The document discusses an introductory session on the Lean Startup methodology, covering topics such as validating business hypotheses through customer interviews and minimum viable products, building an iterative process of developing, testing, and improving early-stage business ideas based on customer feedback. Examples are provided of how companies like IMVU tested assumptions about customer problems and solutions through low-fidelity prototypes and data analysis to guide business model pivots or persevering with the original vision.
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PD Dr. Rainer Harms
Dr. Michel Ehrenhard
r.harms@utwente.nl
International New
Business Development
Session 1: Intro to Lean Startup
3. Typical issues with this class
Comment: „We dont learn much content!“
Reply: „True. You had content throughout your Bachelor, and you will
create your own, specific content while you research.“
Comment: „We are left alone during project execution!“
Reply: „Partially true. But finding your own way in an entrepreneur‘s
reality
Comment: „We dont recieve much feedback!“
Reply: „Partially true. But we have extensive walk-in opportunities
Comment: „The projects are so vague and complex“
Reply: True. Thats real business. We try to help you deal with it.
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7. Startups as experiments: Validated learning
7http://blog.amt.in/the-new-science-of-product-development
http://www.youtube.com/watch?feature=player_embedded&v=WAdikBfKeD8
8. The scientific method
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http://blog.amt.in/the-new-science-of-product-
development
9. Lean Startup – merging the scientific method and
entrepreneurship
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1. Talk to customers – real cases
2. Form hypotheses to test
3. Write code (produce)
4. Roll out to % customers
5. Analyze data
6. Interpret data
7. Share learning
http://blog.amt.in/the-new-science-of-product-
development
10. The B – M – L cycle
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11. IMVU: Eric Ries‘ Lean Startup Story
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www.microsoft .com
http://www.imvu.com/catalog/web_landing.php?p=ls1 llcollection-groupll.blogspot.com
http://www.youtube.com/watch?v=fEvKo90qBns minutes 23 to 35
12. Testing assumption: two IMVU examples
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brucebucks.com
zazzle.com
13. The problem-solution fit
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Refers to a implicitly defined customer segment -> make expliciti
14. The MVP
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„The MVP is the smallest group of features that will elicit customer
feedback about the validity of the customer problem or solution“
Steve Blank
The mechanical turk
15. Getting deeper into the MVP
Low-Fi MVP
Problem exploration MVP: customer inverviews
Product Pitch MVP: asking cash at the end; landing pages, video
demos
Concierege MVP: real delivery, but „Wizard of Oz“
Hi-Fi MVP
Removal of any feature that might distract from the core learning
goal (google, dropbox - > plain interfaces
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„Pivot“ or presevere
http://cdn.elezea.com/images/local-maximum.gif
18. Pivot = strategic change: one way of listing …
Zoom-in-pivot
Zoom-out-pivot
Customer segment pivot
Customer need pivot
Platform pivot
Business architecture pivot
Value capture pivot
Engine of growth pivot
Channel pivot
Technology pivot
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19. Key metrics (example)
Industry-Specific KPI
„Conversion rate“ – from view to click, from click to buy
Reference: the metrics page
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20. Example of empirical project (validated learning)
1. Problem: Mediocre evaluation of BK III course
2. Preliminiary research, eg. Brainstorming: Limited feedback as main problem,
mentoring as potential solution, best practices
3. Hypothesis: „Mentoring is positively related to the course evaluation
4. Test design:
4.1: Sample: this BK III class, all students
4.2: Operationalization: main satisfaction score, project support and feedback score,
assignment feedback score
4.3: Method of analysis: 2-sample mean comparison (t-test)
5. Analyse data
6. Conclusion
7. Results
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22. Example your project
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1. Problem: Newsletter services can be expanded to other segments
2. Preliminiary research, e.g. Brainstorming: lit research, customer interviews about what
they value most about current project, interview with prospective customers etc., SMT,
Porter5forces etc.
3. Hypothesis (better: Assumption!): „Customers derive value from newsletters “
(operationalize!)
4. Test design:
4.1: Sample: x number of prospective customers
4.2: Operationalization: find ways to collect your material and / or find fitting metrics !
4.3: Method of analysis: qualitative vs. quantiative
5. Analyse data
6. Conclusion
7. Results
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Businnes
Model
Generation/
Validation
Minimal
Viable
Product
(MVP)
Usage
3-5 clients
Market
Research Idea?
