LeanStartup Roadmap

Matt RutterCCI Gagauzia

Matt RutterCCI Gagauzia

Small Enterprise Advisormatt@mattrutter.com

Entrepreneurial

The reason most startups fail is not because they build a bad product, it’s

that they build a product nobody needs.

-Eric Ries

What separates successful startups is not necessarily starting with a better initial plan (Plan A), but finding a plan that works before running out of resources.

- Ash Maurya

Customer Development

Lean Startup

Lean Canvas

Today• Lean Startup–Idea Validation–Lean Canvas (Hands-on Practice)–Testing Solutions (MVP)–Scaling to Market (Leveraging Traction)

• Application, Discussion, & Questions

“A startup is not a ‘doll house’ version of a large

company.”

- Eric Ries

What is а “Lean Startup?”

• “Startup” – a temporary organization designed to search for a repeatable and scalable business model.

• Tradition– Write and Execute– Assumptions– Static (Unchanging)

• Lean– Model and Test– Customer Development

– Agile (Iteration, Pivots))

“Startups that succeed are those that manage to

iterate enough times before running out of

resources.”- Eric Ries

Eric Ries, The Lean Startup

LeanStartup Roadmap

• Idea– Problem

Interviews– Market Research

Need

TalentInterest

IDEACustomer/Problem Fit

Determine if the problem exists and is worth solving

• Problem Interviews• Market Research

Right Action, Right Time

Ash Mauryapracticetrumpstheory.com

IDEA

Identify and Test Greatest Risks

First

Customers care about their problems – not

your solution.

IDEA

- Dave McClure

Problem Interview

Goal: To understand…1. What is the problem? Why is it a

problem?2. Who has the problem?3. How do they currently solve the

problem?

Ash Maurya, Running Lean 81

Problem Interview• Do– Create falsifiable hypotheses to test– Speak with customers face-to-face (casual

setting)– Use a script– Take notes (bring partner/co-founder)– Listen and ask questions

• Don’t– Pitch or sell– Ask about the future– Take more time than needed

Problem Interview

• Examples of Falsifiable Hypotheses– X% of interviewees will have problem A– X% of interviewees will currently use

and be dissatisfied with an existing alternative

– X% of interviewees will be viable customers

Ash Maurya, Running Lean 84

Problem Interview• Example Script

1. What’s the hardest part about [problem context]?

2. Can you tell me about the last time that happened?

3. Why was that hard?4. What, if anything, have you done to solve

that problem?5. What don’t you love about the solutions

you’ve tried?Justin Wilcox – How I Interview Customershttp://customerdevlabs.com/2013/11/05/how-i-interview-customers/

Problem Interview• Other questions:– How often do you experience this problem?– How much are you spending to solve this

problem now?– Where do you find information about

[problem context] currently?

• Keys:– Focus on emotional reactions– Use “5 Whys” to get to the core problems– Hear 3 problem stories during each interview

Justin Wilcox – How I Interview Customershttp://customerdevlabs.com/2013/11/05/how-i-interview-customers/

Market Research• What current solutions/alternatives exist?– Cost– Function– Revenue model

• What barriers to entry exist?• Is this a rising or dying trend?

Resources:– google.com/trends, google.com/think– entrepreneur.com/businessideas/index.html– hbr.org, forbes.com, wsj.com,

techcrunch.com

LeanStartup Roadmap

• Idea– Problem

Interviews– Market Research

• Model– Lean Canvas– Solution

Interviews

MODELProblem/Solution Fit

Determine if your model solves the problem

• Lean Canvas• Solution Interviews

Why Lean Canvas?

• Fast• Concise• Dynamic

“Your Product is not The Product”

- Ash Maurya

Lean Canvas Modeling

In Moldova

A business model describes the rational of how an organization creates,

delivers, and captures value.

-Alex Osterwalder, Business Model Generation

Customer Segments• The specific group of

people or organizations a business intends to serve.– Who has the problem?– For whom are we creating

value?– Who must we sell to or

make happy?

• Early Adopters: The characteristics of the first group of people who will purchase your product.

