Silicon Flatirons is pleased to host Rally Software Chief Technology Officer, Zach Nies, for a Crash Course about some of the surprising science behind building successful startups. Even though building a startup is hard work with high failure risk, entrepreneurs Steve Blank and Eric Ries have popularized practices that can increase the odds of success. Following the Customer Development or Lean Startup practices will show you what to do. This talk will give you an understanding of why these techniques work, which will allow you to better apply them to your startup or scale them into your enterprise. The event will focus on high growth business based on the deep experience of a CTO from one of the Front Range's leading companies. Entrepreneurs are by nature execution-oriented and you will walk away from the talk with concrete, actionable ideas that will help you make better decisions tomorrow. The subject matter should be relevant to both entrepreneurs creating new companies and entrepreneurs reinventing existing enterprises.

1. Why Lean Startup Practices
Work & How to Scale Them

2. Zach Nies

3. @zachnies

5. First, something to
think about

7. h"p://www.flickr.com/photos/oregondot/4132135156

8. Entrepreneurs have a
chance to create the
world they want

9. There is proven
science that can
improve your odds of
success

10. What world do you
want to create?

11. What does that feel
like?

12. Success allows you to
create the world you
want and live your
dreams

13. Why am I here
tonight?

15. Success, but they
weren’t living any
dream

16. Discover & promote
the tools that enable
success while living
the dream

17. How I got here

19. Font Sampler
http://media.kelbymediagroup.com/layersmagazine/images/columns/artoftype/may06/glyph-set.jpg http://en.wikipedia.org/wiki/File:Caslon-schriftmusterblatt.jpeg

21. 2,500,000
customers

22. Vision: Civil rights and equality for all

26. Vision: Reinvent
collaboration

27. Amazing team,
exactly the culture I
dreamed of creating

28. Great product

29. One problem:
bad business

30. Why am I doing this?

31. Live inside the Internet

33. Vision: Solve the world’s hardest
problems as citizen engineers

34. 14 minutes in pairs,
7 minutes interviews
of each person:

35. You have created a computer game of
entrepreneurship. You believe you can
combine this game with some
educational material and profiles of
successful entrepreneurs to make an
excellent teaching tool for
entrepreneurship. Your inspiration for
the product came from several reports
in the newspapers and magazines about
increasing demand for
entrepreneurship education.

36. What information would you seek
about potential customers and
competitors?
List questions you would want
answered.
How will you find out this
information - what kind of market
research would you do?

37. h"p://www.flickr.com/photos/oregondot/4132135156

38. Who would first do market
research to determine how to
position the product, calculate
addressable market size, and
expected financial returns?

39. Who is focused on identifying
possible competitors?

40. Who would first figure out your
passion for the idea, what you
know about the market, and
who you know? Then talk to a
few people to see if you can
sell a prototype?

41. Who is focused on identifying
possible partners?

42. Remember your
answers, we will come
back to this later.

43. Books that informed this talk

44. People who informed this talk
David Max Cynthia Kent
Snowden Boisot Kurtz Beck
Frank H. Mark Eric
Knight Newman Ries
Steve
Blank

45. Why care about the
underling principles?
Aren’t there proven
practices?

52. Following Being
the a
Recipe Chef
VS

53. We have recipes

56. For complex
problems, the recipes
won’t always work

57. h"p://www.flickr.com/photos/usarmyafrica/4456180555

58. What’s
unique
about hard
problems?
h"p://www.flickr.com/photos/horiavarlan/4298997922/

59. What you don’t
know is unknown

60. What you predict,
doesn’t come true

61. What worked
yesterday, doesn’t
seem to be
working today

62. How do we make
sense of
environments like
this?

63. h"p://www.flickr.com/photos/virtualeyesee/6107062655

64. Some background
(and a little math)

65. Gaussian distributions
h"p://arxiv.org/abs/cond-­‐mat/0412004

66. Ratio of smallest
to largest values?

67. 4.8

68. Power laws and Pareto distributions
h"p://arxiv.org/abs/cond-­‐mat/0412004

69. Ratio of smallest
to largest values?

70. 150,000

71. Other Pareto distributions
h"p://arxiv.org/abs/cond-­‐mat/0412004

72. High impact, low
probability events

73. An example

74. h"p://en.wikipedia.org/wiki/File:Sultan_Kosen_Tallest_Man_in_the_World.jpg

75. h"p://www.flickr.com/photos/jurvetson/4368494308

76. Business involves
many Pareto
distributions

77. But wait, there’s
more…

78. 4 Dots

79. 6 Connections

80. 64 Patterns

81. 10 Dots

82. 45 Connections

83. ? Patterns

84. Patterns
35,184,372,088,832

85. In business a few
patterns are more
valuable than all
the rest

86. but which ones?

