Lean Startup How to learn from Customers Giles Farrow v2

Giles Farrow ●Marketing Consultant for Software Companies ●25 years IT & Software Marketing ●Company size 1-50,000 employees ●Smarter, reliable way for software to succeed 2

Before Lean Startup Startup Mythology 3 Create Business PlanBrilliant idea in a garage Build Team Raise Funds Massive LaunchExecute Stealthily World Domination

Lean Startup Entrepreneur & Engineer Scientific approach to writing software, increasing quality and speed Better software made little difference to business success 4

Eliminate Uncertainty Startup = ●Don’t : Plan and Pontificate ●Do: Experiment and Learn ●Trust facts not opinions 5 “a human institution designed to create a new product or service under conditions of extreme uncertainty”

Minimum Viable Product MVP: Only solves core problem ●Don’t : Over-Engineer ●Do: Get it into customers’ hands ASAP Zero Product MVPs ●Concierge or Wizard of Oz ●Landing pages or fake buttons 6

Validated Learning Scientific Method ●Hypothesis ●Design experiment ●Record data ●Analysis ●Validated learning ●New hypothesis 7

Canvas Business Model on 1 Page 8

Canvas One-page business plan Living document Makes strategy accessible Blueprint for pitching / marketing 9

Exercise 1 Complete canvas for your business / idea -5 mins -Name -Date 10

1 Customer Customer segments -be specific -real people Early adopters -likely first customers 11

2 Problem Top problems you solve for customers Existing Alternatives -what do people do now? 12

3 Unique Value Proposition Unique Value Proposition -What’s different -What’s valuable High-level Concept -(e.g. YouTube = Flickr for videos) 13

4 Solution Solution -Brief -Factual 14

5 Channels Path to reach customers -Direct -Indirect 15

6 & 7 Revenue & Costs Revenue Streams -Sources of revenue -Add-on services? Cost Structure -Fixed -Variable 16

8 & 9 Metrics & Advantage Key Metrics -Key numbers that show business health / growth Unfair Advantage -What’s hard to copy or buy 17

10 Assumptions Assumptions -What facts does your business model rely on? E.g. -Demand -Price -Partners 18

Example - UberHailo 19 PROBLEM ● Need quick private ad hoc transport ● Minimal waiting, minimal hassle ● Fare should be clear and easy to pay SOLUTION ● Mobile app matches passengers to nearest available driver ● App tracks route, calculates fare and handles payment. UNIQUE VALUE PROPOSITION Your own chauffeur summoned at the touch of a button. UNFAIR ADVANTAGE ● Expertise handling local legislation and unions CUSTOMER SEGMENTS ● Busy professionals in London, New York, Paris ● International business travellers ● Young urban nighttime social Existing Alternatives ● Hail taxi on street ● Call taxi / minicab ● Car hire / zipcar ● Public transport KEY METRICS ● Drivers signed up ● Customers >5 trips HIGH-LEVEL CONCEPT Taxis re-imagined for the 21st century CHANNELS ● Billboard advertising at taxi stands ● Livery on cabs ● PR EARLY ADOPTERS ● Looking for new things to try ● Enjoy mobile apps

Example - UberHailo 20 COST STRUCTURE ● £x Develop app ● £x Operations staff & Phone provision ● £x Marketing REVENUE STREAMS ● 20% of fares ● Phone rental ● Admin fees e.g. cancellations ● Customers willing to trust an app to handle payments ● Getting a taxi quickly is very important for customers ● Customer will register and install app in advance ● Customers will regularly use service ● Customers will recommend to friends ● Can attract publicity at low cost ● Can keep supply of drivers in balance with demand ● App will be easy enough to just use occasionally ● Drivers will adopt “new” technology ● Drivers will agree 20% rate ● Does not break local laws ● Visa / Mastercard will accept payments ASSUMPTIONS

Canvas → Marketing 21 PROBLEM ● Need quick private ad hoc transport ● Minimal waiting, minimal hassle ● Fare should be clear and easy to pay SOLUTION ● Mobile app matches passengers to nearest available driver ● App tracks route, calculates fare and handles payment. UNIQUE VALUE PROPOSITION Your own chauffeur summoned at the touch of a button. UNFAIR ADVANTAGE ● Expertise handling local legislation and unions CUSTOMER SEGMENTS ● Busy professionals in London, New York, Paris ● International business travellers ● Young urban nighttime social Existing Alternatives ● Find a taxi ● Call taxi / minicab ● Car hire / zipcar ● Public transport KEY METRICS ● Drivers signed up ● Customers >5 trips HIGH-LEVEL CONCEPT Taxis for the 21st century CHANNELS ● Billboard advertising at taxi stands ● Livery on cabs ● PR EARLY ADOPTERS ● Looking for new things to try ● Enjoy mobile apps What they are thinking about when looking for a solution and what the competition is Which customers to target

Canvas → Marketing 22 PROBLEM ● Need quick private ad hoc transport ● Minimal waiting, minimal hassle ● Fare should be clear and easy to pay SOLUTION ● Mobile app matches passengers to nearest available driver ● App tracks route, calculates fare and handles payment. UNIQUE VALUE PROPOSITION Your own chauffeur summoned at the touch of a button. UNFAIR ADVANTAGE ● Expertise handling local legislation and unions CUSTOMER SEGMENTS ● Busy professionals in London, New York, Paris ● International business travellers ● Young urban nighttime social Existing Alternatives ● Find a taxi ● Call taxi / minicab ● Car hire / zipcar ● Public transport KEY METRICS ● Drivers signed up ● Customers >5 trips HIGH-LEVEL CONCEPT Taxis for the 21st century CHANNELS ● Billboard advertising at taxi stands ● Livery on cabs ● PR EARLY ADOPTERS ● Looking for new things to try ● Enjoy mobile apps Marketing campaigns / tactics Brief factual description of what you actually do e.g on home page Headline or tagline - quickly grab attention