• Sketch:– Title– Age– Family Details– Income Level– Amount of Free Time– Location– Their Values/Morals– Social Groups– Professional

Associations– Hobbies– Where They Shop

Problems• The top 1-3 problems

your Customer Segments need solved.– What problem are we

curing?– How strong is this

problem?– Will the customer pay to

have this problem removed?

• Existing Alternatives: How the problem is currently solved by the Customer Segments.

• Sketch:– Frequency– Expense– Awareness– Reaction– Newness

– Customer Segments

• Businessmen• Foreigners• University Students

• Early Adopters– Young Adults (22-35 years old)• First 10 customers: 4th year students at ASEM

– Problems

• No comfortable, well-recognized place to meet for a good cup of coffee in Chisinau.

• Existing Alternatives–McDonald’s– Andy’s Pizza–Marcu’s Coffee– 3 в 1

Team Time Customer Segments and Problems

• CS: The specific group of people or organizations a business intends to serve.

• Sketch:– Title– Age– Family Details– Income Level– Amount of Free Time– Location– Their Values/Morals– Social Groups– Professional Associations– Hobbies– Where They Shop

• P: The top 1-3 problems your Customer Segments need solved.

• Existing Alternatives: How the problem is currently solved by the Customer Segments.

• Sketch:– Frequency– Expense– Awareness– Reaction– Newness

Solution• The minimum activities

or features needed to solve the Customer Segments’ top 1-3 Problems.– Outline a feature set to

solve each problem (description of your product or service)

– Only include what is necessary (according to Solution Interviews)

• Sketch:– How problem is

solved– Time needed for

solution– Resources needed– Partners needed

– Solution

1. Offer consistently high-quality cafe goods from a professionally trained staff.

2. Create an easily identifiable facility with an atmosphere conducive for good conversation.

3. Instill customer service and appreciation into every interaction with a Tucano employee or the Tucano facilities.

Team Time - Solution

• The minimum activities or features needed to solve the Customer Segments’ top 1-3 Problems.– Outline a feature set to

solve each problem (description of your product or service)

– Only include what is necessary (according to Solution Interviews)

• Sketch:– How problem is

solved– Time needed for

solution– Resources needed– Partners needed

Unique Value Proposition

• A clear and short message stating the business’ unique Solution to the Customer Segments’ Problem.– The value you create for the

Customer Segment– How are you improving the lives

of our customers?– How are you different?

• High-Level Concept: Brief relation of your UVP to something commonly understood (i.e. ВКонтакте: “Facebook for Russians”).

• Sketch:– How your solution relates

to the customer’s #1 problem

– Finished story benefit of purchasing your product

– How the solution will make your customer feel

Note: The UVP represents the emotional trigger that will convince your customer to purchase your product/service

– Unique Value Proposition

• Slogan: Love. Peace. Coffee.• Offering great coffee, with a great atmosphere, to

enable great conversations. • Truly superior customer service and experience from

entrance to exit.• Fair-Trade and always-fresh 100% Arabica coffee roasted

at Tucano Coffee Roasting Factory.• World-class coffee machines operated by baristas

certified to SCAE standards .

• High-Level Concept: Starbucks for Chisinau.

Team Time - Unique Value Proposition• A clear and short message

stating the business’ unique Solution to the Customer Segments’ Problem.– The value you create for the

Customer Segment– How are you improving the

lives of our customers?– How are you different?

• High-Level Concept: Brief relation of your UVP to something commonly understood (i.e. ВКонтакте: “Facebook for Russians”).

• Sketch:– How your solution

relates to the customer’s #1 problem

– Finished story benefit of purchasing your product

– How the solution will make your customer feel

Note: The UVP represents the emotional trigger that will convince your customer to purchase your product/service

Channels1. Product: How a company

delivers its Value Proposition to the Customer Segments.

2. Marketing: How a company attracts the interest of its Customer Segments.

• Customer Relationship – The closeness and frequency of the relationship developed with the Customer Segments.

• Sketch:– How will you deliver

your solution?– How will your

customer make a purchase?

– How will you find your first 10 paying customers?

– What is the most resource efficient way to attract Early Adopters?

