lean startup & corporate innovation strategies - april 2015
TRANSCRIPT
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Lean Startup & Corporate
Innovation Kevin Shutta
Lean Startup Machine Organizer & Coach
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Who is this guy?
Organize three-day Lean Startup workshops in Washington D.C. and the SF Bay Area
Experience in several startups
Often invited to speak on Lean Startup for accelerators
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Who are you?
Who has read the lean startup?Who has gone to a startup competition?Who has experience in a startup?Who has experience creating disruptive new products?
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Agenda
What is Lean Startup and how you can use it in corporate innovation
Rough outline:• Lean Startup Overview• Corporate Innovation• Questions
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98% of Startups FAILWe believe most fail because never get customers to pay for their offering and/or build something nobody wants.
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My Experience without Lean
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College Hobby
I created over 2,000 videos teaching myself how to speak in public. Practice generally included 10-60 second videos on skills that someone could practice on his/her own:
• Pronunciation• Gestures• Stance• Confidence• Etc.
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Startup Idea: Share this with the world through online network for public speaking
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Washington, D.C. Summer 2013
Top Competitor
SolutionResolve fear through skill-building using low cost, low effort, high feedback training online through a guided community and content.
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Successes
• 1st Place at Startup competition• Designed a few courses of content• Team of 4-7 working on this for 5 months• Investors LOVED the idea, they just wanted to see the PRODUCT
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Customers (Sales Pitch)
50 people in the streets of Washington, D.C.• 48 thought the idea would be good for other people, but not for
themselves• “This would be good for introverts, but not me”• “I take beta blockers before I speak, so I’m fine.”• “I’m a teacher. I got used to the stress a long time ago, so I don’t look for
solutions anymore.”• 1 Person liked it because he wanted to recruit me for network
marketing• 1 Person ACTUALLY wanted to give it a try
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Customers (Product Demo)
Demo in Asperger’s group• 100% (about 10 of 10) saw their speaking skills improve after their
combined content and video course• 0% wanted continued lessons
Online platform for Public Speaking
Customers
Money
Problem
Offering
Solves Problem for
customerCaptures Money
Scalable
Money to Build
Technology to Build
People to Build
Willing to Use $$$ to solve
Problem
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Wall of Shame
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Lesson Learned: forcing my idea on the world doesn’t work
even when everyone thinks it’s a great idea and is ready to be built
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Being wrong and failing is the norm in entrepreneurship. So what can we do?
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What is Lean Startup?
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Startup
A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.
- Eric Ries
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Two Types of Innovation
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Sustaining Innovation – Improving Existing Products
• Product improvements• Cost cutting• Applying best practices
Companies are naturally great at this.
Startups generally do not address sustaining innovation.I will not talk about this today.
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Disruptive Innovation
Definition: Uncovering new prodcuts and creating new lines that grow massive profits and destroy existing markets
Examples:• Music disks to cassettes to CDs to digital• Letters to emails and texting
Drastically changed businesses and market players, lost jobs.
Lean Startup addresses how this can be done.Companies are not good at doing this
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Lean Startup
Lean Startup is about finding the cheapest, fastest way toReduce the risk of your startup not succeeding,And rapidly iterating until you find the business that succeeds
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Your Startup idea is a set of [untested] Questions and Hypotheses
“I believe [Customer] has a problem with [Problem]”“I believe [Solution] will solve [Problem] for [Customer]”“I believe [Customer] will pay for [Solution]”“I believe [Customer] will repeat buy the [Solution] or recommend to a friend”
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So… identify and reduce your risks of failing by testing, validating, and getting to the right model
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Experiments Provide Answers
Hypothesis: “I believe [customer] has a problem with [problem]”
Experiment: Ask the customers. See if they exhibit the behavior of someone with that problem (discussed later)
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Build Experiment
MeasureLearn
Create new experiments to validate / invalidate business models until you fine one that works
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Some Types of Experiments
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Types of Experiments
Experiment Possible Tools Question it Answers(Validation/Invalidation)
Learning Available
Problem Interview
Open-ended questions
Does the customer have the problem I think they have? What problems do they have?
