Iterating to Success: Design Thinking and Lean Startup Principles

Alex Cowan
VENTURE
DESIGN II
ITERATING TO SUCCESS

copyright 2014 Cowan Publishing
AGENDA
Period
Deliverables
SESSION I: Achieving
Customer Relevance
Personas
Problem Scenarios-Alternatives-Value Propositions
Start Business Model Canvas
Storyboards
Customer Discovery
Venture Design II:
Iterating to Success
Venture Planning- focal hypotheses, experiments, and minimum viable
‘product’
Venture Design III:
Focusing & Validating
Venture Progress
Review of ﬁeld work, reﬁnements of approach, planning next iterations.
Venture Design IV:
Engineering Your Business
Model
Detailing your business model and remaining focal assumptions.
Venture Design V:
Designing the Right
Product
Pairing your learnings on personas & hypotheses with high quality,
actionable inputs (stories & wireframes) for product development and
product validation.

VENTURE DESIGN
Foundation in
Design Thinking
Product &
Promotion
User Stories &
Test Cases
Business Model
Canvas
ExperimentLearn
Hypothesize
Lean Startup-
Style Assumptions

VENTURE DESIGN
ExperimentLearn
Hypothesize
Lean Startup-
Style Assumptions

THE FULL STACK PRODUCT PERSON
Specialties
DESIGN&UX
UNIXSYSADMIN
RUBY
PYTON
JAVA
PHP
...
ENTERPRISESALES
...
SEO
ANALYTICS
...
...
...
Technical
Literacy
ARCHITECTURE
FUNDAMENTALS
App. & Platform
Integration
ROLES &
SYSTEMS
In a Technical
Team
Foundation
Concepts
LEAN
DESIGN
THINKING
CUSTOMER
DEV.
AGILE
SOFTWARE
FUNDAMENTALS
Model-View-
Controller

THE FULL STACK PRODUCT PERSON
Specialties
Technical
Literacy
Foundation
Concepts
LEAN

THE STARTUP: THEN AND NOW
Five Year
Plan
Then
!5,000,000%
0%
5,000,000%
10,000,000%
15,000,000%
20,000,000%
25,000,000%
30,000,000%
35,000,000%
40,000,000%
45,000,000%
2012% 2013% 2014% 2015% 2016% 2017% 2018% 2019% 2020%
Revenue%
Expense%
EBITDA%
Lean
Management
Now
6.a PIVOT
experiments
disprove
hypothesis
01 IDEA!
02 HYPOTHESIS
03 EXPERIMENTAL DESIGN
04 EXPERIMENTATION
05 PIVOT OR PERSEVERE?
6.b PERSEVERE

EVIDENCE-BASED INNOVATION & LEAN STARTUP
Do I have real evidence from my buyer
that this is compelling?
01 IDEA!
What are the key assumptions required
to make this business work?
02 HYPOTHESIS
How do I deﬁnitely prove or disprove the
assumptions with a minimum of time
and effort?
04 EXPERIMENTATIONAm I reacting or am I focused on
validating my pivotal assumptions?
‘Pivot or persevere?’

Do I have real evidence from my buyer
that this is compelling?
01 IDEA!

YOUR PRODUCT HYPOTHESIS
A certain PERSONA exists…
X… and they have a certain
PROBLEMS(S) …
?
… where they’re currently
using certain
ALTERNATIVE(S) …
!
… and I have a VALUE
PROPOSITION that’s better
enough than the alternatives
to cause the persona to act
(purchase, use, etc.).

What are the key assumptions required
to make this business work?
02 HYPOTHESIS
How do I deﬁnitely prove or disprove the
assumptions with a minimum of time
and effort?

