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Customer Development/Lean Startup 011910 Class 1
This document provides an introduction to an advanced entrepreneurship course on customer development and the lean startup methodology. It outlines the course objectives, prerequisites, structure, and key concepts that will be covered, including reducing product/market risk, customer development process of discovery, validation, and creation, and building companies with low costs by designing for learning rather than traditional product development processes. The instructors are introduced as Steve Blank and Eric Ries, pioneers of the lean startup approach.
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Customer Development/Lean Startup 011910 Class 1
- 1. Advanced Entrepreneurship: Customer Developmentand the Lean Startup Introduction to the Course Steve Blank & Eric Ries sblank@kandsranch.com eric@theleanstartup.com www.steveblank.com www.startuplessonslearned.com/
- 2. You Are Here Plan Liquidity Company Timeline Idea 1st Round
- 3. You Are Here Plan Liquidity Company Timeline Idea 1st Round
- 4. How do YouGet Here Plan Liquidity Company Timeline Idea 1st Round
- 5. Entrepreneurship Logical Process
- 6. Entrepreneurship Logical Process Intuitive Passion
- 7. Today Part 1: Introductionto the Course Part 2: Key Concepts
- 8. Course Introduction Course Objectives Intro and Backgrounds How the Class Works Customer Development
- 9. Course Objectives Learn how to: Reduce product/market risk Organize sales, marketing and business development when bringing a product to market Understand its relationship with engineering Have Fun Learn from Each Other
- 10. Course Prerequisites Officially – none Realistically: Experience in bringing a new product to market Entrepreneurship 295 or equivalent Have written a business plan
- 11. Introduction and Backgrounds Steve Blank Eric Ries Guest Speakers Class
- 12. Introduction: Steve Blank 8 startups in 20 years 2 strikeouts Rocket Science, Ardent 2 walks ESL, Zilog 2 singles Convergent, MIPS 1 double SuperMac 1 home run E.piphany Non profits: Audubon, POST, Coastal Commission, CLCV, Trustee UCSC Blog: www.steveblank.com Twitter: sgblank
- 13. Introduction: Eric Ries Author: Lean Startup, co/author Black Art of Java Game Programming Company: Co-founder/CTO IMVU There.com Co-founder Catalyst Recruiting Blog: www.startuplessonslearned.com Twitter: ericries
- 14. Introduction: Class Why areyou taking the class? How many of you have: Been in start-ups? Been in a startup that failed? Raised or tried to raise money? How many are: Sales, marketing or business development? Engineers?
- 15. How the ClassWorks Syllabus 3 Application Exercises Research Project Grading Research Project (50%) Application Exercises (25%) Class Participation (25%)
- 16. Class Issues Tech-heavy Enterprise-heavy For-profit versus non-profit Startups versus existing companies Methodology focused on product/customer risk reduction Doesn’t work for technology risks (i.e Biotech) Doesn’t match your experience or opinion
- 17. Logistics Steve Blank and Eric Ries sblank@kandsranch.com eric@theleanstartup.com
- 18. How the ClassWorks Part 1 Class Case Application Research Exercise Project Class 2/Jan 26th Three Types of In & Out Startups Burger Class 3/Feb 2nd Customer E-Ink Market Type Think! Development Class 4/Feb 9h Discovery - Part 1 Webvan/ Team Selection Amazon Class 5/Feb 16th Discovery – Part 2 IMVU/ Draft Concept Linden Labs Class 6/Feb 23rd Discovery – Part 3 Motive Approved Concept Class 7/Mar 2nd Validation Part 1 Wildfire Discovery Class 8/Mar 9th Validation Part 2 HPKittyhawk
- 19. How the ClassWorks Part 2 Class Case Application Research Exercise Project Class 9/Mar 16th Creation - Part 1 Ecton March 23rd No Class Class 10/Mar 30th Creation – Part 2 Erox Class 11/Apr 6th Creation Cases Tivo Interviews Done Class 12/Apr 13th Building - Part 1 Documentum Customer Creation Class 13/Apr 20th Building - Part 2 Class 14/Apr 27th Wrapup Final Paper Due 5/4/09
- 20. Study.Net All materials are on Study.Net Syllabus Reading Assignments Presentations (after each class)
- 21. Reading Class Text: Four Steps to the Epiphany Assigned Reading: In Reader Blogs: www.steveblank.com http://startuplessonslearned.com/ Presentations: www.slideshare.net/ Google Group: http://groups.google.com/group/lean-startup-circle Twitter: sgblank ericries watch http://www.youtube.com/watch?v=R2lE3fgj7QA for what you could be in store for
- 22. The Course Steve Blank and Eric Ries sblank@kandsranch.com eric@theleanstartup.com
- 23. Customer Development Business Plans The Value of “Models” for an Entrepreneur Key Concepts Market versus Technology Risks Vertical Markets Three Types of Startups
- 24. The Top Liesof Venture Capitalists 1. “I liked your company, but my partners didn't.” 2. “If you get a lead, we will follow.” 3. “Show us some traction, and we'll invest.” 4. “We love to co-invest with other venture capitalists.” 5. “We're investing in your team.” 6. “I have lots of bandwidth to dedicate to your company.” 7. “This is a vanilla term sheet.” 8. “We can open up doors for you at our client companies.” 9. “We like early-stage investing.” Source: Guy Kawasaki
- 25. The Top Liesof Entrepreneurs 1. “Our projections are conservative.” 2. “(Big name research firm) says our market will be $50 billion in 2010.” 3. “(Big name company) is going to sign our purchase order next week.” 4. “Key employees are set to join us as soon as we get funded.” 5. “No one is doing what we're doing.”. 6. “No one can do what we're doing.” 7. “Hurry because several other venture capital firms are interested.” 8. “Oracle is too big/dumb/slow to be a threat.” 9. “We have a proven management team.” 10. “Patents make our product defensible.” 11. “All we have to do is get 1% of the market.” Source: Guy Kawasaki
- 26. One Way toPlan a Startup
- 27. Business Plans –Why? Why write a plan? VC’s require it Planning (Strategic/Financial/Ops) Articulate Bus Model/Assumptions What’s wrong with a plan? Static Execution Oriented
- 28. The Value of“Models” Model = shorthand for complicated idea This class teaches a “model” for product introduction How to reduce risk for customer/market fit Side effect is rethinking timing in Sales, Marketing & Business Development
- 29. Timmons Model ofEntrepreneurship (The Business Plan) Communication Resources Opportunity Business Plan Creativity Leadership Team
- 30. Moore Model ofEntrepreneurship (Chasm + Life Cycle)
- 31. New Product Introductions What’s the Model? New Product introduction models Checklist of what to and when to do it Market size and business case Models try to ensure that product matches market Technology and development “gates”
- 32. StageGate™ Model (New ProductIntroduction)
- 34. Steve Blank Modelof Entrepreneurship)
- 35. Venture Capital Modelof a Startup (Execution) Concept/ Product Alpha Test/ Launch/ Bus. Plan Development Beta Test 1st Ship
- 36. New Product Introduction It Doesn’t Always Work New Product Development Process Works great for some new products, fails miserably for others Products usually are late, over cost Typically fails to understand and satisfy customer needs Why?
- 37. Issues in NewProduct Intros Current models: Confuse product development process with customer needs Treat all startups as the same We need a New Product Intro Process Reduces Market RiskSimple, understood by all Founders commitment Cross function organization Solid homework
- 38. What is astartup? A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. Nothing to do with size of company, sector of the economy, or industry
- 39. Entrepreneurship is management Our goal is to create an institution, not just a product Traditional management practices fail “general management” as taught to MBAs Need practices and principles geared to the startup context of extreme uncertainty
- 40. Value vs. Waste In a lean transformation, question #1 is – which activities are value-creating and which are waste? In traditional business, value is created by delivering products or services to customers In a startup, the product and customer are unknowns We need a new definition of value for startups
- 41. Traditional Product Development Unit of Progress: Advance to Next Stage Waterfall Requirements Specification Design Problem: known Solution: known Implementation Verification Maintenance
- 42. Agile Product Development Unit of Progress: A line of Working Code “Product Owner” or in-house customer Problem: known Solution: unknown
- 43. Product Development atLean Startup Unit of Progress: Validated Learning About Customers ($$$) Customer Development Hypotheses, Problem: unknown Experiments, Insights Data, Solution: unknown Feedback, Insights
- 44. Two Kinds ofWaste Type 1 waste – “activities which generate no value but are currently necessary to create value” Requires a change in structure How do we prioritize? Type 2 waste – “activities which create no value and could be eliminated immediately” Requires only a change in behavior Usually caused by “best practices”
- 45. Speed Wins IDEAS LEARN BUILD DATA CODE MEASURE
- 46. Customer Development Turns Market Risk/Product Fit Hypothesis into Facts Customer Customer Customer Company Discovery Validation Creation Building Discovery: Test hypotheses i.e. problem and product Validation: Build a repeatable and scalable sales process Creation: Create end-user demand and fill the sales pipeline Building: Scale via relentless execution
- 47. Lean Startup Advantages Customer Development Builds low-burn companies by design " Low cost market risk testing" Agile Product Organized around learning and Development discovery" Right model for current conditions" The next wave of capital efficient startups!
- 48. This is OurClass Hypotheses, Problem: unknown Experiments, Insights Data, Solution: unknown Feedback, Insights