Running Lean: Raise Your Odds of Building a Successful Product | Ash Maurya | Skillshare

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Running Lean: Raise Your Odds of Building a Successful Product

teacher avatar Ash Maurya, Helping Startups Succeed

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

5 Lessons (1h 19m)
    • 1. Kickoff Lecture

    • 2. Why Products Fail (13:13)

    • 3. Capture Your Business Model in 20 Minutes (11:30)

    • 4. Top 10 Business Model Pitfalls (11:45)

    • 5. Systematically Test Your Plan With Experiments (23:55)

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About This Class

Enroll to get started on your Lean Canvas project immediately! 

We live in an age of unparalleled opportunity for innovation. With the advent of the Internet, cloud computing, and open source software, the cost of building products is at an all-time low. Yet, the odds of building successful startups haven’t improved much.

Most startups still fail.

The number one reason startups fail is not because they fail to build what they set out to build, but because they spend too much time, money, and effort building the wrong product.

When entrepreneurs get hit by an idea they either rush towards building out their solution or rush towards finding investors. Both of these approaches take a lot of time and energy, and can be overwhelming. They are also backwards.

I attribute the entrepreneur’s, often unbridled and singular, passion for the solution as the top contributor to this failure. People place too much emphasis on the original idea but studies conducted on product success and failure tell a different story. It has been statistically shown that most initial ideas don't work as anticipated. Rather, what separates successful entrepreneurs isn't starting with that perfect idea (or Plan A) but finding a plan that works before running out of resources. That last part is key.

This class will show you how.

The class is designed for entrepreneurs/intrapreneurs looking to launch a startup idea or bring a new product to market. It will show you how to get starting by first capturing your initial vision (or Plan A) and then how to bullet-proof this vision and begin the process of stress-testing your business model.

What you’ll learn:

  • How to capture your vision on a single page
  • Refining your vision into a bullet proof business model
  • Finding a compelling problem that is worth solving
  • The critical components of different business models
  • How to de-risk your plan through conversations
  • What matters most to investors

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Meet Your Teacher

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Ash Maurya

Helping Startups Succeed


Ash Maurya is praised for offering some of the best and most practical advice out there for entrepreneurs. He challenges the notion that start-ups should plan based on gut, intuition and luck. Instead he applies a systematic process for rigorously stress testing your "Plan A" until you achieve a plan that works.

Ash is the founder of Spark59 and author of Running Lean. He has launched several startups, including successful ventures such as WiredReach. Through his Running Lean workshops, he's worked closely with entrepreneurs to help them test and refine their vision. Ash holds mentor roles with startup accelerators around the world such as TechStars, Mozilla Foundation, Year One Labs, MaRS, and Capital Factory.

