Welcome to
Lean Startup 301
Aubrey Smith
November 16, 2015
Sponsored by:

Agenda
1. Who is in the room?
2. How will this be valuable?
3. What will we cover?
4. How to participate?
5. What should I do next?

Who is in the room?
• Founders
• 1st
Time Entrepreneurs
• Serial Entrepreneurs
• Intrapraneurs
• Designers
• Developers
• Newbies
• Book Readers

How will this be valuable?
This Session Is
• Practical
• Clear
• Direct
• Simple
• Introductory
• Wisdom sharing
• Hands-on
This Session Is Not
• Book review
• Brainstorming
session
• Full of jargon

How will this be valuable?
Addressing the Main Questions
• What is it?
• Why does it work?
• How does it work?
• Why does it matter?
• How can I get started?
• How can I apply this to my company?

What will we cover?
What we will cover today
• Deep dive into MVPs, experiments
• Discussion of Advanced Topics
• Live Case Studies
• Exercise: Design an Experiment
Innovation
Accounting
Governance
Application in
the
Enterprise
Regulated
Markets

How to participate?
Experiment
Exercise
Live Case Studies
• Listen
• Share
• Please, ask questions!
• Need Volunteers
• Group Participation
• Sharing
1
2

What is the Lean Startup?
Key Areas to Discuss
History
Basic Terminology / Definitions
Application / Applicability
Advanced Topics

What is the Lean Startup?
History
• Robert Deming
• Toyota Lean Manufacturing
• Agile Software Development
• Lean Startup
• Steve Blank
• Eric Ries
• Alexander Osterwalder
• Lean Startup Community

What is the Lean Startup?
A method to systematically address
uncertainty through rapid iteration and market
learning.

Core Principles
Entrepreneurs are everywhere
Entrepreneurship is management
Validated Learning
Build-Measure-Learn Loop
Innovation Accounting
What is the Lean Startup?

Common Purpose
We share a vision for the kind of company we
want to create:
A company that continuously creates new
sources of growth.

The Lean Startup is…
Everywhere.

Who’s accountable?
• Jack Stack: The Great Game of Business
Build a culture of ownership
• Key Parallels
Lean Startup capability and accountability
should be the job of everyone at the company
Governance will vary
Customer learning trumps internal feedback
loops and decisions about products/features

Case 1: Lean Startup at GE?
What is FastWorks?
- Organizational change
- Teams to Growth Boards
- 500 projects, 500 coaches
What are GE Beliefs?
- Customers Determine our Success
- Stay Lean to Go Fast
- Learn and Adapt to Win
- Empower and Inspire Each other
- Deliver Results in an Uncertain
World

Key Areas to Discuss
History
Basic Terminology / Definitions
Application / Applicability
Advanced Topics
What is the Lean Startup?

What is The Lean Startup?
Terminology / Definitions
• Entrepreneurs
• Startups
• Uncertainty
• Vision
• Assumptions
• Hypotheses
• Minimum Viable Product
• Validated Learning
• Pivots

Your Vision
What business do you want to create?
And, why?
What will you not pursue?
And, why?
1
2

Now, get the facts...
• Biggest mistake you can make is to not test
the underlying assumptions of your
business plan
• Leap of Faith Assumptions:
If you prove your Leap of Faith
assumptions false, your business plan falls
apart

Isolating critical assumptions
What is the riskiest element of your
business plan?
Impact
Time horizon
OR
Will kill
Won’t kill

Customer Problem
Solution
Business Model
Scale / Growth
Types of Assumptions

• “If then” statements that help design tests
for an assumption
Paypal - If people can easily transact across multiple
devices, they will be more frequent users of the service
• Clarifies your current understanding of what
uncertainty you seek to resolve
Paypal - Specific action? Timing? Value/amount
Draft your Hypothesis

Minimum Viable Product
• Experiment that helps you validate (or
invalidate) hypotheses about the value
or growth potential for a new product
• An MVP helps you answer a specific
question about one or a few of your
critical assumptions

Case 2: Testing @ AirBnb
Test:
• Photography Concierge
MVP
• 20 Photographers in
the field
Critical Hypothesis:
“Professional photographed listings
get 2-3 times more business (and host
don’t turn down free professional
photography.”
(SXSX, Airbnb)

Case 2: Testing @ AirBnb

MVP: Expert Tip
The MVP begins the process of
validated learning…
• This is an experiment, not a product
• No such thing as “an MVP”
• The smallest possible product we can
imagine to achieve maximum learning
about our hypothesis

Build, Measure, Learn Loop

Minimum Viable Product
Translate your critical assumptions into an
experiment:
Validated Learning
1. Isolate critical
assumptions for testing
2. Draft your hypothesis to
be tested
3. Build an experiment
4. Measure the results
5. Collect the data and
learning in a systematic
1. What artifact will
you use?
2. How will you
use/test it?
3. Who will you test
with (segments)

Minimum Viable Product
Translate your critical assumptions into an
experiment:
Validated Learning
1. Isolate critical
assumptions for testing
2. Draft your hypothesis to
be tested
3. Build an experiment
4. Measure the results
5. Collect the data and
learning in a systematic
1. What artifact will
you use?
2. How will you
use/test it?
3. Who will you test
with (segments)

Fears
• Change in direction without a change in
vision
• OR
• Persevere: A team’s decision to test the
next most important hypothesis
Pivot

Innovation Accounting
• The problem with Vanity Metrics
• Quantitative vs. Qualitative Data
• Leading vs. Lagging Indicators

Key Areas to Discuss
History
Basic Terminology / Definitions
Application / Applicability
Advanced Topics
What is the Lean Startup?

Minimum Viable Product
Translate your critical assumptions into an
experiment:
Validated Learning
1. Isolate critical
assumptions for testing
2. Draft your hypothesis to
be tested
3. Build an experiment
4. Measure the results
5. Collect the data and
learning in a systematic
1. Who will you test
with (segments)
2. What artifact will
you use?
3. How will you
use/test it?

Culture of Testing
1. Experiment design is important
2. But, recording and evaluating the learning is
more important

1. Experiment design is important
2. But, recording and evaluating the learning is
more important
• Establish an organization that learns together
• Only step up to the sophistication of the experiment
and innovation accounting when you are ready to do
so as a team
• Team learning is the most important outcome
Culture of Testing

Discipline of Testing
1. Focus the learning
2. Establish the baseline
3. Track MVPs on a dashboard
4. Employ the right cadence of testing

1. Focus the learning
2. Establish the baseline
3. Track MVPs on a dashboard
4. Employ the right cadence of testing
• Only as sophisticated as your organization is ready
to handle
• Remember: A well-designed experiment will inform
what your next experiment will be
• Parallel path testing should only be employed if you
have available resources
Discipline of Testing

Minimum Viable Product
Translate your critical assumptions into an
experiment:
Validated Learning
1. Isolate critical
assumptions for testing
2. Draft your hypothesis to
be tested
3. Build an experiment
4. Measure the results
5. Collect the data and
learning in a systematic
1. Who will you test
with (segments)
2. What artifact will
you use?
3. How will you
use/test it?

• Customers do not always do what they
say they will
• Avoid “Voice of Customer”
• Measure conversion on the path to
purchase (ex. Funnel metrics)
• “Purchase intent” may require a ‘new’ rung
in the funnel
Exchange of Value

Identify “Early Adopters”
• What customers have this problem/need?
• Who uses a ‘workaround’ today?
• Who values this solution for a unique reason?
• How would we classify segments?
• Innovations may cut across traditional segmentation
• Dig for segmentation variables (time, cost)
A. Build – What segments?

A. Build – What artifact?
Begin with a low fidelity artifact
• Paper brochure
• PowerPoint
• Landing page
• Website
• Clickable Mobile App
• 3d CAD Rendering
• Video

A. Build – What test?
Pick a test
• Interviews (Face-to-face, phone, video)
• Digital Campaign
• Google Adwords
• U/X in-person Test
• Email
• Live Demonstration

Test Problem/Solution Fit
• Bring bare bones “artifact”
• Set Context
• Focus on hypotheses to be tested
• Begin with direct statements (“We believe”)
• Allow customers to hint/point you to what pain /
need they do have
• Seek an “exchange of value”
c
The Interview

A. Build
Advanced Concepts
• Concierge MVP (“Man behind the curtain”)
• A/B Split Test

A. Build
Advanced Concepts
• Concierge MVP (“Man behind the curtain”)
• A/B Split Test
• Helps you obtain statistically significant
information about your potential offering
• Allows you to see what customers do with your
product / service / site
• Gives you information to make decisions – such
as, which features to cut / build

Experiment Example
[software]

❶ MVP #1
Display non-working
prototype at a
showroom
❷ MVP #2
Build full-scale driving
prototype to verify
technology
Avg. down-
payment
Pre-order rate
Prototype
• Driving prototype
(MVP2) improved
which indicates
strategy effectiveness
• MVP #2 validated
technical feasibility
assumptions
Learning
↗
↗
• Purchase intent was
validated by innovation
metrics: Pre-order rate
& avg. down payment
Case 3: Lit Motors Test

Exercise – Part I
Please see White Board

Live Case
Ursula Shekufendeh
AppFolio

Live Case: AppFolio
About AppFolio
• Web-based real estate property
management software
• Property managers can market &
manage property portfolio
Testable Hypothesis:
“If we build a tenant screening
service that landlords can
subscribe to, then we can sell a
service to 80% of RentApp users
(and, quickly reach profitability).”

Exercise – Part II
Please see White Board

B. Measure Results
• One metric that matters, OR
• Simple Dashboard / Excel Spreadsheets, AND
• “Exchange of Value”
• Customers say and do different things
• Avoid “Voice of Customer”
• Measure conversion on the path to purchase (ex.
Funnel metrics)
• Create “proxy” in funnel, if needed

Sample Dashboard
❷
✓
✓
✗
→
❸

• Pivot vs. Persevere
• Continuous Deployment
Tips:
• Pivoting is a team sport
• Ground decisions entirely in the learning
• Learning is cumulative
• Good experiments should teach you what
experiment to do next
C. Commit to Learning

Key Areas to Discuss
History
Basic Terminology / Definitions
Application / Applicability
Advanced Topics
What is the Lean Startup?

Innovation Accounting
• Actionable
• Must demonstrate cause and effect
• Removes bias to report / overvalue “numbers that go
up”
• Accessible
• Simple, easy for the team to understand
• Should not require retraining team to read reports
• Auditable
• Credible data reduces the ability to place blame

• The growth operating system requires new
management principles
• No “one size fits all” Lean Startup Process
• Start small to get big
• Small, honest success cases will bring leaders into the
fold
• Sophistication should be aligned with team capability
and resources
Lean Startup in Enterprise

Live Case
Chris Brown
Vodafone Global Enterprise

Questions?
Aubrey Smith
Sparked Advisory
(202) 907-3993
Heather McGough
Co-Founder, Lean Startup Company
(415) 830-2479
Heather@LeanStartup.co

Appendix

• Vision -> Strategy -> Team
• Strategy is leadership-led:
Governance
PortfolioTeam Company

Startup approach opens market opportunities
Important Themes:
• Dialogue is critical
• Layering regulation improves impact
Regulated Markets

Prioritize Assumptions
• Focuses you, your team
• Draws a line in the sand
• Introduces accountability
• Saves time
• Introduces culture of “learning”

Eric’s Point of View