lean startup roadmap
DESCRIPTION
Lean Startup Roadmap workshop I conduct in Russian. Combines the methodology from Steve Blank, Eric Ries, Ash Maurya, and others. The intention is to provide practical steps individuals new to business and entrepreneurship can take in order to increase the likelihood of success in their new venture. The full workshop usually takes 6-8 hours.TRANSCRIPT
LeanStartup Roadmap
Matt RutterCCI Gagauzia
Matt RutterCCI Gagauzia
Small Enterprise [email protected]
Entrepreneurial
The reason most startups fail is not because they build a bad product, it’s
that they build a product nobody needs.
-Eric Ries
What separates successful startups is not necessarily starting with a better initial plan (Plan A), but finding a plan that works before running out of resources.
- Ash Maurya
Customer Development
Lean Startup
Lean Canvas
Today• Lean Startup–Idea Validation–Lean Canvas (Hands-on Practice)–Testing Solutions (MVP)–Scaling to Market (Leveraging Traction)
• Application, Discussion, & Questions
“A startup is not a ‘doll house’ version of a large
company.”
- Eric Ries
What is а “Lean Startup?”
• “Startup” – a temporary organization designed to search for a repeatable and scalable business model.
• Tradition– Write and Execute– Assumptions– Static (Unchanging)
• Lean– Model and Test– Customer Development
– Agile (Iteration, Pivots))
“Startups that succeed are those that manage to
iterate enough times before running out of
resources.”- Eric Ries
Eric Ries, The Lean Startup
LeanStartup Roadmap
• Idea– Problem
Interviews– Market Research
Need
TalentInterest
IDEACustomer/Problem Fit
Determine if the problem exists and is worth solving
• Problem Interviews• Market Research
Right Action, Right Time
Ash Mauryapracticetrumpstheory.com
IDEA
Identify and Test Greatest Risks
First
Customers care about their problems – not
your solution.
IDEA
- Dave McClure
Problem Interview
Goal: To understand…1. What is the problem? Why is it a
problem?2. Who has the problem?3. How do they currently solve the
problem?
Ash Maurya, Running Lean 81
Problem Interview• Do– Create falsifiable hypotheses to test– Speak with customers face-to-face (casual
setting)– Use a script– Take notes (bring partner/co-founder)– Listen and ask questions
• Don’t– Pitch or sell– Ask about the future– Take more time than needed
Problem Interview
• Examples of Falsifiable Hypotheses– X% of interviewees will have problem A– X% of interviewees will currently use
and be dissatisfied with an existing alternative
– X% of interviewees will be viable customers
Ash Maurya, Running Lean 84
Problem Interview• Example Script
1. What’s the hardest part about [problem context]?
2. Can you tell me about the last time that happened?
3. Why was that hard?4. What, if anything, have you done to solve
that problem?5. What don’t you love about the solutions
you’ve tried?Justin Wilcox – How I Interview Customershttp://customerdevlabs.com/2013/11/05/how-i-interview-customers/
Problem Interview• Other questions:– How often do you experience this problem?– How much are you spending to solve this
problem now?– Where do you find information about
[problem context] currently?
• Keys:– Focus on emotional reactions– Use “5 Whys” to get to the core problems– Hear 3 problem stories during each interview
Justin Wilcox – How I Interview Customershttp://customerdevlabs.com/2013/11/05/how-i-interview-customers/
Market Research• What current solutions/alternatives exist?– Cost– Function– Revenue model
• What barriers to entry exist?• Is this a rising or dying trend?
Resources:– google.com/trends, google.com/think– entrepreneur.com/businessideas/index.html– hbr.org, forbes.com, wsj.com,
techcrunch.com
LeanStartup Roadmap
• Idea– Problem
Interviews– Market Research
• Model– Lean Canvas– Solution
Interviews
MODELProblem/Solution Fit
Determine if your model solves the problem
• Lean Canvas• Solution Interviews
Why Lean Canvas?
• Fast• Concise• Dynamic
“Your Product is not The Product”
- Ash Maurya
Lean Canvas Modeling
In Moldova
A business model describes the rational of how an organization creates,
delivers, and captures value.
-Alex Osterwalder, Business Model Generation
Customer Segments• The specific group of
people or organizations a business intends to serve.– Who has the problem?– For whom are we creating
value?– Who must we sell to or
make happy?
