• Lean Startup Model

• How creative
are you?

• Business ideas

• 4 Ps of Innovation

• Dimensions of Innovation

• Is your idea
a good one?
 Lean startup method
• Most startups fail..
– Which means a lot of wasted money, relationships…
• But it doesn’t have to be this way..

• The traditional startup method:

– Start a company with a long-term vision
– Raise lots of capital to start and grow
– Hire the best and brightest workers to grow faster!
– Find a management team with loooots of experience
– Focus on quality – test the product many times before
you release it
– Begin marketing before you release your product so
that there is a lot of demand for the product!

• What’s wrong with this idea?

 Lean startup method
• Before the lean startup method:
– Start a company with a long-term vision
– Raise lots of capital to start and grow
– Hire the best and brightest workers to grow faster!
– Find a management team with loooots of experience
– Focus on quality – test the product many times before
you release it
– Begin marketing before you release your product so
that there is a lot of demand for the product!

• What’s wrong with this idea?

– You don’t know exactly what customers want
• You are risking everything by not understanding how your
customers will “like” your products
– You are spending way too much money!!!
– You are wasting time!
 Starting a business
is easy and fast, right?
• NO!!!
• How did Air BnB do it differently?
 Air bnb – lean startup
• “Actually startups take off because the
founders make them take off.”
– Paul Graham

• Air BnB struggled from the start..

 Air bnb – lean startup
• How it started..
– Hotels were booked up because of a tech
conference
– Rented out rooms in their house to people who
couldn’t get rooms
 Air bnb – lean startup
• They released the product as quickly as
possible
– It wasn’t a perfect product, but it satisfied the
needs of the people going to the conference
– The idea had potential, but the idea was not yet
scalable.. People didn’t want strangers in their
place
 Air bnb – lean startup
• They tried everything to build up their idea
– Obama breakfast cereal..
– Anything to get people to talk to their friends and
get people to stay again
– Earned about $30,000 USD, but it wasn’t enough
to grow!
– Everyone told
them that it
was a bad idea
– A few investors
liked the idea..
 Air bnb – lean startup
• Their startup launched outside of San Francisco
– People were using their app!!!
– Postings were being put up all across America!!
– But there were still not making any money!
– They tried everything again!
– And realized…
– That…
– The…
– Pictures…
– That…
– People…
– Were…
– Posting were awful!!!
 Air bnb – lean startup
• They had to do something
– So they solved the problem…
– They packed their suitcases, contacted the
people who posted their apartments, and
asked to visit
– They helped these people fix up their
apartments
– Take nice pictures
– Rewrite their descriptions
– Make the postings look really nice!!!
 Air bnb – lean startup
• They couldn’t do this forever.. Not scalable!
– So, they hired teams around the country to help
– Air BnB carefully tracked the quality of their
postings
• It became their key metric to track success!

– They also tracked:

• Monthly active users sending invites
• Invitees per inviter
• Conversion rate to new user
• Conversion rate to new guest
• Conversion rate to new host

– This helped them identify ways to improve

• Helped them understand their customers better..
 Air bnb – lean startup
• Each problem identified was fixed
– They operated the business out of their home
– They learned what they needed to learn and cut
costs anywhere they could
 Air bnb – lean startup
• They invited their customers to be
part of their growth
– They individually called and emailed
each new customer posting a room
– They gave each user a way to do their
own marketing
– They made their website a
market place

– They built personal relationships with

their customers and made them
excited to be part of the company
 Air bnb – lean startup
• They helped their users see the real potential
– People can earn more using Air Bnb than renting
their place other ways
– Some users used it as their full-time job
 Air bnb – lean startup
• Air BnB had succeeded!
– Air BnB grew 800%!
– Air BnB expanded to 89 countries!!
 Air bnb – lean startup
• How did Air BnB build into the successful
company that it is?
– They used the lean startup method

• Lean Startup Method

– Get a product out quickly
– Don’t focus on testing, focus on getting it out and selling

– Track metrics that show problems

• And then solve those problems!!

– Operate with extremely little resources

• Don’t invest in expensive offices, equipment, inventory, etc

– Keep it scalable!
• Focus on the future, never think short-term
• Failure is expected.. It’s how you grow!
 Lean startup method
• Lean Startup Method
– Speed = minimize the total time through the
loop
 Lean startup method
• Lean Startup Method
– Continuous deployment

– Split-test (A/B) experimentation

– Five why’s
 Lean startup method
• Lean Startup Method
– Continuous deployment
• Put out the product quickly
• Focus on making changes quickly
• Work in small batches
• Break down projects into small batches

– Split-test (A/B) experimentation

– Five why’s
 Lean startup method
• Lean Startup Method
– Continuous deployment
– Split-test (A/B) experimentation

– Five why’s
 Lean startup method
• Lean Startup Method
– Continuous deployment
– Split-test (A/B) experimentation
• Keep your testing simple
• Try various versions of the product to see what your
customers respond to
• Measure the results of each
 Lean startup method
• Lean Startup Method
– Continuous deployment
– Split-test (A/B) experimentation
– Five why’s
 Lean startup method
• Lean Startup Method
– Continuous deployment
– Split-test (A/B) experimentation
– Five why’s
• Ask “Why” 5 times to get to the root cause of the
problem
• At each “why”, put a fix in to correct the problem
• Fix the cause, not just the symptom
Lean startup method
 Air BnB questions
• What was the opportunity? How did they find the
opportunity?

