Lean Startup Principles for Validating Ideas
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The document discusses the Lean Startup theory and how it can help address common startup failures. It notes that today's environment for startups is more challenging due to tighter financing. It outlines five common startup traps, including assuming the customer and features are known and burning cash without understanding customer needs. The Lean Startup theory advocates testing ideas with customers early through rapid experiments, identifying problems to solve, and pivoting if customers are not enthusiastic. The document provides an example of how Nordstrom applied Lean Startup principles through quick one-week iterations and simple experiments. It encourages the reader to apply these principles to their own work.
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Lean Startup Principles for Validating Ideas
- 1. Leaning towards a Lean Start Up
- 2. The book that started it all
- 3. Why Talk About it? Before • Cash was readily available • Follow on financing was readily available Today • Debt markets are tight • IPO & M&A window closed • VCs are pessimistic Future • Uncertain - Venture fund returns have been on decline for a decade
- 4. Start Up Trap #1 I know what to build
- 5. Start Up Trap #2 I know who is my customer
- 6. Start Up Trap #3 Burn Cash in the Launch Phase: Get the customers in, no matter what it costs
- 7. Start Up Trap #4 The key is execution
- 8. Start Up Trap #5 I have an idea, let me hire a management team
- 9. Why Startups Fail: A Summary High burn rate Full management teams Assume customer is known Assume features are known Assumes growth is by execution
- 10. Some Amazing Startups That Failed
- 11. Research Confirms Failure Points 10 out of these 20 reasons point to failure to understand the customer.
- 12. So what can we do differently?
- 13. Introducing the Lean Startup Theory
- 14. Lessons From the Lean Startup Test your ideas with customers Identify the problem you are trying to solve Don’t burn money on trying to sell an untested idea Identify the problem you are trying to solve Pivot if the customers don’t share your enthusiasm Scale your start up as you grow
- 15. But Enterprises Struggle With Innovation
- 16. Lean Start Up at Nordstrom Copyright: Nordstrom Innovation Labs
- 17. Take-Away from the Video One week iterations Go and see for yourself Simple, rapid, experiments
- 18. Where are you today? Are you or is your organization doing something cool inspired by the lean start-up phenomenon? How can you apply the principles here to your career?
- 19. End
Notas do Editor
- thanksagile in products connectAgile- software delivery – iterative – relevant to businessBusiness- remained same-over the yearsFresh perspective – for startups For enterprises looking at innovationNot a choice – a necessity to stay relevant as environment around us changes
- Eric Ries (born 1979)[1] is a Silicon Valley entrepreneur and author recognized for pioneering the Lean Startup movement, a new-business strategy which directs startup companies to allocate their resources as efficiently as possible. He is also a well-known blogger within the technology entrepreneur community.-Rid of Failed startups-Fresh thinking – much of how to do business is applied from an FMCG way of doing business-Poster – pop art – cheguervra – freedom from chains of established ways of doing things
- - before – funding was freely availableTons of money on innovation projects – enterprises Now - AccountabilityChanging business paradigmsDisruptive Technology, disruptive business models – experiments with low investment which can be scaled up if required
- Easy to fall in this trap – startups love their project – it is like bringing up a baby – and they fail critical questions they should ask their business.Bunch of 26 year olds – hacking away – and you have a startup. A friend of mine running an e-commerce site selling jewelery online titled his range “Wild Coyote” – which means essentially a jungle bitch. I asked him why he named it – he said it has pop culture references to immigrant gypsies in Mexico and Southern States of US. His market is fashionable young NRIs and I don’t know if they get the point. Check if your customer gets it. This guy has invested already his own savings in branding his inventory.Webvan made a $890 million investment in setting up world class suply chain with robotic warehouses, a patented new mechanism for stocking vans witout first checking if customers want to order grocery online.eToys.comSollyndra – a promising start up focused on solar cells
- If your business model was as simple as a lemonade stall – you will know who your customer is.Reality is different – businesses are a lot more complex Need to identify who is your customer – the customer segment – who needs your problemSeems common sense – right – check again – startups and large enterprises – both making wrong betsManagement theory – who will go to market firstBuild and they will come – In FMCG it works and a lot of management talent in e-commerce comes from the brick and mortar world. Spend millions of dollars in ads, hire super stars when customers don’t have a clue if you are selling soap, shampoo, underwear or a car. Remember the HomeTrade adverts with HrithikRoshan? I still don’t know what business they were in. All major companies have made this mistake at some time. Condom Key Chains, Paris Hilton Dolls,
- Indian e-commerce acquire customers by offering deep discounts – freebies like cash on delivery, trials, collection and return – who will survive – how will it surviveSpend money on customer acquisition – investing in checking if your customer model sticksGo back and check business literature written around this time – recommends that you spend moneyTerms like Cash Burn – when cash is not available – is this a practical way to run a business- Would you do this?
- A lot of start ups were doing surprisingly well in execution. But they fell hard, and their execution efficiency helped them fall more disasterously.A case in point not related to start ups but WW2. The British had one of their largest garrisons in SE Asia at Singapore, but they surrendered to Japs without a fight. To prepare for the battle they led smooth roads from Guam to Singapore and the Japanese used bicyles to move their infrantry – their speed overwhelmed the British defenses which fell flat against Japanese ingenuity. More recently, Solyndra banked on the global prices of oil rising for a boom in solar power adoption – however, OPEC dropped the prices of oil in 2011, and the expected sales never happened for Solyndra. It collapsed despite having a technologically cool product and investing $500 million in supply chain.Everyone has heard of traditional start up failures in Webvan. Compare it to Amazon’s grocery delivery business which started in select cities and has been in Beta for over 3 years.Execution is key, but not the only key.
- Management teams – stuff of legends – don’t have a customer – don’t have a market identified – management stretching the business in different directionsScale organically
- Malegaon ka superman – exemplifies lean movie making
- Next set of slides will answer bunch of questions about lean startup principleNordstorm – upscale fashion department store fetching 9 billion. It has to act like a statrtup
- Hardest things about corporate innovation Simpa networks - electricity to unprivileged ones in India