41631 lecture 3 pt2 lean startup

A method for entrepreneurship

Lean Startup - IntroductionJakob Bejbro Andersenjaban@mek.dtu.dk

Unless otherwise stated, this material is under a Creative Commons 3.0 Attribution–Share-Alike licence and can be freely modified, used and redistributed but only under the same licence and if including the following statement:

“Original material by Thomas J. Howard and Jakob Bejbro Andersen for course 41631 – Innovation and Product Development Department of Mechanical Engineering, The Technical University of Denmark”

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Background

• Author: Eric Ries (founder of three startups).

• Cases used: Several IT and Web startups.

• One of the first frameworks specifically

Minded on entrepreneurship (!).

• Many principles/ideas borrowed from Lean.

• Now a ”must read” book for entrepreneurs.

Eric Ries, 2011

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Current focus in teaching entrepreneurship• Presentation rather than substance.

– Elevator pitches.

• The special breed: the entrepreneurs.– Either you have it or you don’t.

• Putting people together results in Businesses.

– Startup weekend, incubators etc.

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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The novelty in Lean Startup• From:

Entrepreneurship and its succes depends on the opportunity and the entrepreneur’s ability to exploit it.

• To:The entrepreneur, the opportunity and the process are all part of the creation of successful ventures.

Meaning:

Entrepreneurship can be taught!Build -> Measure -> Learn! (loop)

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Relation to Development Log

Data

(none)

New gap/need identified Need or given higher

priority

Input(from mentor,

supervisor, market etc.)

Choice of approach

Execution of approach

Result(data, surveys, drawings,

excel sheets etc.)

(Updated!)

Measure/

Learn

Build

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Questions?

A method for entrepreneurship

Lean Startup – Central ConceptsJakob Bejbro Andersenjaban@mek.dtu.dk

Unless otherwise stated, this material is under a Creative Commons 3.0 Attribution–Share-Alike licence and can be freely modified, used and redistributed but only under the same licence and if including the following statement:

“Original material by Thomas J. Howard and Jakob Bejbro Andersen for course 41631 – Innovation and Product Development Department of Mechanical Engineering, The Technical University of Denmark”

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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A case for the following: EdgeFlow Aps

• Founded in 2009 with PLH Architects and SEED Capital

• I am currently the CEO.

• A tech startup.

• Each prototype iteration has cost EdgeFlow EUR 250.000.

– Two in all.

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Link to movie:

www.edgeflow.dk/EF_movie.avi

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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The central hypotheses

• The company’s value proposition is attractive.

– The customer is going to buy the product at the projected price.

• The company’s ”growth engine” can perform.– Will the company grow as quickly and effectively as intended?– Are the mechanisms in place for achieving this?

•Needs validation!

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Validated learning

• What (exactly) is creating the value / improvement?

• To be certain, tests/experiments should be set up.

• All dimensions of the business model should be validated

in this manner.

•  

• -       A DEVELOPMENT FRAMEWORK FOR STARTUPS: “LEAN STARTUP”  – 45 minutes (2nd module)• o    Background for the framework

– §  Ries background– §  Lean in established industry

• o    Principles of the framework– §  Validated learning

• ·         Planning for feedback• ·         Relate to conventional design work• ·         Cohort analysis (by group, not aggregated)• ·         Q: How would the different groups get systematic feedback?

– §  Minimal viable product• ·         Getting the product launched vs. getting it exactly right• ·         Types of MVPs (concierge etc.)• ·         Q: What would an MVP look like for the groups?

– §  Central hypotheses• ·         Value (-proposition)• ·         Growth (-engine)

– §  Time between “pivots” (tuning the engine)• ·         Pivot or persevere• ·         Fail fast (related to MVP)• ·         Catalog of pivot types• ·         Relevance of Development Log

• §  Aversion to analogs (similar products)• §  Discussion on pros and cons for Lean startup in a tech entrepreneurship context.

Lean startup def: p 20Engine analogy p 20

A B

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Validated learning II – EdgeFlow as case• Formulating value propositions.

– CSR dimensions were deamed unattractive to industry– Financials first!

• But…– Later, we realised that (some) customers were actually quite

interested in a value proposition that included CSR dimensions.

What should I have done?

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Minimal Viable Product

• Designing for value – not for perfection.

• Get to the market and learn.

– Fail fast!

• MVP has the functionality needed to go through one

build -> measure -> learn loop

• MVP types:

– Video

– Concierge

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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MVP – Another EdgeFlow learning

• Go full scale from day 1!– This will help us in completing the technical development faster.

• But…– What about the customers? Will they buy it? – A scaled model would be cheaper, easier to produce and safer to

install on a customer location.– No need for having a finished product if the customer is not interested

in buying it.

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Exercise:

•What could your minimal viable product be?

• Spend 3 minutes deciding on a customer.• Spend 12 minutes on conceptualising MVPs for testing your assumptions (sketch!)

– What will you be testing and how do you measure?

• After 15 minutes (in total), we discuss your ideas.

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Innovation accounting• Results from need to be gathered continuously and

compared.• Growth figures can hide underlying problems.

– Use ”cohort” analysis (analysis by group)

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Pivot or Persevere?

• Is the business performing? (based on innov. accounting)

• If not, you can either:– Persevere (incrimental improvements)– Pivot (Rethink the whole parts of the business)

• Types of pivots (help me guess):– Zoom in/out– Customer segment– Customer need pivot– Engine of growth– Platform

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Pivots in EdgeFlow

• Same story, different light: The switch to CSR– A ”customer need pivot”.

• But…– What about the customers? Will they buy it? – A scaled model would be cheaper, easier to produce and safer to

install on a customer location.– No need for having a finished product if the customer is not interested

in buying it.

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Lean Startup - shortcomings

• ”If you can think it – you can build it”– Cost of technology – adding a new feature costs $ and time– Technological uncertainty– Technology ”lock in”– Technology can resist change.

• Focus on measurements– No descriptions of the development processes required.

• The ”build” step is simplified / neglected.

• Assumes free access to customer (B2C) and A LOT of data.

2013Original material by Thomas J. Howard & Jakob Bejbro for 41631: Innovation in Product Development Department of Mechanical Engineering, Technical University of Denmark

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Questions?