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2010 04 28 The Lean Startup webinar for the Lean Enterprise Institute

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Presented by Eric Ries for LEI on April 28, 2010

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2010 04 28 The Lean Startup webinar for the Lean Enterprise Institute

  1. The Lean Startup#leanstartup<br />Eric Ries (@ericries)<br />http://StartupLessonsLearned.com<br />
  2. Myth #1<br />Myth<br />Lean means cheap. Lean startups try tospend as little money as possible.<br />Truth The Lean Startup method is not about cost,it is about speed.<br />
  3. Myth #2<br />Myth<br />The Lean Startup is only forWeb 2.0/internet/consumer software companies.<br />Truth The Lean Startup applies to all companies that face uncertainty about what customers will want.<br />
  4. Myth #3<br />Myth<br />Lean Startups are small bootstrapped startups.<br />Truth Lean Startups are ambitious and are able<br />to deploy large amounts of capital. <br />
  5. Myth #4<br />Myth<br />Lean Startups replace vision with dataor customer feedback.<br />Truth Lean Startups are driven by a compelling vision, and are rigorous about testing each element of this vision<br />
  6. What is a startup?<br /><ul><li>A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.
  7. Nothing to do with size of company, sector of the economy, or industry</li></li></ul><li>Most Startups Fail<br />
  8. Most Startups Fail<br />
  9. Most Startups Fail<br />
  10. Most Startups Fail<br /><ul><li>But it doesn’t have to be that way.
  11. We can do better.
  12. This talk is about how.</li></li></ul><li>Entrepreneurship is management<br /><ul><li>Our goal is to create an institution, not just a product
  13. Traditional management practices fail</li></ul>- general management” as taught to MBAs<br /><ul><li>Need practices and principles geared to the startup context of extreme uncertainty
  14. Not just for “two guys in a garage”</li></li></ul><li>The Pivot<br /><ul><li>What do successful startups have in common?
  15. They started out as digital cash for PDAs, but evolved into online payments for eBay.
  16. They started building BASIC interpreters, but evolved into the world's largest operating systems monopoly.
  17. They were shocked to discover their online games company was actually a photo-sharing site.
  18. Pivot: change directions but stay grounded in what we’ve learned. </li></li></ul><li>Speed Wins<br />if we can reduce the time between major iterations<br />we can increase our odds of success<br />
  19. A Tale of Two Startups<br />
  20. Startup<br />1<br />
  21. Stealth Startup Circa 2001<br />
  22. All about the team<br />
  23. A good plan?<br /><ul><li>Start a company with a compelling long-term vision.
  24. Raise plenty of capital.
  25. Hire the absolute best and the brightest.
  26. Hire an experienced management team with tons of startup experience.
  27. Focus on quality.
  28. Build a world-class technology platform.
  29. Build buzz in the press and blogosphere.</li></li></ul><li>Achieving Failure<br /><ul><li>Product launch failed </li></ul> - $40MM and five years of pain<br /><ul><li>… but the plan was executed well
  30. Crippled by “shadow beliefs” that destroyed the effort of all those smart people.</li></li></ul><li>Shadow Belief #1<br /><ul><li>We know what customers want. </li></li></ul><li>Shadow Belief #2<br /><ul><li>We can accurately predict the future. </li></li></ul><li>Shadow Belief #3<br /><ul><li>Advancing the plan is progress.</li></li></ul><li>A good plan?<br /><ul><li>Start a company with a compelling long-term vision.
  31. Raise plenty of capital.
  32. Hire the absolute best and the brightest.
  33. Hire an experienced management team with tons of startup experience.
  34. Focus on quality.
  35. Build a world-class technology platform.
  36. Build buzz in the press and blogosphere.</li></li></ul><li>Startup<br />2<br />
  37. IMVU<br />
  38. IMVU<br />
  39. New plan<br /><ul><li>Shipped in six months – a horribly buggy beta product
  40. Charged from day one
  41. Shipped multiple times a day (by 2008, on average 50 times a day)
  42. No PR, no launch
  43. Results 2009: profitable, revenue > $20MM</li></li></ul><li>Making Progress<br /><ul><li>In a lean transformation, question #1 is – which activities are value-creating and which are waste?