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3. Kickoff Lecture: - Hi, - everyone. - This is Ash. - Um, - this is my first time doing a scale share class and doing a Google hangouts on air. - So if I mess up, - I apologize, - but I'll do the best that I can. - So this is the kickoff for the class that you were taking ready rods of building a - successful product. - So I'm going to switch to some slides and just introduce what we're going to be doing in - this class. - And then I will try to switch over and see if I can find questions that you guys might have - to start. - But let me walk through the slides first, - and then we'll go to the question section and you're in a little bit. - So we switched the slides. - Okay, - So by way of introduction, - I often like to tell myself So I would like to tell people that I identify myself first and - foremost as a practicing entrepreneur. - In the last couple of years, - I've been I've written a book and I've been traveling the world. - I teach workshops, - but first and foremost, - I'm an entrepreneur. - I build products much like I'm assuming most of you on the call. - You either build products or you want to build new products, - and so I kind of walk you through what I've learned. - I hate to start with bad news, - but most products fail, - and there's nothing surprising about this statistic. - We already know that the number is pretty high. - Whether it's 90% or less or more, - it's kind of irrelevant. - Most products just just fail. - The more interesting number, - though, - is that the products that do succeed report having drastically changing their plans along - the way. - So what that's really telling us. - It's that it's not so much about having that perfect plan a perfect vision, - perfect business model when you start out, - but rather finding, - getting to that point where you find a plan that works and the key part here is going to be - before running out of resources. - And that, - in a nutshell, - is what motivated me to start this journey of finding a better systematic process for going - from that initial spark of an idea. - So most entrepreneurs will most people in general get hit by ideas for some crazy reason. - Entrepreneurs want to act on those ideas, - and the acting part is the part that's really expensive because you can easily come it - years of your life to a particular idea. - So that was my real motivation for wanting to explore this. - And so I'm going to take a step back. - And first look at why building products is so hard. - You'll see some of this even in the first lecture. - But I thought it's important enough to cover it and reinforce it double multiple times, - and this is a common theme you will see throughout. - So if you take a step back, - it was a one of the main reasons that we often fall into Is this misconception off the - visionary entrepreneur? - And this is a myth that has been propagated by the media. - We like to think of people like Steve Jobs, - the late Steve Jobs, - Steve Jobs and others who are able to perfectly timed the market. - They're able to see where customers were going. - They're able to perfectly timed the market with these perfect products, - and the rest is history that have these overnight successes. - So this is what we've think product launches should be, - and when we see otherwise with our own products, - we feel like their failures and we can have quit too soon, - too early. - But even the you know the visionary Steve Jobs, - and I respect them dearly and for everything is done. - But even he has a string of failures, - and he himself, - on the launch of the iPad, - said that the iPad, - which he hold probably in his hands, - was years in the making. - On the right hand side, - I kind of got this timeline from some blogged that the references down there on all the - different things that could have had to happen for the iPad to be possible. - Some of these things are within Apple. - So even the iPad has a has a history in in the first Newton device that they that Apple - launched on the second Newton device, - which both were massive failures. - And then there's a string of other evolution of both software hardware to the iTunes music - store, - the iPhones, - the iPods. - All of those lead to the eventual iPad, - which was this revolutionary device, - and even though we like to think of it as this visionary launched, - it really has a long history that goes back in this case all the way to 1968. - So that's the part off the journey that we tend not to look at. - So we all want to have these instant overnight successes. - But the process of building successful products is really a long, - arduous, - uh, - sometimes learning and painful process. - The second myth that I like to throw out there is that a lot of us get into the in in front - of fall in love with this notion of building products and building products itself gets in - the way, - and this is a little counterintuitive because most startups are about building great - products. - So what? - What do I mean by this? - And I'll explain that with this slide over here. - If we look at the main reason why products fail as a state, - it was done in Silicon Valley. - It was not because the products failed to to be built. - All the companies that got sufficient funding and resource is to start build out their - original vision. - They were able to build what they set out to build, - but they failed because they were able to They were empty. - What? - They failed to find the right customers and mark pits for the product, - their products. - And so those products essentially didn't have a market for them and could not generate a - sustainable business model. - And so those companies just went out of business naturally. - But I spent all this time you spent years building this product only to find out they had - built something nobody wants. - And the reason that happens is because we get we fall in love with building products. - In a typical product development cycle, - there is this big middle that I've kind of labelled as very little learning. - That's where we often go away for several weeks, - months, - sometimes even years where we choose not to talk to customers because we're heads down - executing a plan. - And that's also where we go astray and either build too much or build the wrong product - altogether. - And this is something that ah, - Steve Blank also pointed at, - um also experienced in his own career and pointed out recently and something he labels as - customer development. - So one of his solutions that he proposes is not to be primarily focused on product - development, - but in parallel inject customers into the process. - And I will go one step further and say it's not just customers. - We have to be injecting conversations in general with people other than ourselves, - and I will kind of get into more of those details in the in the lecture. - The third thing that I see as a big contributor to start ups and products being hard is - this right here as we pay a lot of lip service to listening to customers. - But we really have to know how to listen to customers. - Often times people say I will not listen to customers because Henry Ford wouldn't have done - it because he was a visionary and I'm a visionary like him. - And what we failed to realize is that even in this coat there is a gem of a nugget. - There's a gem of information, - and that is that the customers may not be telling us to go and Master gives an automobile, - but they are clearly telling us what their problems are there, - telling us that they're not happy with their existing solution, - which happens to be a forest, - and the reason they're not happy is because the horse is too slow. - And so if a not front or where to go out and solve this problem, - they would be all ears, - and that's pretty much. - The directive that we have is entrepreneurs. - It's really our job to know what customers want. - It's not their job. - If you if you go into the customer, - want game, - you'll very quickly be speaking out Mars rocket rocket ship Um, - and not really what they need. - So that's kind of a key point there. - So number one reason that products fail, - I would say, - is because we waste time on an effort building the wrong product. - That's at the root of it. - And so what you're going to see in this class are techniques for working, - working in a different way where we try to systematically test what we build before we - commit to really building them a little bit about myself. - I've been an entrepreneur for many, - many years. - I started my first company in the right after the dot com crash, - and like many first time entrepreneurs, - I believe that stealth was the way to go. - I had this spark of an idea. - One day it was it was trying to build a social network before Social network was even a - term. - Um, - and I just kept it to myself as I felt the idea was so valuable if I told another living - person than the idea was just vaporize. - And so, - despite all myself that sometimes there comes a time for ideas of Friendster launched and - soon after there was a whole slew of social networks, - and even then I convinced myself that I was. - I was safe because what I was doing was very different. - I was building a private social network, - and so I rationalized that in my mind and kept building and building until I realized that - people didn't really care about privacy. - They do now there some services out that are doing private social networks. - But back in the early 2000 to 2004 timeframe, - no one really cared about private social network. - They was more a question of Give me a give me a handle where I can I can share away and - bring in friends on that was what what mattered the most, - and so that initial idea failed. - But there's a lesson in there, - and that is that Had I have been more open that I've been talking to customers, - I might have been able to avoid that two year cycle of building a product and realizing - that it was, - it was a difference, - but it was not a difference that mattered to my customers. - Um, - and that's kind of a key point there as well. - So instead of embracing stealth, - I tell people to embrace up security when you're first starting out. - No one really knows about you, - and that's actually a gift. - Our biggest challenge when we first start out is getting noticed at all. - And so what we can instead do instead of trying to be stealthy and not tell anyone about - our product. - We can be selective and tell other people people other than ourselves. - And I'll talk about who those are in some subsequent lectures, - but just to kind of name names. - I would say talking to customers is always a great idea talking to potential customers. - If they don't get excited by the problems you're solving, - then you don't really have anything they don't really say I want. - I want a solution to this problem. - Don't even have to tell them the solution. - As long as you say you're looking to solve this problem, - you can start there, - and no one can steal a problem. - People customers have problems. - You know they have have problems that people know about. - It's the solution is that it's It's the how you solve that will really matter at the end of - the day, - so you can go out there and openly talk about problems without fear of it being stolen. - Other places where you can have those conversations are with trusted advisers. - And so we'll have an exercise here in the next two weeks where you will go and do those - kinds of things, - talk to customers and potentially talk to advisers advisers before customers. - For me, - though, - I had after that first product failure, - I built other products, - and I felt like I got a little bit wiser with each product and I began to embrace failure. - I didn't have a problem with failing, - but