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9/22/2017STARTUP 101 & THE LEAN STARTUPEric HartmanDirector, Lexington Office, Kentucky Innovation NetworkWHAT IS A STARTUP?“A startup is a human institution designedto create a new product or serviceunder conditions of extreme uncertainty.”Eric RiesThe Lean Startup1
9/22/2017STARTUP CHARACTERISTICSInnovativeIdeaPivotSmall BusinessNymbleNewFlexibleInvestorsUnknownRich & FamousTechnologyHigh RiskEntrepreneurLeanFailureFast PacedWHAT IS THE PURPOSE OF ASTARTUP?2
9/22/2017STARTUP BUSINESS DEVELOPMENT PROCESSValueActivityIdeaIP ProtectionPrototypeBusiness PlanBeta CustomersSales/MarketingPaying CustomersGrowth kLowVALUE CREATIONIS DIRECTLY PROPORTIONALTORISK REDUCTION3
9/22/2017STARTUP RISK QUESTIONSWho is our customer?Do we understand our value proposition?Is there a need in the marketplace?Do we understand the customer’s problem?How much will customers pay?Will customers like our product?What features does the product need?How do they want to buy?Will customers tell their friends?How will we make money?Will customers buy?Will anyone use the product?Are customers willing to change?Is our product better than the competition?How will we make our product?How will we sell our product?LEAN STARTUP PRINCIPLES Identify Leap of Faith Assumptions (‘risk’) Run experiments to test assumptions Collect data to answer questions Design and development work [only] to support experiments Adjust business plan based on experimental results (‘pivot’) Track progress (‘innovation accounting’)4
9/22/2017ROI RATIO Assess Degree of Risk Reduction (ΔRisk) Budget (Cost) Calculate Return on Investment – ROI RatioΔRiskCostROI Ratio Prioritize by Ratio If High Ratio (High ROI), Execute ASAP If Low Ratio (Low ROI), Delay to later stageStage 110Stage 2537 629Stage N149435
9/22/2017Stage 11099Stage 276 5Stage N144332STARTUP ENTREPRENEUR’S CHARGEIdentify and mitigate risks - quickly, efficiently - therebycreating value.6
9/22/2017THE LEAN STARTUP"The Lean Startup" by Eric Ries - BOOK SUMMARYhttps://youtu.be/sobxOzRjAGg7
9/22/2017LEAP OF FAITH ASSUMPTIONS “An Entrepreneur’s Super Power” What assumptions? Value Hypothesis Growth HypothesisBUILD – MEASURE – LEARN Kaizen - Continuous and incremental improvement Small Batch Approach Steer the Ship8
9/22/2017BUILD – MEASURE – LEARNMINIMUM VIABLE PRODUCT - MVP Types of MVP Video MVP (looks like) Concierge MVP (works like) START!!!9
9/22/2017MVP RESTAURANT EXAMPLEMVP2MVPEnd GoalTHINK LEAN CHALLENGE Can we answer the question Cheaper? Can we answer the question Faster? Can we take it to the customer Sooner? Do we really need to do this / build this? How does this mitigate risk?There is nothing so useless as doing efficientlythat which should not be done at all. – Peter Drucker10
9/22/2017WHY ENTREPRENEURSHIP?New York Times columnist Thomas Friedman writes:“Graduates today will have to ‘invent’ a job and,given the pace of change today, even reinvent,re-engineer, and reimagine that job.”11
9/22/2017Eric Hartmaneric.hartman@uky.edukyineric@KyINeric12
The Lean Startup. 9/22/2017 2 STARTUP CHARACTERISTICS Innovative New Technology High Risk Entrepreneur Unknown Failure Small Business Rich & Famous Investors Lean Nymble Fast Paced Pivot Idea Flexible WHAT IS THE PURPOSE OF A STARTUP? 9/22/2017 3 STARTUP BUSINESS D
