1. LEAN
STARTUP
WORKSHOP

2. AGENDA
1. Intro
2. Overview of the bases of Lean Startup
1. Lean Manufacturing
2. Customer Development
3. Agile Development
3. Entrepreneurship is Management
4. Validated Learning
5. Build - Measure – Learn
6. Innovation Accounting

3. INTRO

4. WHAT IS A STARTUP?
• A startup is a human institution designed to deliver a new
product or service under conditions of extreme
uncertainty.
• Nothing to do with size of company, sector of the
economy or industry

5. WHY DO STARTUPS
FAIL
• Rarely fail because the product doesn’t work
• Usually fail because there are no customers
• Quality of the initial idea is not correlated with success
• Startups that succeed are those that manage to iterate
enough times before they run out of resources
• Time between these iterations is fundamental

6. THE LEAN STARTUP
• Anything we can do to shrink the time between major
iterations will increase the likelihood of success.
• Speed is the Startup competitive advantage.

7. LEAN STARTUPS GO
FASTER
• Commodity technology stack, highly leveraged (free/open
Source, user‐generated content, SEM).
• Customer development – find out what customers want
before you build it.
• Agile software development – but tuned to the startup
condition.

8. CUSTOMER
DEVELOPME
NT
BASES OF LEAN STARTUP

9. WHAT’S WRONG WITH
THIS?
Product Development
Concept/ Product Dev. Alpha/Beta Launch/
Seed Round Test 1st Ship
- Create Marcom - Hire PR Agency - Create Demand
Marketing Materials - Early Buzz - Launch Event
- Create Positioning - “Branding”
Customer Development in the High-Tech Enterprise
September 2008
9

10. BUILD IT AND THEY
WILL COME
Only true for life and death products
• i.e. Biotech Cancer Cure
• Issues are development risks and distribution,
not customer acceptance
Not true for most other products
• Software, Consumer, Web
• Issues are customer acceptance and market adoption

11. CUSTOMER
DISCOVERY: STEP 1
Customer Customer Customer Company
Discovery Validation Creation Building
Stop selling, start listening
• There are no facts inside your building, so get
outside
Test your hypotheses
• Two are fundamental: problem and product concept

12. CUSTOMER
VALIDATION: STEP 2
Customer Customer Customer Company
Discovery Validation Creation Building
• Develop a repeatable sales process
• Only earlyvangelists are crazy enough to buy

13. CUSTOMER
CREATION
STEP 3
Customer Customer Customer Company
Discovery Validation Creation Building
• Creation comes after proof of sales
• Creation is where you “cross the chasm”
• It is a strategy not a tactic

14. COMPANY BUILDING:
STEP 4
Customer Customer Customer Company
Discovery Validation Creation Building
• (Re)build your company’s organization &
management
• Re look at your mission

15. GENCHI
GEMBUTSU
GO AND SEE FOR YOURSELF
“GET OUT OF THE BUILDING” STEVE BLANK

16. LEAN
MANUFACT
URING
BASES OF LEAN STARTUP

17. JUST IN TIME
The right material
At the right time
At the right place
In the exact
amount

18. STOP THE LINE
“stop and fix
problems as they
occur rather than
pushing them
down the line to be
resolved later”
Jeffrey Liker and
David Meier, Toyota
Way Fieldbook

19. THE ESSENCE OF LEAN IS ENGAGING
EVERYONE IN IDENTIFYING AND
SOLVING PROBLEMS

20. REDUCE ALL FORMS
OF WASTE
Waste
Un-Evenness
Activities that do workload that is
not not balanced
add value
Overburden
work that creates burden for
the
Picture Source – Toyota Motor Company team members or processes
Australia

21. 8 WASTES
In LEAN 8 types of waste have been identified
Waiting
Not using All of these 8 can be either
Over-
People
production
Resource
“Necessary Waste” or
“Un-necessary Waste”
Transport or
Motion Conveyance
Depending on circumstance
Stock & Over-
Materials processing
Rework

22. AGILE
DEVELOPMENT
BASES OF LEAN STARTUP

23. AGILE DEVELOPMENT
Solution: Unknown

24. COMMODITY
TECHNOLOGY STACK
• Leverage = for each ounce of effort you invest in your
product, you take advantage of the efforts of thousands or
millions of others.
• It’s easy to see how high‐leverage technology is driving
costs down.
• More important is its impact on speed.
• Time to bring a new product to market is falling rapidly.
•

25. ENTREPRENEUR
SHIP IS
MANAGEMENT
THAT SOUNDS BORING

26. BUSINESS PLAN VS JUST
DO IT SCHOOL OF
ENTREPRENEURSHIP
• Business Plan
• A business plan never survives a client first contact
• A bad plan greatly executed = dead company
• Just do it
• Have you ever cut a chicken’s head? (you got the picture)

27. STARTUP = EXPERIMENT

28. VALUE OF A STARTUP =
VALIDATED LEARNING
• What products do customers really want?
• How will the product grow?
• Who is our customer?
• Which customer should we listen to and which should we
ignore?

29. VALIDATED
LEARNING

30. VALIDATED LEARNING
Focus energies on validated learning, learning where and
when to invest energy results in saving time and money
To apply scientific method, we need to identify which
hypotheses to test.

