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The Sacred, The
                        Profane, and the Pivot
                             A Brief Case Study of Applied
                        CDM, AARRR Metrics, and Lean Principles




                                      (c) 2009 David Binetti
Monday, March 7, 2011
Definitions
                        Sacred
                           Steve Blank’s Customer Development Model (CDM).
                           I follow it religiously.
                        Profane
                           Dave McClure swears every third word. Oh, and
                           his Acquisition, Activation, Retention, Referral,
                           Revenue (AARRR) model is awesome.
                        Pivot
                           Eric Ries’s concept of strategic shifts predicated on
                           learnings. (Sorry, no pithy witticism for this.)


                                          (c) 2009 David Binetti
Monday, March 7, 2011
CDM (Brief Version)

                          A) Establish Hypotheses

                            Test -> (Iterate or Exit)

                          B) Sell

                            Test -> (Iterate or Exit)




                                    (c) 2009 David Binetti
Monday, March 7, 2011
CDM (Discovery - Phase A)
                        Category                          Hypothesis

                Product            State what you are selling.


                Problem            State the customer problem you are solving.


                Channel            State how you are going to sell your product.

                                   State how you are going to generate demand for
                Demand
                                   your product.
                                   State the market type (existing, re-segmented,
                Market Type
                                   new) you’re in.

                Competitive        State the competition you face.


                                           (c) 2009 David Binetti
Monday, March 7, 2011
CDM (Validation - Phase B)



                        I could explain in detail, but
                        basically boils down to:
                        prove you can sell by actually
                        selling before you scale.




                                  (c) 2009 David Binetti
Monday, March 7, 2011
AARRR Model
                                (AKA, Metrics for Pirates)

                          Metric                       Description
                        Acquisition   Users visit

                        Activation    Users sign up

                        Retention     Users come back

                        Referral      Users like and refer

                        Revenue       User pay something for something


                                            (c) 2009 David Binetti
Monday, March 7, 2011
AARRR Model (cont.)
                         The Model measures:

                           Conversion rates for each step

                           Expected value at each step (not
                           included here.)

                         A ‘one-slide pitch deck’.

                           Have these numbers, and you need
                           nothing else.

                                     (c) 2009 David Binetti
Monday, March 7, 2011
Slight Differences



                        The CDM has you look at and
                        test the whole business model.
                        The AARRR assumes the model
                        rolls up in the metrics.



                                 (c) 2009 David Binetti
Monday, March 7, 2011
How They Complement


                        The CDM teaches you to test
                        assumptions, but isn’t as specific
                        on how to measure results.
                        The AARRR gives metrics to
                        know what’s good, but not how
                        to identify what’s broken.

                                  (c) 2009 David Binetti
Monday, March 7, 2011
Case: Votizen

                        Social Network for Registered Voters

                        Civic Participation Made Simple and
                        Meaningful

                        Voter-Focused (as opposed to politician-
                        focused) approach to $5B Political Market.

                        Independent, non-partisan, simple and fun!


                                   (c) 2009 David Binetti
Monday, March 7, 2011
CDM (Brief)
                        Category                        Hypothesis
                                   Social Network for Registered Voters (“LinkedIn
                  Product
                                   for Politics”)
                                   Traditional campaign techniques #fail in a web
                  Problem
                                   2.0 world.
                                   The internet is the primary source of voter
                  Channel
                                   information.

                  Demand           Social networks are both the product and the
                                   demand-generator.
                                   Resegmented; displace current market for
                  Market Type
                                   direct-mail & robocalls.

                  Competitive      Hyper-fragmented.


                                          (c) 2009 David Binetti
Monday, March 7, 2011
AARRR (Brief)
                        Metric                          Description
                                  Creates account on system. (Precursor-
                   Acquisition
                                  requirement)
                                  Certifies voting record (Authenticates - gives
                   Activation
                                  voter the power)

                   Referrals      Forwards to friends (Acquisition model)

                                  Uses system to affect change (Validates lifetime
                   Retention
                                  value)
                                  Private! (Sorry, not appropriate for a public
                   Revenue
                                  document.)


                                          (c) 2009 David Binetti
Monday, March 7, 2011
Applied
                           Started with MVP - Minimum Viable Product.

                              Just enough to get feedback (cost: $1206)


                            Metric      MVP
                        Acquisition      5%
                        Activation      17%
                        Referrals        -
                        Retention        -
                        Revenue          -



Monday, March 7, 2011
Improve
                        Tried a bunch of A/B testing on home page.

                          Found an optimal message.

                        Learning: When given the option to explore,
                        people explored. When given a direction,
                        they took the direction.

                          If you want something done, make it part
                          of registration flow.


                                      (c) 2009 David Binetti
Monday, March 7, 2011
Applied
                              Significant, immediate jump in initial metrics.
                              (Spend ~$10K)


                            Metric       MVP        V.1
                        Acquisition      5%        17%
                        Activation       17%       90%
                        Referrals         -        4%
                        Retention         -        5%
                        Revenue           -         -



Monday, March 7, 2011
Improve Retention and Referrals

                           Same Process, Different Results

                           A/B, Feedback, Analytics, etc.