• Early Adopters: The characteristics of the first group of people who will purchase your product.
• Sketch:– Title– Age– Family Details– Income Level– Amount of Free Time– Location– Their Values/Morals– Social Groups– Professional
Associations– Hobbies– Where They Shop
Problems• The top 1-3 problems
your Customer Segments need solved.– What problem are we
curing?– How strong is this
problem?– Will the customer pay to
have this problem removed?
• Existing Alternatives: How the problem is currently solved by the Customer Segments.
• Sketch:– Frequency– Expense– Awareness– Reaction– Newness
– Customer Segments
• Businessmen• Foreigners• University Students
• Early Adopters– Young Adults (22-35 years old)• First 10 customers: 4th year students at ASEM
– Problems
• No comfortable, well-recognized place to meet for a good cup of coffee in Chisinau.
• Existing Alternatives–McDonald’s– Andy’s Pizza–Marcu’s Coffee– 3 в 1
Team Time Customer Segments and Problems
• CS: The specific group of people or organizations a business intends to serve.
• Sketch:– Title– Age– Family Details– Income Level– Amount of Free Time– Location– Their Values/Morals– Social Groups– Professional Associations– Hobbies– Where They Shop
• P: The top 1-3 problems your Customer Segments need solved.
• Existing Alternatives: How the problem is currently solved by the Customer Segments.
• Sketch:– Frequency– Expense– Awareness– Reaction– Newness
Solution• The minimum activities
or features needed to solve the Customer Segments’ top 1-3 Problems.– Outline a feature set to
solve each problem (description of your product or service)
– Only include what is necessary (according to Solution Interviews)
• Sketch:– How problem is
solved– Time needed for
solution– Resources needed– Partners needed
– Solution
1. Offer consistently high-quality cafe goods from a professionally trained staff.
2. Create an easily identifiable facility with an atmosphere conducive for good conversation.
3. Instill customer service and appreciation into every interaction with a Tucano employee or the Tucano facilities.
Team Time - Solution
• The minimum activities or features needed to solve the Customer Segments’ top 1-3 Problems.– Outline a feature set to
solve each problem (description of your product or service)
– Only include what is necessary (according to Solution Interviews)
• Sketch:– How problem is
solved– Time needed for
solution– Resources needed– Partners needed
Unique Value Proposition
• A clear and short message stating the business’ unique Solution to the Customer Segments’ Problem.– The value you create for the
Customer Segment– How are you improving the lives
of our customers?– How are you different?
• High-Level Concept: Brief relation of your UVP to something commonly understood (i.e. ВКонтакте: “Facebook for Russians”).
• Sketch:– How your solution relates
to the customer’s #1 problem
– Finished story benefit of purchasing your product
– How the solution will make your customer feel
Note: The UVP represents the emotional trigger that will convince your customer to purchase your product/service
– Unique Value Proposition
• Slogan: Love. Peace. Coffee.• Offering great coffee, with a great atmosphere, to
enable great conversations. • Truly superior customer service and experience from
entrance to exit.• Fair-Trade and always-fresh 100% Arabica coffee roasted
at Tucano Coffee Roasting Factory.• World-class coffee machines operated by baristas
certified to SCAE standards .
• High-Level Concept: Starbucks for Chisinau.
Team Time - Unique Value Proposition• A clear and short message
stating the business’ unique Solution to the Customer Segments’ Problem.– The value you create for the
Customer Segment– How are you improving the
lives of our customers?– How are you different?
• High-Level Concept: Brief relation of your UVP to something commonly understood (i.e. ВКонтакте: “Facebook for Russians”).
• Sketch:– How your solution
relates to the customer’s #1 problem
– Finished story benefit of purchasing your product
– How the solution will make your customer feel
Note: The UVP represents the emotional trigger that will convince your customer to purchase your product/service
Channels1. Product: How a company
delivers its Value Proposition to the Customer Segments.
2. Marketing: How a company attracts the interest of its Customer Segments.
• Customer Relationship – The closeness and frequency of the relationship developed with the Customer Segments.
• Sketch:– How will you deliver
your solution?– How will your
customer make a purchase?
– How will you find your first 10 paying customers?