– Channels

• Product: 1. Purchase coffee beans and equipment from an

international distributor, purchase raw ingredients for baked goods from local producers

2. Trained and certified Tucano employees bake and roast products

3. Engaging and pleasant staff take the customer’s order and payment

4. Tucano employee searches for customer and delivers the order to their seat.

– Channels

• Marketing:– Highly-visible and prominently placed

storefronts– Brightly colored and large advertisements on

billboards– Catering partnerships at prominent events with

occasional giveaways –Word-of-mouth by encouraging existing

customers to invite friends/colleagues for a meeting

– Hosting evening events for NGOs or clubs.

Team Time - Channels1. Product: How a company

delivers its Value Proposition to the Customer Segments.

2. Marketing: How a company attracts the interest of its Customer Segments.

• Customer Relationship – The closeness and frequency of the relationship developed with the Customer Segments.

• Sketch:– How will you deliver

your solution?– How will your

customer make a purchase?

– How will you find your first 10 paying customers?

– What is the most resource efficient way to attract Early Adopters?

Definitions

• Income/Revenue: Money coming in to a business.

• Expense/Cost: Money exiting a business (items the business pays for).

• Profit: Money a business keeps

Profit = Revenue – Expenses

Definitions

• Fixed Costs: Expenses that do not change depending on the number of products sold.

• Variable Costs: Expenses that change in proportion to the number of products sold.

• Break Even Point: Time (in # of products sold) when Revenue = Expenses.

BEP = Fixed Costs / (Price – Variable Costs)

Break Even Point

Gourmet Food Cart• Price of lunches = 55 MDL per lunch• Variable expenses = 20 MDL per lunch• Fixed expenses = 6000 MDL per month

BEP = Fixed Costs / (Price – Variable Costs)

BEP = 6000 / (55-20)BEP = 171 lunches per month

Revenue Streams

• The various income-generating activities of a business.– Customer Segment

paying money to receive the business’ Value Proposition

– Charge as early as the customer will permit

– Determine price based on the value you add, not the cost of production

• Sketch:– For what features will

the customer pay?– What features will be

free?– How will you position

your business against alternative solutions?

– Are you adding value to non-customers who would be willing to pay?

Cost Structure

• All operational expenses of running your business.

• Sketch:– Immediate fixed

costs– Immediate variable

costs (including your labor)

– Break-even point

– Revenue Streams

• Coffee• Baked Goods• Meals• Catering

– Cost Structure• Fixed Costs

– Human Resource Overhead (including salaries) – Equipment– Decorations– Electricity, Gas, Insurance– Marketing

• Variable Costs– Ingredients– Presentation materials– Water– Electricity

• BEP (45% Coffee, 30% Meals, 15% Backed Goods, 10% Catering)

– BEP = 27.000/ (48 – 39) = 3.000 “products”

Team TimeRevenue Streams and Cost Structure

• R$: The various income-generating activities of a business.– Determine price based on the

value you add, not the cost of production

• Sketch:– For what features will the

customer pay?– What features will be free?– How will you position your

business against alternative solutions?

– Are you adding value to non-customers who would be willing to pay?

• C$: All operational expenses of running your business.

• Sketch:– Immediate fixed costs– Immediate variable

costs (including your labor)

– Break-even point

Key Metrics• The 3-5 indicators of a

business’ health (success).– How you track your

customer’s behavior and preferences

– Monitoring the implementation of your business’ key activities

– Informs a business whether or not it needs to pivot/iterate

• Sketch:– Customer Segment

Awareness– New Customer

Acquisition– Inventory Turnover– Time Needed to

Complete Job– On-Time Payments– Customer Retention– Customer Referral

Pirate Metrics

- Dave McClure (500hats.com)

Unfair Advantage• The features of your

business that are difficult for competitors to copy or buy. – What keeps new

competitors from taking your customers?

– If someone “steals” your idea, how will you continue to exist?

• Sketch:– Current advantages

(often based on existing relationships or networks)

– Advantages your business could develop over time

– Note: passion, existing resources, and being “first to market” are not sustainable competitive advantages.

