387 million ways for a startup to fail… and how to avoid them steve blank twitter: sgblank
TRANSCRIPT
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387 Million Ways For a Startup to Fail…
and How to Avoid Them
Steve Blankwww.steveblank.com
Twitter: sgblank
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I Write a Blog www.steveblank.com
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Startups Fail Because They Confuse Search with Execute
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ScalableStartup
Large Company>$100M/year
What’s A Startup
Goal is to search for: unknown customer and
unknown features
Search Execute
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ScalableStartup
Large Company
- Business Model found- i.e. Product/Market fit- Repeatable sales model- Managers hired
What’s A Startup?
A Startup is a temporary organization used to search for a scalable and repeatable business model
Search
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Startups Fail Because They Execute When They Should Search
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ScalableStartup
Large CompanyTransition
Business Model found- customer needs/product features found i.e. Product/Market fit- Found by founders, not employees- Repeatable sales model- Managers hired
The Search for the Business Model
Startups Search and Pivot
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ScalableStartup
Large CompanyTransition
- Business Model found- Product/Market fit- Repeatable sales model- Managers hired
- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 people
The Search for the Business Model The Execution of the Business Model
Startups Search, Companies Execute
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ScalableStartup
LargeCompanyTransition
Traditional Accounting- Balance Sheet- Cash Flow Statement- Income Statement
The Execution of the Business Model
Metrics Versus Accounting
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ScalableStartup
LargeCompanyTransition
Startup Metrics- Customer Acquisition Cost- Viral coefficient- Customer Lifetime Value- Average Selling Price/Order Size- Monthly burn rate- etc.
Traditional Accounting- Balance Sheet- Cash Flow Statement- Income Statement
The Search for the Business Model The Execution of the Business Model
Metrics Versus Accounting
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ScalableStartup
LargeCompanyTransition
Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan
The Execution of the Business Model
Customer Validation Versus Sales
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ScalableStartup
LargeCompanyTransition
Customer Validation- Early Adopters- Pricing/Feature unstable- Not yet repeatable- “One-off’s”- Done by founders
Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan
The Search for the Business Model The Execution of the Business Model
Customer Validation Versus Sales
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ScalableStartup
Large CompanyTransition
Product Management- Delivers MRD’s- Feature Spec’s- Competitive Analysis- Prod Mgmt driven
The Execution of the Business Model
Customer Development VersusProduct Management
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ScalableStartup
Large CompanyTransition
Customer Development- Hypothesis Testing- Minimum Feature Set- Pivots - Founder-driven
The Search for the Business Model The Execution of the Business Model
Customer Development Versus Product Management
Product Management- Delivers MRD’s- Feature Spec’s- Competitive Analysis
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ScalableStartup
Large CompanyTransition
The Execution of the Business Model
Engineering Versus Agile Development
Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs
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ScalableStartup
Large CompanyTransition
Agile Development- Continuous Deployment- Continuous- Minimum Feature Set- Pivots
The Search for the Business Model The Execution of the Business Model
Engineering Versus Agile Development
Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs
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387 Million Ways to Fail
And the 5 Key Reasons Why
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Business Model Universe387 Million Choices (9x9x9x9x9x9x9x9x9) choices
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More startups fail from a lack of customers than from a failure of product development
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Failure 1
No Business Plan survives first contact with customers
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You Need a Scientific Method to Search this Space
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So,Structure the Search
with a Business Model
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Any Business Model in 9 Boxes
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Failure 2
Assume Your Business Model is Correct
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So,Realize They’re Hypotheses
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9 Guesses
Guess Guess
Guess
Guess
GuessGuess
Guess
GuessGuess
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Failure 3
There Are No Facts Inside Your Building
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So,Formalize Testing
Hypotheses Outside
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Testing the Business Model =
Customer Development
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Test Hypotheses:• Product• Market Type• Competition
Turning Hypotheses to Facts
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Test Hypotheses:• Problem• Customer• User• Payer
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Test Hypotheses:• Channel
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Test Hypotheses:• Problem• Customer• User• Payer
Test Hypotheses:• Demand
Creation
Test Hypotheses:• Channel
Test Hypotheses:• Product• Market Type• Competitive
Test Hypotheses:• Pricing Model / Pricing
Test Hypotheses:• Size of Opportunity/Market• Validate Business Model
Test Hypotheses:• Channel• (Customer)• (Problem)
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Test Hypotheses:• Problem• Customer• User• Payer
Test Hypotheses:• Demand
Creation
Test Hypotheses:• Channel
Test Hypotheses:• Product• Market Type• Competitive
Test Hypotheses:• Pricing Model / Pricing
Test Hypotheses:• Size of Opportunity/Market• Validate Business Model
Test Hypotheses:• Channel• (Customer)• (Problem) Customer
Development Team
Agile Development
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Test Hypotheses:• Problem• Customer• User• Payer
Test Hypotheses:• Demand
Creation
Test Hypotheses:• Channel
Test Hypotheses:• Product• Market Type• Competitive
Test Hypotheses:• Pricing Model / Pricing
Test Hypotheses:• Size of Opportunity/Market• Validate Business Model
Test Hypotheses:• Channel• (Customer)• (Problem) Customer
Development Team
Agile Development
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Testing the Business Model is Customer Development
CustomerDiscovery
CustomerValidation
CompanyBuilding
CustomerCreation
Pivot
Search Execution
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Customer Development is the Search
CustomerDiscovery
CustomerValidation
Pivot
Search
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Failure 4
A Mistaken Hypothesis Creates A Crisis
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So,Pivots are Business Model
Changes Without Crisis
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The Pivot Turns Failure Into Insight
• The heart of Customer Development
• Business Model changes without crisis
• Fast, agile and opportunistic
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A Pivot Changes the Business Model
Test Hypotheses:• Problem• Customer• User• Payer
Test Hypotheses:• Demand
Creation
Test Hypotheses:• Channel
Test Hypotheses:• Product• Market
Type•
Competitive
Test Hypotheses:• Pricing Model /
Pricing
Test Hypotheses:• Size of
Opportunity/Market• Validate Business
Model
Test Hypotheses:• Channel• (Customer)• (Problem)
Customer Development Team
Agile Development
The Business Model/Customer Development Canvas
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Failure 5
We Have Plenty of Time
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So,Startups Are Built for
Rapid Search
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Pivot Cycle Time Matters
• Speed of cycle minimizes cash needs
• Minimum feature set speeds up cycle time
• Near instantaneous customer feedback drives feature set
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387 Million Ways to Fail
• No business plan survives first contact with customers
• Assume your business model is correct
• There are no facts inside your building
• A mistaken hypothesis creates a crisis
• We have plenty of time
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Both Books on Amazon
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Thanks
www.steveblank.com