MVP
for
Adoption
MVP
for
Revenue
Month 1 Month 2,3 & 4 Month 5 Month 6
Idea
Business
Plan
Func. Spec
Design
Build
Test
Market
Sell
Some learning
More learning
Most
learning
24. The lean canvas – where does BML hide?
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25. Deliverables
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Starting
canvas
DP 1
Suggest
solution
DP 3
Exam
< 10.02 12.02 26.02 12.03 19.03 26.03 17.4.
Find project
company /
own venture
Problem
interview
DP 2
Solution
interview
DP 4
Pitch
DP 5
26. In short
Find a company / a venture with a (I)NBD issue
Set up a meeting with the entrepreneur, and identify customer-
reserach project
Describe current venture with Lean Canvas (DP 1)
Carry out and report customer interview (DP 2)
Suggest a solution (DP 3)
Get customer feedback from solution (DP 4)
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27. Getting started with the interviews
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Coffee shops
Lurking: on the street, in a location,
online...
@MeetUpsWhere do I find them?
Facebook / LInkedIn
Existing Customers
1st Degree Networks
http://de.slideshare.net/LeanStartupConf/jon-irwin-
rocktheinterview-slides
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Is the problem worth solving?
Make a problem interview.
This is a problem statement
This is another problem statement.
(Priority [ ] | Pain: low, medium, high) | How I solve this
today:
This is a third problem statement.
(Priority [ ] | Pain: low, medium, high) | How I solve this today:
This is a blank problem the customer can fill in.
(Priority [ ] | Pain: low, medium, high) | How I solve this
today:
This is a blank problem the customer can fill in.
(Priority [ ] | Pain: low, medium, high) | How I solve this
today:
Name:
Email Address:
Referrals:Notes:
http://de.slideshare.net/LeanStartupConf/jon-irwin-
rocktheinterview-slides
29. Opener
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Hey, I’m [name], and I’m working on
a project to help conference
attendees connect and collaborate.
Do you wish it was easier to
connect and share ideas with other
attendees like you? [smile]
Yes? Awesome, here we go / No? Okay, thanks. [smile]
http://de.slideshare.net/LeanStartupConf/jon-irwin-
rocktheinterview-slides
30. Analyse the problem interview
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Do the problems really exist?
Are the problems commonly experienced?
Are the problems severe?
Are there problems you didn’t anticipate?
Is this the right customer?
Take an opportunity to refine your target group
Should you Kill / Pivot / Persevere?
http://de.slideshare.net/LeanStartupConf/jon-irwin-
rocktheinterview-slides
This is what people would like to have: Sucess factor (research)
Why doesnt it work? With references
Planning:
Benefits and drawbacks of formal planning (collect info from students)
„Storming the castle“: „just do it“
Collect benefits and drawbacks
Many new ventures are based around implicit hypothese. „There IS a market“!
„I can ask a high price!“
Customers want the stuff that I am planning to produce!
Etc.
BUT YOU DONT KNOW!!!!
In software, Ries sais that you can build anything. Question is whether it should be build!
Play movie
Tell a little about the company story
Original idea: build a 3d interface for existing chat clients.
Customers should download the software, import their „friends“ list to IMVU and start using the soft
This idea is backed by the theory of network externalities (explain), according to which it is extremely difficult to establish a new network in the face of existing networks. This potential lock-in was going to be circumvented by the importing fucntion, while at the same time creating a critical mass for IMVU.
Just: It did not work. After 6month programming power to program import interfaces from all known existing clients, Eric found that NO ONE was using IMVU!
The assumption that they would use it turned out to be false – they should have gotten that information much earlier!
So they went out and talked to potential customers, even paid them to use the software. They just did not want to invite their friends, because they did not want to appear UNCOOL!
So instead of focussing on builiding interoperability, they found that users rather want to remain anonymous and find A LOT OF VALUE in this.
This was an example where an untested assumption led to months of development work resp. development waste.
Second example was about the design of the launch site (first site a user encounters) to register. The registration process was reagarded as too complicated, and a designer was hired to redisign the site. Actually, it was three sites, the entry page, one to register, and one to download the client. Stuff looked cool, but the resistration rates dropped significantly. The question was: „Why did the registration rate drop“? Careful meaurement (quant) revealed that the first two pages („click through“) actually performed better, but the thrid one failed. Research then focussed on the thrid page. There as a HUGE flashy banner on it, any maybe it even said „click me“. But a qualitative (user observation) analysis revealed that the users just did NOT WANT to click on anything „just for fun“ or because it might have been the download botton.
This is also an example of where an untested assumption could have caused problems, however not in the strategic, but in the operational realm, however with serious consequences.