• Customer pain points (if any)• Alternative solutions• Customer Segments• Potential Use Cases (stories)
Solution Interview
PrototypeScreenshotsMock-ups
Could the solution work? • Identify early adopters• Features required / not required in
minimum viable product
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Types of Experiments
Experiment Possible Tools Question it Answers(Validation/Invalidation)
Learning Available
Pitch MVP ScriptsSales materials (e.g. screenshots)Letter of IntentLanding Page
Can we drive traffic? Can we get signups? Will people sacrifice time / money / emails / other currency to solve their pain (with our solution)?
• Sales & marketing tactics• Customer objections• Pricing information
Concierge MVP
A person (you)Simple technology (sometimes)
Does the manual version of my product solve the customer need? Do they return or refer others?
• Product optimization (features needed and not needed)
• Sales funnel optimization• Potential lifetime customer value and
sales model
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Find your Customers
GET OUT OF THE BUILDING. Find customers who have the problem you think they have.
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Find early adopters that have a problem• Aware that they have the problem• Previously searched for a solution• Tried to solve it themselves• Have money to pay for solution
Learn about them! Help them solve the problems they do have.
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Once you have customer and problem, SELL IT!
Get emails, money, etc.
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Pitch MVP
Purpose: see if your customer with the problem will put something on the line to solve that problem
Script:• Intro and qualify them• Do you have a problem with [Problem]?• Present a solution (doesn’t have to work!)• Ask for the currency (attention, money, email address, etc.)
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If people will not give up their email address for a promise to solve their problem, they will not pay money for a product that promises that it will.
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Concierge
Purpose: see if the solution solves the pain
Experiment: manually do what your service is intended to do
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Concierge Sample
Grace NgLean Startup Machine@uxceo
Question: Will connecting people with websites and UX Designers for $$$ create a mutually beneficial experience?
1. Let customers fill out an online form that sends email to Grace2. UX Designers fill out form that submits email to Grace3. Grace manually introduces them in an email
Result: the experience was OK and Grace had more to improve
See the experiment at https://www.youtube.com/watch?v=-_MH8TENpwc
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What does Minimum and Viable mean?
The minimum feature set that solves the customer’s pain
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PivotsIf you find that your proposed hypothesis failed in the market, the market is telling you something. CHANGE YOUR MODEL (PIVOT) and try the new one. Otherwise, you are beating a dead horse.
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Starbucks
Started as…Selling expresso makers and coffee beans
Ended as..
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Case Study[Lean]
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Common Objection: Lean Startup is just for simple consumer software products
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Lean Startup is about finding and eliminating your risks cheaply and effectively. It’s for everything
Sometimes, you need to know if something is technically possible, and the customer aspects are not risks. With lean, you build the riskiest parts first, and you only build one (prototype) for proof of concept.
Either way, YOU’RE STILL LEAN
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Corporate Lean Innovation
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Purpose: Maintain & Increase Profits1. Protect or grow future market share2. Launch new products in new markets3. Make returns
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Why are startups better at disrupting?• Internal barriers• Lack of innovative culture
Questions often asked before creating new products• "Are we good at this?"• "How does this fit into our existing business model?"• "Does it suit our brand?• "What sithe impact on our portfolio?"• "Does my boss like this?"
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Self-Cannibalization
Steve Jobs: we need to invest money in new technology. The Apple II will be outdated in a few years
Board: We need to pour more than the Apple II rather than side projects. It’s 70% of our sales!
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Person Motivations
Entrepreneurs• Power and influence• Autonomy• Managing People• Financial Gain• Altruism
Employees• Security• Prestige• Financial Gain• Affiliation• Recognition• Lifestyle
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Lastly
There are millions of entrepreneurs and startups trying to eat yours and your competitors’ lunch. Many will get the resources to compete.
There is one of you.
GOOD LUCK!
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What can Companies do about it?
