steve blank best copy the startup owners manual sxsw pptx

The Startup Owners Manual

Stanford -‐ School of Engineering U.C. Berkeley -‐ Haas School Of Business

www.steveblank.com Twi9er: @sgblank

Steve Blank

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This Talk is Based On • Business Model GeneraCon •  The Lean Startup •  Four Steps to the Epiphany

This Talk is Based On • Business Model GeneraCon •  The Lean Startup •  The Startup Owners Manual

Not all those who wander are lost

Bilbo Baggins

The Search for a Path

1602 -‐ 1908

The Path to Business ExecuCon

But Startups are Not Smaller Versions of Larger Companies

From Atoms to Bits

The Startup Path

Search Versus ExecuCon

What’s a Startup?

What’s a Business Model?

Value ProposiCon

What Are You Building and For Who?

Customer Segments

Who Are They? Why Would They Buy?

Channels

How does your Product Get to Customers?

Customer RelaConships

How do you Get, Keep and Grow Customers?

Revenue Streams

How do you Make Money?

Key Resources

What are your most important Assets?

Key Partners

Who are your Partners and Suppliers?

Key AcCviCes

What’s Most Important for the Business?

Cost Structure

What are the Costs and Expenses

Turning Hypotheses Into Facts

The Four Steps – The Startup Path

Customer Development


There Are No Facts Inside The Building, So Get the Heck Outside


Test the Problem, Then the SoluCon


The Entrepreneurial Journey

Startup Owners Manual


NaConal Science FoundaCon

•  Yes there’s an E-‐Book version coming •  Free autographed copies -‐ Sunday

Startup America Salon E 1:30 -‐3pm


Examples from the Book

Customer RelaConships

Customer RelaConships Web/Mobile Products– Get Customers

© 2012 Steve Blank

Customer RelaConships Web/Mobile Products– Keep Customers

© 2012 Steve Blank

Customer RelaConships Web/Mobile Products– Grow Customers

© 2012 Steve Blank

Customer RelaConships Web/Mobile Products Get/Keep/Grow

© 2012 Steve Blank

Customer RelaConships Physical & Web Mobile Are Different

© 2012 Steve Blank

How Does This Really Work?

Lean LaunchPad Class

NaConal Science FoundaCon

How Does This Really Work?

8 Weeks from an Idea to a Business

Team Dynamo

Final Presentation

Interviews: 252

Partner: 10 Survey: 76

Al Hassan Hleileh MBA 2 §  MA in POL

ECON SOC H

Elika Mahdavi MS&E MS

§  BS in Indus.Eng.

Megh Gautam MS&E MS §  BTech in IT

Hung Le MS&E MS §  BS in EE/CS

PICTURE

PICTURE PICTURE

PICTURE

THE TEAM

TABLE OF CONTENTS

1.  Overview of our idea evolution

2.  Our journey from week 1 to week 8

3.  Current Idea §  Archetype

§  Product vision

§  Partner

§  Channel & Demand Creation

§  Competitive Landscape

§  Market Sizing

4.  Lesson learned and what next

Travel booking portal for Middle Easterns

Social travel planning

Ex-pat travel portal to Middle East

Travel inspiration - Social platform that nudges people to inspire and enrich their life

2 1 3 5 6

Safe travel portal for US travelers to M.E.

4

IDEA EVOLUTION THROUGH PIVOT

7 8

Nudge to enrich life

Focus Customer Insights

Competition Market size Customer Insights

Market size

Research

Scalability Market size


1

Interviews: 20

Market understanding Best in class product Relationship with partners Human Capital

Hotels Airlines Events (Festivals) Car rentals Promotion companies Deal listings State Tourism Travel agents Conventions (CES) Business Schools (Study groups)

Product Development A/B testing Relationship with hotels; airlines; car rentals Sourcing deals Acquisition, retain customers

Web and mail Advertising Social Media Word of Mouth Referrals Customer call centers Magazines

Lowest price Best inventory Convenient Experiential UI Social Validation Create a Community Multiple options Best Actionable deals Relevant locations

Trusted relationships Successful partnerships Brand awareness/ identification Pilots Cross pollination Events (Parties!)