what I was more interested in, - I was figuring out how to fail faster. - But more importantly, - how to learn and avoid failure altogether because you can get addicted to failing as well, - which is not a good thing. - So for me, - I was looking for when I get these sparks of ideas in my head, - what do I do with them? - How can I go and quickly bet them to see if these were problem worth solving or whether I - should go do something else. - Instead, - cut, - cut that idea loose and and disassociate myself. - And if you don't reach that closure, - the idea is just going to start the Fonte because you feel like you've got so many ideas - and you've not done anything with them and you don't know which one to start with, - and that also creates a paralysis. - So for me, - it was important to vet them as quickly as possible and then move on to the ones that do - work and weed out the ones that don't. - And that's what led to running Lean. - So around the 2000 and eight time frame, - I ran into the early works off Steve Blank and Erik Reece with customer development. - It means startup, - and what they were saying resonated with me so strongly at a, - uh, - a reasoning level at a theoretical level, - that I decided I would try those techniques out and I would start applying them on my next - product, - which I have just been had just started. - And in the process of doing that, - I felt that I had more questions than answers. - I started writing a blawg and publicly sharing my my learning along the way and that - eventually is what got turned into a book. - But even then, - as I said at the start, - I even after writing the book, - I still build products, - and a lot of what I do is is still building products and continue to share my learning. - So that's just a little bit of history about by kind of about where I've been and what I've - done. - A few disclaimers I like to throw out there is that I'm a very I'm very much of a - experiential learner learner. - Everything that I share with you is all built in firsthand experience, - either by way of building products of my own or by, - um, - working with other entrepreneurs, - helping them build products. - So everything here has been field tested and been refined, - and sometimes things are pretty rough, - but we kind of refined them over time, - and we will see these incremental improvements in the methodology. - If you read my belong you kind of Steve see things that start out very rough and they get - more refined over time. - But that's what I what I kind of do. - And that's the same thing that I did with customer development and lean Startup is in many - ways I decided to put them put these ideas through the wringer because there was a lot of - noise. - There still is a lot of noise about how to practice those kinds of things, - and that's what I feel like I I enjoy doing and I encourage everyone to do those kinds of - things because there is a lot of noise in the body of work and I will talk about one way to - get get around around that here in a second. - The other thing I like to throw out there is that there are no silver bullets. - There are no guarantees of success, - so just because you fall a particular methodology does not guarantee that you will build a - successful product. - But what I will pretty much guarantee is that it will raise your odds of building a - successful product so you will know whether you are on the right track or not. - And if you're not on the right track, - the solution is to course correct what we would again overly abused the start of term I'll - try to define it in some of the ah upcoming lectures, - but we will try to pivot your idea in that right direction. - And that is where I think the lean approach really shines is that it's not so much about - starting with that perfect plan. - But it's about building certain systems in place. - Where there is a feedback loop is a learning feedback loop that tells you whether you're on - the right track using weak signals at first and they get stronger over time or whether - you're way off course. - And if you're way off course, - you need to do something drastic initially to get on that right track did actually what the - process is in a nutshell. - It's a road map of what we're going to be talking about. - Um, - I mentioned I've read in the book so there. - A lot of these ideas are captured in the book, - and there's a lot of more detailed step by step instructions or not going to get into all - of those because we only have two weeks. - But I will say that one of the ways to avoid getting lost in the noise is separating - principles from tactics so If you look at the lean body of work, - there are things like split testing and continues deployment. - There's no customer interviews. - There's design thinking. - Type approaches is mean ux the analytics all kinds of different ways that that companies - claim to be to be practicing lean. - But in a nutshell. - There there really principles and not all of those tactics will apply to everyone. - So where I come from, - I say they're these core metal principles that you have to embrace and the reduction of - these to practice and very from product to product on. - And that is the where some of the challenge lies. - But that's also where a lot of the creativity lies that every company can implement lean in - their own way, - based on the culture based on the product they're building. - So these are the meta principles that I kind of embody in my in my book and what I what I - really talk about, - and I'll quickly walk through what these are. - So I mentioned how the entrepreneurs job is to go from that initial plan to one that works - . - You can get anywhere unless you have a plan to begin with, - and so the first step is really documenting that plan. - And so in the in the class, - we're going to be using a tool called Lillian Canvas, - which will allow you to capture that initial plan on a single one page document. - It won't take more than 20 minutes once you've read the video. - What, - you've watched the video and know what to do. - Another 20 minutes later, - you should have your initial plan dot and then what we're gonna do as a next step is begin - to start to refine that plan. - Before we refine it. - We actually identify what is riskiest. - So if you were going to build a complicated product, - you wouldn't start with what's easy. - But so why should we do the same thing when we're trying to build a complicated business - model? - You actually want to start with what is riskiest on that plan. - Sometimes it isn't Mr Lee building a product, - but again finding things like customers finding things like channels to those customers - that ends up being riskier. - Find finding out whether someone would actually pay for your product. - Period might be more riskier than building it and see if they do or do not so we'll talk - about what risk is and how you actually identify what's riskiest on the plan. - And then I will say I will introduce experiments. - We won't have much time to run any experiments in this two week, - but I'll introduce what an experiment is and how you think about experiments and how you - systematically test that plan. - So this is where I will stop limit, - get rid off. - I mean, - Mayor, - and I'm going to go over to the YouTube channel and see if there any questions I was still - that should be able to find questions down here. - If you have any questions, - you can go ahead and type them in the, - uh, - in the common section below. - Okay, - I don't see any questions. - I'm assuming it's not because I can't find them, - but that they really aren't any. - So I guess we'll end the kickoff over here And ah, - look forward to working with you in the ah, - in the coming days. - All right. - Thanks a lot. - Thank you, - everyone 4. Why Products Fail (13:13): - Hi, - this is Ash would spark 59 by way of introduction. - I'd like to say that first and foremost, - I am an entrepreneur and I love entrepreneurs, - so I hate to be the bearer of bad news. - But this is the sad reality most start ups fail. - Most products, - in general fail. - The more interesting number, - though, - is not the high failure rate, - but the fact that most startups that actually succeed report having drastically changing - their plans along the way. - So what that tells us is that what separates successful entrepreneurs from those that don't - quite make it is not necessarily starting with a better plan or vision, - but rather finding a plan that works before running out of resources. - That's what we're going to cover in this course, - a systematic process for quickly vetting new product ideas and raising your odds of - building a successful product. - But before we do that, - let's take a step back and see why building successful products is so hard. - First, - there's a general misconception around how successful products get built. - The media love stories of visionaries who see the future and chart a perfect course to - intersect it. - The reality, - however, - really plays out. - Quite a simply one of the most visionary entrepreneurs of our time is the late Steve Jobs. - But even the unveiling of the visionary computer, - the iPad in Steve Jobs own words where years in the making build in several incremental - innovations and lots of failures, - off software and hardware along the way. - The second reason why building products is hard is that part of development gets in the way - . - This one is a little counterintuitive because the main purpose of a startup is to build a - great product. - But here is how this happens. - Most products fail not because we failed to build what we set out to build, - but because we failed to find the right customers and markets for our products. - In a traditional product development cycle, - we engage customers and markets a little bit of the front end, - but mostly at the tail end of the process. - After we release our product, - there's a large middle where we disengage from customers for several weeks or months at a - time while we build and test or product. - It is usually during this time that we either build too much or are led astray and build - the wrong product, - and finally we pay a lot of lip service to listening to customers. - But you simply can't ask customers what they want. - You have to know how to listen to them. - A lot of people cite this coat and declared hopeless to talk to customers. - But even hidden in this code, - there is a nugget of information. - There is a customer problem statement. - Had customers really said they wanted faster horses, - they would have been asking for something faster than their existing alternative, - which happens to be a horse. - Given the right context, - customers can clearly articulate the problems they want solved. - But it's not their job to come up with solution. - That's your job as the entrepreneur simplifying even further, - I would say that the number one reason why products fail is because we waste time, - money and effort building the wrong product. - I attribute the entrepreneurs often unbridled and singular passion for their killer idea or - solution. - As a top contributor to this failure, - let's see how this story plays out. - When entrepreneurs get hit by an idea, - they typically fall in love with the solution or what I like to call awesome and - immediately rush to start building out their solution. - We're often told to build something unique or different, - so we purposely define the solution in such a manner that when we look around, - we find no competition. - While this makes us happy, - it can be a false positive. - True, - unfair advantages are rarely built from the solution will cover this in great detail later - in the course. - One of the most commonly cited unfair advantages is being first to market. - Take a look at these