Canvas → Marketing 23 PROBLEM ● Need quick private ad hoc transport ● Minimal waiting, minimal hassle ● Fare should be clear and easy to pay SOLUTION ● Mobile app matches passengers to nearest available driver ● App tracks route, calculates fare and handles payment. UNIQUE VALUE PROPOSITION Your own chauffeur summoned at the touch of a button. UNFAIR ADVANTAGE ● Expertise handling local legislation and unions CUSTOMER SEGMENTS ● Busy professionals in London, New York, Paris ● International business travellers ● Young urban nighttime social Existing Alternatives ● Find a taxi ● Call taxi / minicab ● Car hire / zipcar ● Public transport KEY METRICS ● Drivers signed up ● Customers >5 trips HIGH-LEVEL CONCEPT Taxis for the 21st century CHANNELS ● Billboard advertising at taxi stands ● Livery on cabs ● PR EARLY ADOPTERS ● Looking for new things to try ● Enjoy mobile apps How to measure marketing effectiveness Possible way to build trust / credibility

Experiment How to get validated learning 24

Riskiest Assumption = Core to business but least data Riskiest Assumption 25 ● Customers willing to trust an app to handle payments ● Getting a taxi quickly is very important for customers ● Customer will register and install app in advance ● Customers will regularly use service ● Customers will recommend to friends ● Can attract publicity at low cost ● Can keep supply of drivers in balance with demand ● App will be easy enough to just use occasionally ● Drivers will adopt “new” technology ● Drivers will agree 20% rate ● Does not break local laws ● Visa / Mastercard will accept payments UberHailo ASSUMPTIONS

Validated Learning Scientific Method ●Hypothesis ●Design experiment ●Record data ●Analysis ●Validated learning ●New hypothesis 26

Experiment Hypothesis 27 Riskiest Assumption riskiest = we have least data it is fundamental to viability Getting a taxi quickly is very important for customers or Customer / Problem Hypothesis e.g. I believe [customer segment] has a significant problem achieving [goal / objective] I believe young urban professionals out late in London for parties, nightclubs… desire a service that is comparable to taxis but finding a cab is much faster 1 Problem / Solution Hypothesis e.g. I believe this solution will result in [quantifiable outcome]

Experiment Test & Measure 28 Test Method the least expensive way to test my assumption is to… Hire a black cab Friday / Saturday night. Stand at back of taxi lines and offer to summon a cab instantly but it will cost 10% extra. Success Criteria e.g. I will run experiment with X customers and Y will respond by... [It must be possible for test to fail] 10 of 50 young urban professionals queuing for a taxi pay extra 10% for instant cab, where expected wait time is at least 5 minutes.

Experiment Results 29 Result 10 of 25 agreed. Police moved us on three times. People who declined were concerned about safety and legality. Cold / rain seemed to encourage most people. Decision Data is conclusive - getting a cab quickly is an important factor. Should be used in marketing. Means need large pool of drivers to provide quick response Learning Quick pickup important Safety / legality are concerns Adverse weather will increase demand

Learn from Customers How to ask “good” questions

Learning from Customers Normal Approach ●Explain idea ●Ask opinion ●Would they buy? 31 People lie all the time ●Polite ●Want to look good ●Abysmal predicting Customers hold the truth - the facts. We need a different way to learn.

Talk about their life, not your idea ●Past not future ●Fact not opinion ●Specifics not general ●Relaxed not questionnaire Learning from Customers 32 Mom Test A good question is one your mother could say “no” to

Exercise 2 - Customer Questions ●Select Riskiest Assumption related to customers really caring about the problem ●Write Customer / Problem Hypothesis o I believe [customer segment] has a significant problem achieving [goal / objective] ●Write 5 Questions to ask Customer 33

Good or Bad Question? 34 Do you think UberHailo is a good idea? Bad

Good or Bad Question? 35 Would you sign up for UberHailo when it becomes available? Bad

Good or Bad Question? 36 How do you currently get taxis? OK

Good or Bad Question? 37 The last time you got a taxi, how did you get it? Good

Good or Bad Question? 38 When do you have a problem getting a taxi? OK

Good or Bad Question? 39 Tell me about the last time you had a problem getting a taxi. Good

Good or Bad Question? 40 What problems do you encounter when getting a taxi? OK

Good or Bad Question? 41 Tell me about a time when you had a big problem getting a taxi. Good

Good or Bad Question? 42 What have you tried to do about making it easier to get taxis? Good

Good or Bad Question? 43 Please help me understand why you... Good

Good or Bad Question? 44 How much would you pay for a taxi service you can summon quickly? Bad

Good or Bad Question? 45 How much did you spend on taxis last month? Good

Good or Bad Question? 46 What would you need to see before signing up? OK

Good or Bad Question? 47 Who else should I talk to? Good

Recap What did we cover?

Recap ●Eliminate uncertainty ●Canvas, 1-page business model ●Validated learning o Hypothesis o Experiment o Measure ●Learning from customers 49

Resources ●Slides, handouts at sm8.co/leansm8.co/lean ●or Giles Reading ●Lean Startup Eric RiesLean Startup ●Running Lean Ash MauryaRunning Lean ●The Mom Test Rob FitzpatrickThe Mom Test ●The Lean Entrepreneur Brant CooperThe Lean Entrepreneur 50