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Lean Startup by Mind Map: Lean Startup
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Lean Startup

3. Accelerate

Batch

Working in small batches, The goal of a lean startup is not to produce more stuff efficiently, The goal of lean startup is nstead to learn how to build a sustainable business as quickly and cheaply as possible, The startup works in small batches to validate it's learning and then scales it up in order to become profitable

What do you need to learn, Although the feedback loop is build -> measure -> Learn The planning for it starts from the end, We first figure out what do we need to learn and then figure out what metrics we need to put in place in order to learn that and then we go about planning to build the product that can lead us to that learning, Is not the customer but rather our hypothesis about the customer that pulls work away from product development

Grow

Where does growth come from, Sustainable growth is characterized by one simple rule new customers come from actions of past customers, Word-of-mouth, As a side effect of product use, Viral products such as Facebook or PayPal, Fashion or status products, Through funded advertising, The advertising must be paid for out of revenue and not one time sources such as investment capital, As long as the cost of getting a new customer is less than the revenue that the customer generates the excess be used to acquire more customers, Through repeat purchase or use, Subscription model or voluntary repurchase

The three engines of growth, The sticky engine of growth, Word-of-mouth growth, The viral engine of growth, Person-to-person transmission is a necessary consequence of normal product use, Growth happens automatically as a side effect of the customer using the product, The viral coefficient, It measures how many new customers will use a product as a consequence of each new customer who signs up, The coefficient has to be greater than one for the loop to grow exponentially, If more than one people sign up as a result of a customer signing up it is obvious that the loop will continue to grow exponentially, Paid engine of growth, Lifetime value of a customer, The amount of money customer will pay over his or her lifetime, Minus the variable costs, Cost per acquisition of a customer, The engine will grow if lifetime value is greater than the cost per acquisition of a customer, Caveats, Do not try all engines of growth of the same time. Pick one and focus on it exclusively

Engines of growth determine your product and market fits, Startup can figure out whether it is making progress towards it's product or market fit by evaluating each trip through the build measure learn feedback loop

When engines run out, Any engine of growth will at some point run its course and start to slow down or stop, Companies need to be able to adapt do these changes and have a structure that supports adoption of changes

Adapt

Can you go too fast, Startups are in a life or death struggle to learn how to build a sustainable business before they run out of resources and die, However you cannot trade quality for time, Having a low quality product can inhibit learning when the defects prevent customers from experiencing the products benefits

The five WHYs, When confronted with the problem you ask why after every answer., You ask the why five times, To get to the root cause of a problem's which is often hidden behind the obvious symptoms, Automatic speed regulator, The five whys approach acts as the automatic speed regulator, The more problems you have the more you invest in solving those problems

Two simple rules, Be tolerant of all mistakes the first time, Never allow the same mistake to be made twice

Innovate

Creating an innovation sandbox, Create a mechanism for empowering innovation teams out in the open, Rules, Every experiment has to be evaluated on the basis of a single standard report of 5 to 10 actionable metrics, Any team can create a true split test experiment that affects only the sandbox parts of the product or service or only certain customer segment or territories, By making the batch size small the sandbox method allows teams to make cheap mistakes quickly and start learning

Speed

It does not matter how fast we can build

It does not matter how fast we can measure

It only matters how fast we can get through the entire loop, In other words it only matters how fast we can learn, Switching to validated learning feels worse before it starts to feel better

1. Vision

Start

Roots of Lean Startup, The goal of a startup is to figure out the right thing to BUILD (which customers want and will pay for) as quickly as possible, Every new iteration of product, feature or marketing is an attempt to improve this engine of growth, Make constant adjustments with a steering wheel called the Build-Measure-Learn feedback loop, BUILD, MEASURE, LEARN, We can learn, when to PIVOT and when to PERSEVERE, The Big Picture, VISION, The TRUE North of the startup, How often does it change, RARELY, STRATEGY, Components of Strategy, Business Model, Product Roadmap, Ideas about the customer, How often does it change?, Infrequently, A strategy change is called a PIVOT, PRODUCT, Product = The end result of strategy, How often does it change?, Products change constantly as a result of tuning the engine of growth, A product change is OPTIMIZATION

Define

A startup is designed to confront situations of extreme uncertainity, Most tools of general management are not designed to flourish in the harsh soil of extreme uncertainty in which start ups thrive

Learn

if the fundamental goal of entrepreneurship is to thrive under conditions of extreme uncertainty it's most vital function is learning

Validated LEarning, it is a rigorous method for demonstrating progress in periods of extreme uncertainty, it is more concrete more accurate and faster than market forecasting or classic business planning, it is the principal antidote to the lethal problem of achieving failure- successfully executing a plan that leads to nowhere, it is called validated learning because it is always demonstrated by positive improvements in the start up's core metrics, it is always backed up by empirical data collected from real customers, it is the right way to think about productivity in a start up, not in terms of how much stuff we are building, But in terms of how much validated learning we are getting from our efforts, true startup productivity, systematically figuring out the right things to build

