Intro class of the Leaning Startup at Master in Complex Actions at SISSA - Trieste www.mca.sissa.it

1. the Learning Start-up
From Business_Idea to Company_Creation
building_blocks process
Master in Complex Actions, SISSA, Trieste
Leonardo Zangrando, MBA, MSc
February 4th, 2011

2. What and Who
Time to innovate
● At the convergence of the most recent developments on
entrepreneurship such as the Lean Start-up concept, the Business
Model framework and the Customer Development framework, the
Learning Start-up is an organisation running explicit learning
processes to convert a Business Idea into a real business.
Put your (money, time, resources) where your mouth is
● I created the Learning Startup project to experiment and learn
around the Learning Startup concept, starting from the initial
Business Idea of an online, freemium platform to support startups
in their learning process.

3. Biography
Leonardo Zangrando has a background in Mechanical Engineering and holds an MBA from
IESE Business School. He has been consulting on sales effectiveness in the pharma sector for
the past 10+ years. Since 2007 he reoriented his activity towards education and training.
On a parallel track, he has been interested in business start-ups since the mid 90's and has
worked on several projects in the initial transition from business idea to start-up, with
particular focus on bootstrapping (self-financing start-ups.) He is currently helping a number
of start-ups in the transition process to a running business.
Leonardo Zangrando key theme is resource-efficiency, in terms of increasing efficiency of
processes, reducing waste of resources, and expressing full potential. He is fascinated by the
evolutionary process of a start-up, which transforms a business idea into a company and he
is very keen on increasing entrepreneurs success rate by improving the entrepreneurial
process' efficiency.
He advocates the convergence of the most recent developments on entrepreneurship such as
the Lean Start-up concept, the Business Model framework and the Customer Development
framework into the "Learning Start-up", an organisation running explicit learning processes to
convert a business idea into a real business.
He created the Learning Startup project to experiment and learn around the Learning Startup
concept, starting from the initial Business Idea of an online, freemium platform to support
startups in their learning process.

4. Inspiring Authors
● This course was inspired by the work of Steve Blank, Eric
Ries and Alex Osterwalder
● Steve Blank is a retired serial entrepreneur with over 30 years of
experience in high technology companies and management. He is
a Consulting Professor at Stanford in the Graduate School of
Engineering STVP Program and author of “Four Steps to the
Epiphany” http://steveblank.com/
● Eric Ries is the creator of the Lean Startup methodology and the
author of the entrepreneurship blog “Startup Lessons Learned”
http://www.startuplessonslearned.com/
● Alex Osterwalder is an author, speaker and workshop facilitator
on the topic of business model innovation. He is the author of
“Business Model Generation” http://www.businessmodelgeneration.com/

5. Bibliography
Books
● Steve Blank – Four Steps to the Epiphany
● Alex Osterwalder – Business Model Generation
Blogs
● Steve Blank – Steve Blank – NOTE: start from “Customer Development Manifest” tag
● Alex Osterwalder – Business Model Alchemist
● Eric Ries – Startup Lessons Learned
Meta resources
● Steve Blank blog – Tools and Blogs for Entrepreneurs
● Andrew Chen blog – List of Essays
● Tom Eisenmann blog – Readings on Launching Tech Ventures
● Eric Ries blog – Recommended Reading
● Startup Lessons Learned – conference website sllconf.com
● Learning Startup blog – Channels
Other Books
● Brant Cooper & Patrick Vlaskovits – The Entrepreneur’s Guide to Customer Development
● Jason Fried & David Heinemeier Hansson – Re-Work
● Eric Ries – The Lean Startup Book (Sep 2011)
NOTE to find the online resources just google these terms

6. the Learning Start-up
From Business_Idea to Company_Creation
building_blocks process
Master of Complex Actions, SISSA, Trieste
Leonardo Zangrando, MBA, MSc
February 4th, 2011

7. What is a Start-up?

8. Business
STARTUP Company
Idea
A temporary
organisation
to transform
a Business Idea
into a Company

9. This section based on the work of Steve Blank
What is a Business Idea?

10. Business
Idea
● Can it be built now?
● How much R, how much D?
● Does it depend on anything else?
● Are there IP issues?
● Does it solve an existing customer
problem?
Technology Customer Opportunity ● Create a new market?
Driven Driven Driven
● How big a market and when?
● What do you need to turn the idea
into a company?
● How do you test customer
acceptance early?