ASSUMPTIONS: ORGANIZED AND PRIORITIZED
Priority Key Assumption Needs Proving? Experimentation
1
[A key assumption about
the business]
[Whether it needs
proving
[Experiment to
prove or disprove]
1
Hiring managers would
prefer a lightweight quiz
app over calling
references and ad hoc
probing.
Yes
* Customer interviews on
problem scenario
* Value testing through
‘minimum viable product’
2
Managers want to be
able to add their
questions as well
Yes
* Show prototypes with
choices
* Test in beta
Focus on strategic,
pivotal assumptions

FOCUS AND THE LEAN STARTUP
Crossing t’s
Dotting i’s
Doesn’t matter unless it
helps prove (or disprove)
your pivotal assumptions

Subject
all your
activities +
metrics to
that litmus
test.

4 TYPES OF LEAN HYPOTHESES
PERSONA
HYPOTHESIS

PERSONA
HYPOTHESIS
PROBLEM
HYPOTHESIS

PERSONA
HYPOTHESIS
PROBLEM
HYPOTHESIS
VALUE
HYPOTHESIS

PERSONA
HYPOTHESIS
PROBLEM
HYPOTHESIS
VALUE
HYPOTHESIS
CUSTOMER CREATION
HYPOTHESIS

PERSONA HYPOTHESIS- CHECKLIST
Hypothesis Experiment
✔︎ This persona exists (in non-trivial
numbers) and you can identify them.
- Can you think of 5-10 examples?
- Can you set up discovery interviews with them?
- Can you connect with them in the market at large?
✔︎ You understand this persona well. - What kind of shoes do they wear?
- Are you hearing, seeing the same things across your discovery
interviews?
✔︎ Do you understand what they Think
in your area of interest?
- What do you they mention as important? Difficult? Rewarding?
- Do they see the work (or habit) as you do?
- What would they like to do better? To be better?
✔︎ Do you understand what they See in
your area of interest?
- Where do they get their information? Peers? Publications?
- How do they decide what’s OK? What’s aspirational?
✔︎ How do they Feel about your area of
interest?
- What are their triggers for this area? Motivations?
- What rewards do they seek? How do they view past actions?
✔︎ Do you understand what they Do in
your area of interest?
- What do you actually observe them doing?
- How can you directly or indirectly validate that’s what they do?

PERSONA HYPOTHESIS- OUTPUTS & PIVOTS
Common Pivots
1) Re-segmentation (more
granular)
2) Revision of area of interest/
problem space
3) Strategic pivot
Template: bit.ly/personast
Outputs

EXERCISE: WHO’S YOUR EARLY MARKET?
1) How do they differ within your existing persona definitions?
Example: At Enable Quiz, they’re startup’s doing lots of hiring
2) How will you locate them?
Example: At Enable Quiz, they’ll read tech rags to see who just got funded.
3) How will they help you transition to your next segment?
Example: At Enable Quiz, via case studies, references, and incented posts on
LinkedIn.
Answer each as best you can: ~ 1 min/each
(4 min.)

EXERCISE: PERSONA DISCOVERY QUESTIONS (5 MIN)
Question Form Examples Questions (‘Enable Quiz’)
Tell me about [yourself in the role of the
persona]?
- Tell me about being an HR manager?
- How did you choose that line of work? Why?
- What do you most, least like about the job?
- What are the hardest, easiest parts of the job?
- I’ve heard [x]- does that apply to you?
Tell me about [your area of interest]? - Do you do screen new candidates? If not, who?
- Can you tell me about the last time? What was the trigger?
- Who else was involved? What was it like?
Tell me your thoughts about [area]? - How should it ideally be done?
- How is it actually done? Why?
What do you see in [area]? - Where do you learn what’s new? What others do?
- How did you make your last decision?
What do you feel about [area]? - What motivates you? What parts of it are most rewarding?
Why? Tell me about the last time?
- What would it be like in your perfect world?
What do you do in [area]? - Would you show me your interview guide? Example notes?
- What the vetting process was like on the last few
candidates?

