the lean startup at web 2.0 expo

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The Lean Startup #leanstartup Eric Ries (@ericries) h7p://startuplessonslearned.blogspot.com

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Page 1: The Lean Startup at Web 2.0 Expo

TheLeanStartup#leanstartup

EricRies(@ericries)h7p://startuplessonslearned.blogspot.com

Page 2: The Lean Startup at Web 2.0 Expo

ThankYou!

•  ScholarshipDonors– KISSmetrics– BillBraasch(@billmelater)

– BobAniello(@CornOnTheBob)

•  CustomerAdvisoryBoard– HitenShah–  JaredGoralnick– SiqiChen– AndrewMeyer– SimonNewstead–  JeffreyBarman– SeanHeywood

Page 3: The Lean Startup at Web 2.0 Expo

MostStartupsFail

•  Butitdoesn’thavetobethatway.Wecandobe7er.Thistalkisabouthow.

Page 4: The Lean Startup at Web 2.0 Expo

TheLeanStartupandYou

•  ThinkingofstarXnganewcompany,buthaven’ttakenthefirststep

•  Inastartupnowandwanttoiteratefaster•  WanttocreatethecondiXonsforleaninnovaXoninsideabigcompany

Page 5: The Lean Startup at Web 2.0 Expo

ATaleofTwoStartups

Page 6: The Lean Startup at Web 2.0 Expo

Startup#1

Page 7: The Lean Startup at Web 2.0 Expo

Agoodplan?

•  Startacompanywithacompellinglong‐termvision.

•  Raiseplentyofcapital.•  Hiretheabsolutebestandthebrightest.•  Hireanexperiencedmanagementteamwithtonsofstartupexperience.

•  Focusonquality.•  Buildaworld‐classtechnologypla_orm.•  Buildbuzzinthepressandblogosphere.

Page 8: The Lean Startup at Web 2.0 Expo

AchievingFailure

•  Companyfailedu7erly,$40MMandfiveyearsofpain.

•  Crippledby“shadowbeliefs”thatdestroyedtheeffortofallthosesmartpeople.

Page 9: The Lean Startup at Web 2.0 Expo

ShadowBelief#1

•  Weknowwhatcustomerswant.

Page 10: The Lean Startup at Web 2.0 Expo

ShadowBelief#2

•  Wecanaccuratelypredictthefuture.

Page 11: The Lean Startup at Web 2.0 Expo

ShadowBelief#3

•  Advancingtheplanisprogress.

Page 12: The Lean Startup at Web 2.0 Expo

Agoodplan?

•  Startacompanywithacompellinglong‐termvision.

•  Raiseplentyofcapital.•  Hiretheabsolutebestandthebrightest.•  Hireanexperiencedmanagementteamwithtonsofstartupexperience.

•  Focusonquality.•  Buildaworld‐classtechnologypla_orm.•  Buildbuzzinthepressandblogosphere.

Page 13: The Lean Startup at Web 2.0 Expo

Startup#2

Page 14: The Lean Startup at Web 2.0 Expo

IMVU

Page 15: The Lean Startup at Web 2.0 Expo

Newplan

•  Shippedinsixmonths–ahorriblybuggybetaproduct

•  Chargedfromdayone

•  ShippedmulXpleXmesaday(by2008,onaverage50Xmesaday)

•  NoPR,nolaunch•  Results:2007revenuesof$10MM

Page 16: The Lean Startup at Web 2.0 Expo

LeanStartupsGoFaster

•  Commoditytechnologystack,highlyleveraged(free/opensource,user‐generatedcontent,SEM).

•  Customerdevelopment–findoutwhatcustomerswantbeforeyoubuildit.

•  Agilesomwaredevelopment–buttunedtothestartupcondiXon.

Page 17: The Lean Startup at Web 2.0 Expo

Commoditytechnologystack

•  Leverage=foreachounceofeffortyouinvestinyourproduct,youtakeadvantageoftheeffortsofthousandsormillionsofothers.

•  It’seasytoseehowhigh‐leveragetechnologyisdrivingcostsdown.

•  Moreimportantisitsimpactonspeed.

•  Timetobringanewproducttomarketisfallingrapidly.

Page 18: The Lean Startup at Web 2.0 Expo

CustomerDevelopment

  ConXnuouscycleofcustomerinteracXon

  RapidhypothesistesXngaboutmarket,pricing,customers,…

  Extremelowcost,lowburn,Xghtfocus

  Measurablegatesforinvestors

h7p://bit.ly/tpTtE

Page 19: The Lean Startup at Web 2.0 Expo

Ataleoftwostartups,revisited

•  Mirrorsthechangesindevelopmentmethodologiesoverthepastfewyears.

•  Let’slookatthosechangesschemaXcally.