companies. - None of them were first movers in their markets, - but rather they were all fast followers. - One could actually argue that being really first to a market can be a unfair disadvantage - because the burden of learning and marketing a new product is all in the first mover. - Over time, - the legacy of being a first mover can actually create more mass or inertia, - allowing a fast follower to piggyback on the learning of the first mover and getting first - in the customer's mind, - which is really the advantage that can make a difference. - Not simply being first to move another more immediate and pressing reality, - though we faces entrepreneurs, - is affording our creative addiction In other words, - how do we establish enough runway for our product, - the first place we often turn to our people with bags of money. - These could either be internal stakeholders in the company or external stakeholders like - investors. - But when we pitched them only other solution. - We often get shown the door and given the polite no, - let's see why, - when external stakeholders like investors, - look at your company, - they don't care about your solution on Investor does not get excited because you're using - some cutting edge technology in an innovative way. - Rather, - investors are in the business of making a return on their investment, - and they view your company purely from that lens. - The first thing they look for is evidence of traction or engagement with your customers and - markets. - Next, - they care about the intersection of your cost structure and your revenue streams. - In other words, - they want to know how will you build a scalable and profitable business? - Yeah, - they don't really care about who your customers are, - but they do care about how many people they represent. - In other words, - how big is this market? - How big is this problem? - And finally, - they worry about things like defense ability. - They'd like to know if you were to build a successful business, - how you plan on keeping competition and copycats at bay because they will come. - But of all these things, - investors care about traction over everything else. - Since traction is the engagement of your product with customers, - it is actually logical. - Do not start with investors, - but rather start with customers. - So let's take a look and see what customers really care about. - When customers see her company or product, - they to don't care about your solution. - Customers don't wake up one day and say, - I need to buy a product. - Richard and Rails Django Objective C or the next hot programming language. - Customers buy products to solve underlying problems they have. - The way you tell them about your product, - though, - is not through your solution, - but rather by crafting an effective, - unique value proposition. - The unique value proposition is the intersection of your customers, - top problems and your solution. - The job of the unique value proposition is not to close the sale, - but to start the conversation. - People are constantly bombarded by advertising and offers from all over the place. - The first battle is just getting noticed. - As we'll discuss later. - Crafting an effective, - unique value proposition is more easily said than done. - On Important First Step is narrowing down on your prototypical early customer or early - adopter who needs your solution the most. - While we would all like to build a mainstream product like Facebook that is used by - practically everyone around the world, - even Facebook started with a very narrow definition of an early adopter, - which happened to be a college student at Harvard. - When you try to market to everyone, - you end up marketing to no. - One. - If you're able to get this far, - what matters next to customers is the price or currency you place on your product or - service. - In order for customers to part with their hard earned money, - the value of your promise has to be commensurate with your pricing. - It is important to point out that the currency of exchange might not be money, - but other things like attention or engagement, - such as in the case of a multi sided market that uses an ad based model. - There. - You are in charge of your users money to use your product, - but you're still building an asset in terms of how much time and attention that give you a - product, - which you hope to monetize in this case through advertisers. - The thing that matters the most of customers here, - though, - is your unique value proposition or promise. - That's what gets their initial attention, - they realize, - showed you all these different worldviews is so we can attempt to redefine the true product - often. - Entrepreneur, - the true Project An entrepreneur isn't just building on awesome solution but turning that - solution into a question mark and in fact, - turning everything on the canvas into a question mark. - The true product. - If an entrepreneur isn't the solution but a working business model and the true job often - entrepreneur is systematically de risking that business model over time through a series of - conversations. - So how do you do all of this? - You can find the long answer. - In a book I wrote called Running Lean in the book, - I systematically walk you through the process of vetting new product ideas and building - successful products. - It's chock full of real world case studies and field tested tactics for doing all this, - but here is the condensed version of the book shown here as three core meta principles. - The first man of principle document your plan A is critical because, - as entrepreneurs were especially gifted at creating a reality, - distortion fields around ourselves and convincing ourselves that we are on the right path. - While passion and determination are key attributes for success left unchecked, - they can also turn the journey into a faith based one largely driven by dogma versus facts - . - Traditionally, - we have used business plans for this purpose. - Raise your hand. - If you've Everett in a business plan before now leave your hand up if you enjoy the process - . - Usually when I ask a room full of people this question, - all but one or two hands go down. - The intention behind business plans a sound, - but the format is all wrong. - The biggest issue I have with business plans is that they take several weeks to write, - and the people that make you write them don't read these plans themselves. - They instead ask for the one page executive summary, - the 10 page slide deck or the 32nd elevator pitch. - If you're going to have to condense your business, - plan down anyway, - why don't start there and avoid the waste in the first place, - especially since the perfect plan is a myth, - and it's going to change a lot along the way. - The alternative is creating a more portable one page business model, - which looks something like this. - This is the lean cannabis format I adapted from Alex Oster, - Walter's original cannabis, - which I'll show in a second. - If you've ever heard in a business plan before, - he will immediately recognize most of the building blocks on the canvas. - Compared to a business plan, - the lean canvas takes just 20 minutes to create. - It forces you to be concise, - and because it fits on a page, - people can't help but read it and have an opinion. - That last part is absolutely key, - because conversations with people other than yourself is the key part to empirical learning - . - This is what Alex, - Oscar Walter's original cannabis looks like, - and here have highlighted the changes that I made. - I'm not going to go into the details of my changes, - but if you're curious, - you can check out this block post I wrote just on that topic. - But before we go on, - I do want to revisit the three Metta principles one more time. - These meta principles are deeply rooted in the realization that your business model, - not your solution, - is a true product off your startup. - Thinking about your business model as a product is particularly empowering because it - allows you to apply well known product development principles to the building off your - business model. - For instance, - the first principle documenting your plan A on the canvas is an application of the divide - and conquer technique. - You take a tough problem of building a successful business and break it up into its - component parts, - which makes them more manageable. - The next principle of tackling the riskiest parts first is also taken from the pro - development playbook. - If you had six months to deliver a product, - you wouldn't start with what's easiest but rather prioritized, - working on the riskier stuff first. - So there are no last minute surprises as you approach the deadline. - Similarly, - in a startup, - we need to prioritize testing what's riskiest in the business model. - Worse is what's easiest or more fun. - You can see what I'm going for most products. - The solution isn't what's riskiest. - Once you've got your starting plan and risks identified, - you, - then systematically test your plan. - Using experiments going from highest risk to lowest risk. - After you run an experiment, - there is a learning feedback loop that goes backwards. - And you use that to update your risks from there. - And eventually it goes all the way back to where you update your business model. - Next time, - I'm going to show you how you can capture your initial vision or plan in just 20 minutes. - And from there we'll dive a little deeper into the other two matter principles. - Until then, - take care. - Thanks. 6. Capture Your Business Model in 20 Minutes (11:30): - Hi, - this is ash would spark 59 by now. - You should have taken your business model as far as you can or should on paper. - Yes, - I know you can probably continue brainstorming possibilities, - but endlessly brainstorming possibilities grounded and uncertainty is a recipe for failure - . - It's time to get outside the building and gather empirical evidence from people other than - yourself. - This brings us to the second meta principle. - Your next goal should be identifying what's riskiest on your canvas because testing the - entire business model it once can be overwhelming. - Plus, - it will take too long as we'll see shortly. - Not everything needs to be tested. - At the same time, - it's more effective to incrementally test your business model and incorporate your learning - along the way. - This meta principle of tackling the riskiest parts first follows from the business model as - a product theme I shared earlier. - Given a hard deadline for a project, - you wouldn't start by building what's easiest but what's hardest or riskiest to avoid any - last minute thrashing. - The same applies to your business model. - I would go even further and say that building a successful product is fundamentally about - risk mitigation. - The true job. - Often, - entrepreneur is systematically de risking their business model. - Over time, - I'm often approached by solo founders looking to find other co founders. - The technical founders tell me they're building a product and need a business oriented co - founder. - The business oriented co founders tell me that they have this killer idea but can find a - technical co founder to build it with. - My answer to both of them is the same until you gather some additional evidence that your - idea has legs. - It's too risky for others to jump in on faith alone. - They can see what you see, - and it's your job as the entrepreneur to convince them that this is a project worth - committing to. - The same applies with customers customers. - We're constantly bombarded with product offers. - Good marketing is essentially about connecting with your customers needs and de risking the - offer so that they pick you versus the alternative. - The first thing that