KEY TO GOOD PERSONA DISCOVERY
PERSONA
HYPOTHESIS
1) Create a level of person-ability and comfort
2) Acclimate them to the idea that you’re not
just wondering about the ‘general picture’
3) Assure them by demonstration that you’re
not selling anything or advocating a point of
view

PROBLEM HYPOTHESIS- CHECKLIST
✔︎ You’ve identified at least one
discrete problem (habit/need)
- Can you describe it in a sentence? Do others get it?
- Can you identify current alternatives?
✔︎ The problem (habit/need) is
important
- Do subjects mention it unprompted in discovery interviews?
- Do they respond to solicitation (see also value and customer
creation hypotheses)?
✔︎ You understand current
alternatives
- Have you seen them in action?
- Do you have ‘artifacts’ (spreadsheets, photos, posts, notes,
whiteboard scribbles, screen shots)?

PROBLEM HYPOTHESIS- OUTPUTS & PIVOTS
Outputs Common Pivots
1) Pivot to a more material
problem area
2) Strategic pivot
?
X

EXERCISE: PROBLEM DISCOVERY QUESTIONS
(5 min.)
What are the top [5] hardest things about
[area of interest]?
- What are the top 5 most difficult things about making
good tech hires? Why?
How do you currently [operate in area of
interest- if you don’t have that yet]? OR
Here’s what I got on [x]- is that right?
- How do you currently screen for technical skill sets?
- Who does what?
- How does that work?
What’s [difficult, annoying] about [area of
interest]?
- What’s difficult about screening technical candidates?
- How do you validate they have the right skill set?
- How are the actual outcomes? Examples?
What are the top 5 things you want to do
better this year in [general area of interest]?
- What are the top 5 things you want to do better in
technical recruiting and hiring?
Why is/isn’t [your specific area of interest
on that list]?
- Why is/isn’t screening for technical candidates on that
list?

KEY TO GOOD PROBLEM DISCOVERY
PROBLEM
HYPOTHESIS
1) Avoid prompting, progressing to it only as a
last ditch effort
2) Get them in storytelling mode- focus on
specifics and details
3) Focus on just getting them talking- mind the
time but be careful about interrupting for course
corrections

04 EXPERIMENTATIONAm I reacting or am I focused on
validating my pivotal assumptions?
‘Pivot or persevere?’

VALUE HYPOTHESIS- CHECKLIST
✔︎ Your product is better enough
than the alternative to make sales
(traffic, etc.)
- You successful execute a (paid?) concierge MVP
or
- You successfully pre-sell the product
or
- You successfully drive drive sign-up’s online
✔︎ Customers will readily perceive
this superiority if you [x]
- (see above)

PROBLEM HYPOTHESIS- OUTPUTS & PIVOTS
Outputs Common Pivots
1) Pivot from pre-conceived solution/
proposition
2) Pivot to new problem area
3) Strategic pivot
VALUE
PROPOSITION(S)
X
?
!

EXERCISE: VALUE DISCOVERY QUESTIONS
How do you decide on and buy [stuff in
general area of interest]?
- How do you buy [access to recruiting services, resume
searches, HR software, training, prof. ed. books]?
- Who’s involved? What’s the scope of individual
discretion?
How much did you spend [last period]? - How much do you spend on [items of interest]?
[most of this needs to be obtained through direct
experimentation (next section); the following are useful but
probably not pivotal]

TESTING YOUR HYPOTHESIS VIA ‘MVP’
M
V
P
inimum What is the
fastest, cheapest
way to validate or
invalidate this
option so we give
ourselves more
options on future
success?

M
V
P
inimum
iable Will it give us a
definitive result?
What are the
actionable
metrics?

M
V
P
inimum
iable
roduct
Does it really
require actual
product? Can we
use alternative
brands,
channels?

M
V
P
inimum
iable
roduct
is not necessarily actual software/
product (see concierge MVP)
is a first and foremost learning vehicle
…
vs. a project plan
(OK to do those things but always
subordinate them to the learning
mission)
vs. a product development project

output !=
outcome
Is your MVP driving an
extraordinary outcome?
Or is it a vehicle to create
output as usual?