11. Business
Idea
● Is there an articulated customer need?
● How do you know?
● How big a market and when?
● Are others trying to solve it?
● If so, why you?
● What do you need to turn the idea
Technology Customer Opportunity into a company?
Driven Driven Driven
● How do you test your idea early?

12. Business
Idea
● Is there an opportunity no one sees
but you do?
● How do you know it’s a vision not a
hallucination?
● How do you test your idea early?
● How big a market and when?
Technology Customer Opportunity
● Are others trying to solve it?
Driven Driven Driven ● If so, why you?
● What do you need to turn the idea
into a company?

13. Business
Idea
Market Type
● Disruptive Innovation
→ get market share
Buyer value generated (willingness to pay)
● Sustaining Innovation
Costs incurred
→ get market share
● Differentiate on
– Cost (cost leadership)
– Value (product leadership)
Industry Successful Successful Competitor – Customer Relationship
average differentiated low-cost with dual
competitor competitor competitor advantage

14. Business
Idea
Industry Risk
Huge pay-off e.g. in biotech Med Dev / Health Care
for solving technology Technology
problem Life Science / Biotech
Risk
Make it and they will buy it Personalized Medicine
Cleantech
Semiconductors
In other industries you Consumer Electronics
are giving away your
hard work Game Software
Communication Software
Electronic Design Automation
Communication Hardware
No pay-off until you solve
Enterprise Hardware
the customer risk
Enterprise Software
Web 2.0

15. Business
Idea
Industry Risk
Huge pay-off e.g. in biotech Med Dev / Health Care
for solving technology
problem Life Science / Biotech
Make it and they will buy it Personalized Medicine
Cleantech
Semiconductors
In other industries you Consumer Electronics
are giving away your
hard work Game Software
Communication Software
Electronic Design Automation
Communication Hardware
No pay-off until you solve
Enterprise Hardware Customer
the customer risk
Enterprise Software Risk
Web 2.0

16. Business
Idea
Industry Risk
Huge pay-off e.g. in biotech Med Dev / Health Care
for solving technology
problem Life Science / Biotech
Make it and they will buy it Personalized Medicine
Cleantech
Semiconductors
In other industries you Customer
Consumer Electronics AND
are giving away your
hard work Game Software Technology
Risk
Communication Software
Electronic Design Automation
Communication Hardware
No pay-off until you solve
Enterprise Hardware
the customer risk
Enterprise Software
Web 2.0

17. Business
Idea
Venture-Scale Business
Venture-
● Solve a significant
Small
Scale
Business problem/want or need, for
Business
which someone is willing to
pay a premium
● A good fit with the
founder(s) and team
● Can grow large for
traditional VC’s
● Attractive returns for this
type of investor

18. Business
Idea
Small Business
Venture-
● Is there a market?
Small
Scale
Business
Business ● Is it enough for my
objectives?
● Is it sustainable?

19. Business
Idea
Size the Market
● Total Available Market
– How big is the universe
Start-up
● Served Available Market
Target – How many can I reach with
Market
my sales channel
Served
Available
● Start-up Target Market
Market – who will be my most likely
buyers
Total
Available
Market

20. Business
Idea
● Market Size Questions:
● How big can this market be?
● How much of it can we get?
● Market growth rate
● Market structure (Mature or in flux?)
Start-up
Target
Market ● Most important
● Talk to Customers and Sales Channel
Served
Available
Market ● Next important
Total ● Desk Research
Available ● Industry analysis reports
Market
● Financial analysis reports

21. A Business' Building Blocks

22. Customer
Known
Product(s)
for
Customer(s) Customer
Unknown
Product Product
Known Unknown

23. Is this really
a Start-up?
Customer
Known
Product known
AND
Customer known
– Is it really a Start-up?
– What is it really about?
Product
Known
Setting up the systems
to make the Company work

24. Customer
Known
Product unknown
AND / OR
Customer unknown Customer
Unknown
– A real-life Start-up! In real life
you're here!
– What is it about?
Product Product
Known Unknown
Solving for the unknowns
= product / market fit

25. Let's find a way to describe
how a Business works
this section based on the work by Alex Osterwalder
● What is a Business about?
● How does it do it?

