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387 Million Ways For a Startup to Fail… and How to Avoid Them Steve Blank www.steveblank.com Twitter: sgblank.

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Presentation on theme: "387 Million Ways For a Startup to Fail… and How to Avoid Them Steve Blank www.steveblank.com Twitter: sgblank."— Presentation transcript:

1 387 Million Ways For a Startup to Fail… and How to Avoid Them Steve Blank Twitter: sgblank

2 I Write a Blog

3 Startups Fail Because They Confuse Search with Execute

4 Scalable Startup Large Company >$100M/year Whats A Startup Goal is to search for: unknown customer and unknown features SearchExecute

5 Scalable Startup Large Company - Business Model found - i.e. Product/Market fit - Repeatable sales model - Managers hired Whats A Startup? A Startup is a temporary organization used to search for a scalable and repeatable business model Search

6 Startups Fail Because They Execute When They Should Search

7 Scalable Startup Large Company Transition Business Model found - customer needs/product features found i.e. Product/Market fit - Found by founders, not employees - Repeatable sales model - Managers hired The Search for the Business Model Startups Search and Pivot

8 Scalable Startup Large Company Transition - Business Model found - Product/Market fit - Repeatable sales model - Managers hired - Cash-flow breakeven - Profitable - Rapid scale - New Senior Mgmt ~ 150 people The Search for the Business Model The Execution of the Business Model Startups Search, Companies Execute

9 Scalable Startup Large Company Transition Traditional Accounting - Balance Sheet - Cash Flow Statement - Income Statement The Execution of the Business Model Metrics Versus Accounting

10 Scalable Startup Large Company Transition Startup Metrics - Customer Acquisition Cost - Viral coefficient - Customer Lifetime Value - Average Selling Price/Order Size - Monthly burn rate - etc. Traditional Accounting - Balance Sheet - Cash Flow Statement - Income Statement The Search for the Business Model The Execution of the Business Model Metrics Versus Accounting

11 Scalable Startup Large Company Transition Sales - Sales Organization - Scalable - Price List/Data Sheets - Revenue Plan The Execution of the Business Model Customer Validation Versus Sales

12 Scalable Startup Large Company Transition Customer Validation - Early Adopters - Pricing/Feature unstable - Not yet repeatable -One-offs - Done by founders Sales - Sales Organization - Scalable - Price List/Data Sheets - Revenue Plan The Search for the Business Model The Execution of the Business Model Customer Validation Versus Sales

13 Scalable Startup Large Company Transition Product Management - Delivers MRDs - Feature Specs - Competitive Analysis - Prod Mgmt driven The Execution of the Business Model Customer Development Versus Product Management

14 Scalable Startup Large Company Transition Customer Development - Hypothesis Testing - Minimum Feature Set - Pivots - Founder-driven The Search for the Business Model The Execution of the Business Model Customer Development Versus Product Management Product Management - Delivers MRDs - Feature Specs - Competitive Analysis

15 Scalable Startup Large Company Transition The Execution of the Business Model Engineering Versus Agile Development Engineering - Requirements Docs. - Waterfall Development - QA - Tech Pubs

16 Scalable Startup Large Company Transition Agile Development - Continuous Deployment - Continuous - Minimum Feature Set - Pivots The Search for the Business Model The Execution of the Business Model Engineering Versus Agile Development Engineering - Requirements Docs. - Waterfall Development - QA - Tech Pubs

17 387 Million Ways to Fail And the 5 Key Reasons Why

18 Business Model Universe 387 Million Choices (9x9x9x9x9x9x9x9x9) choices

19 More startups fail from a lack of customers than from a failure of product development

20 Failure 1 No Business Plan survives first contact with customers

21 You Need a Scientific Method to Search this Space

22 So, Structure the Search with a Business Model

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33 Any Business Model in 9 Boxes

34 Failure 2 Assume Your Business Model is Correct

35 So, Realize Theyre Hypotheses

36 9 Guesses Guess

37 Failure 3 There Are No Facts Inside Your Building

38 So, Formalize Testing Hypotheses Outside

39 Testing the Business Model = Customer Development

40 Test Hypotheses: Product Market Type Competition Turning Hypotheses to Facts

41 Test Hypotheses: Problem Customer User Payer

42 Test Hypotheses: Channel

43 Test Hypotheses: Problem Customer User Payer Test Hypotheses: Demand Creation Test Hypotheses: Channel Test Hypotheses: Product Market Type Competitive Test Hypotheses: Pricing Model / Pricing Test Hypotheses: Size of Opportunity/Market Validate Business Model Test Hypotheses: Channel (Customer) (Problem)

44 Test Hypotheses: Problem Customer User Payer Test Hypotheses: Demand Creation Test Hypotheses: Channel Test Hypotheses: Product Market Type Competitive Test Hypotheses: Pricing Model / Pricing Test Hypotheses: Size of Opportunity/Market Validate Business Model Test Hypotheses: Channel (Customer) (Problem) Customer Development Team Agile Development

45 Test Hypotheses: Problem Customer User Payer Test Hypotheses: Demand Creation Test Hypotheses: Channel Test Hypotheses: Product Market Type Competitive Test Hypotheses: Pricing Model / Pricing Test Hypotheses: Size of Opportunity/Market Validate Business Model Test Hypotheses: Channel (Customer) (Problem) Customer Development Team Agile Development

46 Testing the Business Model is Customer Development Customer Discovery Customer Validation Company Building Customer Creation Pivot Search Execution

47 Customer Development is the Search Customer Discovery Customer Validation Pivot Search

48 Failure 4 A Mistaken Hypothesis Creates A Crisis

49 So, Pivots are Business Model Changes Without Crisis

50 The Pivot Turns Failure Into Insight The heart of Customer Development Business Model changes without crisis Fast, agile and opportunistic

51 A Pivot Changes the Business Model Test Hypotheses: Problem Customer User Payer Test Hypotheses: Demand Creation Test Hypotheses: Channel Test Hypotheses: Product Market Type Competitive Test Hypotheses: Pricing Model / Pricing Test Hypotheses: Size of Opportunity/Market Validate Business Model Test Hypotheses: Channel (Customer) (Problem) Customer Developme nt Team Agile Developme nt The Business Model/Customer Development Canvas

52 Failure 5 We Have Plenty of Time

53 So, Startups Are Built for Rapid Search

54 Pivot Cycle Time Matters Speed of cycle minimizes cash needs Minimum feature set speeds up cycle time Near instantaneous customer feedback drives feature set

55 387 Million Ways to Fail No business plan survives first contact with customers Assume your business model is correct There are no facts inside your building A mistaken hypothesis creates a crisis We have plenty of time

56 Both Books on Amazon

57 Thanks


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