CASE STUDY: DROPBOX
OPPORTUNITY
Underlying demand and supporting
infrastructure ready for a great file
sharing app.
CHALLENGE
Building a great cross-platform app.
required VC funding. VC’s saw a space
with lots of existing competitors
struggling to get traction.

CASE STUDY: DROPBOX
Persona
Problem
Scenario
Alternatives
Value Prop.
Tom the Techie- early adopter who works on projects that require swapping a lot of files
between a shifting network of collaborators.
It’s difficult to share files between a network of collaborators, particularly if they’re: big
or numerous or change a lot.
Many existing products, but none of them super compelling and widely adopted.
Also, custom setup’s which work but are cumbersome to set up and maintain.
A file sharing service that truly feels transparent to the user across all major platforms-
OSX, iOS, Windows, etc.
What Minimum Viable Product
(MVP)?
That you can bootstrap?
That doesn’t require software at all?

THE ‘WIZARD OF OZ’ MVP
Result: Excellent traction
and conversion to sign-up’s.
Strong validation signal.
Created a synthetic demo
tailored for early market
(techies), promoted it, and
measured email sign-up’s.

EXAMPLE: ENABLE QUIZ
OPPORTUNITY
Hiring quality technical talent is critical
for many companies, but screening for
skill sets is time consuming and
awkward.
CHALLENGE
The founding team wants to bootstrap
without external funding so they need
to focus on a specific technical
domain, one that will get them strong
early traction.

EXAMPLE: ENABLE QUIZ
Persona(s)
Problem
Scenario
Alternatives
Value Prop.
Helen the HR Manager- responsible for sourcing and screening job candidates
Frank the Functional Manager- hiring manager responsible for acquiring and managing
talent
Helen: hard to screen for technical skills
Frank: never has enough time for recruiting and doesn’t want to be a jerk during
interviews
Helen: call references, take their word for it (on skills)
Frank: ask a few probing questions
A lightweight quizzing app that has Helen can use to do quick, effective screening.
What Minimum Viable Product (MVP) for deciding on the right first
topics?

THE ‘PRE-SALES’ MVP
Target Outcome: Informed
selection of starter topics (and
baseline on initial conversions).
Ran Google AdWord
campaigns across top
ranking technical topics,
measuring click through
rate and landing page sign-
up’s.

CASE STUDY: LEONID SYSTEMS
OPPORTUNITY
Major disruption and new product
opportunities among telecom
providers with introduction of voice-
over-IP and cloud communications.
IT systems need to be rethought.
CHALLENGE
As a one-person startup, Leonid had
actionable ideas but not enough
resources to execute an end-to-end
solution.

CASE STUDY: LEONID SYSTEMS
Persona
Problem
Scenario
Alternatives
Value Prop.
Chris the CTO- has funding and mandate to transition the business towards hosted
services; many bases to cover
IT is the most expensive, most risky area when making changes to the business.
1) Place large, risky bets on major new system upgrades. 2) Make small incremental
updates (but risk not keeping pace).
Leonid will offer modular, integration-friendly applications in two critical areas: 1)
services provisioning and 2) end user self-service portals.
What Minimum Viable Product (MVP)?

LEONID MVP’S: FROM CONSULTING TO PRODUCT
CONSULTING
‘PRODUCTIZED’
CONSULTING
PRODUCTS
Started with consulting as a
‘concierge’ vehicle to create
tactical solutions, evolving
to full-fledged product.
Result: Steady step-wise
growth with consistently
better understanding of key
customer problem

CASE STUDY: ZAPPOS
OPPORTUNITY
An observed problem scenario around
the difficulty of finding the right shoe
at local retail and a giant (but nascent)
market in online retail (1999).
CHALLENGE
Consumers still in the early stages of
adopting and habituating to online
retail. Founder (Nick Swinmurn)
wanted to bootstrap.