88. h"p://www.flickr.com/photos/virtualeyesee/6107062655

89. How do we make
sense of this?

90. Plausible Probable
Unordered Ordered

91. Plausible Probable
Unordered Ordered

92. Plausible Probable
Chaotic Complex Complicated Simple
Unordered Ordered

93. An example
Plausible Probable
Chaotic Complex Complicated Simple
Unordered
h"p://www.flickr.com/photos/ksionic/383240468
Ordered

94. Plausible Probable
Complex Complicated
Chaotic Simple
Unordered Ordered

95. Plausible Probable
Complex Complicated
Chaotic Simple
Unordered Ordered

96. Plausible Probable
Complex Complicated
Chaotic Simple
Unordered Ordered

97. Plausible Probable
Complex Complicated
Cause & Effect is
obvious to all and is
repeatable
Chaotic Simple
Unordered Ordered

98. Plausible Probable
Complex Complicated
Cause & Effect is not
obvious and requires
analysis or expertise
Chaotic Simple
Unordered Ordered

99. Plausible Probable
Complex Complicated
Cause & Effect is only
coherent in
retrospect, and not
repeatable
Chaotic Simple
Unordered Ordered

100. Plausible Probable
Complex Complicated
Cause & Effect not
perceivable
Chaotic Simple
Unordered Ordered

101. The Cynefin Framework
Complex Complicated
Cause & Effect is only Cause & Effect is not
coherent in obvious and requires
retrospect, and not analysis or expertise
repeatable
Disorder
Cause & Effect is
Cause & Effect not obvious to all and is
perceivable repeatable
Chaotic Simple
Unordered Ordered

102. How about an
example?

103. Music Industry in 2000 - Napster
Complex Complicated
Independent Managing a large tour
musicians self
publishing online
Disorder
Managing a NIN tour
Major label online
distribution CD distribution
Chaotic Simple
Unordered Ordered

104. What does this
imply about taking
action?

105. Probe, Sense, Respond Sense, Analyze, Respond
Complex Complicated
Disorder
Chaotic Simple
Act, Sense, Respond Sense, Categorize, Respond

106. Probe, Sense, Respond Sense, Analyze, Respond
Complex Complicated
Disorder
Standard procedures
Process re-engineering
Chaotic Simple
Act, Sense, Respond Sense, Categorize, Respond

107. Probe, Sense, Respond Sense, Analyze, Respond
Complex Complicated
Analysis
Planning
Many expert opinions
Disorder
Chaotic Simple
Act, Sense, Respond Sense, Categorize, Respond

108. Probe, Sense, Respond Sense, Analyze, Respond
Complex Complicated
Frequent experiments
Pattern matching
Exploring hunches
Disorder
Chaotic Simple
Act, Sense, Respond Sense, Categorize, Respond

109. Probe, Sense, Respond Sense, Analyze, Respond
Complex Complicated
Disorder
Crisis management
Innovation
management
Chaotic Simple
Act, Sense, Respond Sense, Categorize, Respond

110. Probe, Sense, Respond Sense, Analyze, Respond
Complex Complicated
15 - 30 < 150
Disorder
5 > 150
Chaotic Simple
Act, Sense, Respond Sense, Categorize, Respond

111. An example

113. Entrepreneurship
Complex Complicated
Disorder
Chaotic Simple

114. Complex Domain
Probe, Sense, Respond
Cause & Effect is only Frequent experiments
apparent in Pattern matching
retrospect, and not Exploring hunches
repeatable
15 – 30 people

115. What is our
boundary?

116. Vision & Empathy

117. h"p://www.flickr.com/photos/virtualeyesee/6107062655

118. The journey starts
with vision and
empathy

119. “He knows the ‘why’ for
his existence, will be
able to bear almost any
‘how.’
Viktor Frankl

120. In pairs for 2 minutes:
Think about the world
you want to create.
Describe it. Also,
what does it feel like?

121. Manage the
emergence of
beneficial
coherence

122. Coevolution

123. Probe, Sense,
Respond

124. Probe, Sense,
Respond
A $40 example

127. Successful
MBA
Serial
Students
Entrepreneurs

128. You have created a computer game of
entrepreneurship. You believe you can
combine this game with some
educational material and profiles of
successful entrepreneurs to make an
excellent teaching tool for
entrepreneurship. Your inspiration for
the product came from several reports
in the newspapers and magazines about
increasing demand for
entrepreneurship education.