Validated learning is the essential unit of progress for startups

we have to see every start up as a grand experiment, every product every feature every marketing campaign everything a start up does is an experiment designed to achieve validated learning

Experiment

one of the most important lessons of the scientific method is that if you cannot fail you cannot learn

break it down, the first step would be to break down the grand vision into component parts

success is not delivering a feature; success is learning how to solve the customers problem

2. STEER

Test

A minimum viable products helps entrepreneurs start the process of learning as quickly as possible, it is not necessarily the smallest product imaginable, It is simply the fastest way to get through the build-measure-learn feedback loop with the minimum amount of effort, the MVPs goal is to test hypothesis as set out in the leap

first products are not meant to be perfect, the first products need to be sold to the early adopters, they accept the 80% solution, They use their imagination to fill in what a product is missing, when in doubt simplify and cut out features, every extra feature is a form of waste and adds to learning time iteration.

quality and design of MVP, even the low-quality MVP can help build a great high quality product, remove any feature process or effort that does not contribute directly to the learning your after

innovation accounting, if the initial results on MVP are not favorable a team could give up hope and abandon the project, however in order to avoid that, we need a commitment to iteration ahead of time, we need to figure out if we are making progress towards validated learning, and that's where measurement comes in

Measure

innovation accounting, first use the MVP to get data on where the company is right now, establishing baseline, MVPs are used to get feedback on assumptions, MVPs help get real baseline data in a companies growth model, Second the start up must tune the engine of growth from baseline to ideal, tuning the engine, every new initiative that the company undertakes should be targeted at improving one of the drivers of its growth model, Third depending on the data the startup must pivot or persevere, cohort analysis, looking at the performance of each group of customers that come into contact with the product independently, each new group is called a cohorts, each cohort represents an independent report card

optimization versus learning, it is no use optimizing something or executing with discipline on a plan that cannot yield the desired results, learning milestones prevent this negative possibility through innovation accounting

actionable metrics versus vanity metrics, cohorts and split test, a split test is where different versions of the product are offered to different customers in the same time., By looking at the changes in behavior between the two groups one can make inferences about the impact of different variations

the three components of effective metrics, actionable, it must show real cause and effect or it is a vanity metrics, accessible, the metrics must be made accessible to the team that is working on the project so that they can look at the numbers from the past and the present and take action accordingly, auditable, we need to be able to test the data by hand in the messy real world

Pivot or persevere, while 5% off entrepreneurship is big idea the remaining 95% is the gritty work measured through innovation accounting, one of the biggest decisions that a start up must make is when to pivot and when to persevere

Pivot or Persevere

everything so far has led up to this point of decision, are we making progress to believe that our initial hypothesis is correct or do we need to make a course correction?

innovation accounting leads to faster pivots, the goal of creating learning milestones is not to make the decision easy. It is to make sure that there is a right data available at decision time., Failure is a prerequisite to learning

what is a Pivot?, a course correction designed to test a new fundamental hypothesis, while keeping one foot rooted in what has been learned so far we make a fundamental change in strategy in order to seek even more validated learning

how many pivots can a start up afford, the runway is the amount of time remaining in which a startup must either launch successfully or fail, which effectively means the number of pivots remaining, If the runway is measured as a function of pivots remaining it is vital to maximize the number of pivots which implies that a startup needs to pivot faster

pivots require courage, most entrepreneurs who have pivoted wish they had done it sooner. why?, first vanity metrics can allow entrepreneurs to form wrong conclusions, second when there is an unclear hypothesis it's impossible to experience complete failure., And without failure there is no impetus to make a pivot, launch and see what happens approach is flawed because you will always succeed ...... succeed in seeing what happened, third many entrepreneurs are afraid. They're afraid to see their idea fail without even having the chance to prove itself

Types of pivots, zoom in, what was initially considered a feature in a product becomes the whole product, zoom out, what was initially considered the whole product becomes a single feature of a much larger product, customer segment, the product solves a real problem but for different set of customers than initially planned for, customer needs, the problem being solved is not the most important problem that the customer has. There is a related problem that is more important and can be solved by us, platform, changing from a platform to an application or application to a platform, business architecture, going from high-margin low-volume to low-margin high-volume, going from B2 B to B to C, value capture, changing the way the company captures value, engine of growth, changing the growth strategy - viral, sticky or paid growth, Channel, changing the sales channel or changing any other channel of the product delivery, technology, using a completely different technology

a pivot is a strategic hypothesis, think of it as a new hypothesis that will require a new MVP to test

Leap

We need to identify which hypothesis to test, the riskiest elements of a startup's plan on which everything depends, also known as leap of faith assumptions

strategy is based on assumptions, the goal of startup's early efforts should be to test the assumptions as soon as possible, the first challenge for an entrepreneur is to build an organization that can test these assumptions systematically, the second challenge is to perform that rigorous testing without losing sight of companies overall vision

Genchi Gembutsu, use in Toyota production systems it means "go and see for yourself", it is unacceptable to take any assumptions for granted

design the customer avatar, the goal of early contact with customers is not to get definitive answers, The goal is that we understand our potential customers and what problems they have, with this understanding we can create a customer archetype