from idea to a business
DESCRIPTION
Have an idea for a new business but don't know how to progress it? A great place to start is to discover your business model.TRANSCRIPT
Getting from an Idea to a BusinessWorkshop 1: Discover your business model using the Lean Canvas
Rory Cawley [email protected]://ie.linkedin.com/in/rorycawleyAll based on Running Lean by Ash Maurya
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Workshop aims
1. Understand what to do once you have a startup idea
2. Learn a systematic technique to reduce the risk of your startup failing
3. Create a framework for your startup that can progress you further
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What to do once you have a startup idea
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You have a big idea, what’s next?
Don’t waste any more time – let’s BUILD IT!
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You have a big idea, what’s next?
Don’t waste any more time – let’s BUILD IT! Entrepreneurs love to create things This creative work will only last as long as there
is money in the bank When the money runs out that’s it!
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You have a big idea, what’s next?
Don’t waste any more time – let’s BUILD IT! Life is too short building something no-one wants
– this is the top reason startups fail
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Why is building successful products so hard?
It’s a myth that a visionary entrepreneur just comes up with the product and builds it to great applause from the market
Startups who just focus on building their imagined product mostly find there is a poor market fit and poor customer demand
The result is very costly failure
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Most Startups fail!
Startups that are capable of changing their plan to eventually find one that works before running out of resources have the best chance of success
Most initial plans FAIL
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Facts versus opinions
A strong vision is vital but it needs to be backed by facts not just opinions
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Vision backed by facts
Initial vision is largely a set of untested assumptions
To strengthen the vision all assumptions need to be tested to ensure the vision is upheld with facts
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Write down your initial vision
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Share your vision with people
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Understand the problem
“A problem well stated is a problem half-solved” – Charles Kettering
“Customers don’t care about your solution. They care about their problems” – Dave McClure
You must figure out what customers want and will pay for as quickly and cost effectively as possible
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Learning from the customer
“It’s not the customer’s job to know what they want” – Steve Jobs
“If I had asked people what they wanted they would have said faster horses” – Henry Ford
In the case of Ford, the customer really had a problem with transport speed and that was the problem Ford set out to solve
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Learning as startup progress
It’s up to you to help customers clearly spell out what their problems are
The customer isn’t expected to come up with a solution however! Instead of pitching your solution focus on learning from people –
customers, team members, advisors, investors
In fact, learning is the true measure of progress for a startup
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Have enough runway to deliver your product
Your startup can keep going as long as it has enough resources – usually money
Entrepreneurs pitch their idea (the solution) to internal stakeholders or investors to get enough of a runway to deliver the product
However, people and especially investors don’t really care about your amazing and innovative solution
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What do investors care about?
Investors want a return on investment so the first thing they seek is evidence of traction, engagement with your customers or markets
Investors want to know about your cost structures and revenue streams (margins) or how you will build a scalable and profitable business
Investors care about what the market size is, how big is this problem
Investors worry about how easy it would be to keep other people from just copying your business
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Traction
Internal stakeholders or investors care about traction more than anything else
Traction is the engagement of your product with customers Therefore before going to investors it’s best to start off with
customers
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What do customers care about?
Customers don’t care (that much) about the solution Customers buy products that solve the underlying problems they
have The way you tell customers about your product is through a well
crafted Unique Value Proposition (the promise) The UVP is the intersection of the customers top problems and
your solution The UVP starts the conversation, it should get you noticed – it
doesn’t close the deal Important to start by identifying who needs your solution the most If you try to market to everyone then you market to no-one, start
with early adopters Price is very important for customers – the price of your product
needs to be in line with the value it brings
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The solution versus the business model
We’ve seen that a successful business needs to appeal to customers and investors
We saw that the entrepreneur needs to initially write out your assumptions about:
– The top customer problems– The unique value proposition– The market size– How to show traction– What makes your idea difficult to copy– Costs involved in running the company– Price of the product– The ways customers can find and buy your product– And of course the amazing solution
All the above can be covered by creating a business model The business model is the real product
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What to do with the business model
The initial working business model consists of a bunch of assumptions
The job of the entrepreneur is to – systematically de-risk this business model over time – through a series of conversations– With
Customers Internal team Competitors Investors Advisors
The true benefit of the model is when it facilitates learning from other people
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One page format for your business model
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Learn a systematic technique to reduce the risk of your startup failing
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The three stage approach
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Stage 1: document your plan A on a lean canvas
Divide and conquer Take the tough parts of creating a business Break them into smaller bits to make it more manageable Do a separate canvas for each possible customer segment A suggested order to fill in the boxes is on the canvas below Some of the models can be eliminated straight away
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Stage 2: identify the riskiest parts of your plan
Standard project management Start with the riskiest stuff first Avoid some last minute surprises as you approach deadline Test what’s riskiest in the business model vs. what’s easiest The riskiest part is often not the solution but the problem
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Stage 3: systematically test your plan
Test your assumptions going from highest risk to lowest risk Run experiments to test the assumptions and get answers Test multiple models in parallel At this stage some models might be prioritised on review of the
answers from certain customer segments Feedback the results to adjust the plan
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Create a framework for your startup that can progress you further
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Creating a lean canvas for your startup step by step
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Lean Canvas Example
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The Problem – Customer Segment pair drives model
ProblemTop 3 Problems
Existing Alternatives
Customer Segments
Early Adopters
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What’s unique about your product?
Unique Value Proposition
High-level concept
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What features would solve the top problems?
Solution
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Channels – getting your product to customers
Channels
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Revenue Streams and Cost Structure
Revenue Streams Cost Structure
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Key Metrics
Key Metrics
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Unfair Advantage
Unfair Advantage
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Where to next?
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Lean Canvas:Problem Solution Unique Value
PropositionUnfair Advantage
Customer Segments
Cost Structure Revenue Streams
Key Metrics Channels
Date: Version Name:
name
12th May 2013 First brainstorm
Top 3 problems.
Top 3 features.
Single, clear, compelling message that states why you are different and worth buying.
Can't be easily copied or bought.
Target Customers.
Early Adopters:
Personas:
Activity that drives retention/revenue.
Path to customers.
Customer Acquisition CostsDistribution CostsHostingPeople, etc.
Revenue ModelLifetime valueRevenueGross Margin