– Key Indicators

• 100 new customers per week• 40% of customers return once per week• 70% of customers recommend to

friends/family• 750 orders between all locations per day• 6 minutes – average time it takes from

the moment a customer enters the ordering line until the customer’s food/drink is delivered

- Unfair Advantage

• American research experience and professional network

• Location of real estate• Employee acquisition and training

program

Team TimeKey Metrics and Unfair Advantage

• KM: The 3-5 indicators of a business’ health (success).

• Sketch:– Customer Segment

Awareness– New Customer Acquisition– Inventory Turnover– Time Needed to Complete

Job– On-Time Payments– Customer Retention– Customer Referral

• UA: The features of your business that are difficult for competitors to copy or buy.

• Sketch:– Current advantages– Advantages your business

could develop over time

– Note: passion, existing resources, and being “first to market” are not sustainable competitive advantages

MODEL• Lean Canvas• Solution Interviews– Return to the earlier interviewees and

propose the Solution and UVP you sketched• Do you have the right feature set?

– Discuss your business model (the interaction of all 9 boxes) with mentors or fellow entrepreneurs• Do you have a realistic path to profit?

LeanStartup Roadmap• Idea– Problem

Interviews– Market Research

• Model– Lean Canvas– Solution

Interviews

• Test– MVP– Early Adopter

Sales

TESTSolution/Product Fit

Determine how to effectively offer your solution in a minimal product

• Minimal Viable Product (MVP)• Early Adopter Sales

Lean Startup

Traditiona

l Startup

Minimum Viable Product

Minimum Viable Product

• Strategy used for fast and qualitative market testing of a product or product feature

• The most resource-efficient (time, money, energy) method of creating and capturing value from the Customer Segment–MUST solve the problem of customer– Should not require a loan or long timeframe

Minimum Viable Product

• Create falsifiable hypotheses– One quantitative metric per test

• Sell product, but continue learning• Produce product in small batches• Communicate insights with team

early and often

Minimum Viable Product

• Moldovan Agritourism Business– Plan and organize

excursions/events for individual customers

– Drive them personally– Provide food and

sleeping arrangements from home

– Work on own garden/field/orchard, collect payment

• Internet-Based Food Distributor– Create online form

(free) for customers (in one town) to place order (5 products)

– Purchase these products from the local market

– Personally deliver to homes the next day

– Collect payment

Examples:

Early Adopter Sales

• Begin selling to very specific Customer Segment (10-15 people)

• Learn which features are “must-have” and which are unnecessary

• Determine price point – High enough the customer must contemplate

the purchase, low enough the customer will buy

Goal: Validate business model not # of sales

LeanStartup Roadmap• Idea

– Problem Interviews– Market Research

• Model– Lean Canvas– Solution Interviews

• Test– MVP– Early Adopter Sales

• Scale– Product 1.0 Launch– Business Plan– Investors

SCALEProduct/Market Fit

Determine if your product will attract demand from regional / national /

international markets

• Product 1.0 Launch• Business Plan• Investors

Product 1.0 Launch

• Use recommendations from Early Adopters to expand sales

• Test various price points• Execute marketing strategy• Maintain close contact with customers• Keep learning who is and who is not your

customer segment

Business Plan1. Unique Value Proposition2. Customer Development

Learnings3. Solution4. Problem/Customer Segments5. Problem/UVP/Unfair Advantage6. Solution/Revenue Streams7. Channels (Marketing)8. Channels (Production)9. Conversations w/ Partners, UA10. Solution Interviews/MVP/Early

Sales11. Key Metrics12. Cost Structure/Revenue Streams13. Cost Structure/Revenue Streams

1. Cover2. Executive Summary3. Company Description4. Market5. SWOT Analysis6. Product/Service Line7. Marketing and Sales8. Operational Activity9. Ownership and Management10. Risk Assessment and

Mitigation11. Action Plan12. Budget13. Break Even Point14. Funding Request15. Staff16. Appendices

Investors

• Family and Friends• Business Plan Competitions• Economic Development Projects• Angel Investors• Banks• Venture Capital

Lowest Risk

Greatest Risk

What is Success?

Know the impact you wish to make in the

world and scale accordingly.

Discussion

Matt RutterEntrepreneurial Development Consultant

Chamber of Commerce and Industry of Gagauzia+(373) 60 735 102

matt@mattrutter.comSkype: matthewlrutter