Mentortoolkit

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CORE PRINCIPLES BUILD"

LEARN"

Lean Startup Model: Eric Ries

Customer Development Model: Steve Blank

UNTESTED HYPOTHESES

BUILD-MEASURE-LEARN

At the beginning, what entrepreneurs have are only untested hypotheses / assumptions / opinions, not facts. Hypotheses need to be turned into facts; there are no facts inside the room.

Turn ideas into products with minimum features that allow testing & feedback, measure how customers respond, learn whether to pivot or persevere. The aim is to minimize the time through this loop.

GET OUT OF THE BUILDING The only way to get to know customers

MINIMUM VIABLE PRODUCT (MVP) Contains fewest number of features needed to achieve a specific objective.

CUSTOMER DEVELOPMENT

VALIDATED LEARNING

Most startups fail not because they lack a product; they fail because they lack customers and a proven financial model. Getting to know customers right from the beginning & establishing a continuous customer feedback loop throughout the product development cycle helps to create better solutions.

Essentially to find the right Problem/Solution Fit to get the right Product/Market Fit.

MVP would test most of the startup始s assumptions & establish baseline metrics to provide learning milestone. Each failed hypothesis leads to a new pivot, where we change just one element of the customerproblem-solution hypotheses or business model, based on learning but don始t abandon everything learnt. The sooner you realize a hypothesis is wrong, the faster you can update & retest it.

LEAN STARTUP Which of startup始s efforts are value-creating & which are wasteful? !

MEASURE"

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TIMELINE & EXPECTATIONS

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START FROM: Validating Problem / Customer Hypothesis

GET OUT OF THE BUILDING

YES

NO

Create Solutions & Unique Value Proposition

Talk to more customers or another customer segment

MINIMUM VIABLE PRODUCT

PIVOT

PERSEVERE SHARE:

EACH WEEK: Build – Measure – Learn

• • • • •

Hypothesis: Hereʼs what we thought Experiments: So hereʼs what we did Results: So hereʼs what we found Iterate: So hereʼs what we are going to do next Update Lean Canvas

2nd – 8th Mar 2014

8th – 15th Feb 2014 • • •

• Prepare updated Lean Canvas Send invitations to mentor & PwC on LeanStack Identify potential Problem & Customer Segment •

16th – 22nd Feb 2014 • •

Talk to 10 potential customers Validate Problem & Customer hypotheses

23rd – 1st Mar 2014 • • • 1! !

Identify potential UVP / Solution based on validated Problem / Customer hypotheses Talk to another 10 – 15 potential customers Validate UVP / Solution hypotheses (incl. features for MVP)

•

Based on customer insight, decide to pivot / persevere Talk to another 10 potential customers and/or channel partners Identify basic revenue model strategy & how to reach customers

9th – 15th Mar 2014

• •

Understand basic fixed & variable costs involved List key activities that need to be tracked

16th – 23rd Mar 2014

• Understand an unfair advantage that cannot be easily copied or bought by potential competitors

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Week 1: Problem / Customer Segment

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GET OUT OF THE BUILDING • • •

• • •

Talk to at least 10 potential customer.

What are the Pains, Gains and Jobs to be done?

Do you know what your customers read, what events they attend, and where they turn for new information? Draw a day in the life of customer (If not, you donʼt know enough).

What is the resulting Customer Archetype? Draw a diagram http://personapp.io/ How do customers solve this problem(s) today? Does your value proposition solve it? How? What was it that made customers interested? Excited?

List the Pains, Gains & Jobs to be done for your Top Customers Identify main customer segment (do not be too broad/narrow). Learn what customers really want, not what they say they want or what we think they should want: • • •

What are the top 3 – 10 pains (ie. time, cost) that they have? Whatʼs keeping them awake at night?

What gains they are looking for (ie. Benefits/Desires: saving money, time, effort) What jobs (ie. functional, social, emotional) do they want done? What is the job they are hiring you to do? Which features from the value proposition will do that?

List top 3 problems For the identified customer segment, describe the top 1-3 problems they need solved.

List existing alternatives Then document how early adopters (ideal customers) address these problems today. Unless this is solving a brand new problem (unlikely), most problems have existing solutions. Many times these may not be readily obvious competitors. Doing nothing could also be a viable alternative for a customer if the pain is not acute enough.

Identify other user roles Next identify any other user roles that will interact with this customer. This is where you distinguish between customers & users, customers pay, users donʼt. How can you reach them?

Zoom into possible early adopters With these problems in mind, get more specific on the customer segment. Narrow down the distinguishing characteristics of your prototypical customer.

Tips for Teams Do not settle for the “do you like my product/idea” answer and moving on. Use the 5 Whys root cause analysis by asking why 5 consecutive times to answers to go from surface-level to deeper root cause.

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Tips for Mentors • • •

Do not drive team to an early conclusion rather than learning.

Make sure team has hypotheses about who their users and customers are?

Ask: Did you learn anything different?

2!

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Week 2: Unique Value Proposition / Solution

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GET OUT OF THE BUILDING • • • •

Get out of the building & talk to 10-15 potential customers face-to-face Follow up with Survey Monkey (or similar service) to get more data What constitutes a pass/fail signal for each test? For example, at what point would you say that your hypothesis wasnʼt even close to correct?

