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2009 11 09 The Lean Startup Oulu Edition

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2009 11 09 The Lean Startup Oulu Edition

  1. The Lean Startup#leanstartup<br />Eric Ries (@ericries)<br />http://StartupLessonsLearned.com<br />
  2. Event sponsors<br />
  3. Most Startups Fail<br />
  4. Most Startups Fail<br />
  5. Most Startups Fail<br />
  6. Most Startups Fail<br />But it doesn’t have to be that way. <br />We can do better. <br />This talk is about how.<br />
  7. What is a startup?<br />A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. <br />Nothing to do with size of company, sector of the economy, or industry<br />
  8. The Pivot<br />What do successful startups have in common?<br />They started out as digital cash for PDAs, but evolved into online payments for eBay. <br />They started building BASIC interpreters, but evolved into the world&apos;s largest operating systems monopoly. <br />They were shocked to discover their online games company was actually a photo-sharing site.<br />Pivot: change directions but stay grounded in what we’ve learned. <br />http://startuplessonslearned.blogspot.com/2009/06/pivot-dont-jump-to-new-vision.html<br />
  9. Speed Wins<br />if we can reduce the time between major iterations<br />we can increase our odds of success<br />
  10. A Tale of Two Startups<br />
  11. Startup #1<br />
  12. Stealth Startup Circa 2001<br />
  13. All about the team<br />
  14. A good plan?<br />Start a company with a compelling long-term vision. <br />Raise plenty of capital.<br />Hire the absolute best and the brightest.<br />Hire an experienced management team with tons of startup experience.<br />Focus on quality. <br />Build a world-class technology platform.<br />Build buzz in the press and blogosphere.<br />
  15. Achieving Failure<br />Company failed utterly, $40MM and five years of pain.<br />Crippled by “shadow beliefs” that destroyed the effort of all those smart people.<br />
  16. Shadow Belief #1<br />We know what customers want. <br />
  17. Shadow Belief #2<br />We can accurately predict the future. <br />
  18. Shadow Belief #3<br />Advancing the plan is progress. <br />
  19. A good plan?<br />Start a company with a compelling long-term vision. <br />Raise plenty of capital.<br />Hire the absolute best and the brightest.<br />Hire an experienced management team with tons of startup experience.<br />Focus on quality. <br />Build a world-class technology platform.<br />Build buzz in the press and blogosphere.<br />
  20. Startup #2<br />
  21. IMVU<br /> <br />
  22. IMVU<br /> <br />
  23. New plan<br />Shipped in six months – a horribly buggy beta product<br />Charged from day one<br />Shipped multiple times a day (by 2008, on average 50 times a day)<br />No PR, no launch<br />Results 2009: profitable, revenue &gt; $20MM<br />
  24. Lean Startups Go Faster<br />Commodity technology stack, highly leveraged (free/open source, user-generated content, SEM).<br />Customer development – find out what customers want before you build it. <br />Agile (lean) product development – but tuned to the startup condition. <br />
  25. Customer Development<br /><ul><li>Continuous cycle of customer interaction
  26. Rapid hypothesis testing about market, pricing, customers, …
  27. Extreme low cost, low burn, tight focus
  28. Measurable gates for investors</li></ul>http://bit.ly/FourSteps<br />
  29. Agile Product Development(A tale of two startups, revisited)<br /><ul><li>Principles drawn from Lean Manufacturing and Toyota Production System
  30. These examples are drawn from software startups, but increasingly:
  31. All products require software
  32. All companies are operating in a startup-like environment of extreme uncertainty</li></li></ul><li>Traditional Product Development<br />Unit of Progress: Advance to Next Stage<br />Waterfall<br />Requirements<br />Specification<br />Design<br />Problem: known<br />Solution: known<br />Implementation<br />Verification<br />Maintenance<br />
  33. Agile Product Development<br />Unit of Progress: A line of Working Code<br />“Product Owner” or in-house customer<br />Problem: known<br />Solution: unknown<br />
  34. Product Development at Lean Startup<br />Unit of Progress: Validated Learning About Customers ($$$)<br />Customer Development<br />Hypotheses,<br />Experiments,<br />Insights<br />Problem: unknown<br />Data,<br />Feedback,<br />Insights<br />Solution: unknown<br />
  35. Minimize TOTAL time through the loop<br />IDEAS<br />LEARN<br />BUILD<br />DATA<br />CODE<br />MEASURE<br />