26. Q. What is a Business about?
A. Reach Customers and
Deliver Value to them

27. CUSTOMERS /
CUSTOMER SEGMENTS
from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
which customers and users are you serving?
which jobs do they really want to get done?

28. from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
do for them? do they care?
what are you offering them? what does it
VALUE PROPOSITIONS

29. from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
CHANNELS
through which interaction points?
how does each customer segment want to be reached?

30. DEMAND CREATION /
CUSTOMER RELATIONSHIPS
from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
what relationships are you establishing with each segment?
personal? automated? acquisitive? retentive?

31. REVENUE STREAMS
from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
what are customers really willing to pay for? how?
are you generating transactional or recurring revenues?

32. Q. How does it do it?
A. Using Key Resources to
perform Key Activities
(or have someone else do it)

33. from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
which assets are essential?
KEY RESOURCES
which resources underpin your business model?

34. from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
KEY ACTIVITIES
business model? what is crucial?
which activities do you need to perform well in your

35. from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
KEY PARTNERS
who do you need to rely on?
which partners and suppliers leverage your model?

36. from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
what is the resulting cost structure?
COST STRUCTURE
which key elements drive your costs?

37. key value demand creation /
activities proposition customer relationships
key customers /
partners segments
from “Business Model Generation” by Alex Osterwalder
images by JAM Visual Thinking - www.jam-site.nl
cost revenue
structure key streams
resources channels

38. That's a Business Model - What does it do?


39. A Business Model
describes the rationale of how an organisation...

Creates Value Delivers Value
Captures Value

40. Def_Business Model
A Business Model describes
from “Business Model Generation” by Alex Osterwalder
the rationale of how an
organisation creates, delivers,
and captures value

41. What is a Company?

42. Company
KP KA VP DC CU
KR CH
An on-going
CS RS organisation
executing a
+ Business Model
(through plans,
EXECUTION systems, procedures)

43. What does a Start-up do to transform
a Business Idea into a Company?
This section based on the work of Steve Blank

44. Sketch out the Business Model
building
building
block
block
building
block building building
block block
building
block
building
block
building building
block block

45. But realise it's just a set of Hypotheses
Hyp
Hyp
building
building
block
block
Hyp
building Hyp Hyp
block building building
block block
Hyp
building
block
Hy p
building
block
Hyp Hyp
building building
block block

46. Start-ups SEARCH
STARTUP Company
● Test and refine the hypotheses until the entire
Business Model is TESTED
● Make sure the Business Model is PROFITABLE
● Make sure the Business Model is REPEATABLE
● Make sure the Business Model is SCALABLE
(not applicable to craftsmen and one-off projects)

47. Start-ups SEARCH
STARTUP Company
● Test and refine the hypotheses until the entire
Business Model is TESTED
1- Solve for Technology Risk Concept
Product
Devel.
Alpha/Beta
Test
Launch /
1st Shipm.
– Product Development
2- Solve for Customer Risk Customer
Discovery
Customer
Validation
Customer
Creation
Company
Building
– Customer Development

48. then BUILD
STARTUP Transition Company
A temporary Building An on-going
organisation the Systems organisation
searching for a which implement executing a
tested, repeatable, the Business Model Business Model
and scalable (so far we were (through plans,
Business Model in design mode) systems, procedures)
SEARCH BUILD GROW

49. Next Steps
KP KA VP DC CU
STARTUP Transition Company
Business
= = =
Idea
KR CH SEARCH BUILD GROW
CS RS

Business Modeling
Product Alpha/Beta Launch /
Concept
Devel. Test 1st Shipm.

Product Development
Customer Customer Customer Company
Discovery Validation Creation Building

Customer Development

Systems Development

50. More Start-ups fail from
a Lack of Customers
than from a failure
of Product Development
Steve Blank
Retired Entrepreneur
Venture Capital advisor
Stanford Professor of Entrepreneurship

51. This section based on the work of Steve Blank
Customer Development process

52. If Start-ups fail more from a Lack of
Customers than Product Development failure
then why do we have
● process to manage product development?
● no process to manage customer development?

