Lean Startup and the Process of Innovation, INC.
Topics covered Lean Startup Overview Startup and the Innovation Process Make Your Idea Tangible Lean Experiments Decisions The Art of the Pivot
Continuous innovation process Goal: Learn and apply lean startup principles by doing. What to expect: -Experience constant state of disequilibrium -Learn to think out of the box -Develop momentum and speed in diffusing innovation -Application of creative process to innovation -Application of research process to innovation
How will you do it?
What is Lean? Elimination of waste in the production and delivery of value to the customer.
What is a Startup? A startup is an temporary organization formed to search for a repeatable and scalable business model. Steve Blank A human institution designed to create new products and services under conditions of extreme uncertainty. Eric Ries
What is Lean Startup? Elimination of waste in searching for a scalable business model, or significant business impact. Goal for lean startups: Learning through the innovation process. Lean Startup Myths: Lean = cheap or poor quality Only for high tech (hint: it works in large orgs too) Replaces vision with customer demands
Lean Start Up Focus The Lean Startup is a management science for entrepreneurs of all kinds. It enables rapid customer-centric iteration of innovation. It helps startups test their vision before it's too late. It is a tool for people who want to change the world.
Customer-Centric Approach to Innovation It is no secret that global companies are faced with decreased brand loyalty and an increase in customer power today. It s market forces like these that support the importance of focusing on the user experience.
Need to innovate the business model Where speed-to-market alone used to be much of the formula for success for market leaders, today s most revolutionary innovations are about user and business model innovations, such as Airbnb and Uber.
What is innovation
Major Type of Innovation Product innovation, which involves new and improved product and services, and enhance allocative efficiency by giving society more preferred mixture of goods and services. Process innovation, which involves new and improved production and distribution methods and improves productive efficiency by increasing the productivity inputs and reducing average total cost.
Innovation Spectrum
Sustaining Innovation versus Disruptive Innovation
Ten Areas to Innovate
Innovation Goal We continue to improve our product and processes to provide sustainable solutions to our stakeholders.
Innovation cycle
Examples of Innovation
Innovation process with a business model In as much as we are committed to a goal, we should also develop a system. Goals can motivate us to accomplish things, but only a system can ensure that we will reach our goals.
The System: Lean Startup Loop
Ideation Ideation is the creative process of generating, developing, and communicating new ideas, where an idea is understood as a basic element of thought that can be either visual, concrete, or abstract. Ideation comprises all stages of a thought cycle, from innovation, to development, to actualization.
Ideation: Fundamental Challenges All entrepreneurs face the same fundamental challenges: How do we know if we re making progress? How do we know if customers will want what we re building? How do we know what kind of value we can create? Why do we build this in the first place?
Ideation: Find your meaning 1. Begin with an educated guess -OK to begin without the answers, you re probably wrong anyway. -Innovators are problem solvers. 2. Change guesses into facts using experiments -Measure behavior, test hypotheses, capture surprises -Make decisions based on the results of your experiments 3. Move through the loop quickly -Build the absolute minimum required to test your assumptions -Build your case one experiment at a time -Get moving!
Ideation: Design your MVP A minimum viable product (MVP) is the "version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort" (similar to a pilot experiment). The goal of an MVP is to test fundamental business hypotheses (or leap-of-faith assumptions) and to help entrepreneurs begin the learning process as quickly as possible.
Code your product and process Continuous deployment, similar to continuous delivery, is a process "whereby all code that is written for an application is immediately deployed into production," which results in a reduction of cycle times.
Lean Experimentation Research Process Finding the middle ground Creative Process Optimal Combination Rigor Inspiration
Research Process
Creative Process
Rapid Experimentation Continuum No Experience (unknown) Search High Risk - many unknowns Sustaining Innovations Breakthrough Innovations (disruptive) Optimize Low Risk - few unknowns Experienced (known)
Measure Focus on the key metrics that matter ignore vanity metrics. 1. Measure important customer behavior 2. Willingness to exchange currency (time, attention, money) 3. What activities must we do to deliver customer value? 4. Something else unique to your idea? Use metrics to eliminate gap between say vs. do, focus on metrics involving do.
Feedback We have to ask customers if they will use our product? Feedback provide us data to analyze. Tools Feedback Management System(FMS) is a system of processes and software that enables organizations to centrally manage deployment of surveys while dispersing authoring and analysis throughout an organization.
