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The Basics of Lean Startup Learn Build Measure The Basics of Lean Startup Todd Strother, PhD UW-Extension: Business and Entrepreneurship The Center for Technology Commercialization Introductions •Program manager of SBIR Advance, •Teaching team member for Ideadvance •Assisted over 40 companies through Lean Startup learning • $75K grants • $75K - $100K grants • UW campuses (not Madison) • Match SBIR/STTR grants • tech from WiSys or UWMRF • www.wisconsinsbir.org • www.uwideadvance.org Sponsors 608-219-4183 [email protected] Goals and Objectves •Learn what Lean Startup is, and isn’t •Show where Lean Startup is being used •Compare Lean Startup to conventional practices •Become familiar with Business Model Canvas tool •Recognize Minimal Viable Products and their value Sponsors 608-219-4183 [email protected] What is Lean Startup? Well, there’s only two of us, so we are running pretty “Lean” Yes, I’ve worked in Lean manufacturing and have “Lean Six Sigma” Certification Sponsors 608-219-4183 [email protected] What is Lean Startup? • It is not Lean Manufacturing – Just in time manufacturing • Not efforts to reduce cash burn rate Its Customer focused • Not product focus – Focus groups – Surveys – Product pitches Sponsors 608-219-4183 [email protected] What is Lean Startup? • Lean Manufacturing –Eliminates wasteful steps in product areas • Lean Startup –Eliminates wasteful steps in customer, market areas Sponsors 608-219-4183 [email protected] What is Lean Startup? around 2008 • Steve Blank-Entrepreneurship Prof at Stanford • Eric Ries – Focused too much time on Product Launch – Not enough on what customers wanted • Stop wasteful planning and product development – Before ‘customer feedback’ – Avoid elaborate business plans and the perfect product Sponsors 608-219-4183 [email protected] What is Lean Startup? • If we want to avoid “wasteful” planning – Do you need a Business Plan? • Often times, yes – Investors want one – The business needs some direction and thought • But it will be wrong anyway Sponsors 608-219-4183 [email protected] What is Lean Startup? • It’s a philosophy of: – Focusing first and foremost on your business and market hypotheses. – Collecting data from people about their desires, needs and behaviors. – Quickly and efficiently (in)validating those hypotheses. – Distancing yourself from your passion about your product in favor of your passion to solve a market need. Sponsors 608-219-4183 [email protected] What is Lean Startup? • Recognize your business ‘guesses’ • Be willing to see that you are wrong • Set quantitative goals • Test early and often • Test minimally viable products • Collect solid data with real numbers • Pivot to where your research leads you Sponsors 608-219-4183 [email protected] Scientific Method (it’s a Process) • Hypothesis – It’s a guess, you don’t know if its correct • Testing – Experiment to validate or invalidate your guess – Collect the data • Analysis – Objectively determine what the data tells you Sponsors 608-219-4183 [email protected] Lean Startup(it’s a Process) • Hypothesis – Recognize your business ‘guesses’ – Be willing to see if you are wrong • Testing – Set quantitative goals – Test early and often – Test minimally viable products – Collect solid data with real numbers • Analysis – Pivot to something else where the science leads you Sponsors 608-219-4183 [email protected] Lean Startup(it’s a Process) Guess!! Build Learn Build Learn Measure Measure Guess!! Sponsors 608-219-4183 [email protected] What is Lean Startup? • Process to identify Business Assumptions – Prioritize – Test them • Reduce commercial risk Sponsors 608-219-4183 [email protected] What is Lean Startup? The hardest part: Recognizing assumptions and that you could be mistaken Examples: Remote controlled snow plow Sponsors 608-219-4183 [email protected] What is Lean Startup? Remote Controlled Snow Plow • Over 10 years and ~$100k in development • With current expenses: price ~$6000 • His Identified needs: – Space and room to build – Sheet metal, welder, painter, technician – website • Real needs: – Customer identification – Value proposition – Regulatory, product liability Sponsors 608-219-4183 [email protected] What is Lean Startup? Ideal where the market or product/market fit is unknown or uncertain Scalable Startup Mature Business Who is Customer? Voice of Customer? They have good evidence Don’t have proof of who of who their customer is. their customer really is Sponsors 608-219-4183 [email protected] The heart of Lean Startup-- Application of the Scientific Method to Business • Set up and RECOGNIZE your hypotheses • Test the hypotheses – By collecting Data – INTERVIEWS!! Talking to people • Revisit/change/pivot to new hypothesis Sponsors 608-219-4183 [email protected] Goals and Objectves •Learn what Lean Startup is, and isn’t •Show where Lean Startup is being used •Compare Lean Startup to conventional practices •Become familiar with Business Model Canvas tool •Recognize Minimal Viable Products and their value Sponsors 608-219-4183 [email protected] Lean Startup is Taking Hold Innovative Companies Heat exchangers Inverter/energy storage De Pere WI New Berlin WI Colleges and Universities Established Companies Sponsors 608-219-4183 [email protected] Lean Startup is Taking Hold Federal Government • NSF • NIH • NASA • Dept of Energy • USDA Sponsors 608-219-4183 [email protected] Lean Startup is Taking Hold Sponsors 608-219-4183 [email protected] Goals and Objectves •Learn what Lean Startup is, and isn’t •Show where Lean Startup is being used •Compare Lean Startup to conventional practices •Become familiar with Business Model Canvas tool •Recognize Minimal Viable Products and their value Sponsors 608-219-4183 [email protected] What is Lean Startup? Ideal where the market or product/market fit is unknown or uncertain Scalable Startup Mature Business Who is Customer? Voice of Customer? Sponsors 608-219-4183 [email protected] What people want their business to do Idea Research Prototype Product What really happens This is a not a startup path IDEA BUSINESS This is a startup path IDEA BUSINESS Failure Sponsors 608-219-4183 [email protected] “Forget” about Market Track Parallel Market Track Idea Research Prototype Product Customer Research PM Fit Validation What we hope becomes reality Hickory Syrup • Mike Starshak Princeton Wi (Green Lake County) • Produces Hickory related products • Not ever done before: – New product – New customers/markets • Strategies? – Customer stories – Wi Hickory Association – Grocery stores, restaurants • Even before technical issues are worked out Sponsors 608-219-4183 [email protected] No Business Plan survives first contact with customers You were so preoccupied with whether you could, that you didn’t stop to think if you should. --Jeff Goldblum Sponsors 608-219-4183 [email protected] Wrong way to think of a Start-Up Why?: Because that’s what a ‘real’ Business has Patent Agent Chief Scientific Officer CEO Wescientist had: No product No Sales No Customers And ProductionNo Idea engineer CFO Sales Manager Sponsors 608-219-4183 [email protected] Thesis Statement! More startups fail from a lack of customers than from a failure of product development Lean Startup is a Contact Sport Learn: Ask about the customer’s life What are their pain points? Don’t talk about the product or the business idea Start The process by listening- not Pitching! Confirm: Get commitments, not opinions (i.e. commit time, reputation, money) Sponsors 608-219-4183 [email protected] Lean Startup is a Contact Sport Sponsors 608-219-4183 [email protected] Goals and Objectves •Learn what Lean Startup is, and isn’t •Show where Lean Startup is being used •Compare Lean Startup to conventional practices •Become familiar with Business Model Canvas tool •Recognize Minimal Viable Products and their value Sponsors 608-219-4183 [email protected] Business Model Canvas- Identify Assumptions Guess Guess Guess Guess Guess Guess Guess Guess Guess Sponsors 608-219-4183 [email protected] Where to Focus- Customer Discovery Does the customer have REAL pain? Who really is your customer? Requires shift from thinking about your idea to focusing on value customers will “pay” for Sponsors 608-219-4183 [email protected] VALIDATION BMC 3 Grypmat Sponsors 608-219-4183 [email protected] Goals and Objectves •Learn what Lean Startup is, and isn’t •Show where Lean Startup is being used •Compare Lean Startup to conventional practices •Become familiar with Business Model Canvas tool •Recognize Minimal Viable Products and their value Sponsors 608-219-4183 [email protected] Minimum Viable Product (MVP) Testing Key Assumptions • Laura Klein, VP of Product at Hint Health, puts it bluntly (and effectively). “An MVP is not an excuse for a crappy product. MVPs are all about learning, and you don’t learn anything from a crappy product except that people don’t like crappy products.” Website to gauge interest in products MVP tracks where the customers click. Do they click on Neurons, Cardio, Blood, Hepatic? This will provide quantitative information on what cell type is of interest. This will lead us to see what product line neuron cardio blood hepatic is potentially most important. Text about products and services: We provide kits to directly convert neuron progenitor cells into your target cells, and partially differentiated cell lines that Technical Bulleted list of you can take to completion. data products and uses. Click on the cell products of interest References • Progenitor cells and • do your own published thing MVP also tracks if customers are interested work: • Partially diff cell in Kits or Cells. Which button they click on • Takes a load of work off of you is a data point. • Kits and supplies This will lead us to see what they want Marketing • Do the entire more: the Kit products to do the entire blather work directly work, or the cell line. Kits Cells 4 MVP examples 1.
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