Young and the affluent High disposable incomes Willing to explore Young and single Divergent origins Social media savvy Young couples Trendsetting behavior Young families Best education for kids Cultural experience Trendy destinations

Human Capital Product Development Advertising costs Maintaining relationships Refunds

Percentage of booking costs Percentage of hotel/package (s) Advertising revenues Event of the month Exclusive partnership with events

WEEK 1 – MAKE MY DREAM New Remain Remove W

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1

§  Middle East focused platform

§  Offer a booking platform with group discounts and flash-sales

§  Ramp up strategy through social conversations

§  Preserve memories of travel through photo sharing and quotes

Middle East focused Travel booking portal











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1











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§  Too broad a platform

§  Too many value propositions

Lack of focus in value propositions











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1

§  The method we used was a top-down approach

§  We didn’t use net numbers (gross) §  The lesson here is that if we were to do it

again we would use bottom up / net figures

Market sizing problem











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We were not focused on a specific customer segment – too broad. Our interview base was biased towards our network – needed a better sample.

Lack of focus in customer segments











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§  Focus is crucial – be it in your value proposition or in your customer segmentation

§  Market sizing – Use bottom up whenever possible

§  Get out of the building – in spirit and in action. Avoid bias

Key learning



1

Customer focus

2

Interviews: 20

Market understanding Human Capital Relationship with partners Best in class product

Social Networks Travel Publications Hotels Business Schools Travel agents Airlines Events Deal listings Car rentals Promotion companies State Tourism Conventions (CES)

Customer Acquisition Customer Retention Product Dev Relationship with key partners Sourcing deals

Word of Mouth Social Media Web and mail Advertising Referrals Customer call centers Magazines

Easy and pleasurable trip planning Best inventory Convenient Experiential UI Lowest price Multiple options Best Actionable deals Relevant locations Create a Community Social Validation

Trusted relationships Successful partnerships Events (Parties!) Brand awareness/ identification Pilots Cross pollination




WEEK 2 – SOCIAL TRIP PLANNING New Remain Remove W

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Through our mentors, we really dug into our customers insights §  They were telling us that they didn’t just want to go to the

middle east

§  They wanted a seamless, social and enjoyable travel experience from A-Z

§  We pivoted to The Middle Easts travel booking portal with a ramp up focused on influential who want easy and pleasurable trip planning

Pivot to social travel planning for group traveling










New Remain Remove W

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2 WEEK 2 – SOCIAL TRIP PLANNING











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When research for potential partners, we learned of several existing competitors with similar product

§  crowded

§  hypercompetitive

What was the problem?











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§  We should have looked at the competitive landscape earlier

§  We should have spoken to industry / domain experts earlier

Key learning



2 3

Competition


1

Interviews: 64

Market understanding Human Capital Relationship with partners

Social Networks Hotels Business Schools Travel agents Travel Publications Airlines Events Deal listings


Word of Mouth Social Media

Local knowhow and content Easy and pleasurable trip planning Best inventory

Trusted relationships Successful partnerships Events (Parties!)

Young and the affluent High disposable incomes Willing to explore Young and single Divergent origins Social media savvy Young couples Trendsetting behavior


Percentage of booking costs

WEEK 3 – EX-PAT TRAVELING New Remain Remove W

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Pivot to Ex-pat Community Travel Portal

We pivoted back to the original idea with focus on one customer segment §  A travel planner for Ex-Pat students who frequently visit the Middle-East &

other major cities.

§  We want to capture & publish their travel experience.











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We interviewed 64 people and found: §  The market was too small

§  There is little homogeneity in customer needs

§  Too low frequency of travel to justify target market












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§  Market sizing is crucial

Key learning


3


4

Market size


2


1

Interviews: 33

Survey: 46


Social Networks Alumni Associations Hotels Business Schools Travel agents Travel Publications Airlines Events Deal listings

Customer Acquisition Customer Retention Product Development Relationship with key partners Sourcing deals


Safety proposition Local knowhow and content Community/Group Travel Easy and pleasurable trip planning Best inventory

Trusted relationships Successful partnerships

Young and the affluent High disposable incomes Willing to explore -MBA Students



WEEK 4 – US TRAVEL TO Middle East New Remain Remove W

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Pivot to US Traveler Portal to Middle East

We expanded our market to entire US travel market §  Platform to facilitate Americans to

travel to the Middle-East







MBA Students Young and the affluent High disposable incomes Willing to explore




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4

We surveyed 46 people and interview 33 more §  Young & Affluent Americans

traveling to the Middle East need local insight.

§  We’ll be the trusted source!

Young affluent market







Young and the affluent High disposable incomes Willing to explore -MBA Students




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Launched website with full basic booking functionalities

Ebtism.com went live

§  Full basic functionalities (login, browse deals and book trips)

§  4 sourced deals from agencies

§  42 GSB students booked

Exclusive login Deals selection (real sourcing) Value proposition Ability to book trips











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We spoke to Christos Stergiou, founder of truegreece.com (Greece Analogue) §  10 years of development

§  $5M idea












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Market size need to be VENTURE SCALE We want to DISRUPT the Travel Space. Let’s Re-think the Entire Idea!

