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- 1. the Learning Start-up FromBusiness_Idea to Company_Creation building_blocks process Master in Complex Actions, SISSA, Trieste Leonardo Zangrando, MBA, MSc February 4th, 2011
- 2. What and Who Timeto innovate ● At the convergence of the most recent developments on entrepreneurship such as the Lean Start-up concept, the Business Model framework and the Customer Development framework, the Learning Start-up is an organisation running explicit learning processes to convert a Business Idea into a real business. Put your (money, time, resources) where your mouth is ● I created the Learning Startup project to experiment and learn around the Learning Startup concept, starting from the initial Business Idea of an online, freemium platform to support startups in their learning process.
- 3. Biography Leonardo Zangrando hasa background in Mechanical Engineering and holds an MBA from IESE Business School. He has been consulting on sales effectiveness in the pharma sector for the past 10+ years. Since 2007 he reoriented his activity towards education and training. On a parallel track, he has been interested in business start-ups since the mid 90's and has worked on several projects in the initial transition from business idea to start-up, with particular focus on bootstrapping (self-financing start-ups.) He is currently helping a number of start-ups in the transition process to a running business. Leonardo Zangrando key theme is resource-efficiency, in terms of increasing efficiency of processes, reducing waste of resources, and expressing full potential. He is fascinated by the evolutionary process of a start-up, which transforms a business idea into a company and he is very keen on increasing entrepreneurs success rate by improving the entrepreneurial process' efficiency. He advocates the convergence of the most recent developments on entrepreneurship such as the Lean Start-up concept, the Business Model framework and the Customer Development framework into the "Learning Start-up", an organisation running explicit learning processes to convert a business idea into a real business. He created the Learning Startup project to experiment and learn around the Learning Startup concept, starting from the initial Business Idea of an online, freemium platform to support startups in their learning process.
- 4. Inspiring Authors ● This course was inspired by the work of Steve Blank, Eric Ries and Alex Osterwalder ● Steve Blank is a retired serial entrepreneur with over 30 years of experience in high technology companies and management. He is a Consulting Professor at Stanford in the Graduate School of Engineering STVP Program and author of “Four Steps to the Epiphany” http://steveblank.com/ ● Eric Ries is the creator of the Lean Startup methodology and the author of the entrepreneurship blog “Startup Lessons Learned” http://www.startuplessonslearned.com/ ● Alex Osterwalder is an author, speaker and workshop facilitator on the topic of business model innovation. He is the author of “Business Model Generation” http://www.businessmodelgeneration.com/
- 5. Bibliography Books ● Steve Blank – Four Steps to the Epiphany ● Alex Osterwalder – Business Model Generation Blogs ● Steve Blank – Steve Blank – NOTE: start from “Customer Development Manifest” tag ● Alex Osterwalder – Business Model Alchemist ● Eric Ries – Startup Lessons Learned Meta resources ● Steve Blank blog – Tools and Blogs for Entrepreneurs ● Andrew Chen blog – List of Essays ● Tom Eisenmann blog – Readings on Launching Tech Ventures ● Eric Ries blog – Recommended Reading ● Startup Lessons Learned – conference website sllconf.com ● Learning Startup blog – Channels Other Books ● Brant Cooper & Patrick Vlaskovits – The Entrepreneur’s Guide to Customer Development ● Jason Fried & David Heinemeier Hansson – Re-Work ● Eric Ries – The Lean Startup Book (Sep 2011) NOTE to find the online resources just google these terms
- 6. the Learning Start-up FromBusiness_Idea to Company_Creation building_blocks process Master of Complex Actions, SISSA, Trieste Leonardo Zangrando, MBA, MSc February 4th, 2011
- 7. What is aStart-up?
- 8. Business STARTUP Company Idea A temporary organisation to transform a Business Idea into a Company
- 9. This section basedon the work of Steve Blank What is a Business Idea?
- 10. Business Idea ● Can it be built now? ● How much R, how much D? ● Does it depend on anything else? ● Are there IP issues? ● Does it solve an existing customer problem? Technology Customer Opportunity ● Create a new market? Driven Driven Driven ● How big a market and when? ● What do you need to turn the idea into a company? ● How do you test customer acceptance early?
- 11. Business Idea ● Is there an articulated customer need? ● How do you know? ● How big a market and when? ● Are others trying to solve it? ● If so, why you? ● What do you need to turn the idea Technology Customer Opportunity into a company? Driven Driven Driven ● How do you test your idea early?
- 12. Business Idea ● Is there an opportunity no one sees but you do? ● How do you know it’s a vision not a hallucination? ● How do you test your idea early? ● How big a market and when? Technology Customer Opportunity ● Are others trying to solve it? Driven Driven Driven ● If so, why you? ● What do you need to turn the idea into a company?
- 13. Business Idea Market Type ● Disruptive Innovation → get market share Buyer value generated (willingness to pay) ● Sustaining Innovation Costs incurred → get market share ● Differentiate on – Cost (cost leadership) – Value (product leadership) Industry Successful Successful Competitor – Customer Relationship average differentiated low-cost with dual competitor competitor competitor advantage
- 14. Business Idea Industry Risk Huge pay-off e.g. in biotech Med Dev / Health Care for solving technology Technology problem Life Science / Biotech Risk Make it and they will buy it Personalized Medicine Cleantech Semiconductors In other industries you Consumer Electronics are giving away your hard work Game Software Communication Software Electronic Design Automation Communication Hardware No pay-off until you solve Enterprise Hardware the customer risk Enterprise Software Web 2.0
- 15. Business Idea Industry Risk Huge pay-off e.g. in biotech Med Dev / Health Care for solving technology problem Life Science / Biotech Make it and they will buy it Personalized Medicine Cleantech Semiconductors In other industries you Consumer Electronics are giving away your hard work Game Software Communication Software Electronic Design Automation Communication Hardware No pay-off until you solve Enterprise Hardware Customer the customer risk Enterprise Software Risk Web 2.0
- 16. Business Idea Industry Risk Huge pay-off e.g. in biotech Med Dev / Health Care for solving technology problem Life Science / Biotech Make it and they will buy it Personalized Medicine Cleantech Semiconductors In other industries you Customer Consumer Electronics AND are giving away your hard work Game Software Technology Risk Communication Software Electronic Design Automation Communication Hardware No pay-off until you solve Enterprise Hardware the customer risk Enterprise Software Web 2.0
- 17. Business Idea Venture-Scale Business Venture- ● Solve a significant Small Scale Business problem/want or need, for Business which someone is willing to pay a premium ● A good fit with the founder(s) and team ● Can grow large for traditional VC’s ● Attractive returns for this type of investor
- 18. Business Idea Small Business Venture- ● Is there a market? Small Scale Business Business ● Is it enough for my objectives? ● Is it sustainable?
- 19. Business Idea Size the Market ● Total Available Market – How big is the universe Start-up ● Served Available Market Target – How many can I reach with Market my sales channel Served Available ● Start-up Target Market Market – who will be my most likely buyers Total Available Market
- 20. Business Idea ● Market Size Questions: ● How big can this market be? ● How much of it can we get? ● Market growth rate ● Market structure (Mature or in flux?) Start-up Target Market ● Most important ● Talk to Customers and Sales Channel Served Available Market ● Next important Total ● Desk Research Available ● Industry analysis reports Market ● Financial analysis reports
- 21. A Business' BuildingBlocks
- 22. Customer Known Product(s) for Customer(s) Customer Unknown Product Product Known Unknown
- 23. Is this really a Start-up? Customer Known Product known AND Customer known – Is it really a Start-up? – What is it really about? Product Known Setting up the systems to make the Company work
- 24. Customer Known Product unknown AND / OR Customer unknown Customer Unknown – A real-life Start-up! In real life you're here! – What is it about? Product Product Known Unknown Solving for the unknowns = product / market fit
- 25. Let's find away to describe how a Business works this section based on the work by Alex Osterwalder ● What is a Business about? ● How does it do it?
- 26. Q. What isa Business about? A. Reach Customers and Deliver Value to them
- 27. CUSTOMERS / CUSTOMER SEGMENTS from “Business Model Generation” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl which customers and users are you serving? which jobs do they really want to get done?
- 28. from “Business ModelGeneration” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl do for them? do they care? what are you offering them? what does it VALUE PROPOSITIONS
- 29. from “Business ModelGeneration” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl CHANNELS through which interaction points? how does each customer segment want to be reached?
- 30. DEMAND CREATION / CUSTOMER RELATIONSHIPS from “Business Model Generation” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?
- 31. REVENUE STREAMS from “BusinessModel Generation” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl what are customers really willing to pay for? how? are you generating transactional or recurring revenues?
- 32. Q. How doesit do it? A. Using Key Resources to perform Key Activities (or have someone else do it)
- 33. from “Business ModelGeneration” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl which assets are essential? KEY RESOURCES which resources underpin your business model?
- 34. from “Business ModelGeneration” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl KEY ACTIVITIES business model? what is crucial? which activities do you need to perform well in your
- 35. from “Business ModelGeneration” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl KEY PARTNERS who do you need to rely on? which partners and suppliers leverage your model?
- 36. from “Business ModelGeneration” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl what is the resulting cost structure? COST STRUCTURE which key elements drive your costs?
- 37. key value demand creation / activities proposition customer relationships key customers / partners segments from “Business Model Generation” by Alex Osterwalder images by JAM Visual Thinking - www.jam-site.nl cost revenue structure key streams resources channels
- 38. That's a BusinessModel - What does it do?
- 39. A Business Model describesthe rationale of how an organisation... Creates Value Delivers Value Captures Value
- 40. Def_Business Model A Business Model describes from “Business Model Generation” by Alex Osterwalder the rationale of how an organisation creates, delivers, and captures value
- 41. What is aCompany?
- 42. Company KP KA VP DC CU KR CH An on-going CS RS organisation executing a + Business Model (through plans, EXECUTION systems, procedures)
- 43. What does aStart-up do to transform a Business Idea into a Company? This section based on the work of Steve Blank
- 44. Sketch out theBusiness Model building building block block building block building building block block building block building block building building block block
- 45. But realise it'sjust a set of Hypotheses Hyp Hyp building building block block Hyp building Hyp Hyp block building building block block Hyp building block Hy p building block Hyp Hyp building building block block
- 46. Start-ups SEARCH STARTUP Company ● Test and refine the hypotheses until the entire Business Model is TESTED ● Make sure the Business Model is PROFITABLE ● Make sure the Business Model is REPEATABLE ● Make sure the Business Model is SCALABLE (not applicable to craftsmen and one-off projects)
- 47. Start-ups SEARCH STARTUP Company ● Test and refine the hypotheses until the entire Business Model is TESTED 1- Solve for Technology Risk Concept Product Devel. Alpha/Beta Test Launch / 1st Shipm. – Product Development 2- Solve for Customer Risk Customer Discovery Customer Validation Customer Creation Company Building – Customer Development
- 48. then BUILD STARTUP Transition Company A temporary Building An on-going organisation the Systems organisation searching for a which implement executing a tested, repeatable, the Business Model Business Model and scalable (so far we were (through plans, Business Model in design mode) systems, procedures) SEARCH BUILD GROW
- 49. Next Steps KP KA VP DC CU STARTUP Transition Company Business = = = Idea KR CH SEARCH BUILD GROW CS RS Business Modeling Product Alpha/Beta Launch / Concept Devel. Test 1st Shipm. Product Development Customer Customer Customer Company Discovery Validation Creation Building Customer Development Systems Development
- 50. More Start-ups failfrom a Lack of Customers than from a failure of Product Development Steve Blank Retired Entrepreneur Venture Capital advisor Stanford Professor of Entrepreneurship
- 51. This section basedon the work of Steve Blank Customer Development process
- 52. If Start-ups failmore from a Lack of Customers than Product Development failure then why do we have ● process to manage product development? ● no process to manage customer development?
- 53. A few observations ● Start-ups are about learning and discovery, not execution of a business model ● Start-ups are not small versions of large companies ● Entrepreneurs and their VC's are executing on guesses While the FACTS are out of the building
- 54. These observations turninto a model Product Alpha/Beta Launch / Concept Devel. Test 1st Shipm. Product Development Customer Development Customer Customer Customer Company Discovery Validation Creation Building Pivot
- 55. Customer Development KeyIdeas ● Parallel process to Product Development ● Measurable checkpoints ● Tied to customer milestones ● Notion of market types to represent reality ● Emphasis on learning and discovery before execution
- 56. STARTUP Step 1 – Customer Discovery ● Stop selling, start listening – There are no facts inside your building, so get outside ● Test your hypotheses – Two are fundamental: problem and product concept – Use a Minimum Feature Set / Minimum Viable Product for the tests Customer Customer Customer Company Discovery Validation Creation Building Pivot
- 57. STARTUP Step 1 – Customer Discovery Minimum Viable Product / Minimum Feature Set "The Minimum Viable Product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort." Customer Customer Customer Company Discovery Validation Creation Building Pivot
- 58. STARTUP Step 2 – Customer Validation ● Develop a Repeatable and Scalable sales process ● Only early adopters are crazy enough to buy ● Pivot back to Customer Discovery if no customers ( = no product / market fit ) Customer Customer Customer Company Discovery Validation Creation Building Pivot
- 59. STARTUP Step 2→1 – Pivot ● The Heart of Customer Development ● Iteration without CRISIS ● Fast, agile and opportunistic ● Speed of cycle minimizes cash needs ● Minimum Feature Set speeds up cycle time ● Near instantaneous customer feedback drives feature set Customer Customer Customer Company Discovery Validation Creation Building Pivot
- 60. STARTUP Step 2 – Customer Validation ● Can you draw your business model? – Acquisition costs, path to profitability? ● Do you have a proven sales roadmap? – Org chart? Influence map? ● Do you understand the sales cycle? – ASP, LTV, ROI, etc. (Average Selling Price, Lifetime Customer Value, Return On Investment) ● Do you have a set of orders (€ ’s) validating the roadmap? ( proven product / market fit ) Customer Customer Customer Company Discovery Validation Creation Building Pivot
- 61. Step 3 –Customer Creation Transition ● Creation comes after proof of sales ● Financing for scale ● Creation is where you “cross the chasm” into the transition phase ● Lean Start-ups are not cheap Start-ups Customer Customer Customer Company Discovery Validation Creation Building Pivot
- 62. Step 4 –Company Building Transition ● (Re)build your company’s organization & management ● Re-look at your mission Customer Customer Customer Company Discovery Validation Creation Building Pivot
- 63. STARTUP Search vs. Execution Transition Start-ups SEARCH for a Companies EXECUTE a tested business model tested business model ● the process is iterative ● design the systems ● and start executing A Start-up becomes a Company when it finds a Product / Market fit Customer Customer Customer Company Discovery Validation Creation Building Pivot
- 64. Schedule ● The Learning Start-up ● 04 Feb 2011 – Building Blocks and Process (foundations lesson) 3hrs ● Customer Discovery ● 25 Feb 2011 – Testing Value Proposition (follow-up + assignments) 1hr ● 18 Mar 2011 – Testing Customers (follow-up + assignments) 1hr ● Customer Validation ● 08 Apr 2011 – Testing Demand Creation (follow-up + assignments) 1hr ● 06 May 2011 – Testing Channels (follow-up + assignments) 1hr ● 27 May 2011 – Testing Revenue Streams (follow-up + assignments) 1hr ● 10 Jun 2011 – Testing Key Partners (follow-up + assignments) 1hr ● 01 Jul 2011 – Testing Key Resources and Costs (follow-up + assignments) 1hr ● Start-up Transition ● 22 Jul 2011 – Business Plan 2.0 (follow-up + business planning lesson) 2hrs ● 12-16 Sep 2011 – Business Pitch
- 65. Assignments ● Business Idea (BI sheet) ● Market Analysis (MA sheets) ● Market Type ● Technology Risk / Customer Risk ● Market Size / Target Market ● Business Model (BM canvas) ● 9 blocks Hypotheses ● Hypotheses Testing (HT sheets) ● plan + thresholds ● Lessons Learned (LL sheet) ● Start your journal or blog
- 66. Thank you Leonardo Zangrando theLearning Startup leo@zangrando.com