gets their attention is your unique value proposition or the promise - you make raising investment to isn't done solely on the merits of your solution, - but rather by de risking all these things traction being the one that gets the most - attention. - So with all that, - let's turn back to the canvas and see how you prioritize these kinds of risks. - The first thing to realize is that your canvas has lots of uncertainty. - When you first start out, - almost everything is uncertain. - But there's a difference between uncertainty and risk, - so it helps to start with some definitions. - Uncertainty is simply the existence of multiple possible outcomes. - For instance, - you may not know whether customer Segment A is a better early adopter than customer segment - be. - But at risk is a quantified state of uncertainty where we attribute a value to being wrong - . - So in the previous example, - customer segment A may represent a higher price point than customer segment. - Be if your business model hinges on being able to charge your customers that higher price - point missing that mark could have a catastrophic effect, - and so it would be, - ah, - higher risk. - Next, - let's talk about the different types of risks. - The first is product risk, - which is all about getting the product right on the canvas. - Product risk is represented by the problem solution and unique value proposition boxes. - I also include cost structure because it represents the resource is you need to build out - your product and revenue streams because pricing is very much part of your product to, - as you might remember from earlier, - where I showed you the bottled water. - Example. - Customer risk is all about building a scalable path to customers on the canvas. - It is represented by the customer segment, - early adopters and channel boxes. - And finally, - market risk is all about building a viable business, - which on the canvas are represented by these boxes. - Existing alternatives because they represent your true competition, - the key metrics you will use to measure traction. - The intersection between your cost structure and revenue streams will determine your - margins or viability of the business model. - And finally, - you're unfair advantage story to defend against competition. - So the good news is that while everything on your canvas is uncertain to some degree, - not all uncertainties are equal. - From a risk perspective, - the first step to prioritizing risk is understanding that three stages of a product what's - risk it on your canvas morphs as you move through each of these stages. - So let's walk through them. - The first stage is the problem solution fit stage Here, - you ask yourself whether you have a problem worth solving in the first place. - From a risk perspective, - the biggest risk initially lie in the customer segment and problem boxes. - If you don't understand customers and their problems, - you can build the right solution for them, - and everything else on the canvas falls apart. - This is why I push entrepreneurs to start with this quadrant in their initial testing. - Once you have a good enough problem and customer segment understanding, - you can then start formulating the first version all of your solution, - or what in the lean sense we'd call a minimum viable product. - You're then ready to move into the second stage, - where the key question is testing. - Whether you have built something enough people want from a risk perspective. - At this stage, - aspects of your product, - like your solution, - unique value proposition and pricing are probably most important. - It's also important to point out that this stage is more about learning versus optimization - , - and pricing is a good way to illustrate this distinction. - I consider revenue streams as one of the riskier aspects of your product. - If you find out later that customers won't pay for your product, - that can be fatal for your business model. - That's why I advocate charging for your product from day one. - Worse is hiding behind an Alfa or beta product. - Excuse. - That said, - at this stage, - I'm also MAWR interested in testing that people will actually pay something than trying to - find out that optimal price testing that people will pay is a learning goal. - Finding the optimal price is an optimization go better saved until the next stage. - Now, - once you have enough people using your product, - you're focused, - then shifts to the final stage where your goal is to scale your product. - At this stage, - you have demonstrated that your product does deliver value at least a small scale your - risks now shift to We're scaling your solution, - scaling your channels, - optimizing margins and establishing a competitive advantage against copycats and - competition. - Understanding these three stages of the start up and the underlying learning milestones is - very helpful in triaging your risks. - The problem we have is entrepreneurs isn't necessarily identifying things to work on, - but focusing on the right things to work on at the right time. - Incorrect prioritization of risks is one of the top contributors of waste here. - I'll show you a quick brainstorming exercise to do with your team for triaging your risks - in this way, - you had out post it notes to everyone on your team and have them write out their top 10 - risks. - You then triaged these risks first, - by when they matter. - That is, - when will the particular risk have the greatest impact? - You roughly group them by the three stages. - Problem solution. - Fit brought up market fit or scale. - Next, - you place them into one of the quadrants on the right, - based first on how uncertain you are about the risk and then based on the potential impact - or value of the risk coming true. - So, - using the pricing example again, - I may be reasonably certain that customers will pay something for my product because there - is evidence that they use other pain alternatives for solving this problem. - But because my business model works only at a certain premium price point, - that constitutes high risk. - Once you've done the 1st 1 Similarly, - go back and triage all your other risks. - The final step is quickly joining down your mitigation plan under the risk or on a second - posted card. - This is usually a one line or one sentence summary on how you might solve our address at - particular risk. - So, - for instance, - if one of the risk is that nobody will buy from us because they don't yet trust us, - one of the mitigation plants might be to go and get some third party social proof or third - party certification or validation that we are indeed trustworthy. - This is a good exercise to triage your known risks. - But what about the risks? - You don't yet know that you don't know. - The best way to uncover these kinds of risks is by having conversations with other people - people you would consider bringing on as advisors. - These air typically other entrepreneurs with prior domain knowledge and our experience who - can complement certain gaps on your own canvas. - For instance, - if you're trying to sell into the enterprise, - talking to someone who has successfully done this before might help uncover certain tactics - or risk areas that you might be able to avoid or employ to get into those markets. - When setting up these meetings, - I don't recommend simply emailing them a copy of her canvas and then asking them what they - think. - The reason is that the canvases like a good slide day. - A slide deck often assumes context that needs to be communicated in person. - And so if you just simply email them your canvas, - you may be subject to a lot of misunderstanding. - I instead recommends setting up a face to face meeting, - if possible, - or one over the phone with a potential advisor. - Using a learning context, - you're in pitching but seeking advice. - Spend 2 to 3 minutes walking them through your canvas. - Asked them what they think, - then shut up in lesson. - Pay particular attention to the immediate objections they raise. - Trying not to view the objection is a reflection on yourself or try to convince them - otherwise. - Instead, - view these objections as third party external prioritization of risks that you most likely - will need to address. - At some point, - you should ask them what they think you would need to do to overcome these objections after - the meeting. - Similarly, - triaged they're risks toe, - identify when they're important, - how important they are and what actions might be needed to mitigate them. - While potential advisors are a great source for prioritizing risks, - beware of the adviser paradox had the end of the day it is still your job to own your - business model. - No one can tell you what you do. - And even though advisers usually have the best intentions at heart, - they can give you bad advice. - So instead of blindly falling, - what advisers tell you, - synthesize it and apply it. - If they raise objections, - try to find ways to address them if they give you a prescriptive advice tested first. - That small scale the process for finding good advisers is very similar to that of finding - good early adopters. - It takes time when you do find a good advisor, - consider turning it into a more formal relationship. - So that's what I have to share on risks for today. - Remember that incorrect privatization of risk is the top contributor of waste, - so don't skimp out on the steppe. - It can also make the difference between accelerating your learning and simply spinning your - wheels with needless busy work. - Next time I'll talk about how you set up design and run experiments to mitigate your top - risks. - Until then, - take care 7. Top 10 Business Model Pitfalls (11:45): - Hi, - this is Ash would spark 59 by now. - You should have completed your first business model canvas. - Today we're going to spend some time putting your business model through the ringer. - The reasoning behind this is best summed up by Seth Coded. - All products go through some level of thrashing successful products do all their thrashing - at the beginning. - Yes, - Last time I stress that you can't reason your way to a plan that works. - And, - yes, - you have to get outside the building to empirically test your plan. - But you can get your initial plan to a much stronger starting point and save yourself a lot - of learning time simply by avoiding some common pitfalls that have tripped up other - entrepreneurs. - That is what today is really about. - I'm going to run down the top 10 business model pitfalls I have repeatedly seen by working - with hundreds of entrepreneurs and show you how to avoid them. - Here we go, - number 10. - Not clearly defining your success metric. - I've recently run into a number of entrepreneurs who from the outside seemed to have it all - together. - They have a nice office, - 20 plus people in the team and a product that customers do seem to like. - But they are unhappy. - They're unhappy because they want to grow their business even more. - When I asked them why they want to grow, - or more specifically to what they want to grow into, - they don't really have an answer. - They're pursuing growth for the sake of growth. - The reverse extreme is also common. - It's fairly common to find entrepreneurs who have achieved just enough lukewarm success to - keep plowing forward endlessly. - Both of these companies are what we call zombie companies. - They have mastered the art of creating just enough short term runway to keep them from - going out of business at the root. - The problem is that they don't really have a clear vision of what success should look like - . - This is something you capture under your key metrics section. - Now I'm not going to tell you what success should look like for you. - It's different for different people. - For some