31. MINIMIZE TOTAL TIME
THROUGH TOTAL J me through the loop
Minimize
THE LOOP
IDEAS
LEARN BUILD
DATA CODE
MEASURE

32. LEARNING
MILESTONES
Planned the opposite way:
• What do we need to learn?
• Use Innovation accounting to figure out what needs to be
measured to know if we are gaining validated learning
What product needs to be built to run the experiment and
measure?

33. MINIMUM VIABLE
PRODUCT
If you say this feature “should” be there, it doesn’t belong in
your MVP
• Video MVP – Make a video how it works as if it’s already
done
• The Concierge MVP – Do it by hand, customer by
customer
• Wizard of Oz MVP – 8 people behind a curtain

34. QUALITY IN
AN MVP
IF WE DON’T KNOW WHO THE CUSTOMER
IS, WE DON’T KNOW WHAT QUALITY IS

35. STARTUP’S JOB
• Measure where it right and wrong
• Confronting hard truths
• Devise Experiments to learn how to move the real
numbers closer to the ideal reflected in the business plan

36. BUILD
MEASURE
LEARN

37. BUILD MEASURE
LEARN

38. EXPERIMENTS
• Do them with early adopters, not average customers
• GOAL: Measure what customers did (unlike focus groups)
• An experiment is a PRODUCT

39. YOUR TWO MOST
IMPORTANT
ASSUMPTIONS
• Value Hypothesis
• Growth Hypothesis

40. INNOVATION
ACCOUNTING

41. INNOVATION
ACCOUNTING
1. Baseline - Use MVP to establish real data on where the
company is right now
2. Tuning the engine - Fine tune from baseline towards ideal
3. Pivot or persevere

42. BASELINE
• Test riskiest assumptions first
• Careful with vanity metrics (up and to the right)
• Use Learning milestones
• P.e. conversion rates
• Sign up and trial rates
• Customer lifetime value

43. TUNING THE ENGINE
• Work towards second learning milestones
• Every prod. Dev, marketing should be targeted at
improving one of the drivers of it’s growth model

44. PIVOT OR PERSEVERE
Schedule a regular meeting (every 6 weeks, for instance)
Startups that fails to converge to something like the ideal:
time to pivot

45. FUNNEL METRICS
Behaviors critical to engine of Growth (specific to each
business)
• Customer registration
• Downloads
• Trials
• Repeat Usage
• Purchase

46. COHORT ANALYSIS
• One of the most important tools of Startup Analysis
• Don’t look at cumulative totals or gross numbers like total
revenue and total number of customers
• Look at performance of each group of customers
• Each group is called a Cohort

47. VANITY METRICS
• Gross Metrics
• Total Registered User
• Total Paying customers,
• etc

48. INSTEAD OF
VANITY
METRICS
USE COHORT ANALYSIS AND SPLIT TESTS

49. THE 3 AAA OF
METRICS
• Actionable – Must demonstrate clear cause and effect
• Accessible – Make reports as simple as possible so that
everyone understands them
• Auditable – Ensure data is credible

50. PIVOT
Structured Course Correction designed to test a new
fundamental hypothesis about a product, strategy and
engine of growth.
A pivot requires that we keep one foot rooted in what we’ve
learned so far, while making a fundamental change in
strategy

51. CATALOG OF PIVOTS
• Zoom-in – refocus on what was before a feature
• Zoom-out – what was once the product becomes a feature
• Customer Segment – changing the target audience
• Customer need – change to a higher customer need
• Platform – from product to platform and viceversa
• Business Architecture – From high margin, low volume to
low margin high volume or vice versa
• Value Capture – Change the way company captures value
• Engine of Growth – change Viral, sticky or paid
• Channel – change sales channel
• Technology – deliver the same in different technology

52. BATCH
A CAUTIONARY TALE ABOUT LETTERS

53. SINGLE PIECE FLOW
FASTER THAN BATCH
• No sorting/stack/move around
• Batch more efficient per step but less as a system
• Faster to catch mistakes with little to no impact
• Overall performance of system more important than
individual performance

54. ENGINE OF
GROWTH

55. HOW CUSTOMERS
DRIVE GROWTH
1. Word of Mouth
2. Side effect of product usage
3. Funded Advertising
4. Repeat purchase or use

56. STICKY ENGINE OF
GROWTH
• Designed to attract and retain customers for the long term
• Relies on having a high customer retention rate
• Tracks churn rates very carefully

57. VIRAL ENGINE OF
GROWTH
• Quantified by viral loop
• Speed determined by viral coefficient
• Viral Coefficient = how many new customers will use the
product as a consequence of each new customer that
signs up
• Viral coefficient higher than 1 = exponential growth

58. PAID ENGINE OF
GROWTH
• Revenue from customers fuels cost of acquiring new
customers
• Customer lifetime value determines how much to spend
per new customer
• Cost of Acquisition (CPA) – Money spent versus new
customers that signed up

59. FIVE WHYS ROOT
CAUSE ANALYSIS
A technique for continuous Improvement of company
Process.• Ask “why” five times when Something
unexpected happens.
• Make proportional investments in prevention at all five
levels of the hierarchy.
• Behind every supposed technical problem is usually a
human problem. Fix the cause, not just the symptom.

60. AN EXERCISE – BMC
OF TASK RABBIT