                             Incremental improvement on retention
                             and referrals.

                             Was improving, but marginal value of
                             efforts were asymptotic.

                           Time for a pivot!

                                       (c) 2009 David Binetti
Monday, March 7, 2011
The Pivot
                        Eric Ries concept: shift direction while
                        grounded in learning

                          Implementation of “back to start of CDM”

                        I took learning and created new MVP.

                          So, $10K sunk cost -- buh-bye! (ugh)

                          Needed to fire current developers,
                          hire new skills. (double-ugh)

                                      (c) 2009 David Binetti
Monday, March 7, 2011
The Pivot (cont.)

                        But, not a waste!

                          Time, money and effort brought learning.

                        Look beyond the features to the problem.

                          “I always wanted to get more involved.
                          This makes it so much easier. Thanks!”



                                      (c) 2009 David Binetti
Monday, March 7, 2011
Applied
                           New product launched as MVP - @2gov on Twitter

                              Contact all public officials at a single address.

                           Results? Much better R&R, and better conversion.

                            Metric       MVP         V.1        New
                                                              Product
                        Acquisition       5%         17%       42%
                        Activation        17%       90%        83%
                        Referrals          -         4%        54%
                        Retention          -         5%        21%
                        Revenue            -          -          -



Monday, March 7, 2011
Applied
                           Next step: test revenue assumptions

                              Provide a channel for voters to support causes and
                              candidates in which they believe.

                           Another pivot! - No data yet

                            Metric         MVP            V.1      New       Next
                                                                 Product   Iteration
                        Acquisition         5%            17%     42%          ?
                        Activation         17%            90%     83%          ?
                        Referrals            -            4%      54%          ?
                        Retention            -            5%      21%          ?
                        Revenue              -             -        -          ?



Monday, March 7, 2011
Takeaways
                        Set up your CDM hypotheses so that you know
                        what you are trying to accomplish and how to
                        tell if you are finished or need to start over.

                        The AARRR approach serves as a great ‘startup
                        dashboard.’ Numbers don’t lie (as long as you
                        don’t lie to yourself.)

                        Should you need to iterate, then pivot -- don’t
                        flail. Measure success by lessons learned, not
                        by the results themselves (oh, and restate CDM.)


                                       (c) 2009 David Binetti
Monday, March 7, 2011
Learn from the Source

                         CDM: http://www.steveblank.com

                         AARRR: http:/ /www.slideshare.net/
                         Startonomics/startup-metrics-for-pirates-
                         presentation

                         Pivot: http://
                         www.startuplessonslearned.com/2009/06/
                         pivot-dont-jump-to-new-vision.html


                                       (c) 2009 David Binetti
Monday, March 7, 2011
Feedback Wanted!

                        Would love feedback!

                        Want to get better, so criticism is preferred.

                          “If you don’t have anything bad to say,
                          then don’t say anything.”

                        dbinetti@gmail.com



                                      (c) 2009 David Binetti
Monday, March 7, 2011

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David Binetti lean startup sxsw