people, - success is building $100 million company. - For others, - it's building a $10 million company for others. - Yet it's something else entirely, - like bringing a change in the world, - making a dent in the universe. - There is no wrong answer. - But whatever your reason, - you should take the time to ask yourself why you want to build this specific business and - what the finished story benefit would be to you. - That is, - how will you recognize success when you see it? - Then you need to set a time box for realizing this finish story benefit. - In other words, - try to focus on your overall why and when. - For this business. - This is a great talk to help with uncovering your why. - I'll have more to say about the golden circle in later videos. - Once you have your why and when written down, - you then want to take a step back and ask whether your current business model can scale at - least on paper, - to meet that success metric. - If not, - rethink your business model. - Now Worse is waiting to see what happens six months or two years from now. - Next, - we all would like to build a company like Facebook that is used by practically everyone on - the planet. - But here's the thing. - When you start by building a product for everyone, - you end up building a product for no one. - Even Facebook didn't start by opening up their network to everyone. - They started with a specific customer segment there, - early adopter who happened to be college students, - and not just any college student but college students at the Harvard campus. - At this point, - it's critical to hone in on your early adopters because they will define and determine your - initial business model. - Now those of you that have read Geoffrey Moore's Crossing The Chasm Book will be quick to - point out that the early adopters behave very differently from mainstream customers and - that there is this chasm between them that can be hard to cross later. - But here's the thing. - Most of you are at the beginning of this curve. - You should be so lucky to have a chasm to cross one day. - Also, - you can cross this chasm by trying to leapfrog early adopters, - but rather by riding the curve and using early adopters to build enough momentum to then - leap over the chasm. - So take one more passenger early adopter definition and make sure it's a specific, - as you can make them while still maintaining a healthy addressable market size. - That said, - there is a real danger of getting too narrow too soon and falling into the local maximum - trap at the earliest stages. - Your job isn't executing, - but finding a plan that works, - we can turn to computer science and search algorithms for some inspiration. - Here in computer science, - there is a mathematical optimization technique called hill climbing that attempts to find - better solutions by incrementally changing a single element off the solution. - The problem with this approach is that while it's good at finding a local optimum, - it doesn't guarantee that you'll be able to find the best possible solution out of all - possible solutions. - A way to see this visually is imagining you're blindfolded and placed halfway up on the - smaller hill in this picture, - and you're given the task to get to the highest point. - You'll probably have no problem stumbling your way eventually up to the top of the small - hill, - where you'll declare your the highest point on Lee to be shocked by the neighboring - mountain. - When you take off your blindfold, - the same thing can happen with your business model. - If you narrow down too quickly and focus all your attention on optimizing it, - you may successfully achieve a local maximum but miss out on a much bigger opportunity. - While there is no way to completely avoid the local Maxima problem, - you can raise your odds of success when you're initially open to exploring and even testing - multiple models in parallel. - After creating your initial canvass, - it's usually a good idea to take a step back and ask yourself if there are other customer - segments Andrew problems that you can explore. - I recommend quickly sketching a few variations and picking a short list no more than three - canvasses for further testing. - If you still just have one, - that's okay, - too. - You will eventually need to convert to just one model as you get further in your testing - anyway. - The more important thing at this stage is to be open to multiple possibilities and cast a - wider net. - Since everything on your canvas is still a guess and open to a lot of uncertainty, - Number seven The secret to getting a customer's attention is nailing their problem. - You can do that by using a general problem statement, - but going the other way. - Revisit your problem statements and using your more specific early adopter definition now - attempt to get even more specific on your problems. - Use the five wife's technique. - I showed you last time and the jobs to be done framework to define specific work flows or - use cases where the problem surfaces. - Number six. - Having no unfair advantage story. - I mentioned before that most startups don't have an unfair advantage on Day one, - and it's OK to leave this section blank. - Especially of the alternative is speaking something that is clearly not an unfair advantage - , - such as having more passion or more features that said theon for Advantage boxes. - Unlike the other boxes, - it's not something you decide to test one day, - but rather if and when you start getting some traction, - your competition and copycats will do it for you. - If you don't get have an unfair advantage by then, - you may be easily displaced, - so you do have to at least take some time to think about this unfair advantage and think - about where it will come from, - maybe even start taking some initial steps towards building it. - Number five. - The biggest initial challenge of a startup is getting noticed at all my customers, - which is the job off your unique value proposition. - It needs to be different, - and it needs to matter if you could do these two things. - You stand to make the competition irrelevant. - Revisit your unique value proposition using the formulas I shared with you last time and - see if you can make them stronger or come up with alternates that you may want to test. - Remember that your unique value proposition typically goes on the landing page, - where it has less than eight seconds to make an impression. - At the same time, - this is something you're going to do a lot of testing around, - so don't stretch too much over this. - But just make sure that this is something that you give enough attention. - Number four. - Not having enough runway running out of resources is the main reason products eventually - fail. - One of your main jobs initially, - should be establishing enough runway until your next significant learning milestone. - I tend to break these milestones into three stages. - The first milestone. - Ask the question. - Do I have a problem worth solving? - You determine this through early conversations with customers, - after which you define your initial product or minimum viable product. - Once your minimum buyable product is defined, - you build it in the second stage and then test. - If it works well enough at small scale. - And then finally, - you turn your attention towards scaling, - so the initial milestones that I like to get through are usually the problem solution. - Fit stages and some off the product market fit stage. - Revisit your cost structure and solution boxes to see if you can reduce cope even further - on your minimum viable product. - So you're short on your validation cycle with customers. - If you're going to be raising funding, - identify how much traction or customer engagement you need to achieve for that conversation - with investors. - If you're bootstrapping, - identify your break even point and put some time constraints around it. - Number three. - No significant path to customers I wrote a post titled The Follis E of Customer Development - , - which you can find on my blog's. - The main thesis in there was that the ability to build a scalable channel ultimately - determines your products. - Fate. - You can sometimes identify a handful of early adopters, - use them to build the right product and even get paid. - But if you can't reach Mawr customers at scale, - nothing else matters. - While it's okay to start with any channel to start the process of learning, - I would encourage you even at this stage, - to identify where scalable channels will come from and start investing in building and - testing them right now from day one. - Number two. - No monetize herbal pain. - The difference between a hobby and a business is that the latter gets you paid. - Your business model needs to be able to tell a conceivable story, - at least on paper, - on who is going to pay you and why. - There are two main questions to answer here. - What do customers pay today to solve this must have problem, - and what will you charge for your solution? - You determine both of these from your list of existing alternatives. - It helps to again think of your product in terms of a job. - Customers hire you to do how much money or effort to do they expand. - Getting this job done is a good way to start this process. - And finally, - the number one pitfall, - which hopefully should not be a surprise at this point, - is falling in love with your solution. - When entrepreneurs get hit by an idea, - they fall in love with solution or again, - what I like to call as awesome sometimes that awesome is truly awesome, - for a lot of people, - but more often than not, - it's not as much as possible. - Differ thinking about your final solution, - at least for now. - Just don't do it. - Instead, - challenge yourself to think in terms of the minimum viable product where the primary - directive is delivering value to customers in the fastest matter possible, - your true minimum viable product will be revealed as you get outside the building and start - having real conversations with customers. - So there you have it. - Work your cannabis through each of these pitfalls and you'll find yourself at a much - stronger starting point until next time. - Take care, - thanks. 