  36. There’s much more…<br />IDEAS<br />Code Faster<br />Learn Faster<br />BUILD<br />LEARN<br />Unit Tests<br />Usability Tests<br />Continuous Integration<br />Incremental Deployment<br />Free & Open-Source Components<br />Cloud Computing<br />Cluster Immune System<br />Just-in-time Scalability<br />Refactoring<br />Developer Sandbox<br />Minimum Viable Product<br />Split Tests<br />Customer Interviews<br />Customer Development<br />Five Whys Root Cause Analysis<br />Customer Advisory Board<br />Falsifiable Hypotheses<br />Product Owner Accountability<br />Customer Archetypes<br />Cross-functional Teams<br />Semi-autonomous Teams<br />Smoke Tests<br />CODE<br />DATA<br />Measure Faster<br />MEASURE<br />Split Tests<br />Clear Product Owner<br />Continuous Deployment<br />Usability Tests<br />Real-time Monitoring<br />Customer Liaison<br />Funnel Analysis<br />Cohort Analysis<br />Net Promoter Score<br />Search Engine Marketing<br />Real-Time Alerting<br />Predictive Monitoring<br />
  37. There’s much more…<br />Startup Lessons Learned <br />(season one 2008-2009)<br />Every essay from the blog’s first year<br />Beta version available for the first time today<br />http://bit.ly/SLLbookbeta<br />
  38. Thanks!<br /><ul><li>Startup Lessons Learned Blog
  39. http://StartupLessonsLearned.com/
  40. Getting in touch (#leanstartup)
  41. http://twitter.com/ericries
  42. eric@theleanstartup.com
  43. Startup Lessons Learned – in print
  44. Beta version available today
  45. http://bit.ly/SLLbookbeta</li></li></ul><li>Part Two<br />
  46. How to build a Lean Startup<br />Let’s talk about some specifics. <br />Continuous deployment<br />Minimum Viable Product<br />Five why’s <br />
  47. Continuous Deployment<br />IDEAS<br />LEARN<br />BUILD<br />Learn Faster<br />Customer Development<br />Five Whys<br />Build Faster<br />Continuous Deployment<br />Small Batches<br />Continuous Integration<br />Refactoring<br />DATA<br />CODE<br />MEASURE<br />Measure Faster<br />Split Testing<br />Actionable Metrics<br />Net Promoter Score<br />SEM <br />
  48. Continuous Deployment<br /><ul><li>Deploy new software quickly
  49. At IMVU time from check-in to production = 20 minutes
  50. Tell a good change from a bad change (quickly)
  51. Revert a bad change quickly
  52. And “shut down the line”
  53. Work in small batches
  54. At IMVU, a large batch = 3 days worth of work
  55. Break large projects down into small batches</li></li></ul><li>Cluster Immune System<br />What it looks like to ship one piece of code to production:<br /><ul><li>Run tests locally (SimpleTest, Selenium)
  56. Everyone has a complete sandbox
  57. Continuous Integration Server (BuildBot)
  58. All tests must pass or “shut down the line”
  59. Automatic feedback if the team is going too fast
  60. Incremental deploy
  61. Monitor cluster and business metrics in real-time
  62. Reject changes that move metrics out-of-bounds
  63. Alerting & Predictive monitoring (Nagios)
  64. Monitor all metrics that stakeholders care about
  65. If any metric goes out-of-bounds, wake somebody up
  66. Use historical trends to predict acceptable bounds</li></ul>When customers see a failure:<br /><ul><li>Fix the problem for customers
  67. Improve your defenses at each level</li></li></ul><li>Minimum Viable Product<br />IDEAS<br />Code Faster<br />Learn Faster<br />BUILD<br />LEARN<br />Continuous<br />Deployment<br />Minimum Viable <br />Product<br />CODE<br />DATA<br />Measure Faster<br />MEASURE<br />Rapid Split Tests<br />
  68. Possible Approaches<br />“Maximize chances of success”<br />Build a great product with many features that increase the odds that customers will want it<br />Problem: no feedback until the end, might be too late to adjust<br /> “Release early, release often”<br />Get as much feedback as possible, as soon as possible<br />Problem: run around in circles, chasing what customers think they want<br />
  69. Minimum Viable Product<br />The minimum set of features needed to learn from earlyvangelists – visionary early adopters<br />Avoid building products that nobody wants<br />Maximize the learning per dollar spent<br />Get the facts before it’s too late<br />Probably much more minimum than you think!<br />
  70. Minimum Viable Product<br />Visionary customers can “fill in the gaps” on missing features, if the product solves a real problem<br />Allows us to achieve a big vision in small increments without going in circles<br />Requires a commitment to iteration<br />
  71. Fears<br />False negative: “customers would have liked the full product, but the MVP sucks, so we abandoned the vision”<br />Visionary complex: “but customers don’t know what they want!”<br />Too busy to learn: “it would be faster to just build it right, all this measuring distracts from delighting customers”<br />
