percentages

Drew Houston

The Mantra

Over 200,000 business teams pay for Dropbox productsHas 500 million registered users

Valuation of $ 10 Billion