WHAT IS LEAN STARTUP? - SESSION 5

www.solvayentrepreneurs.be
WHAT IS LEAN STARTUP?
SESSION 5 (out of 10)
LEAN
ENTREPRENEURSHIP
This session is part of a 10-weeks course
given to master students of the SOLVAY
BRUSSELS SCHOOL OF ECONOMICS
AND MANAGEMENT by professor Olivier
WITMEUR.

Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR 2
•  The importance of
assumptions
•  How to test fast and cheap
•  What is the ‘lean’ movement?
A revolution in
entrepreneurship?
QUESTIONS AGENDA RESOURCES
•  Back to Product-Market fit
•  Introduction to Lean
entrepreneurship
•  Lean Canvas and dashboards
•  Limitations of lean
•  Why lean startup changes
everything (HBR)
Desired Outcomes of the Session

Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR
PRODUCT MARKET FIT
#1

Customer – Value Canvas
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Looking for product-market fit? Focus!
B. Cooper, 2013
5

How to segment?
•  Different level pain or passion
•  Seek to solve problem differently
•  Require different marketing
•  Require different distribution
•  Require different sales
•  Not necessarily demographic-based
•  …
6

Select your customer segment (Segment matrix)
Compare different segment in terms of
–  Depth of pain
–  Budget
–  Market size
–  Time to prototype
–  Easiness to reach
–  Fit with personal values
–  …
Rate: High/moderate/low
7

What are your hypothesis?
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LEAN
ENTREPRENEURSHIP
#2

Why so many startups fail?
•  Ignore customers
•  No market need
•  Need of business model
•  Poor product
•  Pricing issues
•  Failure to adapt their offering / business model
•  Rely to heavily on their (business) plan à Too much rigidity?
10

Hot topic!
11

The new Gurus
12
STEVE BLANK
ERIC RIES
BRANT COOPER
ASH MAURYA

Lean Startup Movement Mindset
“Life’s too short to build something nobody wants” - Eric Ries
“Customers don’t care about your solution, they care about their problems” - Dave McClure
“Bind a solution to your problem as late as possible” - Ash Maurya
“It’s not the customer’s job to know what they want” - Steve Jobs
“Given the right context, customers can clearly articulate their problems, but it’s your job to come up with the
solution” - Ash Maurya
“Remove any feature, process or effort that does not contribute directly to the learning you seek” - Eric Ries
“A good design is one that changes customer behaviour for the better” - Eric Ries
“Real learning comes from facts and commitment, not opinions and promises” - Eric Ries
“Get out of the building” - Steve Blank
“Startups that succeed are those that manage to iterate enough times before running out of resources” - Eric
Ries
“While ideas are cheap, acting on them is quite expensive” - Ash Maurya
“Fail often and fail fast… in order to succeed soon.”
“You waste if you don’t learn.“
13

What is Lean Startup?
Optimize efficiency in the discovery of customers
and how to create value.
Eliminate non value-add activities.
Validated learning.
Influenced by lean management, bootstrapping, agile product development methods, design thinking,
qualitative market research methods…
14

The Lean Startup Cycle
15
BUILD
MEASURE
LEARN
IDEA
Value Creation
& Business Model
Hypotheses
PRODUCT
•  Basic tests
•  Minimum Viable
Product (MVP)
•  Prototype
•  Proof of Concept
DATA
Metrics
PERSEVERE
or PIVOT?
* Adapted from E. Ries, Lean Startup, 2012
A pivot is a structured course
correction designed to test a new
fundamental hypothesis about the
product, business model and
engine of growth. (E. Ries)

BUILD - Minimum Viable Product
“The minimum viable product is that version of a new product which allows a team to collect the maximum
amount of validated learning about customers with the least effort” - Eric Ries
16

MVP vs. Prototype
17
•  Validate the market assumptions
•  Can be different from the final product
•  Must show the features to the
potential customers and enables to
gather information from the market
•  Verify technical assumptions
•  Is a demonstration to potential
investors/customers but is not
launched on the market.
•  Nice if it can be built at minimum cost
MVP PROTOTYPE