129. 1. Who could be your potential customers for
this product?
2. Who could be your potential competitors for
this product?
3. What information would you seek about
potential customers and competitors - list
questions you would want answered.
4. How will you find out this information - what
kind of market research would you do?
5. What do you think are the growth
possibilities for this company?

132. Probe, Sense,
Respond

133. Validated Learning
Eric Ries

134. Design Thinking

135. h"p://www.flickr.com/photos/virtualeyesee/6107062655

136. How do you
manage complex
systems?

137. “The only valid model of a
complex system is the
system itself.
Murray Gell-Mann

138. Finely Grained
Objects

139. Small teams
5 - 30

140. Small experiments

143. Meaning emerges
through
interaction

144. Get out of the
building!

145. Learn through
experiments that
are safe to run

146. Hard for
startups

147. Hard for
companies

148. How do you make
$600 Million in
2010?

149. Hundreds of A/B
experiments at all
times

150. Maximize learning – Don Reinertsen
http://jchyip.blogspot.com/2010/05/lean-software-and-systems-conference.html

151. How small should
experiments be?

152. Chip flip game

153. The power of
small batches

154. The power of Agile

155. Waterfall
“Managing the Development of Large Software Systems”
Dr. Winston W. Royce – 1970

156. Waterfall
All
Features
in Release
“Managing the Development of Large Software Systems”

157. Waterfall
All
Features
in Release
“Managing the Development of Large Software Systems”

158. Waterfall
All
Features
in Release
“Managing the Development of Large Software Systems”

159. Iterative Feedback

160. Scrum Framework
Backlog Standup
Grooming
Iteration Demo / Review
Planning
&
Retrospective
Iteration
Product
Iteration
Product
Backlog
Backlog
Increment

161. Focus on Stories
Stor y Stor y Stor y
1 2 3
All Stories
in Iteration
All Stories
in Iteration
All Stories
in Iteration

162. Flow of value
Vision Design In Done Deployed What was
Development learned?

163. h"p://www.flickr.com/photos/virtualeyesee/6107062655

164. Distributed
Cognition

165. Wise Crowd

166. Wise Crowd
Diversity
Independence
Decentralization
Aggregation

167. Wise Crowd
Francis Galton

168. An experiment
Count the passes
the white team
makes

170. An experiment
How many
passes?

171. An experiment
What else did you
notice?

173. Selective
Attention Bias

174. Change Blindness

176. Disintermediation

177. Help everyone
detect weak
signals

178. Share raw data
from experiments
with everyone

179. Democratize
information

180. h"p://www.flickr.com/photos/virtualeyesee/6107062655

181. A case study

182. Jerome Breche, CEO

183. Scaling these
concepts

184. What is Lean?

185. h"p://reallycoolthings.net/2010/06/10/lean-­‐and-­‐agile/

186. Lean is …
Organizational
Learning
System
Operating
People System
System
Frode
L.
Odegard,
Lean
SoTware
InsVtute

187. Making sense
at scale

188. At a startup
Complex Complicated
Disorder
Chaotic Simple
Idea/Market Fit – Code Base – People/Org

189. New product inside big company
Complex Complicated
Disorder
Chaotic Simple
Idea/Market Fit – Code Base – People/Org

190. Applying this
with your team

191. Does everyone know why?
h"p://www.flickr.com/photos/lejoe/2800660239

192. No death
marches
h"p://www.flickr.com/photos/west_point/5566824566
h"p://www.flickr.com/photos/elcapitan/2387917709

193. Cut debt
days
h"p://www.flickr.com/photos/consumerist/4406234952

194. Learn from setbacks
h"p://www.flickr.com/photos/cakesquared/3819067260

195. Small experiments
h"p://www.flickr.com/photos/denisecarbonell/5593039053

197. Retrospectives
What
S
What has What HYPOTHESE
HELPED HIND has could we
ERED
us?! us?! draw about
how we move
forward?!

198. Publicize what you learn
h"p://www.flickr.com/photos/lorenkerns/4114441322

199. Every situation isn’t the same

200. h"p://www.flickr.com/photos/virtualeyesee/6107062655

201. Entrepreneurs have a
chance to create the
world they want

202. There is proven
science that can
improve your odds of
success

203. Pick 2 concepts
from tonight

204. Take them back to
your team

205. Create the world
you want

206. h"p://www.flickr.com/photos/fla"op341/224597838