L10 – Lean Startup

Federico Della Bella, MBA & TLC Engineer

Politecnico di Milano
 Business Plan always work?

Motorola Iridium: history of a disaster

Satellite Mobile System

Product Development
$ 5 billion
7 years from concept to launch Bankrupt Clients
No changes in the PLAN Sales promotion 500,000 clients
Fast growing mobile technology and Summer party
market Contests

1980s 1998 2000

Project Launch
Satellite phone
Anywhere on earth
Engineering problem
66 satellites
Few mobile phones
Mobile tech not reliable
Focus on small groups
1999 2011
First call
Cost satellite call: $ 7 per
minute Technology Sold
Cost GSM mob call: $ 0,50 $ 25 million deal
Iridium handset cost $
7.000
GSM mobile: few hundreds

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 Business Plan always work?

Webvan: history of a disaster # 2

Home-to-home retail grocery business

Strategy
Clients click and order
Hired experienced CEO Launch Grow
Execute Business Plan Beta-test 47,000 new customers
Killer sw application ($ 18 million) 1.100 customers 2,000 daily orders
Automated warehouse ($ 40 million) First regional web store 71% repeat orders
Waterfall product development Hired more than 500 employees
15 distribution centers
1996 1998

Foundation
Track record of founders
$ 400 million from VCs
1999 2000
Development
Clients click and order IPO Bankrupt
Hired experienced CEO $ 400 million raised $ 612 M deficit
Execute Business Plan $ 8,5 billion cap Chapter 11
Killer sw application
Waterfall product
development

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 Lean Startup Method

Why that happened?

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 Lean Startup Method & Metrics

Iridium & Webvan: common mistakes

• Untested and unverified hypotheses
• Wrong target audience, segmentation, and pricing
• Complex infrastructure model
• Too much money, expanded too fast
• Wrong management crisis (it’s a Marketing problem!)
• Execution of a plan
• Assumption: no trials no errors
• Focus on launch date
• We know what customer want
• Go-to-market timing
• Evolution of the competition
•…
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 Lean Startup Method

What is a start-up?

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 Lean Startup Method

What is a start-up?
“A startup is not a smaller version of a large
company.
A startup is a temporary organization in search
of a scalable, repeatable, profitable business
model”
Steven Blank

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 Lean Startup Method

What is Business Model?

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 Lean Startup Method

What is Business Model?

A business model describes the rationale of how
an organization creates, delivers, and captures
value.
Alex Osterwalder, Yves Pigneur
“Business Model Generatio”

Or in English: A business model describes how

your company makes money.
(Or depending on your metrics for success, get
users, grow traffic, etc.)
Steven Blank

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 Lean Startup Method

From a startup to a scalable business

The search of a business model The execution of a business model

Scalable
Transition Company
Startup

• Business Model • Cash Flow Breakeven

• Product/Market Fit • Profitable
• Repeatable Sales Model • Rapid scale
• Managers Hired • New senior management
Source
http://steveblank.com/2010/01/25/whats-a-startup-first-principles/

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 Lean Startup Method

Lean Startup Method: how

Pillar 1: Identify the Business Model

@ Alex Osterwalder, Yves Pigneur “Business Model Generatio”

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 Lean Startup Method

Lean Startup Method: how

Pillar 2: In-depth focus on value proposition and customers

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 Lean Startup Method

Lean Startup Method: how

Pillar 3: Agile Development (technologies and products dev)

@ Eric Ries

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 Lean Startup Method

Lean Startup Method: how

Pillar 4: Customer Development

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 Lean Startup Method

Focus on Customer Development

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 Lean Startup Method

Customer Development

1. Customer Discovery
Understanding customer problems and needs

2. Customer Validation
Developing a sales model that can be replicated

3. Customer Creation
Creating and driving end-users demand

4. Company Building
Transitioning organization to execution

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 Lean Startup Method

Focus on Customer Development

• Startup searches for a business model that works

• If customer feedbacks reveals the business hypotheses are

wrong: pivot to new hypothesis

• Once a model is proven start executing

• Build a formal organization

• The process is iterative

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 Lean Startup Method

Customer Development: Search

Customer Discovery
Understanding customer problems and needs
Translate ideas into business model
Create a Minimum Viable Product

Customer Validation
Developing a repeatable sales model
If doesn’t work, pivot and iterate the process
If the business model is validated, execute

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 Lean Startup Method

Customer Development: Execution

Customer Creation
Product refined enough to sell
Build demand through marketing & sales
Scale up the business

Company Building
Transition from startup mode
Customer development team
Function departments

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 Lean Startup Method

Lessons learnt
• A startup is an organization formed to search for a repeatable and scalable
business model.

• The goal of your early business model can be revenue, or profits, or users,
or click-through – whatever you and your investors have agreed upon.

• Customer and Agile Development is the way for startups to quickly iterate
and test their hypotheses about their business model.

• Most startups change their business model multiple times.

• The approach combines Business Planning, Agile Development, Customer

Development

Source
http://steveblank.com/2010/01/25/whats-a-startup-first-principles/

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 Lean Startup Method

A theoretical framework
Handbooks
• Business Model Generation – Alexander Osterwalder, Yves Pigneur. John Wiley &
Sons Inc., 2010

• TheLean Startup: How Today's Entrepreneurs Use Continuous

Innovation to Create Radically Successful Businesses - Eric Ries; Crown
Business, 2011

• TheStartup Owner’s Manual. The Step – by - Step Guide for Building

a Great Company – Steven Blank and Bob Dorf; K&S Ranch Inc, 2012

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 Lean Startup Method

A theoretical framework
Some additional Readings
• TheDefinitive Business Plan. The fast track to intelligent business
planning 
for executives and entrepreneurs - Richard Stutely, FT – Pearsons

• How to Design a Winning Business Model – Ramon Casadeus-Masanell, Joan E.

Ricart. HBR, January, February 2011

• How to Write a Great Business Plan – William A. Sahlman. HBR, 1997

• Why Lean Startup Changes Everything – Steven Blank, HBR, May 2013

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