Insights from feedback Within customer feedback data (such as purchase history and support history) are hidden details about what products customers are likely to want, the price they re willing to pay, and what they think of their service experience. Pass it along to your product management team to enable them to improve your products and create smarter upsells. With it they can prioritize features for future products and create products that really resonate with buyers. Pass this data along to your service delivery team to help them improve their service, develop new offerings and identify new customer needs. Deliver this feedback to your customer service team as well. Empower them to mitigate service issues and further improve the customer experience.
Learn and Decide The output from lean experimentation is new knowledge and insights about your customer or business model. 1. Build a case over time, using multiple experiments 2. Experiments to learn, not just validate. 3. Savor the surprises! 4. Is your confidence increasing or decreasing? 5. Why, why, why?
The Lean Startup Loop THE DADDY DUCK INNOVATION PROCESS
Exercise Run the Loop Review and post your idea (customer + problem + solution) Brainstorm your riskiest assumptions Narrow to your top 3 assumptions Document your Leap of Faith (LOF) Assumption Brainstorm hypotheses Document a single hypothesis Brainstorm experiments to test hypothesis Narrow to a single experiment Document your experiment Build and run your experiment outside with real customers Learn as a team close the loop
Exercise 1 Make Your Idea Tangible
Document Your Idea Tangible, measurable solution to a specific customer problem or pain points be specific! Task: Identify the following Customer: Who is experiencing the problem. Problem: What is the customer s problem Solution: Your proposed solution to the problem
What are assumptions? Something taken for granted or accepted as true without proof Opinions vs. Facts (Hint: What you think is fact, is likely an assumption)
Exercise 2 Leap of Faith (LOF) Assumption
Brainstorm Assumptions What customer behaviors must take place for your solution to be adopted? What assumptions are you taking for granted as fact? What keeps you up at night? Task: Write down as many assumptions as possible as a team, one assumption per sticky note.
Narrow Assumptions What is the biggest assumption that if false, will cause you product to fail? What is most unknown, where do gaps exist? Focus on customer behavior related assumptions (ex: Commuters will love to have a public transportation link apps) Task: Narrow your assumptions using the Lean Loop poster 2x2 grid.
Post Your Leap of Faith This is the riskiest assumption for your business idea. If this is not true, we re out of business (ex: Commuters will love to have a public transportation link apps) Task: Place a single sticky note of your riskiest, LOF assumption on your poster.
Exercise 3 Hypothesis
Variables If we do X, Y% of people will behave in way Z X= Your solution (the carrot) Y% = Your target metric (the number) Z = The customers behavior (the hoop)
Create Hypothesis If we do X, Y% of people will behave in way Z Task: Write down your hypothesis on a sticky note, and place on your poster.
Pitch 1 Customer + Problem + Solution + LOF
Exercise 4 Lean Experiments
Why Lean Experiments? Reduce the risk associated with resource investment, move faster with more certainty. Change opinions into facts Inform our decisions with data and customer insights Separate customer words from behavior Output = Insights + Data (what did we learn from the customer + what behavior did we measure)
Brainstorm Experiments Will his experiment will test your hypotheses? Measure real behavior (or as close to it as possible) Can you get a quick answer? Capture surprises as well as data Important: Use behavior + currency exchange to eliminate say vs. do NO SURVEYS KEEP IT HUMAN (currency = time, money, attention, personal info, usage) Task: Brainstorm at least 3 different experiment methods
Choose 1 Experiment Can you get your answers quickly? How will you measure behavior? How will you interact in person with your target customer? Did we mention: NO SURVEYS + KEEP IT HUMAN Task: Select the best experiment to run first
Document Experiment Task: On your poster, complete a sticky note for each of the following: 1. Describe the experiment 2. What specific behavior will you measure? 3. What currency will you collect? 4. Minimum success criteria (ex: 50% sign-up) NOTE: No surveys, keep it human!
Go! Run your experiment in the wild 1. Don t tell people this is an experiment 2. Collect contact info so you can follow-up later 3. Ask why or why not look for surprises!
Learn and Decide Closing the Loop
What are you looking for? A strong behavioral response from your target customer, confirming or denying your hypothesis. 1. Did your numeric hypothesis pass or fail? 2. Do you know why or why not? 3. What surprised you? Ex: 50% of small business signed up for our online beta program, providing their email and contact info.
Output = Learning 1. What insights did you encounter which change the way you think about your customer? 2. How painful is the problem? 3. Does it exist at all? 4. Have we identified the pain points where we need to create a solution? 5. Are they trying to solve it today? 6. What process, if any, are they taking to solve their problem? 7. What were your biggest surprises?
The Art of the Pivot A significant change in direction based on new customer insights, where the vision remains the same. Example: Idea: App to help diabetics maintain healthy eating habits. Insight: Diabetic caregivers often care more than patients about maintaining healthy habits Pivot to: App for diabetic caregivers instead of diabetics
Close the Loop Based on what you learned, is your leap of faith true or false? Why or why not? If true Persevere! -Move on to next leap of faith, repeat loop process -Push to be more aggressive for next experiment If false Pivot! -Change one or more components of your Idea, Repeat loop process -Important: leverage insights gathered during your experiment! Document updates on your poster and canvas -Create new sticky notes and place them on top of existing notes
Pitch 2 Customer + Problem + Solution + LOF + Experiment + Decision
Refine and Repeat the Loop
Loop to the Start, Begin Again 1. Review/update your vision and idea 2. Pick your next Leap of Faith assumption to test 3. Create a new hypothesis for next experiment 4. Create the next experiment to test your next hypothesis 5. Run your next experiment with real customers! Task: As a team, run through the steps of your poster, asking for mentor help if needed.
Digital Experiments Run a digital experiment overnight 1. Unbounce.com 2. Bit.ly 3. Wufoo.com 4. MailChimp.com 5. Godaddy.com 6. Craigslist.com 7. Facebook Ads 8. Google AdWords
Judge the Search Teams are just as important as ideas -Teams must demonstrate the ability to search, in addition to their idea s viability. No team gets it right the first time. Real customer behavior trumps opinion -Teams must demonstrate the ability to generate data from customers using behavioral experiments. Evidence builds in small increments over time -Teams must move through multiple experiments loops in small increments, in order to increase confidence over time.
Judge the Business Model Identify a specific customer -Teams must demonstrate understanding of their specific customer segment, and insights related to the customer s desired outcomes. Deliver value to the customer -Teams must demonstrate their proposed solution is delivering value to their target customer, via currency exchange (time, attention, dollars) Generate positive business impact -Teams must demonstrate Intuit can extract value for shareholders (and employees as well)
Before we Begin, Review. Review/update your vision and idea Pick your next Leap of Faith assumption to test Create a new hypothesis for next experiment Create experiment(s) to test your next hypothesis Run your next experiment with real customers! Task: As a team, run through the steps of your poster, asking for mentor help if needed.
Pitch 3 Tell Your Story Vision + Customer + Problem + Solution + LOF + Experiment 1
What are you looking for? A strong behavioral response from your target customer, confirming or denying your hypothesis. Do you know why or why not? How painful is the problem? Does it exist at all? Are they trying to solve it today? What process, if any, are they taking to solve their problem
Repeat until your business is validated (or not).
Final Loop Did you get a strong behavioral response from your target customers? Did your numeric hypothesis pass or fail? Do you know why or why not? What surprised you? What is your decision as of right now? How confident are you in this decision?
Pitch 4 Final: Tell Your Story Vision + Customer + Problem + Solution + LOF + Experiment 1, 2, 3 + Final Decision
Next Steps Try it Don t wait for permission to run experiments 1. Start small, think big 2. Set aside specific time for experiments 3. Help each other you re in the club 4. Include leaders in the process
Business Model Canvas
Business Model Canvas
Start with Customer, then Business Use learning from customers to inform how to create business.
Vision: Create Entrepreneurs. Corporations Conferences Lean Startup community Conduct events Follow-up Coaching Mentors Content Jumpstart your idea quickly. Find your meaning. Lean startup principle. Find out if customers like your idea. Event + follow-up support from the community. Word of Mouth Social Media Entrepreneurs Product Teams Service Teams Academies CEO, CFO, GM Per-event: Facilities, facilitators (~$6,000 est.) Fees to attend % of New ideas in market
Mission: Mentor Entrepreneurs. BUs Lean Startup community Conduct events Follow-up coaching Jumpstart your idea quickly. Find your meaning. Lean lean startup principles. Event + follow-up support from the community. Entrepreneurs Product Teams Service Teams Academies Mentors Content Find out if customers like your idea. Word of Mouth Social Media CEO, CFO, GM Per-event model (~$6,000) + employee time Fees to attend % of New ideas in market
Thanks! Now Leap!