Lean Start-Up Principles
and
Minimum Viable Product
Thanks to Steve Blank, Erik Ries, Sean Ellis
What are the Lean Startup Principles?
•
Nail it then scale it
•
Rapid hypothesis testing about market, pricing,
customers (customers & markets unknown)
•
MVP (Minimum viable product)
•
Low burn by design (no scaling until revenue)
•
Metrics, iteration, agile development
•
Learn fast (fail fast)
Founder’s Job
• Search for Minimum Viable Product (“MVP”)
and Scalable Business Model
• How?
Scalable
Startup
Transition
Real Business
Unknown customer needs
Unknown feature set
Unknown business model
Model found by iteration
Source: Steve Blank
What is MVP?
• Minimum Viable Product
– Part of the “Lean Startup” methodology espoused by
Eric Ries
Eric Ries’ definition:
– The minimum viable product is that version of a new
product which allows a team to collect the maximum
amount of validated learning about customers with
the least effort.
– Big vision meets rapid, metrics-based iteration
Problem Definition Process
• What is the basic need/problem?
• What is the desired outcome?
• Who stands to benefit and why?
• How is it solved now?
Before Coding
• Test/validate that the problem you are solving
– Actually exists
– Is (painful) worth solving (customers will pay for it)
– Is widespread (big market)
– Is solved by your minimum feature set
Minimum Viable Product
http://web.archive.org/web/20070701074943/http://blog.pmarca.com/2007/06/the-pmarca-gu-2.html
Why?
• Save time and money
– Spend imagination before money
– Engineer risk out of product and model
– Run lots of experiments
Value Proposition
What Are You Building and For Who?
© 2012 Steve Blank
Product/Market
Fit
Pain Killers
Reduce or eliminate wasted time,
costs, negative emotions, risks during and after getting the job done
Pain = Customer Problem
Gain = Customer Solution
The Value Proposition
Gain
Creators
Products
&
MVP
Services
Pain
Killers
Pain Killers - Hypotheses
• Produce savings?
– (e.g. time, money, or efforts, …)
• Make your customers feel better?
– (e.g. kills frustrations, annoyances, things that give them a headache, ...)
• Fix underperforming solutions?
– (e.g. new features, better performance, better quality, ...)
• Ends difficulties and challenges customers encounter?
– (e.g. make things easier, helping them get done, eliminate resistance, ...)
•
Wipe out negative social consequences?
– (e.g. loss of face, power, trust, or status, ...)...
• Eliminate risks
– (e.g. financial, social, technical risks, or what could go awfully wrong, ...)
Pain Killer – Is it a Problem or Need?
• Are you solving a Problem?
• Are you fulfilling a Need?
• For who?
• How do you know?
Pain Killer - Ranking
• Rank each pain your products and services kill according to
their intensity for the customer.
•
Is it very intense (appendicitis) or very light (annoying)?
• For each pain indicate the frequency at which it occurs
Gain Creators
How do you create benefits the customer
expects, desires or is surprised by, including
functional utility, social gains, positive
emotions, and cost savings?
Gain Creators- Hypotheses
• Create savings that make your customer happy?
– (e.g. in terms of time, money and effort, ...)
• Produce expected or better than expected outcomes?
– (e.g. better quality level, more of something, less of something, ...)
• Copy or outperform current solutions that delight customer?
– (e.g. regarding specific features, performance, quality, ...)
• Make your customer’s job or life easier?
– (flatter learning curve, usability, accessibility, more services, lower cost of
ownership, ...)
• Create positive consequences that customer desires?
– (makes them look good, produces an increase in power, status, ...).
Gain Creator- Ranking
• Rank each gain your products and services create according to
its relevance to the customer.
•
Is it substantial or insignificant?
•
For each gain indicate the frequency at which it occurs.