53. A few observations
● Start-ups are about learning and discovery,
not execution of a business model
● Start-ups are not small versions of large
companies
● Entrepreneurs and their VC's are executing on
guesses
While the FACTS are out of the building

54. These observations turn into a model
Product Alpha/Beta Launch /
Concept
Devel. Test 1st Shipm.
Product Development
Customer Development
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot

55. Customer Development Key Ideas
● Parallel process to Product Development
● Measurable checkpoints
● Tied to customer milestones
● Notion of market types to represent reality
● Emphasis on learning and discovery before
execution

56. STARTUP
Step 1 – Customer Discovery
● Stop selling, start listening
– There are no facts inside your building, so get
outside
● Test your hypotheses
– Two are fundamental: problem and product concept
– Use a Minimum Feature Set / Minimum Viable
Product for the tests
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot

57. STARTUP
Step 1 – Customer Discovery
Minimum Viable Product / Minimum Feature Set
"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."
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot

58. STARTUP
Step 2 – Customer Validation
● Develop a Repeatable and Scalable sales process
● Only early adopters are crazy enough to buy
● Pivot back to Customer Discovery if no
customers ( = no product / market fit )
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot

59. STARTUP
Step 2→1 – Pivot
● The Heart of Customer Development
● Iteration without CRISIS
● Fast, agile and opportunistic
● Speed of cycle minimizes cash needs
● Minimum Feature Set speeds up cycle time
● Near instantaneous customer feedback drives feature set
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot

60. STARTUP
Step 2 – Customer Validation
● Can you draw your business model?
– Acquisition costs, path to profitability?
● Do you have a proven sales roadmap?
– Org chart? Influence map?
● Do you understand the sales cycle?
– ASP, LTV, ROI, etc. (Average Selling Price, Lifetime Customer
Value, Return On Investment)
● Do you have a set of orders (€ ’s) validating the
roadmap? ( proven product / market fit )
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot

61. Step 3 – Customer Creation Transition
● Creation comes after proof of sales
● Financing for scale
● Creation is where you “cross the chasm” into the
transition phase
● Lean Start-ups are not cheap Start-ups
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot

62. Step 4 – Company Building Transition
● (Re)build your company’s organization &
management
● Re-look at your mission
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot

63. STARTUP
Search vs. Execution Transition
Start-ups SEARCH for a Companies EXECUTE a
tested business model tested business model
● the process is iterative ● design the systems
● and start executing
A Start-up
becomes a
Company when
it finds
a Product /
Market fit
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot

64. Schedule
● The Learning Start-up
● 04 Feb 2011 – Building Blocks and Process (foundations lesson) 3hrs 
● Customer Discovery
● 25 Feb 2011 – Testing Value Proposition (follow-up + assignments) 1hr
● 18 Mar 2011 – Testing Customers (follow-up + assignments) 1hr
● Customer Validation
● 08 Apr 2011 – Testing Demand Creation (follow-up + assignments) 1hr
● 06 May 2011 – Testing Channels (follow-up + assignments) 1hr
● 27 May 2011 – Testing Revenue Streams (follow-up + assignments) 1hr
● 10 Jun 2011 – Testing Key Partners (follow-up + assignments) 1hr
● 01 Jul 2011 – Testing Key Resources and Costs (follow-up + assignments) 1hr
● Start-up Transition
● 22 Jul 2011 – Business Plan 2.0 (follow-up + business planning lesson) 2hrs
● 12-16 Sep 2011 – Business Pitch

65. Assignments
● Business Idea (BI sheet)
● Market Analysis (MA sheets)
● Market Type
● Technology Risk / Customer Risk
● Market Size / Target Market
● Business Model (BM canvas)
● 9 blocks Hypotheses
● Hypotheses Testing (HT sheets)
● plan + thresholds
● Lessons Learned (LL sheet)
● Start your journal or blog

66. Thank you
Leonardo Zangrando
the Learning Startup
leo@zangrando.com