9. Systematically Test Your Plan With Experiments (23:55): - Hi, - this is ash would spark 59 is a quick recap. - By now, - you should have documented your initial plan A and identified a handful of top risk items - to tackle. - This brings us to the final and most important medic principle, - using experiments to systematically test your plan. - Running experiments is the key activity in the lean startup, - but running effective experiments takes discipline and is actually quite hard to do in this - video. - I'm going to walk you through some ground rules for doing just that. - But first, - let's start with the definition. - If you already familiar with the lean start up methodology, - you've no doubt seen this picture before. - This is the build measure learned Loop Erik Reece codified about three years ago. - A cycle around this loop is what we call an experiment. - It starts at the very top with a set of ideas or hypotheses. - You then turned these hypotheses into some aspect of a product. - This doesn't have to be the final product, - but some appropriate proxy of it, - which you put in front of customers for the purpose of measuring their reaction, - either through qualitative and or quantitative meats. - The data you collect here leads to learning, - which then fuels the next set of ideas or experiments. - As an example, - I might have a set of hypotheses that my early adopters will be Internet marketers and that - they would pay $100 a month for my product. - I might decide instead of building out the full product, - which would take too long to instead put up a demo or screenshot of my product on a landing - page and then go show it to these Internet marketers. - At the end of the demo, - I would present my $100 a month pricing model and measure how many of them convert to the - next stage. - Based on the reactions to my offer, - I might have to refine my hypotheses and start a new experiment. - Or, - if my hypotheses were validated, - I would move onto testing other high risk hypotheses and follow up experiments when - designing an experiment. - There are three attributes that are critical. - The first speed has measured by the cycle time around this loop. - You remember from earlier that the real challenge in building a successful product is going - from your initial plan A to a plan that works before running out of resources. - To do this, - you have to learn as quickly as possible. - It is important to obsessively reduce the scope of what you have to build without - compromising on the hypothesis you're trying to test and then getting it out in front of - customers as quickly as possible. - Every experiment needs to end and customer learning an experiment is only done after you - have measured your customers reaction and reach some action. - Will learning or decision point and something? - I talk a lot about this focus at any given point in time. - There are dozens of things that could possibly be tested, - but only a handful of them will have that 10 X impact on your progress. - You need to only focus on those key actions or top risks and ignore the rest. - There's a visual way of illustrating what happens when you don't have all three of these - attributes. - If you're going fast and focused but not learning from customers, - the image of a dog chasing its tail comes to mind. - You're probably executing on some plan, - but remember that most initial plans don't work by themselves. - Without the customer feedback loop, - you risk building too much or going astray and building the wrong product. - If your focus on the right things and learning from customers but are going to slow you - stand, - the risk of running out of resource is or being outpaced by a fast follower. - And finally, - if you're going fast and learning but not focus on the right things, - this is one of the more common traps of premature optimization. - This is where, - as a technical founder, - you might obsess over scalability and endlessly to you in your code or servers instead of - launching. - The reality is that you have zero customers today. - It would probably have zero very few customers when you actually launch. - If your customers do end up crashing your servers, - that is actually a great problem to have, - because it shows demand for your product. - You can almost always come back and solve these at first using more hardware and then - falling up with additional tuning and optimization. - Twitter, - YouTube, - Facebook all went through this and did an architect for massive scale from day one. - I don't want to just pick on the technical folks. - If you are a marketer, - you might fall into the trap of endlessly optimizing your landing pages. - At some point, - you reach a point of diminishing returns. - Squeezing an additional half a percent in conversion on a site that only gets 100 visitors - a day might not be the best use of your effort at this stage of your product cycle. - So the key point I want to drive home is that in order to build an optimal learning loop, - you need to design your experiments to maximize on all three things. - Speed learning and focus. - Next, - I'm going to cover some ground rules for running effective experiments. - First, - there's a natural tension on the one hand between keeping her experiment small and fast and - , - on the other hand, - expecting them to uncover big breakthrough insights. - You'll probably never run a single experiment that completely de arrest your entire - business model. - Experiments will be treated a standalone, - monolithic projects, - but should rather be strung together so the learning is additive. - The three stages here help illustrate this additive process. - When you first get hit by an idea, - you start by validating. - If you have a problem worth solving you then move into the solution value testing phase and - then finally into growth or scale. - Each of these stages are additive and builds on learning from the previous stages. - Next, - the expected outcomes of your experiments needs to be declared up front. - This is very important because if you simply plan on seeing what happens, - you will always succeed because something will happen. - It's then very easy to rationalize whatever happens, - good or bad to fit into your mental model or reality distortion field and convince yourself - that you are on the right track. - Simply stating or expected. - Outcome, - however, - is not enough. - You have to state it as a fault if Aibel hypothesis, - which is a concept taken right out of the scientific method of fault. - If Aibel hypothesis is a statement that can be proven falls, - this is a necessary condition when setting up an experiment. - Otherwise, - it's too easy to fall into the inductive ist trap. - And always convince yourself you're on the right track. - Let me illustrate this with an example considered a statement above here. - I believe that because I am called on coat on expert, - I'll be able to drive early adopters to my product. - I might do a number of things to test this belief. - Such as write a block post, - speak or send out a Twitter update announcing my product. - But at what point is this hypothesis validated? - Is it when I get 10 people to sign up 100 people or 1000 people because they don't - explicitly state this, - I can declare success at any point provided I get at least one side up. - Here is the same belief torn into a more specific and testable falsify able hypothesis. - This time I'm going to take a specific action, - which in this case is writing a block post. - And as a result of that action, - I expect to see at least 100 sign ups. - This time. - I clearly know how to both measure and declare success. - Here's a simple formula I use for crafting fault Bible hypothesis. - It starts with a specific repeatable action. - On the left hand side, - they will drive an expected measurable outcome on the right. - As simple as the step sounds, - I often find entrepreneurs reluctant to make such predictions. - They're generally two reasons for this. - First, - they hate to be proven wrong. - This one is inherent in our nature. - We often have personal egos attached to our products I know it's hard to offer an easy - solution here. - All I can say is that running lean is fundamentally about being less wasteful. - The irony is that you can really appreciate waste unless you have been somewhat wasteful - before. - At some point in the entrepreneur life cycle you started, - detach your personal ego from your product and realize that there's a bigger goal that is - outside your product preconceptions. - You start to realize that it's more effective to be empirical and objective than to run on - blind faith alone. - The second reason entrepreneurs are uncomfortable making these kinds of predictions is that - they feel they don't have the right information to make them welcome to the world of - building products under conditions of extreme uncertainty. - Yes, - when you first start out, - your judgment is going to be all off. - You're going to repeatedly make overly optimistic predictions and be completely wrong, - and that's okay. - The good news is that over time you'll begin to understand your business better, - and your judgment will improve. - But what happens when you don't yet have enough data to clearly decide? - Either way, - say, - in my last case with the block post, - what do I do. - If after the first week I get exactly 60 sign ups, - the natural tendency is to want to wait just another week longer. - Pretty soon we started rationalizing, - extending the experiment even longer, - hoping that the data will make a turn for the better. - Pretty soon weeks can turn into months, - and this is a pretty slippery slope. - Remember that in a startup, - time is the scarcest resource. - Other resource is like money and people can fluctuate up and down. - But time only moves in one direction. - To avoid this trap off long running experiments, - you need to clearly time box your experiment alongside the falsify able hypothesis. - If I had put a time box of two weeks on my block post experiment than after two weeks, - I would review the data and clearly declare whether the hypothesis was validated or - invalidated again. - The time books may not be perfect, - and you may actually need to add more time. - That again is okay. - The important thing is that after two weeks, - you pause to reflect on the status of the experiment. - And if you decide that more time is needed, - you make that decision within reason versus wishful thinking. - Which brings us to the last point on experiments, - which is a big one. - When experiments fail, - many entrepreneurs run away from that failure and are quick to change direction, - drastically justifying it as a pivot. - Unfortunately, - the word pivot has become an overly abused, - lean startup term. - A pivot represents a change in strategy, - and it needs to be grounded in learning. - Otherwise, - it's just a disguise to see what sticks strategy, - which is not the most optimal way for finding a plan that works. - There's also a reason that the hockey stick curve is largely flat at the beginning. - It's not because the founders were to dump or not working hard enough. - But before you can find a business model that works, - you have to go through a lot of stuff that doesn't The answer isn't running away from - failed experiments, - but rather digging deeper when an experiment fails, - because either you had an unexpected outcome or hit your time box deadline. - Taking the time to uncover the root cause for this failure is where you'll find your - breakthrough insights. - So that was a high level overview of the running lean process. - Let's put it all together Now you start with your best guess of an initial business model - or your plan A. - You then identify what's risk. - It's on the plan through conversations with your team and external advisers. - Finally, - you craft a set of small, - fast experiments to test those risky assumptions using the principles we outlined today. - After each experiment, - there is a learning feedback loop that helps you update your risks and your business model - . - And then the cycle repeats itself. - Before we leave, - I'd like to share a concrete case study that will help you solidify a number of the - principles and tactics we've covered in this series so far. - I usually speak to a diverse audience of entrepreneurs and can always rely on my high tech - or software hardware case studies. - So I often use a product that is much simpler to understand and doesn't require any prior - context. - To understand it, - I'm going to walk you through a case study on how I wrote my book. - Yes, - I was testing and refining a lot of these principles while I was writing my book and - applied every one of these techniques to the writing process. - Even though you may not have written a book, - you can probably appreciate that writing a book is a big project. - In fact, - you'll see shortly. - It's very similar to building any other type of product, - so let's get right to it. - Going back in time, - I was busy running my previous company wired reach. - Along the way, - I realized that I was averaging about two years between my products, - which was way too long. - I was also constantly getting hit with new ideas to build, - So I started a search for better, - faster ways for vetting these ideas. - In 2009 I ran into the early works of Steve Blank and Erik Reece, - and a