  • 1. The Sacred, The Profane, and the Pivot A Brief Case Study of Applied CDM, AARRR Metrics, and Lean Principles (c) 2009 David Binetti Monday, March 7, 2011
  • 2. Definitions Sacred Steve Blank’s Customer Development Model (CDM). I follow it religiously. Profane Dave McClure swears every third word. Oh, and his Acquisition, Activation, Retention, Referral, Revenue (AARRR) model is awesome. Pivot Eric Ries’s concept of strategic shifts predicated on learnings. (Sorry, no pithy witticism for this.) (c) 2009 David Binetti Monday, March 7, 2011
  • 3. CDM (Brief Version) A) Establish Hypotheses Test -> (Iterate or Exit) B) Sell Test -> (Iterate or Exit) (c) 2009 David Binetti Monday, March 7, 2011
  • 4. CDM (Discovery - Phase A) Category Hypothesis Product State what you are selling. Problem State the customer problem you are solving. Channel State how you are going to sell your product. State how you are going to generate demand for Demand your product. State the market type (existing, re-segmented, Market Type new) you’re in. Competitive State the competition you face. (c) 2009 David Binetti Monday, March 7, 2011
  • 5. CDM (Validation - Phase B) I could explain in detail, but basically boils down to: prove you can sell by actually selling before you scale. (c) 2009 David Binetti Monday, March 7, 2011
  • 6. AARRR Model (AKA, Metrics for Pirates) Metric Description Acquisition Users visit Activation Users sign up Retention Users come back Referral Users like and refer Revenue User pay something for something (c) 2009 David Binetti Monday, March 7, 2011
  • 7. AARRR Model (cont.) The Model measures: Conversion rates for each step Expected value at each step (not included here.) A ‘one-slide pitch deck’. Have these numbers, and you need nothing else. (c) 2009 David Binetti Monday, March 7, 2011
  • 8. Slight Differences The CDM has you look at and test the whole business model. The AARRR assumes the model rolls up in the metrics. (c) 2009 David Binetti Monday, March 7, 2011
  • 9. How They Complement The CDM teaches you to test assumptions, but isn’t as specific on how to measure results. The AARRR gives metrics to know what’s good, but not how to identify what’s broken. (c) 2009 David Binetti Monday, March 7, 2011
  • 10. Case: Votizen Social Network for Registered Voters Civic Participation Made Simple and Meaningful Voter-Focused (as opposed to politician- focused) approach to $5B Political Market. Independent, non-partisan, simple and fun! (c) 2009 David Binetti Monday, March 7, 2011
  • 11. CDM (Brief) Category Hypothesis Social Network for Registered Voters (“LinkedIn Product for Politics”) Traditional campaign techniques #fail in a web Problem 2.0 world. The internet is the primary source of voter Channel information. Demand Social networks are both the product and the demand-generator. Resegmented; displace current market for Market Type direct-mail & robocalls. Competitive Hyper-fragmented. (c) 2009 David Binetti Monday, March 7, 2011
  • 12. AARRR (Brief) Metric Description Creates account on system. (Precursor- Acquisition requirement) Certifies voting record (Authenticates - gives Activation voter the power) Referrals Forwards to friends (Acquisition model) Uses system to affect change (Validates lifetime Retention value) Private! (Sorry, not appropriate for a public Revenue document.) (c) 2009 David Binetti Monday, March 7, 2011
  • 13. Applied Started with MVP - Minimum Viable Product. Just enough to get feedback (cost: $1206) Metric MVP Acquisition 5% Activation 17% Referrals - Retention - Revenue - Monday, March 7, 2011
  • 14. Improve Tried a bunch of A/B testing on home page. Found an optimal message. Learning: When given the option to explore, people explored. When given a direction, they took the direction. If you want something done, make it part of registration flow. (c) 2009 David Binetti Monday, March 7, 2011
  • 15. Applied Significant, immediate jump in initial metrics. (Spend ~$10K) Metric MVP V.1 Acquisition 5% 17% Activation 17% 90% Referrals - 4% Retention - 5% Revenue - - Monday, March 7, 2011
  • 16. Improve Retention and Referrals Same Process, Different Results A/B, Feedback, Analytics, etc. Incremental improvement on retention and referrals. Was improving, but marginal value of efforts were asymptotic. Time for a pivot! (c) 2009 David Binetti Monday, March 7, 2011
  • 17. The Pivot Eric Ries concept: shift direction while grounded in learning Implementation of “back to start of CDM” I took learning and created new MVP. So, $10K sunk cost -- buh-bye! (ugh) Needed to fire current developers, hire new skills. (double-ugh) (c) 2009 David Binetti Monday, March 7, 2011
  • 18. The Pivot (cont.) But, not a waste! Time, money and effort brought learning. Look beyond the features to the problem. “I always wanted to get more involved. This makes it so much easier. Thanks!” (c) 2009 David Binetti Monday, March 7, 2011
  • 19. Applied New product launched as MVP - @2gov on Twitter Contact all public officials at a single address. Results? Much better R&R, and better conversion. Metric MVP V.1 New Product Acquisition 5% 17% 42% Activation 17% 90% 83% Referrals - 4% 54% Retention - 5% 21% Revenue - - - Monday, March 7, 2011
  • 20. Applied Next step: test revenue assumptions Provide a channel for voters to support causes and candidates in which they believe. Another pivot! - No data yet Metric MVP V.1 New Next Product Iteration Acquisition 5% 17% 42% ? Activation 17% 90% 83% ? Referrals - 4% 54% ? Retention - 5% 21% ? Revenue - - - ? Monday, March 7, 2011
  • 21. Takeaways Set up your CDM hypotheses so that you know what you are trying to accomplish and how to tell if you are finished or need to start over. The AARRR approach serves as a great ‘startup dashboard.’ Numbers don’t lie (as long as you don’t lie to yourself.) Should you need to iterate, then pivot -- don’t flail. Measure success by lessons learned, not by the results themselves (oh, and restate CDM.) (c) 2009 David Binetti Monday, March 7, 2011
  • 22. Learn from the Source CDM: http://www.steveblank.com AARRR: http:/ /www.slideshare.net/ Startonomics/startup-metrics-for-pirates- presentation Pivot: http:// www.startuplessonslearned.com/2009/06/ pivot-dont-jump-to-new-vision.html (c) 2009 David Binetti Monday, March 7, 2011
  • 23. Feedback Wanted! Would love feedback! Want to get better, so criticism is preferred. “If you don’t have anything bad to say, then don’t say anything.” dbinetti@gmail.com (c) 2009 David Binetti Monday, March 7, 2011