Minimum Viable Product Types
18
•  Open interviews
•  Pitch of a fake product:
email, call, face-to-face…
•  Low fidelity prototypes
•  Mock-up
•  Basic advertising campaign
•  Like on Facebook, sign-up
page…
•  Landing page with call-to-
action.
•  Video, 3D, pictures …
NEEDS / DEMAND PROOF OF CONCEPT VALUES / DRIVERS
•  Wizard of Oz, Concierge…
•  Interactive mock-up
•  Video demo
•  Actual prototype, Beta
version …
•  Partly implemented solution
•  Full offering presentation:
website, folder,
PowerPoint…
•  Letter of intent, pre-order…
from customers
•  Crowd funding campaign
•  Offering, quote … from
suppliers
•  A/B testing, incl. for pricing
strategy test, conversion
rate…
•  Real life marketing
campaign
Desirability
Feasibility
Sustainability

* Adapted from S. Montreuil, E&I 2013

MEASURE - Metrics
Example of key assumptions
–  Problem hypothesis: test if the product really create value to customers
–  Customer hypothesis: test who is the customer and how he/she (re)act
–  Growth hypothesis: test how new customers will discover the product, incl. funnel metrics
Vanity vs. actionable metrics
–  Vanity metrics: “good for feeling awesome”
–  Actionable metrics: “the only metrics that entrepreneurs should invest energy in collecting are
those that help them make decisions”
3 A’s of metrics
•  Actionable
•  Accessible
•  Auditable
19

LEARN - Persevere, Pivot or Abandon
“A pivot is a structured course correction designed to test a new fundamental hypothesis about the product,
business model and engine of growth” – Eric Ries
20

Run test
Building a Business with the Lean Approach
21
Prioritize
Hyp.
validated
Hyp.
rejected
SCALE-UP STOP
PERSEVERE
Envision
PIVOT
Revision
Set vision
* Adapted from Eisenmann & al., HBS, 2
Create test
- MVP / Experience
- Market research
- …
Define
hypotheses
- Value proposition
- Market sizing
- Channels
- Partnerships
- …

MVP Examples
Dropbox 2008
Lockitron (First 1000)
Your case … from idea to real product
22

LEAN CANVAS AND
DASHBOARDS
#3

Validation canvas
(To be compared with your entrepreneurial course journal)
24

Lean Canvas
Ash Maurya, 2012
25
Solution((S)
Top$3$features
Unfair(Advantage(
(UA)
Can't$be$easily$
copied$or$bought
Key(Metric((KM)
Key$activity$you$
measure$
Channels((CH)
Path$to$customers
Problem((P)
Top$3$problems
Unique(Value(
Propistion((UVP)
Single,$clear,$
compelling$message$
that$states$why$you$
are$different$and$
worth$buying
Customer(segments(
(CS)
Target$custmers$
(early$adopters)
Cost(Structure((C$)
Customer$acquisition$cost
Distribution$costs
Hosting
People,$etc.
Revenu(Streams((R$)
Revenu$Model
Life$Time$Value
Revenue
Gross$Margin

Lean Dashboard
Spark59.com
26

Customer Development
Brant Cooper / Steve Blank
27

Lean Launchpad
Steve Blank
28

LIMITATIONS OF LEAN
#4

Lean is good… but not magic. Beware the fad.
•  In the past, it was called qualitative ‘market research’
•  Test with the customer… but who is the customer. Is she/he ready to play the game?
•  Time consuming. Too much tests?
•  Ability to build MVP? Costs?
•  OK when you have many customer (mass market) but how to deal with very small market
•  Reputation risk (with ‘crappy’ MVP)
•  Confidentiality issues
•  Pivot is trendy … but not a recipe for success.
30

The main steps towards your final project.
31
VALUE
PROPOSITION
BUSINESS
MODEL
ROADMAP
Key activities,
resources & partners
Revenues model &
costs structure
Problem-Solution fit
Product-Market fit
Market sizing
Competition
Stages & milestones
Get-Keep-Grow
Risks & scenario
FINANCE
P&L, cash and
balance sheet
Financing
CREATE
TEST
=
BUILD
MEASURE
LEARN
YOU

A real passion for entrepreneurship education and entrepreneurs.
•  Student entrepreneurs: 2x
•  Full time entrepreneur: once, in a team of 5
•  Coach: 500+ projects over the last 20 years
•  (Advisory) Board member in multiple new ventures
•  Policy making: 2x
•  Director of Solvay Entrepreneurs
•  PhD in entrepreneurship in 2008
•  … never as an investor
My wife (as Colombo), no kids, one dog (Vicky).
33
Olivier Witmeur (Belgian, 46)

Solvay entrepreneurs is the entrepreneurship center of the Université Libre de
Bruxelles. We support entrepreneurs through the development of their venture, from
an idea to a successful and sustainable business.
34
Solvay Entrepreneurs

Let’s keep in touch!
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