lot of what they were saying resonated with me. - And so I decided to test them out in my next product. - But as I started applying these principles, - I ended up with more questions than answers and decided I would turn this product into a - public testbed and openly blogged about it. - Week after week, - I shared my learning and slowly my readership creo. - Then one day I got an email asking if I'd consider turning my block posts into a book. - At first I was flattered but politely refused because I was just too busy running my - company. - I'd never considered writing a book before and didn't have the time anyway. - But after the 12th request or so I decided to explore a little further, - I did this by setting up problem interviews with these readers to understand who they were - . - I assumed they were entrepreneurs, - but I needed to be sure. - More importantly, - I wanted to know why they wanted me to write this book. - There was no shortage of content available online. - I wanted to understand what top problem they were expecting the book to solve for them. - So through these interviews I learned that most of them were not just entrepreneurs, - but we're also technical founders like me. - They, - too, - had been struggling with taking lean principles to practice and found my writing to be an - actionable how to guide. - Armed with this knowledge, - I decided to spend 1/2 day creating a demo for the book, - which I did in the form of a teacher page. - It looked something like this. - You'll notice this is not the most aesthetic page, - but it's not bad for 1/2 day's work. - I quickly picked a placeholder title in a stock image for the book. - I didn't bother get getting these things right at the stage because they weren't what's - riskiest. - While the title in book cover are important, - once the book is in the bookstore, - I had more risk your things to tackle first, - such as the Table of Contents you see down below. - If this book wasn't going to be any good, - the best title or book cover in the world wasn't going to save it. - So I set up another round of solution interviews, - and this time I asked if people would be willing to buy the book if it had this table of - contents. - Most business books are price in the $2030 range, - so I didn't even bother putting that on the page again. - The risk Your thing here was getting people to want to buy the book, - not optimizing for the exact price point. - These conversations were immensely helpful in refining the content off the book, - and after a few updates, - I got all 12 people to say they would buy the book while this was good, - small scale validation. - Selling the book to just 12 people wouldn't justify the time and effort that would go into - writing this book. - And so I turned a teaser page into a much larger smoke test. - I made three changes here. - First, - I changed the title during my problem interviews. - A number of people thought the title getting lean wasn't active enough, - since Lean is about doing. - I suggested running, - lean, - and that stuck. - Second, - I added it coming this summer launch date. - This was back in March of 2000 and 10 so that gave me a 2 to 5 month window, - depending on how far you stretch this summer. - And finally, - I added a formed collect email addresses from people interested in the book had estimated - the book writing process, - taking 2 to 3 months since it was largely a repackaging off my block content. - Given the 20 to $30 price point for the book, - I did a simple back of the envelope calculation and decided that I needed to collect at - least 1000 email addresses before I would take the book products seriously. - So I set up this page announcing on my blawg and Twitter, - a few people like Erik Reece help spread the word, - and then I left the page alone and went back to running my company. - By early summer, - I had reached my 1000 email goal, - and that was when I decided to take the next step. - I tried writing the first chapter, - but I look back at the table of contents. - I realized that a lot of my original thinking had changed by the table of contents was - mostly okay. - I realized that writing this book would no longer be a cut and paste job from my blawg. - It would take too long, - and I needed another way to write this book. - The answer came in the form of a free workshop. - I spent a day taking my table of contents and turning it into a slide deck. - It was much the same content you're seeing right now, - but just not as pretty was mostly tax in a lot of bullet points, - announced a freely in start of workshop in Austin, - Texas, - where I live and got 30 people interested. - The reason I kept this workshop free because I had no idea what people would pay for - something like this. - Also, - a good test for value is trying to give away something for free. - If people don't take it at $0 the shore in hell will not pay for it. - I also decided not to run the workshop with all 30 people at once, - but instead broke them up into three groups of 10. - My thinking here was that if the first workshop was outright terrible, - I'd be able to fix any problems with the other groups instead of burning of my list all in - one go. - This is the lien principal of testing and small batches. - Interestingly enough, - the first workshop went really well. - People like the contents so much, - and many said they would have paid for it. - And so I conducted some impromptu price testing on the spot and ran to other workshops and - a number mawr. - After that, - as paid workshops all the while continued to increase in test pricing. - Getting people to pay for your product is the first form of validation. - I ran these paid workshops all through the summer and kept refining the content not through - writing a manuscript but through refining the slide deck. - By the end of the summer, - I had fully mapped the entire book and was ready to actually start writing it. - But there was a problem. - I'd originally promised my book as a summer launch and somewhere had come and gone. - People were getting antsy and started enquiring about the status of the book. - I wrote back to them and told them that I had grossly underestimated the effort it would - take to write this book. - But now that I was ready to start writing it, - I was going to make them an offer. - I gave them a preview chapter of the book and told him that if they pre ordered the book - right now, - I deliver two chapters of the book to them every two weeks. - I would essentially write the book much like we write software. - This delivery schedule worked for my book because it was a nonfiction book, - and it had lots of explicit, - actionable content, - like exercises and interview scripts that people could put to use in their startups. - So while people were busy testing the content from previous chapters on their own startups - , - I'd be able to stay ahead with the next update. - I went back to the book page and changed the coming this summer to coming soon because I - didn't really have an exact end date. - This time around, - I also added a preorder option and offered a discount. - I have since then changed my position on this. - I went back and asked people who pre ordered after the fact if the $25 discount mattered to - them and they told me that it did it. - The other interesting thing that happened is only about half the people went for this pre - order option. - I asked the others why they didn't, - and they cited packaging as the biggest reason. - Many of them did not want to read the book as a PdF and chose to wait for a print or kindle - version. - My first inclination was that I can find a way to support them. - But then I realized that these people were not really. - My early adopters on early adopter is someone who wants your product so badly that they're - willing to tolerate a less than perfect version and jump through. - A few hoops have needed once again, - creating a Kindle or print version off the book wasn't the riskiest thing, - but testing the content off the book. - I chose not to create the extra work for myself and simply treated the people who didn't - pre order as latter stage customers. - These two week releases were incredibly helpful. - I got great feedback every two weeks that ranged from basic typo fixes to content and flow - suggestions. - I can confidently say that become of this continuous feedback loop with customers, - I was able to write a much better book which required very little final editing because it - was all being done incrementally along the way. - This, - by the way, - is another example of the principle of small batches. - Then an interesting thing happened. - When I was about 2/3 of the way through the book, - I got a random email from a major publisher. - They had read my partial book and had a book deal on the table. - I got on the phone, - and my first question was, - Why do you want to publish this book? - I told in my book. - Wasn't DRM protected? - And there were several copies freely float floating around on the Internet. - In fact, - that even helped in distributing some of those copies myself. - By placing the book in communities like hacker news. - They told me that none of that mattered to them. - What they saw was a book that had been sufficiently dearest from their vantage point - because I had managed to sell over 1000 copies on my own. - They fell that with their distribution platform they would be able to 10 X that number, - and that made this a compelling book for them. - When they put it that way, - it all made sense had demonstrated early traction, - which matters most to external stakeholders, - like investors and in this case, - to a publisher. - And I tried to have this conversation of the beginning of this process. - Back in early 2000 and 10 I would have had no leverage, - and this conversation would have probably gone a very different way, - I told the publisher my commitment was to get the first edition published, - and after that I'd entertained the idea of publishing a print version. - I went ahead and did finish the book in February of 2011. - At that point, - I went back to the book page and revamped it to look a lot more appealing. - As a marketing site, - I got a designer to create a book cover. - I got a number of prominent people like David Skok, - who are early adopters, - also to write me a testimonial. - At this stage, - the book product shifted from value creation to scaling. - I started testing a number of tactics to promote and sell the book and eventually sold over - 15,000 copies of this first edition to complete the story using the software analogy. - Large software is never finished but just released. - I felt the same way about this book. - I felt that I had a lot more to say once the book was published, - and so I kept on writing on my blawg. - I created a newsletter and I kept teaching workshops. - The workshops were only intended as an M V P to the book, - but after writing the book, - demand for these workshops actually went up and I found myself running these paid workshops - all over the world. - It is true these workshops that I started testing more advanced concepts and launched a - couple of additional products. - At this point, - I was still running my old company, - which I decided to sell and start sparked 59 around the mission of using tools, - content and coaching to help entrepreneurs succeed. - And yes, - I did finally go back and published a second edition of the book which looks like this. - Hopefully, - this case study helps solidify the key principles we have covered throughout the series and - sparks you to take that next step with your product. - If you'd like to get more content like this, - consider subscribing to my free running Lean Mastery newsletter. - You can find it on the spark 59 home page until next time. - Take care, - Thanks.