Key learning


3


4


2


1

Social platform that nudges people to travel

5

Market size

Interviews: 17

Survey: 10

User data Human Capital Relationship with partners

Social Networks Travel Websites Alumni Associations Travel agents Business Schools Hotels



Enrichment (Travel) Leads Safety proposition Local knowhow and content Community/Group Travel


Online travelers Travel Websites MBA Students Young and the affluent High disposable incomes Willing to explore


Leads Advertising Percentage of booking costs

WEEK 5 – TRAVEL NUDGE Paying partner side End-user side Remove W

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5

Pivot to travel inspiration

We pivot to a brand new market §  Inspire people to travel more

through recommendation

§  Relevant based on social graph and travel history











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Inception of Nudge by looking at the competitive landscape

Revised later










Paying partner side End-user side Remove W

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5 WEEK 5 – TRAVEL NUDGE











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Bottom-up estimation §  Market = population x nudge

frequency x CTR x CPC

§  With leads revenue sharing model, TAM is based on assumptions of nudges frequency and conversion

§  Target market is justifiable with an annual revenue of $267 million with 31% market penetration

Sizeable potential market

SOM = $267M

SAM = $373M

TAM = $900M

WEEK 5 – TRAVEL NUDGE











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Mock up of the product for customer interview



3


4


2


1


5 6

Interviews: 52 + 3 partners


Social Networks Travel Websites

Customer Acquisition Customer Retention Product Development Relationship with key partners


Enrichment (Travel) Customer Acquisition Leads


Online travelers Travel Websites

Human Capital Product Development Advertising costs Maintaining relationships

Cost per acquisition Leads Advertising


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Partner

Reach out to Travelocity (Jim Hornthal) §  Customer insights differed

§  Technological challenges (e.g. cookies)

§  Revenue share instead of lead generating Reach out to Expedia and Bookingmarkets §  Confirm revenue share model (5% - 10%) and we

even got a standard term












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6

Then we went out of the building to interview 50 people at Stanford Mall §  What prevents people from traveling is time, not

imagination or laziness (seasonal)

§  People don’t want to be nudged too often (1 per month)

§  Referrals from close friends more valuable than referrals from strangers

The customers value relevance of nudges



3


4


2


1


5 6 7

Nudge to enrich

life

Market size

Interviews: 16


Social Networks Travel Websites Event Websites University Events Merchants



Enrichment (Activities + Travel) Customer Acquisition Enrichment (Travel)


Students Graduates Young Families Travel Websites Online travelers


Cost per acquisition

WEEK 7 - NUDGE W

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Expand from travel to include activity nudges

§  We expanded our nudges to include activities, events, social reminders than just travels

§  Keep user more engaged with relevant frequent nudges










WEEK 7 - NUDGE W

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WEEK 7 - NUDGE W

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7

We went out of the building to interview 20 people §  People also want to be nudged in other

things than just travel §  Mobile is the most effective medium to

increase engagement

The customers want diverse nudges










WEEK 7 - NUDGE W

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3


4


2


1


5 6 7 8

Nudge to enrich life

Interviews: 15 Partners: 7

Pilot nudges: 20










NUDGE Paying partner side End-user side Remove W

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nudge /nəәj/ verb: to push slightly or gently, especially with the elbow, to get someone's attention, prod someone into action, etc. noun: a slight or gentle push or jog, especially with the elbow.

Creating NUDGE





Enrichment (Activities + Travel) Customer Acquisition


Students Graduates Young Families Travel Websites



WEEK 8 (FINAL) Paying partner side End-user side Remove W

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CUSTOMER ARCHETYPES

Ashley Clair Alex

§  Age: 26 §  Stanford Student §  Worked in Hollywood §  Loves Adventures §  Wants to be nudged

relevantly, and inspired!

§  Age: 28 §  Works at mobile start-up in

San Francisco, originally from Montana

§  Single & dating §  Plays soccer, runs

marathons §  Likes to cook/host dinner

with friends when possible

§  Age: 38 §  Married, 1 child (4 y.o. Clay) §  Investment professional in

New York §  Volunteer coach for son’s

hockey team §  Commutes for work to

Manhattan every day §  Goes out of town to the

country for break once/month with his family

NUDGE TYPES

social push serendipity

Nudges from friends as a social push OCCURING EVENTS

(REALITY)

EVENTS YOU ARE AWARE OF (CONSCIOUS)

DESIRE (SUBCONSCIOUS)

Discovering nudges

Highest conversion rate nudges

nudge

SIMULATED NUDGE

“ As long as there is transparency between advertisers, the suggestion database and its users, this is an innovative idea. Otherwise, it is a rather subversive tool for consumer and social trends. An interesting concept either way!