  44. In traditional business, value is created by delivering products or services to customers
  45. In a startup, the product and customer are unknowns
  46. We need a new definition of value for startups</li></li></ul><li>Traditional Product DevelopmentUnit of Progress: Advance to Next Stage<br />Waterfall<br />Requirements<br />Specifications<br />Design<br />Problem: known<br />Solution:known<br />Implementation<br />Verification<br />Maintenance<br />
  47. Agile Product DevelopmentUnit of Progress: A line of Working Code<br />“Product Owner” or in-house customer<br />Problem: known<br />Solution:unknown<br />
  48. Product Development at Lean StartupUnit of Progress: Validated Learning About Customers ($$$)<br />Hypotheses, Experiments,<br />Insights<br />Problem:unknown<br />Data, Feedback,<br />Insights<br />Solution:unknown<br />
  49. Minimize TOTAL time through the loop<br />
  50. There’s much more…<br />Build Faster<br />Unit Tests<br />Usability Tests<br />Continuous Integration<br />Incremental Deployment<br />Free & Open-Source<br /> Components<br />Cloud Computing<br />Cluster Immune System<br />Just-in-time Scalability<br />Refactoring<br />Developer Sandbox<br />Minimum Viable Product<br />Learn Faster<br />Split Tests<br />Customer Interviews<br />Customer Development<br />Five Whys Root Cause<br />Analysis<br />Customer Advisory Board<br />Falsifiable Hypotheses<br />Product Owner<br />Accountability<br />Customer Archetypes<br />Cross-functional Teams<br />Semi-autonomous Teams<br />Smoke Tests<br />Measure Faster<br />Funnel Analysis<br />Cohort Analysis<br />Net Promoter Score<br />Search Engine Marketing<br />Real-Time Alerting<br />Predictive Monitoring<br />Measure Faster<br />Split Tests<br />Clear Product Owner<br />Continuous Deployment<br />Usability Tests<br />Real-time Monitoring<br />Customer Liaison<br />
  51. Thanks!<br /><ul><li>Startup Lessons Learned Blog
  52. http://StartupLessonsLearned.com
  53. In print: http://bit.ly/SLLbookbeta
  54. Getting in touch (#leanstartup)
  55. http://twitter.com/ericries
  56. eric@theleanstartup.com
  57. Lean Startup Intensive at Web 2.0 Expo</li></ul> May 3, 2010 in San Francisco<br /><ul><li>http://web2expo.com/webexsf2010/public/schedule/detail/13260</li></li></ul><li>Backup<br />
  58. How to build a Lean Startup<br /><ul><li>Let’s talk about some specifics.
  59. Minimum viable product
  60. Five why’s
  61. Rapid split-tests
  62. Continuous Deployment</li></li></ul><li>Minimum Viable Product<br />Learn Faster<br />Customer Development<br />Five Whys<br />Build Faster<br />Continuous Deployment<br />Small Batches<br />Minimum Viable Product<br />Refactoring<br />Measure Faster<br />Split Testing<br />Actionable Metrics<br />Net Promoter Score<br />SEM <br />
  63. Why do we build products?<br /><ul><li>Delight customers
  64. Get lots of them signed up
  65. Make a lot of money
  66. Realize a big vision; change the world
  67. Learn to predict the future</li></li></ul><li>Possible Approaches<br /><ul><li>“Maximize chances of success”
  68. build a great product with enough features that increase the odds that customers will want it
  69. Problem: no feedback until the end, might be too late to adjust
  70. “Release early, release often”
  71. Get as much feedback as possible, as soon as possible
  72. Problem: run around in circles, chasing what customers think they want</li></li></ul><li>Minimum Viable Product<br /><ul><li>The minimum set of features needed to learn from earlyvangelists – visionary early adopters
  73. Avoid building products that nobody wants
  74. Maximize the learning per dollar spent
  75. Probably much more minimum than you think!</li></li></ul><li>Minimum Viable Product<br /><ul><li>Visionary customers can “fill in the gaps” on missing features, if the product solves a real problem
  76. Allows us to achieve a big vision in small increments without going in circles
  77. Requires a commitment to iteration
  78. MVP is only for BIG VISION products; unnecessary for minimal products.</li></li></ul><li>Techniques<br /><ul><li>Smoke testing with landing pages, AdWords
  79. SEM on five dollars a day
  80. In-product split testing
  81. Paper prototypes
  82. Customer discovery/validation
  83. Removing features (“cut and paste”)</li></li></ul><li>Fears<br /><ul><li>False negative: “customers would have liked the full product, but the MVP sucks, so we abandoned the vision”
