promoting lean startup at zhihu in 2012

lean Startup

A startup is a human institution designed to

create a new product or service under conditions of

extreme uncertainty.

Product/Market FitIf you are asking ...

What's our biggest RISK?

Leap-of-faith assumptions

Entrepreneurship is a kind of management.

Could the success rate of innovative products be improved?

The lean startup methods

Validated learning

Build - Measure - Learn

Innovative Accounting

Lean Manufacturing

Knowledge and accountability of individual workers

The shrinking of batch sizes

Just-in-time production and inventory control

Acceleration of cycle times

Validated learning

The most vital function of startup is learning

What does it cost to learn something

Positive improvements in core metrics

(false feedback)

Experiment

Think big, Start small

For long-term change, experiment immediately

Break it down. Value/Growth hypothesis

An experiment is a product

Vision = hypothesis + prediction

MVP

Minimum waste

Measure it's impact

Vanity/Actionable metrics

Pivot or Persevere

FacebookValue and Growth

Value & Growth

value-creating vs value-destroying

value vs waste

manufacture: profitability of each customer, cost of acquiring, repeat purchase

marketplace: network effect

Engine of Growth

Paid: Customer Lifetime Value deducted by Cost per Acquisition

Sticky: Rate of Acquisition over Churn Rate

Viral: The Viral coefficient

“P.S. Get your free e-mail at Hotmail”

and the Feedback Loop behind it

Get out of the buildingGenchi Gembutsu

Go and See for yourself

whether I was in manufacturing, product development, sales, distribution, or public affairs. You cannot be sure you really

understand any part of any business problem unless you go and see for yourself firsthand. It is unacceptable to take anything for

granted or to rely on the reports of others.

Case study: Scott Cook, Intuit, 1982.

Go thru the feedback loop with minimum effort

Early adopter

Quality?

When in doubt, simplify!

Any thing beyond what is required to learning is a form of waste

Case study:Food on the Table

An elaborate service

FotT's MVP

Inefficient? Or Progressing?

Automate the overhead

The role of quality and design

High-quality exp - the principle

If t do not know who the customer is, we do not know what quality is.

To learn instead of to speculate

Surprise!

Case study:IMVU

Problem: Moving around your 3D avatar.

They kind of "cheated"

Which version is low quality?

(natural selection)

A Disciplined, Systematic Approach

Innovative accounting

What about traditional accounting

3 steps of innovation accounting

Establish baseline (current status)

Tune the engine toward the ideal

Pivot or Persevere

Text

MeasureWhat metrics(data) to use

and how to interpret

Cohort Analysis(on $5 a day)

Day in and day out

Performance of indie groups

Funnel / Flow

Hard facts to learn

Optimization vs LearningDownward spiral follows

energy that could have been invested to help build a sustainable business were used to resort to the usual

bag of success theater tricks: last-minute ad buys, channel stuffing, and whiz-bang demos, in a

desperate attempt to make the gross numbers look better.

Caution: Vanity metrics

Isn't it exciting?

Driven by past initiatives

Irrelevant to the efficacy of the team

Gross numbers are misleading

Lack of cause-and-effect inferences

Case study: Grockit

Lead by a visionary

Agile, process-oriented, disciplined

Efficiency, morale - learning culture

A/B tests on customer behavior reveal real customer needs

Hypothesis testing for lazy registration

KanbanCapacity Constraint4 states: product backlog, actively being

built, done(from a technical perspective), or in the process of being validated

Get the hang of it

Three A's of metrics

Actionable

Accessible

Auditable

Pivot or PersevereA challenge everyone entrepreneur faces eventually

Pivot or Persevere

Land of living dead

A sustainable business that creates value and drive growth

Improve human faulty judgement by subjecting to repeated tests

Case: VotizenUSA.gov, social network of verified voters, attracted early adopters who love the concept, in the face of moderate

success, a series of pivot/persevere decisions

Customers would be interested enough to sign up

Able to verify them as registered voters

Verified voters would engage with Votizen's activism tools overtime

Engaged customer would recruit friends into civic causes

Iterate

Initial MVP Optimization

Registration 5% 17%

Activation 17% 90%

Retention 5%

Referral 4%

Revenue n/a n/a

Optimize

Before Opt. After Opt.

Registration 17% 17%

Activation 90% 90%

Retention 5% 8%

Referral 4% 6%

Revenue n/a n/a

Success might be just around the corner

Leap-of-faith questions identified, tested, and with quantitative predictions made

Failing business behind positive metrics

“I always wanted to get more involved, this makes it so much easier”

“The fact that you prove I'm a voter matter”

“There's no one here, what's the point of coming back”

Zoom In Pivot

Before Pivot After Pivot

E. of growth Sticky Paid

Registration 17% 42

Activation 90% 83

Retention 8% 21

Referral 6% 54

Revenue n/a < 1

Lifetime Value n/a Minimal

@2gov, social lobbying platform, translate twits into paper petitions

Customer Segment Pivot

B2C > B2B: Political campaigning.

Companies/organizations showed extreme eager to use and pay.

Sales didn't materialize.

Hypothesis refuted.

Platform Pivot

Before Pivot After Pivot

E. of growth Paid Viral

Registration 42 51

Activation 83 92

Retention 21 28

Referral 54 64

Revenue 1 11

Lifetime Value Minimal $.2 / message

Model based on Google Adwords, opinions of verified voters carried weight with elected officials,

high referral low marketing cost

A startup's runway is the number of pivots it can

still makeRaise money or Cut costs

/ \Waste or Ability to B.M.L

Q: How to extend our runway?

A catalog of Pivots

Zoom in

Zoom out

Customer segment

Customer need

Platform

Business architecture

Value capture

Channel

Engine of growth

Technology

Pivot or Persevere meeting

Courage

A emotionally charged decision to make, so schedule it in advance

Failure to pivot

One foot rootedAcceleration

Success’ prerequisit