• How did the company save money during their

development? Why was this important to their success?

• How did the lean startup method allow the company to

better understand their customers?

• Why was it important for the company to track metrics?

• How did the company involve its customers in its

growth?
 Lean vs traditional
LEAN TRADITIONAL
Organization - Teams focus on learning, - Teams focus on departments:
tracking, fixing, improving accounting, finance,
- Work together marketing, etc
- Work separately

Financial Reporting - Only track the metrics - Focus on accounting

that show problems reporting: income, cash flow

Failure - Expected! - Exception: often the end

- Used to identify problems - Fix by firing employees
to solve

Speed - Rapid! - Measured

- Operating on good- - Operating on complete data
enough data
Lean vs traditional
HOW CREATIVE ARE YOU?
 Creativity Test 1

• Finish the drawing

– Who has the most interesting?
 Creativity Test 2

• 4 minutes to think of as many uses as you

can for these items
BUSINESS IDEAS
 Discovery: Idea generation
• How to generate business ideas
– Both entrepreneurs and intrapreneurs

– What do you think?

– Passion
– Problem inventory analysis
– Focus groups
– Brainstorming
– Ideas just come to you!
 Discovery: Idea generation
• How to generate business ideas

– Problem inventory analysis

• Consider a problem that needs to be solved
• Understand the root causes of that issue
• Create solutions to those problems:
products/services
4 P’S OF INNOVATION
 Creativity vs innovation
• Creation
– Unleashing the potential of the mind to come up
with new ideas
– Subjective: Hard to measure

• Innovation
– Introducing change into a relatively stable system
– Objective: Totally measurable
 Creativity vs innovation
• Creation
– Unleashing the potential of the mind to come up
with new ideas
– Subjective: Hard to measure

• Innovation
– Introducing change into a relatively stable system
– Objective: Totally measurable
 4 p’s of innovation
• Does every innovative idea need to be a new one?
• 4P’s of innovation:
– Product
• Changes the product

– Process
• Changes to how the product is made and delivered

– Position
• Changes to the context in which the products/services are
introduced

– Paradigm
• Changes to the way people think about the product
 4 P’s of innovation (types)
• 4P’s:
– Product
• Changes the product
– Process
• Changes to how the product is made
– Position
• Changes to the purpose of the company
– Paradigm
• Changes to how the product is consumed
 4 P’s of innovation
• Team 1
– Comic books

• Team 2
– Sneakers / casual shoes

• Team 3
– lipstick

• Team 4
– Hair combs

• Team 5
– Coffee beans
 4 P’s of innovation
• Example of a Product Innovation
– Medicine
– Kids don’t like to take medicine!
– Buy.. What do kids like?
• CANDY!
– Kids are happy to take medicine if it is also candy
 4 P’s of innovation
• Example of a Process Innovation
– How many of you have ever forgotten to pay your
bills?
– So did he
– Luckily, he found a startup company that can
facilitate automatic bill pay
– Now he is happy
 4 P’s of innovation
• Example of a Position Innovation
– What are these?
– Who wears these?
• Tell me about these people…
– Who originally wore those jeans?
• Tell me about these people..
 4 P’s of innovation
• Example of a Paradigm Innovation
– Henry Ford
• “If I asked people what they wanted, they would have
asked for a five-legged horse”

– Steve Jobs
• “Customers don’t know what they want until we’ve
shown them”

– Steve Jobs
• “Did Alexander Graham Bell didn’t do any market
research before he invented the phone”
 Dimensions of innovation
• Innovations run a spectrum
– Sustaining vs Disruptive
 Dimensions of innovation
Sustaining innovation
• Builds upon existing
knowledge and resources
• Competence-enhancing
• Relatively small changes in
performance/utility
• Can build towards
something big!
Disruptive innovation
• Requires new knowledge or
resources
• Existing competence loses
value
• Step changes in
performance
• Opens new markets for
more startups
• Relatively rare
 Dimensions of innovation
Innovation Type Sustaining Disruptive
Product •Windows 7 and 8 replace •First speech recognition
Vista and XP software
•CDs replaced vinyl records •Spotify streams music across
multiple devices
Process •Improved banking services •Mpesa in Kenya changed the
at physical banks way people bank
•Improved retail shopping •Online shopping websites
experience at malls allow people to shop in their
underwear
Position •Changing the target market •Selling the Tata Nano car to
for icecream from children to poor people in India for $2,000
adults per car
Paradigm •Dyson redefining the home •Amazon, Google and Skype
appliance market with high redefining whole industries:
performance engineered retail, advertising,
products telecommunications online
 Dimensions of innovation
Disruptive innovation
• A smaller company with fewer resources is
able to successfully challenge established
existing businesses
– Pulling away customers
– Moving faster to serve customers than bigger
companies are able to move
– Starting with an underserved market, but carving
off bigger pieces very quickly