Intro to Lean Startup and insight into the barriers and strategies for corporate innovation. Corporate Innovation inspired by Trevor Owens, CEO of Lean Startup Machine.

1. Lean Startup &
Corporate Innovation
Kevin Shutta
Lean Startup Machine Organizer & Coach
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2. Who is this guy?
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Organize three-day Lean Startup workshops
in Washington D.C. and the SF Bay Area
Experience in several startups
Often invited to speak on Lean Startup for
accelerators

3. Who are you?
Who has read the lean startup?
Who has gone to a startup competition?
Who has experience in a startup?
Who has experience creating disruptive new products?
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4. Agenda
What is Lean Startup and how you can use it in corporate innovation
Rough outline:
• Lean Startup Overview
• Corporate Innovation
• Questions
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5. 98% of Startups FAIL
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We believe most fail because never get customers to pay for their offering and/or
build something nobody wants.

6. My Experience without Lean
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7. College Hobby
I created over 2,000 videos teaching myself how to speak in public.
Practice generally included 10-60 second videos on skills that someone
could practice on his/her own:
• Pronunciation
• Gestures
• Stance
• Confidence
• Etc.
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8. Startup Idea: Share this with the world
through online network for public speaking
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9. Washington, D.C. Summer 2013
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Top Competitor
Solution
Resolve fear through skill-building using low cost, low effort, high
feedback training online through a guided community and content.

10. Successes
• 1st Place at Startup competition
• Designed a few courses of content
• Team of 4-7 working on this for 5 months
• Investors LOVED the idea, they just wanted to see the PRODUCT
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11. Customers (Sales Pitch)
50 people in the streets of Washington, D.C.
• 48 thought the idea would be good for other people, but not for
themselves
• “This would be good for introverts, but not me”
• “I take beta blockers before I speak, so I’m fine.”
• “I’m a teacher. I got used to the stress a long time ago, so I don’t look for
solutions anymore.”
• 1 Person liked it because he wanted to recruit me for network
marketing
• 1 Person ACTUALLY wanted to give it a try
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12. Customers (Product Demo)
Demo in Asperger’s group
• 100% (about 10 of 10) saw their speaking skills improve after their
combined content and video course
• 0% wanted continued lessons
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13. Online platform for Public Speaking
Customers
Money
Problem
Offering
Solves
Problem for
customer
Captures
Money
Scalable
Money to
Build
Technology
to Build
People to
Build
Willing to Use
$$$ to solve
Problem

14. Wall of Shame
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15. Lesson Learned: forcing my idea on the world
doesn’t work
even when everyone thinks it’s a great idea and is
ready to be built
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16. Being wrong and failing is the norm in
entrepreneurship. So what can we do?
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17. What is Lean Startup?
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18. Startup
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A startup is a human institution designed to deliver a new
product or service under conditions of extreme uncertainty.
- Eric Ries

19. Two Types of Innovation
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20. Sustaining Innovation – Improving Existing Products
• Product improvements
• Cost cutting
• Applying best practices
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Companies are naturally great at this.
Startups generally do not address sustaining innovation.
I will not talk about this today.

21. Disruptive Innovation
Definition: Uncovering new prodcuts and creating new lines that grow
massive profits and destroy existing markets
Examples:
• Music disks to cassettes to CDs to digital
• Letters to emails and texting
Drastically changed businesses and market players, lost jobs.
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Lean Startup addresses how this can be done.
Companies are not good at doing this

22. Lean Startup
Lean Startup is about finding the cheapest, fastest way to
Reduce the risk of your startup not succeeding,
And rapidly iterating until you find the business that succeeds
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23. Your Startup idea is a set of [untested] Questions
and Hypotheses
“I believe [Customer] has a problem with [Problem]”
“I believe [Solution] will solve [Problem] for [Customer]”
“I believe [Customer] will pay for [Solution]”
“I believe [Customer] will repeat buy the [Solution] or recommend to a
friend”
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24. So… identify and reduce your risks of failing by
testing, validating, and getting to the right model
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25. Experiments Provide Answers
Hypothesis: “I believe [customer] has a problem with [problem]”
Experiment: Ask the customers. See if they exhibit the behavior of
someone with that problem (discussed later)
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26. 26
Build
Experiment
MeasureLearn
Create new experiments
to validate / invalidate
business models until you
fine one that works