”

“ Love the product idea!

”

“ This is awesome! I love it!! Just told me to walk the dish today! phenomenal and stunning all in one shot!!

”

We did a pilot to test how many people sign up for nudge

§  103 people try the product

§  42 people left email (41% signup for service rate)

NUDGE: "it's 4 months till you graduate, take your best friend out for a coffee at Coupa, and share some of the good times you have had at GSB"

SIMULATED NUDGE

We carefully selected people we know to send them tailored nudges

We sent tailored nudge to 25 people with 40% conversion rate

§  10 people actually like the nudge and go

§  4 people may take the trip in the future

§  11 people didn’t respond

NUDGE: "Visit the Rodin Sculpture Garden this week and get inspired. Located next to the Cantor Arts Center but accessible at all hours, the Rodin Sculpture Garden houses one of the largest collection of Rodin sculptures”

RECOMMENDING PLATFORM

Computational §  Matrix factorization §  Collaborative

filtering

Crowd-sourced Social nudging

Curated

Data mining Social networks

Geography

Context-based Customized user preference

Time

Past behaviors

Input Model

Revenue sharing (CPA)

PARTNERS

Partner

Gifts

Event + Activities

Travel

University Events

Restaurants

Facebook Ad

Facebook Fan Page

YouTube Video

Views

273,380

Unique

120,173 82

Clicks

0.030%

CTR

$0.38

CPC

83

Like

Free

CPC Engage

46

Website

Unique

430 62%

Bounce rate

2:22min

Avg time

DEMAND CREATION W

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7

370

Days

900

898 60

3

7

30

COMPETITIVE LANDSCAPE

Inspiration Planning Sharing Q&A Flash Deal Community

Reminder

INCOME STATEMENT

Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 User growth projection 2,000 20,000 50,000 500,000 1,000,000 2,000,000 4,000,000

Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Revenues Advertising N/A N/A N/A N/A N/A N/A N/A Rev. Share * $10,000 $100,000 $250,000 $2,500,000 $5,000,000 $10,000,000 $20,000,000 Total Revenue $10,000 $100,000 $250,000 $2,500,000 $5,000,000 $10,000,000 $20,000,000 Cost of Sales Customer Acquisition $60 $600 $1,500 $15,000 $30,000 $60,000 $120,000 Advertising & Promotions $1,000 $1,000 $1,000 $3,000 $3,000 $3,000 $3,000 Total Cost of Sales $1,060 $1,600 $2,500 $18,000 $33,000 $63,000 $123,000 Gross Profit $8,940 $98,400 $247,500 $2,482,000 $4,967,000 $9,937,000 $19,877,000 Expenses Development ** $645,000 $645,000 $645,000 $940,000 $1,115,000 $1,290,000 $1,465,000 Hosting $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 Other Wages *** $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 Travel $5,000 $5,000 $5,000 $10,000 $10,000 $15,000 $15,000 Office + Utilities $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 Total Expenses $763,250 $763,250 $763,250 $1,063,250 $1,238,250 $1,418,250 $1,593,250 Net Income ($754,310) ($664,850) ($515,750) $1,418,750 $3,728,750 $8,518,750 $18,283,750

California Universities

Local beta at Stanford Go global !

§  Focus is key – segmentation is important

§  Market sizing is crucial!!!!

§  There is nothing more important than good team environment and culture

§  Mentorship is hugely important, we couldn’t have got where we are without our

Mentors help

§  We should be open to pivot – even at an earlier stage and trade off: The need to be loyal to our old ideas vs. new innovations that could solve problems based on

our customer insights

§  Distilling insights and listening to experiments

§  Looking past ourselves

§  We have a heightened awareness of confirmation bias and try and assuage that in our different experiments

LESSON LEARNED

WHAT’S NEXT

Incubators

CRITICAL SUCCESS MILESTONES NEXT 6 MONTHS

§  Initiate Cohort Analysis

§  Expand Beta testing to entire Stanford Campus

§  Test Gamification iteration and Badges

§  Develop machine learning and curation technology and resources to

enable scalability

§  Hire key resources (software developer, data scientist, marketing,

business development, social animal) and space

Why Do We Do This?

Make Your Lives Extraordinary

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