Type Definition Potential Upside
Company Control
Incubation Innovate from within Lower HighAcquisition Purchase innovative
companies (> 50% stake)High High
Investment Invest in innovative companies (< 50% stake
High Low
IncubationGrow disruption from within
Skunkworks – take best and brightest and assign them to a program
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Lockheed Martin assigned a team to develop the fast, light X-56A aircraft to undermine other offerings
Advantages: accomplish specific goalsDisadvantages: often secretive, best with structured innovation
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IncubationGrow disruption from within
Intrapreneurship – programs to commercialize internal employee ideas
Advantages: increase idea pool. Can be followed by accelerator programDisadvantages: Governed by existing lines, employees don’t know how to implement ideas, encouraging sustaining innovation
Collected 550 business plans per year from employees3-month boot camp for finalists to polish ideasWinners were passed to business lines for implementation
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IncubationGrow disruption from within
Innovation Lab – salaried intrapreneurs research and innovate together
Advantage: invent cool stuffDisadvantage: may not have commercialization/implementation knowledge, may not have incentives
Xerox invented the mouse and Ethernet, although they were commercialized by others
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IncubationGrow disruption from within
Techstars model: teams apply with ideas, finalists work on ideas for 3 months, then teams pitch to company and investors at closing.
Advantages: incentives (employees keep most of profits), semi-unstructured innovationDisadvantage: corporate chosen ideas, which limits innovative potential
Microsoft collected applications & put 11 teams in Techstars for 3 months, purchasing one for $5 million. Others companies have done the same
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AcquisitionPurchase disruptive companies
Advantages: any company can innovate, doesn’t have to be you. Own technology, innovative teams, fastest option to acquireDisadvantages: costly
Three of Google’s highest profile acquisitions
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InvestmentPurchase a financial share of disruptive companies
Advantages: any company can innovate, doesn’t have to be you. Hedge risks of disruption.Disadvantages: costly. Expect to pay more than Venture Capitalists and Angels for similar shares as they usually bring contacts, expertise, and support, and corporations have a bad reputation for managing startups
$850 million in investments in internal venture fund (large example)Invest in companies related to IntelLarge returns include MySQL and Citrix
Combination of Strategies
Innovation Colony – separate department dedicated to creating new products. Department has budget to incubate, acquire, or invest as appropriate
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Advantages: corporate control, combination of approaches, budgetary approach, fits in with corporate structure
Disadvantages: requires money and many ideas for best results
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Innovation Tips
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To increase disruption, connect with startup world
• Learn about startups and investment/acquisition opportunities through your Venture Capitalist and Angel investor friends• Connect with entrepreneurs• Connect with other executives who are doing the same thing you are
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Use a Different Brand Name
Problems with using your brand name or “powered by…”• Increased conversions due to brand recognition (experiment
externality)• No worry about putting out a poor product• Risk publicity for unforeseen issues
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Bring in Entrepreneurs and Innovators to Lead, Manage, and Coach• Your portfolio managers need to know how to manage innovation• Your entrepreneurs and innovators need good practices and
knowledge from someone who has done it before• Bureaucrats will not know how to manage or coach innovation teams
will
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Be Cautious with your Leadership Team• Innovation practices need leadership support in both ideas and
implementation• If implement 10% time, needs to be:• Applied to product teams• Results tracked• Enforced by you• Enforced and celebrated by your management team
If you don’t get support, old corporate habits will take over again.
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Wrapping Up
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Sources
The Lean Enterprise (main source)by Trevor Owens, CEO of Lean Startup Machine
Other content is a mix of my own and from other sources
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Lean Startup MachineThe hands-on Lean Startup workshop
• Learn a repeatable process for finding products that succeed with companies• Hands-on guidance and practice from successful entrepreneurs and
leaders in Lean• Three days of hands-on training• In most major cities worldwide
https://www.leanstartupmachine.com
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Learn More about Lean
There are plenty of books out there these days.
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Lean Startup Machine does enterprise workshops
Go here to learn more:https://www.leanstartupmachine.com/enterprise-lean-startup
A few companies LSM has worked with:
