2009 08 19 the lean startup techstars edition
TRANSCRIPT
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Eric Ries (@ericries)http://StartupLessonsLearned.blogspot.com
The Lean Startup#leanstartup
TechStars Edition
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Most Startups Fail
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Most Startups Fail
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Most Startups Fail
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Most Startups Fail
• But it doesn’t have to be that way. • We can do better. • This talk is about how.
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What is a startup?
• 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
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Product / Market Fit
“Do whatever is required to get to product/market fit. Including:
changing out people, rewriting your product,
moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to,
raising that fourth round of highly dilutive venture capital
—whatever is required.”
— Marc Andreessenhttp://blog.pmarca.com/2007/06/the-pmarca-gu-2.html
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The Pivot
• What do successful startups have in common?– They started out as digital cash for PDAs, but
evolved into online payments for eBay. – They started building BASIC interpreters, but
evolved into the world's largest operating systems monopoly.
– They were shocked to discover their online games company was actually a photo-sharing site.
• Pivot: change directions but stay grounded in what we’ve learned.
http://startuplessonslearned.blogspot.com/2009/06/pivot-dont-jump-to-new-vision.html
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Speed Wins
if we can reduce the time between major iterations
we can increase our odds of success
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A Tale of Two Startups
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Startup #1
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Stealth Startup Circa 2001
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All about the team
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A good plan?
• Start a company with a compelling long-term vision.
• Raise plenty of capital.• Hire the absolute best and the brightest.• Hire an experienced management team with tons
of startup experience.• Focus on quality. • Build a world-class technology platform.• Build buzz in the press and blogosphere.
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Achieving Failure
• Company failed utterly, $40MM and five years of pain.
• Crippled by “shadow beliefs” that destroyed the effort of all those smart people.
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Shadow Belief #1
• We know what customers want.
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Shadow Belief #2
• We can accurately predict the future.
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Shadow Belief #3
• Advancing the plan is progress.
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A good plan?
• Start a company with a compelling long-term vision.
• Raise plenty of capital.• Hire the absolute best and the brightest.• Hire an experienced management team with tons
of startup experience.• Focus on quality. • Build a world-class technology platform.• Build buzz in the press and blogosphere.
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Startup #2
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IMVU
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IMVU
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New plan
• Shipped in six months – a horribly buggy beta product
• Charged from day one• Shipped multiple times a day (by 2008, on
average 50 times a day)• No PR, no launch• Results: 2007 revenues of $10MM
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Lean Startups Go Faster
• Commodity technology stack, highly leveraged (free/open source, user-generated content, SEM).
• Customer development – find out what customers want before you build it.
• Agile (lean) product development – but tuned to the startup condition.
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Commodity technology stack
• Leverage = for each ounce of effort you invest in your product, you take advantage of the efforts of thousands or millions of others.
• It’s easy to see how high-leverage technology is driving costs down.
• More important is its impact on speed.• Time to bring a new product to market is
falling rapidly.
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Customer Development Continuous cycle of customer
interaction Rapid hypothesis
testing about market, pricing, customers, …
Extreme low cost, low burn, tight focus
Measurable gates for investors
http://bit.ly/FourSteps
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Agile Product Development(A tale of two startups, revisited)
• Principles drawn from Lean Manufacturing and Toyota Production System
• These examples are drawn from software startups, but increasingly:– All products require software – All companies are operating in a startup-like
environment of extreme uncertainty
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Traditional Product DevelopmentUnit of Progress: Advance to Next Stage
Waterfall
Requirements
Specification
Design
Implementation
Verification
Maintenance
Problem: known
Solution: known
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Agile Product DevelopmentUnit of Progress: A line of Working Code
Problem: known
Solution: unknown
“Product Owner” or in-house customer
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Product Development at Lean StartupUnit of Progress: Validated Learning About Customers ($$$)
Problem: unknown
Solution: unknown
Customer Development
Hypotheses,Experiments,Insights
Data,Feedback,
Insights
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Minimize TOTAL time through the loop
LEARN BUILD
MEASURE
IDEAS
CODEDATA
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How to build a Lean Startup
• Let’s talk about some specifics.
• Small Batches• Continuous deployment• Split-test (A/B) experimentation• Minimum Viable Product• Five why’s
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Build Faster
Continuous Deployment
Small Batches
Continuous Integration
Refactoring
Small Batches
LEARN BUILD
MEASURE
IDEAS
CODEDATA
Learn Faster
Customer Development
Five Whys
Measure Faster
Split Testing
Actionable Metrics
Net Promoter Score
SEM
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Benefits of Small Batches
• Faster feedback• Problems are instantly localized• Reduce risk• Reduce overhead
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Build Faster
Continuous Deployment
Small Batches
Continuous Integration
Refactoring
Continuous Deployment
LEARN BUILD
MEASURE
IDEAS
CODEDATA
Learn Faster
Customer Development
Five Whys
Measure Faster
Split Testing
Actionable Metrics
Net Promoter Score
SEM
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Continuous Deployment• Deploy new software quickly
• At IMVU time from check-in to production = 20 minutes
• Tell a good change from a bad change (quickly)
• Revert a bad change quickly• And “shut down the line”
• Work in small batches• At IMVU, a large batch = 3 days worth of work
• Break large projects down into small batches
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Cluster Immune SystemWhat it looks like to ship one piece of code to production:
• Run tests locally (SimpleTest, Selenium)o Everyone has a complete sandbox
• Continuous Integration Server (BuildBot)o All tests must pass or “shut down the line”o Automatic feedback if the team is going too fast
• Incremental deployo Monitor cluster and business metrics in real-timeo Reject changes that move metrics out-of-bounds
• Alerting & Predictive monitoring (Nagios)o Monitor all metrics that stakeholders care abouto If any metric goes out-of-bounds, wake somebody upo Use historical trends to predict acceptable bounds
When customers see a failure:o Fix the problem for customerso Improve your defenses at each level
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Rapid Split Tests
IDEAS
CODEDATA
BUILDLEARN
MEASURE
Code FasterContinuous
Deployment
Measure FasterRapid Split Tests
Learn FasterFive Whys RootCause Analysis
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Split-testing all the time
• A/B testing is key to validating your hypotheses
• Has to be simple enough for everyone to use and understand it
• Make creating a split-test no more than one line of code:
if( setup_experiment(...) == "control" ) { // do it the old way} else { // do it the new way}
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The AAA’s of Metrics
• Actionable• Accessible• Auditable
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Measure the Macro
• Always look at cohort-based metrics over time• Split-test the small, measure the large
Control Group (A) Experiment (B)
# Registered 1025 1099
Downloads 755 (73%) 733 (67%)
Active days 0-1 600 (58%) 650 (59%)
Active days 1-3 500 (48%) 545 (49%)
Active days 3-10 300 (29%) 330 (30%)
Active days 10-30 250 (24%) 290 (26%)
Total Revenue $3210.50 $3450.10
RPU $3.13 $3.14
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Minimum Viable Product
IDEAS
CODEDATA
BUILDLEARN
MEASURE
Code FasterContinuous
Deployment
Measure FasterRapid Split Tests
Learn FasterMinimum Viable Product
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Why do we build products?
• Delight customers• Attract lots of them• Make a lot of money• Big vision: change the world
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Possible Approaches
• “Maximize chances of success”– Build a great product with many features that
increase the odds that customers will want it– Problem: no feedback until the end, might be too
late to adjust• “Release early, release often”
– Get as much feedback as possible, as soon as possible
– Problem: run around in circles, chasing what customers think they want
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Minimum Viable Product
• The minimum set of features needed to learn from earlyvangelists – visionary early adopters– Avoid building products that nobody wants– Maximize the learning per dollar spent– Get the facts before it’s too late
• Probably much more minimum than you think!
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Minimum Viable Product
• Visionary customers can “fill in the gaps” on missing features, if the product solves a real problem
• Allows us to achieve a big vision in small increments without going in circles
• Requires a commitment to iteration
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Examples
• Building IMVU in six months• 2004 “Kerry vs. Bush avatar debate”
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Techniques
• Smoke testing with landing pages, AdWords• SEM on five dollars a day• In-product split testing• Paper prototypes• Customer discovery/validation• Removing features (“cut and paste”)
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Fears
• False negative: “customers would have liked the full product, but the MVP sucks, so we abandoned the vision”
• Visionary complex: “but customers don’t know what they want!”
• Too busy to learn: “it would be faster to just build it right, all this measuring distracts from delighting customers”
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Five Whys
IDEAS
CODEDATA
BUILDLEARN
MEASURE
Code FasterContinuous
Deployment
Measure FasterRapid Split Tests
Learn FasterFive Whys RootCause Analysis
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Five Whys Root Cause Analysis
• A technique for continuous improvement of company process.
• Ask “why” five times when something unexpected happens.
• Make proportional investments in prevention at all five levels of the hierarchy.
• Behind every supposed technical problem is usually a human problem. Fix the cause, not just the symptom.
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There’s much more…
IDEAS
CODEDATA
BUILDLEARN
MEASURE
Code FasterUnit Tests
Usability TestsContinuous Integration
Incremental DeploymentFree & Open-Source Components
Cloud ComputingCluster Immune System
Just-in-time ScalabilityRefactoring
Developer SandboxMinimum Viable Product
Measure FasterSplit TestsClear Product OwnerContinuous DeploymentUsability TestsReal-time MonitoringCustomer Liaison
Learn FasterSplit TestsCustomer InterviewsCustomer DevelopmentFive Whys Root Cause AnalysisCustomer Advisory BoardFalsifiable HypothesesProduct Owner AccountabilityCustomer ArchetypesCross-functional TeamsSemi-autonomous TeamsSmoke Tests
Funnel AnalysisCohort Analysis
Net Promoter ScoreSearch Engine Marketing
Real-Time AlertingPredictive Monitoring
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Get Started Today
• You are ready to do this, no matter – who you are– what job you have– what stage of company you’re in
• Get started now, today.
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Thanks!
• Startup Lessons Learned Blog– http://StartupLessonsLearned.blogspot.com/
• Getting in touch (#leanstartup)– http://twitter.com/ericries– [email protected]
• Workshop Tomorrow, Aug 20– http://bit.ly/boulder-workshop– 9am-1pm at TechStars