CASE STUDY: ZAPPOS
Persona
Problem
Scenario
Alternatives
Value Prop.
Sam the shoe-hound- knows what he wants but not where to get it.
Sam is unable to find the shoe he wants at local retailers, wasting time and getting
frustrated.
Possibly mail order or wait until he’s in a bigger market to go to the store.
Make the shoe Sam wants accessible online and make sure he has a great experience so
he’ll come back and not have to think about where to find the shoe he wants anymore.
What Minimum Viable Product
(MVP)?

CASE STUDY: ZAPPOS
Result: It worked and the
rest is history.
Photographed shoes and put
them online to observe
whether anyone bought
them.

CASE STUDY: SPRIG
source: as told to Lean Startup Circle, SF (Jan 2014)
Startup looking for early traction for
investors: Whole Foods (deli) meets Uber.
OPPORTUNITY
Large opportunity to resegment and
disrupt food prep. and delivery business.
Desire to move fast and learn fast.
CHALLENGE
Some existing competitors and slow
fundraising process. Food prep. and
delivery requires infrastructure.

CASE STUDY: SPRIG
Persona*
Problem
Scenario
Alternatives
Value Prop.
Paula the Professional- health conscious, short on time, moderate to high income,
already uses similar services like Uber.
I want to have a nice, healthy dinner with no hassle and at a price I can afford (like $12).
Going to the store or an expensive, take-out, or a slow delivery service (>20 minutes).
A healthy meal like you would order a cab (on Uber): “Dinner on Demand … Prep Time is
3 Taps … Delectable Prices” (Sprig Home Page)
What MVP?
* This is me interpolating/guessing on an item; not part of the Sprig team’s explanation.

SPRIG MVP & EXPERIMENTATION
Result: Excellent uptake and
valuable observations on
the proposition and
customer journey.
Hire a chef for the day, put
the offer on Eventbrite,
email friends - concierge
MVP.

CASE STUDY: PAUL HOWE & ASSOCIATES
OPPORTUNITY
Funded startup team rapidly iterating
through B2C concepts with lightweight
experimentation.
One idea: Some people would like to
know how much their stuff is worth.
CHALLENGE
Iterate to a successful concept while
the time and money permits.

CASE STUDY: PAUL HOWE & ASSOCIATES
Persona*
Problem
Scenario
Alternatives
Value Prop.
?
I have a lot of stuff around that I might want to sell and/or I’m just generally curious
about how much it’s worth, how much I’ve spent.*
Going through credit card statements or receipts.
It’s interesting and possibly useful to know how much stuff you have.*
What MVP?
* This is me interpolating/guessing on an item; not part of the team’s explanation.

CONCIERGE MVP: PAUL HOWE & ASSOCIATES
Result: They don’t care. Time
to move on to the next
concept.
Get a few sign-up’s with
access to email and bank
account info. Review by hand
on a concierge basis and
compile a statement for them.
Do they care?

CASE STUDY: STEALTH PHOTO-SOCIAL STARTUP
OPPORTUNITY
Lots of exciting things happening in
the photo-social space.
CHALLENGE
The team had several ideas but few
resources.

CASE STUDY: STEALTH PHOTO-SOCIAL STARTUP
Persona
Problem
Scenario
Alternatives
Value Prop.
Existing poster of photos. Personas: Martha the Mom, Pat the Party Planner, Teresa the
Teen Social Butterfly
[I want to do something interesting with my photos so that my social graph rewards me
with interest and acclaim]
Manually enhance photos, use alternative enhancers/amplifiers like Instagram
[This is something users can do with photos that will generate engaging content for their
social graph]

USER JOURNEY: PHOTO-SOCIAL
ASSUMPTION
User’s social
network will like
and share the app’s
output
What MVP?
That you can
bootstrap?
That doesn’t
require
software at all?

USER JOURNEY: PHOTO-SOCIAL
MVP
Create the target
output by hand
(concierge style)
Does anyone care?
ASSUMPTION
User’s social
network will like
and share the app’s
output

ABOUT MVP’S AND PRODUCTS IN GENERAL
(Not the other way around)
Concierge and other non-
software MVP’s can be pretty
magical.
Find 100 people that are
really into it and you can
probably grow.