Minimum Viable Product
Define Minimum Viable Product – Physical
• First, tests your understanding of the problem (pain)
• Next tests your understanding of the solution (gain)
– Proves that it solves a core problem for customers
• The minimum set of features needed to learn from early
evangelists
- Interviews, demos, prototypes, etc
- Lots of eyeball contact
Define the Minimum Viable Product –
Web/Mobile
• NOW build a “low fidelity” app for customer feedback
– tests your understanding of the problem
• LATER build a “high fidelity” app tests your understanding of
the solution
– Proves that it solves a core problem for customers
– The minimum set of features needed to learn from earlyvangelists
- Avoid building products nobody wants
- Maximize the learning per time spent
The Art of the MVP
• A MVP is not a minimal product
• “But my customers don’t know what they want!”
• At what point of “I don’t get it!” will I declare defeat?
Things to Consider
Value Proposition – Common Mistakes
• It’s just a feature of someone else’s product
• It’s a “nice to have” instead of a “got to have”
• Not enough customers care
Questions for Value Proposition
• Competition: What do customers do today?
• Technology / Market Insight: Why is the problem so
hard to solve?
• Market Size: How big is this problem?
• Product: How do you do it?
Key Questions for Value Prop
• Problem Statement: What is the problem?
• Ecosystem: For whom is this relevant?
• Competition: What do customers do today?
• Technology / Market Insight: Why is the problem so
hard to solve?
• Market Size: How big is this problem?
• Product: How do you do it?
Technical Versus Market Insight
Technology and Market Insight
Technology Insight
• Moore’s Law
• New scientific
•
discoveries
Typically applies to
hardware, clean tech
and biotech
Market Insight
 Value chain disruption
 Deregulation
 Changes in how
people work, live and
interact and what they
expect
Examples of Technical Insight
• Security framework to secure
the internet of things
 Re-programmable ASICs
Examples of Market Insight
• People want to play more involved
games than what is currently offered
• Facebook can be the distribution for
such games
 Masses of people are more likely to microblog than blog
 The non-symmetric relationships will allow
companies and individuals to self-promote
and will impact distribution
 European car sharing sensibilities could be
adopted in North America
 People, particularly in urban
environments, no longer wanted to own
cars but wanted to have flexibility.
Types of Value Propositions
Comes from Market Insight
Comes from Technical Insight
More Efficient
Lower
cost
Smaller
Faster
Better
Distribution
Simpler
Better
Branding
Better
Bundling
Growing Valuable “Normal” Startup
Scale
Get Efficient
Conversion
Product/Market Fit (Value)
Creating Value: Normal Startup
•
Product/market fit = product is “must have” (value)
•
Become a “must have” with customer development
–
Validate “value” assumptions early (who needs/why?)
–
Get users on first release ASAP
–
Find “must have” users/use cases
–
Facts outside building (interviews then surveys)
–
Pivot if necessary to create value
Key “Value” Question in Surveys
“How would you feel if you could no longer use Product?”
“Very Disappointed”
My Recommendation
0% – 25%
Keep burn low, engage, iterate
26% – 39%
Try repositioning, retargeting
40% – 100%
Proceed up pyramid
Iterate, Pivot, A/B Testing
Customer
Discovery
Customer
Validation
Run lots of experiments
Talk to lots of customers
Test hypothesis
Rinse and repeat
Source: Steve Blank
Customer
Creation
Build
Company
How Zynga Uses MVP
From Mark Pincus, CEO & Founder
– Create a 5-word pitch for a new product or feature
– Put it up on a high traffic webpage
– If it gets clicks, collect the emails of interested customers
– Build a ‘ghetto’ version of the product or feature
– Test everything
– Iterate constantly
Source: http://grattisfaction.com/2010/01/how-zynga-does-customer-development-minimum-viable-product/
In-Class Exercise
• Pick any 3 teams who presented today
• Tell us who you think their customers will be.
Why?
• How many customers do they need to talk to
before they have relevant data?
Deliverables for Next Week
•
•
•
•
User / customer hypotheses?
Did you learn anything different?
Did your Value Proposition change?
What are your customer acquisition cost
hypotheses?
• What are the benefits (economic or other)?
• If part of a company, who’s the decision maker, how
large is the budget and how will the buying decision
be made?
• Web startups: start coding the product!
One Way