– What is the most resource efficient way to attract Early Adopters?
– Channels
• Product: 1. Purchase coffee beans and equipment from an
international distributor, purchase raw ingredients for baked goods from local producers
2. Trained and certified Tucano employees bake and roast products
3. Engaging and pleasant staff take the customer’s order and payment
4. Tucano employee searches for customer and delivers the order to their seat.
– Channels
• Marketing:– Highly-visible and prominently placed
storefronts– Brightly colored and large advertisements on
billboards– Catering partnerships at prominent events with
occasional giveaways –Word-of-mouth by encouraging existing
customers to invite friends/colleagues for a meeting
– Hosting evening events for NGOs or clubs.
Team Time - Channels1. Product: How a company
delivers its Value Proposition to the Customer Segments.
2. Marketing: How a company attracts the interest of its Customer Segments.
• Customer Relationship – The closeness and frequency of the relationship developed with the Customer Segments.
• Sketch:– How will you deliver
your solution?– How will your
customer make a purchase?
– How will you find your first 10 paying customers?
– What is the most resource efficient way to attract Early Adopters?
Definitions
• Income/Revenue: Money coming in to a business.
• Expense/Cost: Money exiting a business (items the business pays for).
• Profit: Money a business keeps
Profit = Revenue – Expenses
Definitions
• Fixed Costs: Expenses that do not change depending on the number of products sold.
• Variable Costs: Expenses that change in proportion to the number of products sold.
• Break Even Point: Time (in # of products sold) when Revenue = Expenses.
BEP = Fixed Costs / (Price – Variable Costs)
Break Even Point
Gourmet Food Cart• Price of lunches = 55 MDL per lunch• Variable expenses = 20 MDL per lunch• Fixed expenses = 6000 MDL per month
BEP = Fixed Costs / (Price – Variable Costs)
BEP = 6000 / (55-20)BEP = 171 lunches per month
Revenue Streams
• The various income-generating activities of a business.– Customer Segment
paying money to receive the business’ Value Proposition
– Charge as early as the customer will permit
– Determine price based on the value you add, not the cost of production
• Sketch:– For what features will
the customer pay?– What features will be
free?– How will you position
your business against alternative solutions?
– Are you adding value to non-customers who would be willing to pay?
Cost Structure
• All operational expenses of running your business.
• Sketch:– Immediate fixed
costs– Immediate variable
costs (including your labor)
– Break-even point
– Revenue Streams
• Coffee• Baked Goods• Meals• Catering
– Cost Structure• Fixed Costs
– Human Resource Overhead (including salaries) – Equipment– Decorations– Electricity, Gas, Insurance– Marketing
• Variable Costs– Ingredients– Presentation materials– Water– Electricity
• BEP (45% Coffee, 30% Meals, 15% Backed Goods, 10% Catering)
– BEP = 27.000/ (48 – 39) = 3.000 “products”
Team TimeRevenue Streams and Cost Structure
• R$: The various income-generating activities of a business.– Determine price based on the
value you add, not the cost of production
• Sketch:– For what features will the
customer pay?– What features will be free?– How will you position your
business against alternative solutions?
– Are you adding value to non-customers who would be willing to pay?
• C$: All operational expenses of running your business.
• Sketch:– Immediate fixed costs– Immediate variable
costs (including your labor)
– Break-even point
Key Metrics• The 3-5 indicators of a
business’ health (success).– How you track your
customer’s behavior and preferences
– Monitoring the implementation of your business’ key activities
– Informs a business whether or not it needs to pivot/iterate
• Sketch:– Customer Segment
Awareness– New Customer
Acquisition– Inventory Turnover– Time Needed to
Complete Job– On-Time Payments– Customer Retention– Customer Referral
Pirate Metrics
- Dave McClure (500hats.com)
Unfair Advantage• The features of your
business that are difficult for competitors to copy or buy. – What keeps new
competitors from taking your customers?
– If someone “steals” your idea, how will you continue to exist?
• Sketch:– Current advantages
(often based on existing relationships or networks)
– Advantages your business could develop over time
– Note: passion, existing resources, and being “first to market” are not sustainable competitive advantages.