EXERCISE: YOUR (CONCIERGE) MVP
Component
Notes
What is the experience you want to provide? - What are the preconditions and general steps?
What measurable outcome would validate
your value proposition?
- How will you know if it’s delivering value?
- This could be: a) measurably better outcomes b) activity
levels c) follow-on interest
How will you ﬁnd participants and what are
the core screening/qualiﬁcation criteria?
- How will you know if the subjects are relevant to your
core hypothesis?
(5 min.)

LEAN AT LARGE
Priority Key Assumption Needs Proving? Experimentation
1
[A key assumption about
the business]
[Whether it needs
proving
[Experiment to
prove or disprove]
1
Hiring managers would
prefer a lightweight quiz
app over calling
references and ad hoc
probing.
Yes
* Customer interviews on
problem scenario
* Value testing through
‘minimum viable product’
2
Managers want to be
able to add their
questions as well
Yes
* Show prototypes with
choices
* Test in beta

VENTURE DESIGN
Foundation in
Design Thinking
ExperimentLearn
Hypothesize
Lean Startup-
Style Assumptions
Lean at Large

PLANNING WITH LEAN AT LARGE
Let’s assume.
Then test.
Let’s not
argue

FULL CIRCLE
THINK SEE
FEEL DO
PERSONAS
Who?
X
PROBLEM
SCENARIOS &
ALTERNATIVES
What?
VALUE
PROPOSITIONS
& ASSUMPTIONS
What if?
!
USER
STORIES &
PROTOTYPES
How?
Scale?
Pivot?
PRODUCT &
PROMOTION
/
CUSTOMER
DISCOVERY &
EXPERIMENTS
Tell me…?

FULL CIRCLE (IN REVERSE)
!
PRODUCT &
PROMOTION
USER
STORIES &
PROTOTYPES
Did the
implementation
deliver on the story?
/
CUSTOMER
DISCOVERY
&
EXPERIMENTS
How did the
customer/user
react?
VALUE
PROPOSITIONS
& ASSUMPTIONS
!
Was the
implemented
story relevant
to the
proposition?
X
PROBLEM
SCENARIOS &
ALTERNATIVES
Is problem
relevant? Is the
proposition
better vs.
alternatives?
THINK SEE
FEEL DO
PERSONAS
Do we
understand this
person? What
makes them
tick?

CLASS PRESENTATIONS
As Presenter
1) What is it? Use pos. statement.
2) How are you doing on the
personas checklist?
4) The problem scenarios checklist?
5) Where/how will you find
interview subjects? What’s your
target number?
6) Ideas for MVP? Next steps,
timing?
As Audience
- Focus on the process; avoid
editorial
- Ask a lot of questions
- Think about it like an investor
(5 min./each)

POINT OF EMPHASIS
You are
the most
important
part of the
experiment
Make sure
you’re
learning

RECOMMENDED NEXT STEPS
“Homework”
1. Draft a working set of assumptions
2. Design your experiments and execute.
GOOGLE DOC TEMPLATE FOR ABOVE:
http://bit.ly/venturetemplate

RECOMMENDED NEXT STEPS
Follow-On Workshops
1. For Creating Strong Personas
Day in the Life Workshop: http://bit.ly/daynthelife
2. For Structuring Your Product Value Propositions into Testable Assumptions
Venture Design II: Iterating to Success: http://bit.ly/vdesignII
3. For Designing a Profitable Business Model
Venture Design IV: Engineering Your Business Model: http://bit.ly/vdesignIV
4. For Linking the Above to an Effective Product Development Program
Venture Design V: Designing the Right Product: http://bit.ly/vdesignV

FINI
acowan@alexandercowan.com
@cowanSF
www.alexandercowan.com/venture-design
http://bit.ly/alexGAJune
www.alexandercowan.com/startup-sprints

Iterating to Success: Design Thinking and Lean Startup Principles

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