What did you learn about your value proposition from talking to your first customers?

Be different, but make sure your difference matters The key to unlocking whatʼs different about your product is deriving your UVP directly from the intersection between your #1 problem and the solution.

Focus on finished story benefits Highlight benefits over features but benefits still require your customers to translate them to their worldview. A good UVP gets inside the head of your customers and focuses on the benefits your customers derive after using your product.

Target early adopters !"!#$%&'!

Too many marketers try to target the “middle” in the hopes of reaching mainstream customers and in the process water down their message. Your product is not ready for mainstream customers yet.

Your sole job should be finding and targeting early adopters which requires bold, clear, and specific messaging.

Answer: What, Who, and Why A good UVP needs to clearly answer the first 2 questions - What is your product / service and who is the customer. The “Why will people want it?” is sometimes hard to fit in the same statement. Use a sub-heading for that.

Create a high-concept pitch A high-concept pitch usually builds on other familiar concepts to quickly get an idea across and make it easily spreadable. Unlike a UVP, a high-concept pitch is best used in conjunction with something else that sets the right context such as an elevator pitch.

Create solutions As all you have are untested hypotheses, donʼt get carried away with fully defining a solution just yet.

Rather simply sketch out the top features or capabilities next to each problem. ONLY define solutions when youʼve validated the problem.

Watch Out for: • • • • • •

3! !

Not enough customer interviews Vague data from the interviews Little to no insight from the data No clue about market size or overly optimistic Did not articulate experiments to test their hypothesis Did not articulate pass/fail tests for each hypothesis

Ask: • • •

Is your solution based on a validated problem?

What were your value proposition hypotheses?

What did you discover from customers?

Week 3: Channels / Revenue

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GET OUT OF THE BUILDING • • • •

Talk to at least 10 potential customers and channel partners Test pricing in front of 100 customers on the web, 10-15 customers nonweb Whatʼs the revenue model strategy?

What are the pricing tactics?

Pick the right channels • • • • • • •

•

Awareness: How do you raise awareness about your product/services?

Evaluation: How do you help customers evaluate your organisationʼs UVP? Purchase: How do you enable customers to purchase specific products and services?

Delivery: How do you deliver a UVP to customers?

After Sales: How do you provide post-purchase customer support?

Differentiate between physical and virtual channels Distribution channel economics: Understand the impact a channel can have on revenue streams.

The more complex the channel, the smaller the margins will be. There is a cost-benefit analysis made when choosing channels Channels are a strategy; discovering the right channel is an art.

Revenue is different than price SOCIAL ENTERPISE SOCIAL IMPACT TRADE Mixing together social purpose & commercial realities • • •

This is not about income statement, balance sheet and cash flow. Those are operating details that are derived after a proven revenue model and pricing.

Revenue model = Strategy company uses to generate cash from each customer segment Within the revenue model, how do I price the product? o Pricing is a tactic Watch Out for: o Revenue model is the strategy •

Ask: • • • • •

What is your revenue model?

Why did you select it?

How do customers buy today?

What do they pay today?

What do competitors charge?

Donʼt let them slow down the pace of discovery and customer calls

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• • • • • •

Teams may be stuck on their original customer segment or UVP. By now some might need encouragement to pivot Some might be making lots of calls, getting lots of data, but have no clue what it means Did not articulate experiments to test their hypotheses Students confuse pricing tactics with revenue model Students price on cost vs. value No appreciation of competitive pricing or offerings; revenue adds up to a small business They may not understand the relationship between a channel and its revenue streams. The more complex the channel, the smaller the margins. The cost-benefit analysis for choosing channels

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Week 4: Cost / Key Metrics

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Not just obvious costs • Consider all TOTAL costs, not just the obvious ones (ie. People, Building, Material, etc). Whatʼs the most important cost? What are the most expensive resource and key activity? What are the fixed and variable costs? Is there any economies of scale? Is this a business worth doing?

• Calculate break-even point ie. number of customers it takes to reach this • Evaluate against metric for success • Different models: Cost neutral or cost subsidized from commercial operations Key Metrics List the activities that should be tracked in order to measure your organizationʼs success. Differentiate between: • Vanity Metrics: Measurements that seem to provide a favorable picture of an organizationsʼ performance, but donʼt accurately reflect key metrics of growth or impact • Actionable Metrics: Measurements that reflect the key drivers of a business & from which you can develop actionable strategies.

Week 5: Unfair Advantage If it can be easily copied or bought, it is not an unfair advantage Also known as Competitive Advantage & Barriers to Entry, how will you defend against competition?

Imagine your co-founder steals your idea, sets up another shop, and slashes prices, do you still have a business? A real unfair advantage is something that cannot be copied or bought: • Insider information • Personal authority • A dream team • Existing customers • The ʻrightʼ celebrity endorsement • Large network effects • Community • Organic search ranking • Patents • Core values Your unfair advantage story Itʼs not something that you decide to test one day. If and when you start gaining traction with your product, your unfair advantage will be tested by competition and copycats. If you donʼt have one yet, leave it blank for now rather than listing something weak so that it serves as a constant reminder to keep looking for one.

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Example of a Lean Canvas

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Example of an Experiment Report

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