•  Theseexamplesaredrawnfromsomwarestartups,butincreasingly:– Allproductsrequiresomware– AllcompaniesareoperaXnginastartup‐likeenvironment

Page 20: The Lean Startup at Web 2.0 Expo

Problem: known Solution: known

Waterfall

TradiXonalProductDevelopmentUnitofprogress:AdvancetoNextStage

Requirements

Design

Implementa2on

Verifica2on

Maintenance

Page 21: The Lean Startup at Web 2.0 Expo

Problem: Known Solution: Unknown

“Product Owner” or in-house customer

AgileUnitofprogress:alineofworkingcode

Page 22: The Lean Startup at Web 2.0 Expo

Problem: Unknown Solution: Unknown

ProductDevelopmentatLeanStartupUnitofprogress:validatedlearningaboutcustomers($$$)

Page 23: The Lean Startup at Web 2.0 Expo

MinimizeTOTALXmethroughtheloop

IDEAS

CODEDATA

BUILDLEARN

MEASURE

Page 24: The Lean Startup at Web 2.0 Expo

HowtobuildaLeanStartup

•  Let’stalkaboutsomespecifics.Thesearenoteverythingyouneed,buttheywillgetyoustarted

•  ConXnuousdeployment•  Split‐test(A/B)experimentaXon•  Fivewhy’s

Page 25: The Lean Startup at Web 2.0 Expo

ConXnuousDeployment

IDEAS

CODEDATA

BUILDLEARN

MEASURE

CodeFasterConXnuousDeployment

MeasureFasterRapidSplitTests

LearnFasterFiveWhysRootCauseAnalysis

Page 26: The Lean Startup at Web 2.0 Expo

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

•  Work in small batches •  At IMVU, a large batch = 3 days worth of work

•  Break large projects down into small batches

Page 27: The Lean Startup at Web 2.0 Expo

Cluster Immune System What 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

Whencustomersseeafailure:o  Fix the problem for customers o  Improve your defenses at each level

Page 28: The Lean Startup at Web 2.0 Expo

RapidSplitTests

IDEAS

CODEDATA

BUILDLEARN

MEASURE

CodeFasterConXnuousDeployment

MeasureFasterRapidSplitTests

LearnFasterFiveWhysRootCauseAnalysis

Page 29: The Lean Startup at Web 2.0 Expo

Split‐tesXngalltheXme

•  A/BtesXngiskeytovalidaXngyourhypotheses

•  Hastobesimpleenoughforeveryonetouseandunderstandit

•  MakecreaXngasplit‐testnomorethanonelineofcode:

if(setup_experiment(...)=="control"){//doittheoldway}else{//doitthenewway}

Page 30: The Lean Startup at Web 2.0 Expo

TheAAA’sofMetrics

•  AcXonable•  Accessible•  Auditable

Page 31: The Lean Startup at Web 2.0 Expo

MeasuretheMacro

•  Alwayslookatcohort‐basedmetricsoverXme•  Split‐testthesmall,measurethelarge

ControlGroup(A) Experiment(B)

#Registered 1025 1099

Downloads 755(73%) 733(67%)

AcXvedays0‐1 600(58%) 650(59%)

AcXvedays1‐3 500(48%) 545(49%)

AcXvedays3‐10 300(29%) 330(30%)

AcXvedays10‐30 250(24%) 290(26%)

TotalRevenue $3210.50 $3450.10

RPU $3.13 $3.14

Page 32: The Lean Startup at Web 2.0 Expo

FiveWhys

IDEAS

CODEDATA

BUILDLEARN

MEASURE

CodeFasterConXnuousDeployment

MeasureFasterRapidSplitTests

LearnFasterFiveWhysRootCauseAnalysis

Page 33: The Lean Startup at Web 2.0 Expo

FiveWhysRootCauseAnalysis

•  AtechniqueforconXnuousimprovementofcompanyprocess.

•  Ask“why”fiveXmeswhensomethingunexpectedhappens.

•  MakeproporEonalinvestmentsinprevenXonatallfivelevelsofthehierarchy.

•  Behindeverysupposedtechnicalproblemisusuallyahumanproblem.Fixthecause,notjustthesymptom.

Page 34: The Lean Startup at Web 2.0 Expo

There’smuchmore…

IDEAS

CODEDATA

BUILDLEARN

MEASURE

CodeFasterUnitTests

UsabilityTestsConXnuousIntegraXon

IncrementalDeploymentFree&Open‐SourceComponents

CloudCompuXngClusterImmuneSystemJust‐in‐XmeScalability

RefactoringDeveloperSandbox

MeasureFasterSplitTestsClearProductOwnerConXnuousDeploymentUsabilityTestsReal‐XmeMonitoringCustomerLiaison

LearnFasterSplitTestsCustomerInterviewsCustomerDevelopmentFiveWhysRootCauseAnalysisCustomerAdvisoryBoardFalsifiableHypothesesProductOwnerAccountabilityCustomerArchetypesCross‐funcXonalTeamsSemi‐autonomousTeamsSmokeTests

FunnelAnalysisCohortAnalysis

NetPromoterScoreSearchEngineMarkeXng

Real‐TimeAlerXngPredicXveMonitoring

Page 35: The Lean Startup at Web 2.0 Expo

TheLeanStartup

•  Youarereadytodothis,whetheryouare:– ThinkingofstarXnganewcompany,buthaven’ttakenthefirststep

– Areinastartupnowthatcoulditeratefaster– WanttocreatethecondiXonsforleaninnovaXoninsideabigcompany

•  Getstarted,now,today.

Page 36: The Lean Startup at Web 2.0 Expo

Thanks!

•  StartupLessonsLearnedBlog–  h7p://startuplessonslearned.blogspot.com/

•  Webcast:“HowtoBuildaLeanStartup,step‐by‐step”– May1,2009at10amPST–  h7p://www.oreillynet.com/pub/e/1294

•  TheLeanStartupWorkshop – Anall‐dayeventforaselectaudience– May29,2009inSanFrancisco–  Signupat:h7p://bit.ly/a5uw8