– Key Indicators
• 100 new customers per week• 40% of customers return once per week• 70% of customers recommend to
friends/family• 750 orders between all locations per day• 6 minutes – average time it takes from
the moment a customer enters the ordering line until the customer’s food/drink is delivered
- Unfair Advantage
• American research experience and professional network
• Location of real estate• Employee acquisition and training
program
Team TimeKey Metrics and Unfair Advantage
• KM: The 3-5 indicators of a business’ health (success).
• Sketch:– Customer Segment
Awareness– New Customer Acquisition– Inventory Turnover– Time Needed to Complete
Job– On-Time Payments– Customer Retention– Customer Referral
• UA: The features of your business that are difficult for competitors to copy or buy.
• Sketch:– Current advantages– Advantages your business
could develop over time
– Note: passion, existing resources, and being “first to market” are not sustainable competitive advantages
MODEL• Lean Canvas• Solution Interviews– Return to the earlier interviewees and
propose the Solution and UVP you sketched• Do you have the right feature set?
– Discuss your business model (the interaction of all 9 boxes) with mentors or fellow entrepreneurs• Do you have a realistic path to profit?
LeanStartup Roadmap• Idea– Problem
Interviews– Market Research
• Model– Lean Canvas– Solution
Interviews
• Test– MVP– Early Adopter
Sales
TESTSolution/Product Fit
Determine how to effectively offer your solution in a minimal product
• Minimal Viable Product (MVP)• Early Adopter Sales
Lean Startup
Traditiona
l Startup
Minimum Viable Product
Minimum Viable Product
• Strategy used for fast and qualitative market testing of a product or product feature
• The most resource-efficient (time, money, energy) method of creating and capturing value from the Customer Segment–MUST solve the problem of customer– Should not require a loan or long timeframe
Minimum Viable Product
• Create falsifiable hypotheses– One quantitative metric per test
• Sell product, but continue learning• Produce product in small batches• Communicate insights with team
early and often
Minimum Viable Product
• Moldovan Agritourism Business– Plan and organize
excursions/events for individual customers
– Drive them personally– Provide food and
sleeping arrangements from home
– Work on own garden/field/orchard, collect payment
• Internet-Based Food Distributor– Create online form
(free) for customers (in one town) to place order (5 products)
– Purchase these products from the local market
– Personally deliver to homes the next day
– Collect payment
Examples:
Early Adopter Sales
• Begin selling to very specific Customer Segment (10-15 people)
• Learn which features are “must-have” and which are unnecessary
• Determine price point – High enough the customer must contemplate
the purchase, low enough the customer will buy
Goal: Validate business model not # of sales
LeanStartup Roadmap• Idea
– Problem Interviews– Market Research
• Model– Lean Canvas– Solution Interviews
• Test– MVP– Early Adopter Sales
• Scale– Product 1.0 Launch– Business Plan– Investors
SCALEProduct/Market Fit
Determine if your product will attract demand from regional / national /
international markets
• Product 1.0 Launch• Business Plan• Investors
Product 1.0 Launch
• Use recommendations from Early Adopters to expand sales
• Test various price points• Execute marketing strategy• Maintain close contact with customers• Keep learning who is and who is not your
customer segment
Business Plan1. Unique Value Proposition2. Customer Development
Learnings3. Solution4. Problem/Customer Segments5. Problem/UVP/Unfair Advantage6. Solution/Revenue Streams7. Channels (Marketing)8. Channels (Production)9. Conversations w/ Partners, UA10. Solution Interviews/MVP/Early
Sales11. Key Metrics12. Cost Structure/Revenue Streams13. Cost Structure/Revenue Streams
1. Cover2. Executive Summary3. Company Description4. Market5. SWOT Analysis6. Product/Service Line7. Marketing and Sales8. Operational Activity9. Ownership and Management10. Risk Assessment and
Mitigation11. Action Plan12. Budget13. Break Even Point14. Funding Request15. Staff16. Appendices
Investors
• Family and Friends• Business Plan Competitions• Economic Development Projects• Angel Investors• Banks• Venture Capital
Lowest Risk
Greatest Risk
What is Success?
Know the impact you wish to make in the
world and scale accordingly.
Discussion
Matt RutterEntrepreneurial Development Consultant
Chamber of Commerce and Industry of Gagauzia+(373) 60 735 102
[email protected]: matthewlrutter