  72. Don’t Launch<br />IDEAS<br />Code Faster<br />Learn Faster<br />BUILD<br />LEARN<br />Continuous<br />Deployment<br />Don’t Launch<br />CODE<br />DATA<br />Measure Faster<br />MEASURE<br />Rapid Split Tests<br />
  73. Don’t Launch<br />What is a launch?<br />Marketing Launch<br />Announce a new product, start its PR campaign, and engage in buzz marketing activities. <br />Product Launch<br />Make a new product available to customers in the general public. <br />
  74. Effects of Marketing Launch<br />Drive customers into your sales pipeline<br />Establish credibility with potential partners<br />Help you raise money<br />… however … <br />
  75. Other Consequences<br />A marketing launch establishes your positioning<br />Waste customers on a non-working business model <br />You never get a second chance to launch<br />
  76. Why do we launch?<br />Investors push for it (ego?)<br />Founders push for it (ego?)<br />Fear of the accidental launch<br />Instead: build a Minimum Viable Product, establish small but renewable audience, iterate iterate iterate<br />
  77. Know When to Launch<br />When you have a strategy for the launch<br />Know the success metrics<br />Know your fundamental driver of growth<br />Know where, when, and how to launch<br />Launch when you can predict the future<br />
  78. Five Whys<br />IDEAS<br />Code Faster<br />Learn Faster<br />BUILD<br />LEARN<br />Continuous<br />Deployment<br />Five Whys Root<br />Cause Analysis<br />CODE<br />DATA<br />Measure Faster<br />MEASURE<br />Rapid Split Tests<br />
  79. Five Whys Root Cause Analysis<br /><ul><li>A technique for continuous improvement of company process.
  80. Ask “why” five times when something unexpected happens.
  81. Make proportional investments in prevention at all five levels of the hierarchy.
  82. Behind every supposed technical problem is usually a human problem. Fix the cause, not just the symptom.</li></li></ul><li>Get Started Today<br />You are ready to do this, no matter <br />who you are<br />what job you have<br />what stage of company you’re in<br />Get started now, today. <br />
  83. There’s much more…<br />IDEAS<br />Code Faster<br />Learn Faster<br />BUILD<br />LEARN<br />Unit Tests<br />Usability Tests<br />Continuous Integration<br />Incremental Deployment<br />Free & Open-Source Components<br />Cloud Computing<br />Cluster Immune System<br />Just-in-time Scalability<br />Refactoring<br />Developer Sandbox<br />Minimum Viable Product<br />Split Tests<br />Customer Interviews<br />Customer Development<br />Five Whys Root Cause Analysis<br />Customer Advisory Board<br />Falsifiable Hypotheses<br />Product Owner Accountability<br />Customer Archetypes<br />Cross-functional Teams<br />Semi-autonomous Teams<br />Smoke Tests<br />CODE<br />DATA<br />Measure Faster<br />MEASURE<br />Split Tests<br />Clear Product Owner<br />Continuous Deployment<br />Usability Tests<br />Real-time Monitoring<br />Customer Liaison<br />Funnel Analysis<br />Cohort Analysis<br />Net Promoter Score<br />Search Engine Marketing<br />Real-Time Alerting<br />Predictive Monitoring<br />
  84. There’s much more…<br />Startup Lessons Learned <br />(season one 2008-2009)<br />Every essay from the blog’s first year<br />Beta version available for the first time today<br />http://bit.ly/SLLbookbeta<br />
  85. Thanks!<br /><ul><li>Startup Lessons Learned Blog
  86. http://StartupLessonsLearned.com/
  87. Getting in touch (#leanstartup)
  88. http://twitter.com/ericries
  89. eric@theleanstartup.com
  90. Startup Lessons Learned – in print
  91. Beta version available today
  92. http://bit.ly/SLLbookbeta</li></li></ul><li>Backup<br />
  93. Rapid Split Tests<br />IDEAS<br />Code Faster<br />Learn Faster<br />BUILD<br />LEARN<br />Continuous<br />Deployment<br />Five Whys Root<br />Cause Analysis<br />CODE<br />DATA<br />Measure Faster<br />MEASURE<br />Rapid Split Tests<br />
  94. Split-testing all the time<br />A/B testing is key to validating your hypotheses<br />Has to be simple enough for everyone to use and understand it<br />Make creating a split-test no more than one line of code:<br />if( setup_experiment(...) == &quot;control&quot; ) {<br /> // do it the old way<br />} else {<br /> // do it the new way<br />}<br />
  95. The AAA’s of Metrics<br />Actionable<br />Accessible<br />Auditable<br />
  96. Measure the Macro<br />Always look at cohort-based metrics over time<br />Split-test the small, measure the large<br />

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