27. Some Types of Experiments
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28. Types of Experiments
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Experiment Possible Tools Question it Answers
(Validation/Invalidation)
Learning Available
Problem
Interview
Open-ended
questions
Does the customer have the problem I think they
have? What problems do they have?
• Customer pain points (if any)
• Alternative solutions
• Customer Segments
• Potential Use Cases (stories)
Solution
Interview
Prototype
Screenshots
Mock-ups
Could the solution work? • Identify early adopters
• Features required / not required in
minimum viable product

29. Types of Experiments
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Experiment Possible Tools Question it Answers
(Validation/Invalidation)
Learning Available
Pitch MVP Scripts
Sales materials (e.g.
screenshots)
Letter of Intent
Landing Page
Can we drive traffic? Can we get signups? Will
people sacrifice time / money / emails / other
currency to solve their pain (with our solution)?
• Sales & marketing tactics
• Customer objections
• Pricing information
Concierge
MVP
A person (you)
Simple technology
(sometimes)
Does the manual version of my product solve the
customer need? Do they return or refer others?
• Product optimization (features
needed and not needed)
• Sales funnel optimization
• Potential lifetime customer value
and sales model

30. Find your Customers
GET OUT OF THE BUILDING. Find customers who have the problem you
think they have.
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31. Find early adopters that have a problem
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• Aware that they have the problem
• Previously searched for a solution
• Tried to solve it themselves
• Have money to pay for solution
Learn about them! Help them solve the problems they do have.

32. Once you have customer and problem, SELL IT!
Get emails, money, etc.
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33. Pitch MVP
Purpose: see if your customer with the problem will put something on
the line to solve that problem
Script:
• Intro and qualify them
• Do you have a problem with [Problem]?
• Present a solution (doesn’t have to work!)
• Ask for the currency (attention, money, email address, etc.)
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34. 35

35. If people will not give up their email address for a
promise to solve their problem, they will not pay
money for a product that promises that it will.
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36. Concierge
Purpose: see if the solution solves the pain
Experiment: manually do what your service is intended to do
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37. Concierge Sample
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Grace Ng
Lean Startup Machine
@uxceo
Question: Will connecting people with websites and UX Designers for $$$ create a
mutually beneficial experience?
1. Let customers fill out an online form that sends email to Grace
2. UX Designers fill out form that submits email to Grace
3. Grace manually introduces them in an email
Result: the experience was OK and Grace had more to improve
See the experiment at https://www.youtube.com/watch?v=-_MH8TENpwc

38. What does Minimum and Viable mean?
The minimum feature set that solves the customer’s pain
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39. Pivots
If you find that your proposed hypothesis failed in the market, the
market is telling you something. CHANGE YOUR MODEL (PIVOT) and
try the new one. Otherwise, you are beating a dead horse.
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40. Starbucks
Started as…
Selling expresso makers and
coffee beans
Ended as..
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41. Case Study
[Lean]
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43. Common Objection: Lean Startup is just for
simple consumer software products
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44. Lean Startup is about finding and eliminating your
risks cheaply and effectively. It’s for everything
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Sometimes, you need to know if something is technically possible, and
the customer aspects are not risks. With lean, you build the riskiest parts
first, and you only build one (prototype) for proof of concept.
Either way, YOU’RE STILL LEAN

45. Corporate Lean Innovation
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46. Purpose: Maintain & Increase Profits
1. Protect or grow future market share
2. Launch new products in new markets
3. Make returns
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47. Why are startups better at disrupting?
• Internal barriers
• Lack of innovative culture
Questions often asked before creating new products
• "Are we good at this?"
• "How does this fit into our existing business model?"
• "Does it suit our brand?
• "What sithe impact on our portfolio?"
• "Does my boss like this?"
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48. Self-Cannibalization
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Steve Jobs: we need to invest money in new technology. The Apple II will be
outdated in a few years
Board: We need to pour more than the Apple II rather than side projects. It’s
70% of our sales!

49. Person Motivations
Entrepreneurs
• Power and influence
• Autonomy
• Managing People
• Financial Gain
• Altruism
Employees
• Security
• Prestige
• Financial Gain
• Affiliation
• Recognition
• Lifestyle
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50. Lastly
There are millions of entrepreneurs and startups trying to eat yours and
your competitors’ lunch. Many will get the resources to compete.
There is one of you.
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GOOD LUCK!