  84. Visionary complex: “but customers don’t know what they want!”
  85. Too busy to learn: “it would be faster to just build it right, all this measuring distracts from delighting customers”</li></li></ul><li>Five Whys<br />Learn Faster<br />Five Whys Root<br />Cause Analysis<br />Code Faster<br />Continuous Deployment<br />Measure Faster<br />Rapid Split Tests<br />
  86. Five Whys Root Cause Analysis<br /><ul><li>A technique for continuous improvement of company process.
  87. Ask “why” five times when something unexpected happens.
  88. Make proportional investments in prevention at all five levels of the hierarchy.
  89. Behind every supposed technical problem is usually a human problem. Fix the cause, not just the symptom.</li></li></ul><li>Rapid Split Tests<br />Learn Faster<br />Five Whys Root<br />Cause Analysis<br />Code Faster<br />Continuous Deployment<br />Measure Faster<br />Rapid Split Tests<br />
  90. Split-testing all the time<br /><ul><li>A/B testing is key to validating your hypotheses
  91. Has to be simple enough for everyone to use and understand it
  92. Make creating a split-test no more than one line of code:</li></ul>if( setup_experiment(...) == "control" ) {<br /> // do it the old way<br />} else {<br /> // do it the new way<br />}<br />
  93. The AAA’s of Metrics<br /><ul><li>Actionable
  94. Accessible
  95. Auditable</li></li></ul><li>Measure the Macro<br /><ul><li>Always look at cohort-based metrics over time
  96. Split-test the small, measure the large</li></li></ul><li>Continuous Deployment<br />Learn Faster<br />Customer Development<br />Five Whys<br />Build Faster<br />Continuous Deployment<br />Small Batches<br />Minimum Viable Product<br />Refactoring<br />Measure Faster<br />Split Testing<br />Actionable Metrics<br />Net Promoter Score<br />SEM <br />
  97. Continuous Deployment<br /><ul><li>Deploy new software quickly
  98. At IMVU time from check-in to production = 20 minutes
  99. Tell a good change from a bad change (quickly)
  100. Revert a bad change quickly
  101. And “shut down the line”
  102. Work in small batches
  103. At IMVU, a large batch = 3 days worth of work
  104. Break large projects down into small batches</li></li></ul><li>Cluster Immune SystemWhat it looks like to ship one piece of code to production:<br /><ul><li>Run tests locally (SimpleTest, Selenium)
  105. Everyone has a complete sandbox
  106. Continuous Integration Server (BuildBot)
  107. All tests must pass or “shut down the line”
  108. Automatic feedback if the team is going too fast
  109. Incremental deploy
  110. Monitor cluster and business metrics in real-time
  111. Reject changes that move metrics out-of-bounds
  112. Alerting & Predictive monitoring (Nagios)
  113. Monitor all metrics that stakeholders care about
  114. If any metric goes out-of-bounds, wake somebody up
  115. Use historical trends to predict acceptable bounds
  116. When customers see a failure
  117. Fix the problem for customers
  118. Improve your defenses at each level</li>

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