51. What can Companies do about it?
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Type Definition Potential
Upside
Company
Control
Incubation Innovate from within Lower High
Acquisition Purchase innovative
companies (> 50% stake)
High High
Investment Invest in innovative
companies (< 50% stake
High Low

52. Incubation
Grow disruption from within
Skunkworks – take best and brightest and assign them to a program
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Lockheed Martin assigned a team to
develop the fast, light X-56A aircraft
to undermine other offerings
Advantages: accomplish specific goals
Disadvantages: often secretive, best with structured innovation

53. Incubation
Grow disruption from within
Intrapreneurship – programs to commercialize internal employee ideas
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Advantages: increase idea pool. Can be followed by accelerator program
Disadvantages: Governed by existing lines, employees don’t know how to
implement ideas, encouraging sustaining innovation
Collected 550 business plans per year from employees
3-month boot camp for finalists to polish ideas
Winners were passed to business lines for implementation

54. Incubation
Grow disruption from within
Innovation Lab – salaried intrapreneurs research and innovate together
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Advantage: invent cool stuff
Disadvantage: may not have commercialization/implementation
knowledge, may not have incentives
Xerox invented the mouse
and Ethernet, although they
were commercialized by
others

55. Incubation
Grow disruption from within
Techstars model: teams apply with ideas, finalists work on ideas for 3
months, then teams pitch to company and investors at closing.
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Advantages: incentives (employees keep most of profits), semi-
unstructured innovation
Disadvantage: corporate chosen ideas, which limits innovative
potential
Microsoft collected applications
& put 11 teams in Techstars for 3
months, purchasing one for $5
million. Others companies have
done the same

56. Acquisition
Purchase disruptive companies
Advantages: any company can innovate, doesn’t have to be you. Own
technology, innovative teams, fastest option to acquire
Disadvantages: costly
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Three of Google’s
highest profile
acquisitions

57. Investment
Purchase a financial share of disruptive companies
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Advantages: any company can innovate, doesn’t have to be you. Hedge
risks of disruption.
Disadvantages: costly. Expect to pay more than Venture Capitalists and
Angels for similar shares as they usually bring contacts, expertise, and
support, and corporations have a bad reputation for managing startups
$850 million in investments in internal venture
fund (large example)
Invest in companies related to Intel
Large returns include MySQL and Citrix

58. Combination of Strategies
Innovation Colony – separate department dedicated to creating new
products. Department has budget to incubate, acquire, or invest as
appropriate
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Advantages: corporate control, combination of approaches, budgetary
approach, fits in with corporate structure
Disadvantages: requires money and many ideas for best results

59. Innovation Tips
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60. To increase disruption, connect with startup
world
• Learn about startups and investment/acquisition opportunities
through your Venture Capitalist and Angel investor friends
• Connect with entrepreneurs
• Connect with other executives who are doing the same thing you are
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61. Use a Different Brand Name
Problems with using your brand name or “powered by…”
• Increased conversions due to brand recognition (experiment
externality)
• No worry about putting out a poor product
• Risk publicity for unforeseen issues
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62. Bring in Entrepreneurs and Innovators to Lead,
Manage, and Coach
• Your portfolio managers need to know how to manage innovation
• Your entrepreneurs and innovators need good practices and
knowledge from someone who has done it before
• Bureaucrats will not know how to manage or coach innovation teams
will
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63. Be Cautious with your Leadership Team
• Innovation practices need leadership support in both ideas and
implementation
• If implement 10% time, needs to be:
• Applied to product teams
• Results tracked
• Enforced by you
• Enforced and celebrated by your management team
If you don’t get support, old corporate habits will take over again.
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64. Wrapping Up
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65. Sources
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The Lean Enterprise (main source)
by Trevor Owens, CEO of Lean Startup Machine
Other content is a mix of my own and from
other sources

66. Lean Startup Machine
The hands-on Lean Startup workshop
• Learn a repeatable process for finding products that succeed with
companies
• Hands-on guidance and practice from successful entrepreneurs and
leaders in Lean
• Three days of hands-on training
• In most major cities worldwide
https://www.leanstartupmachine.com
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67. Learn More about Lean
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There are plenty of books out there these days.

68. Lean Startup Machine does enterprise workshops
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Go here to learn more:
https://www.leanstartupmachine.com/enterprise-lean-startup
A few companies LSM has worked with:

69. Questions
Connect and Contact Info
Kevin Shutta
kshutta@gmail.com
www.linkedin.com/in/kevinshutta
@KevinShutta
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