I gave a Lean Startup presentation at Kellogg Entrepreneurship Conference on Wed May 25, 2011. It's an intro presentation so if you know lean well already, it's all review.

1. Lean Startups
The Manufacturing of Innovation

3. Who am I?
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

4. Founder of Blueleaf.com
Who am I?
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

5. Founder of Blueleaf.com
Board Member oneforty
Who am I?
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

6. Founder of Blueleaf.com
Mentor at Techstars
Board Member oneforty
Who am I?
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

7. Founder of Blueleaf.com
Mentor at Techstars
Board Member oneforty
Who am I?
One of the first Boston Chicken Franchisees
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

8. Founder of Blueleaf.com
Mentor at Techstars
Board Member oneforty
Who am I?
One of the first Boston Chicken Franchisees
Product Management at a series of startups
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

9. Founder of Blueleaf.com
Mentor at Techstars
Board Member oneforty
Who am I?
One of the first Boston Chicken Franchisees
Product Management at a series of startups
Investment Banker for Tech Cos
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

10. Lean Startups

11. Name has caused confusion

12. Toyota Production System
Lean Manufacturing

13. Minimize waste ...
http-//www.flickr.com/photos/editor/172690560/sizes/l/in/photostream/.jpg

14. Not cheap or bootstrapped

15. Startups?

16. It’s where innovation happens

17. What is a startup?

18. What is a startup?
• A startup is a human institution designed to deliver a new product or
service under conditions of extreme uncertainty
• Nothing to do with size of the company, sector of the economy or
industry

19. Said Differently ...

20. Innovation

21. Innovation Manufacturing

22. Innovation Manufacturing
Repeatable process for creating market accepted innovation

23. Innovation Manufacturing
Apply lean manufacturing principles and the scientific method to
the process of innovation

24. Lean Startups
Apply lean manufacturing principles and the scientific method to
the process of innovation

25. CAUTION_http-//www.flickr.com/photos/32315759@N00/452776240/sizes/z/in/photostream/

26. Methodology Can’t
Replace Judgement

27. Or Replace Vision

28. Why bother with this?

29. Source: Eric Ries

30. Most Innovations Fail
Source: Eric Ries

31. It doesn’t need to be that way . . .

32. Why Do Startups Fail?

33. Lack of Customers

34. Question?

35. Does it make sense that we have
product development process ...
Source: Steve Blank

36. ... but a not a Customer
Development Process?

37. Entrepreneurial
Superpowers

38. Vision / Delusional
Capacity
Entrepreneurial
Superpowers

39. Vision / Delusional
Capacity
Bias for Action
Entrepreneurial
Superpowers

40. Steve Blank Hypotheses
• Entrepreneurs and Investors are generally executing on guesses
• Startups aren’t small versions of large organizations
• They are about learning/discovery, not execution
• Need to surface hypotheses/assumptions and test against facts
• However, the Facts Live Outside of the Building

41. Led to Customer
Development Model
Source: Steve Blank

42. Customer Development is at the
Heart of Lean Startups

43. Surface Hypotheses & Test

44. Facts Live Outside of the Building

45. Separate Vision from Delusion

46. Customer Development

47. Eric Ries Extended Model
• Steve realized the Problem was unknown,
• Eric’s Insights
• Given that the Solution is also unknown
• Agile development needed to match Customer development speed

48. Built To Learn
IDEAS
LEARN BUILD
DATA
CODE
MEASURE

49. John Boyd’s Insight
IDEAS
LEARN BUILD
DATA
CODE
MEASURE

50. John Boyd’s Insight
OODA Loop IDEAS
LEARN BUILD
DATA
CODE
MEASURE

51. John Boyd’s Insight
OODA Loop IDEAS
• Observe, Orient, Decide, Act LEARN BUILD
DATA
CODE
MEASURE

52. John Boyd’s Insight
OODA Loop IDEAS
• Observe, Orient, Decide, Act LEARN BUILD
• Depends on accurate external data DATA
CODE
MEASURE

53. John Boyd’s Insight
OODA Loop IDEAS
• Observe, Orient, Decide, Act LEARN BUILD
• Depends on accurate external data DATA
CODE
MEASURE
• Speed through the loop beats
quality of iteration

54. Changes Context of Progress

55. Not About Working Big Plan

56. Progress
=
Validated Learning About Customers

57. Or we can accelerate into a brick wall

58. Changes scope of
development efforts

59. Changes scope of
development efforts
• Huge feature lists don’t make sense

60. Changes scope of
development efforts
• Huge feature lists don’t make sense

61. Changes scope of
development efforts
• Huge feature lists don’t make sense
• Actual working product may not make sense

62. Changes scope of
development efforts
• Huge feature lists don’t make sense
• Actual working product may not make sense

63. Changes scope of
development efforts
• Huge feature lists don’t make sense
• Actual working product may not make sense
• Create the smallest amount of “product” necessary to learn

64. Minimum Viable Product

65. Product / Market Fit
“Do whatever is required to get to product/market fit. Including:
changing out people,
rewriting your product,
moving into a different market,
telling customers no when you don’t want to,
telling customers yes when you don’t want to,
raising that fourth round of highly dilutive venture capital
—whatever is required.”
— Marc Andreessen
http://blog.pmarca.com/2007/06/the-pmarca-gu-2.html

66. Great Startups Adjust To Facts

67. The Pivot
http://startuplessonslearned.blogspot.com/2009/06/pivot-dont-jump-to-new-vision.html

68. The Pivot
• What do successful startups have in common?
• They started out as digital cash for PDAs, but evolved into online
payments for eBay.
• They started building BASIC interpreters, but evolved into the world's
largest operating systems monopoly.
• They were shocked to discover their online games company was actually
a photo-sharing site.
http://startuplessonslearned.blogspot.com/2009/06/pivot-dont-jump-to-new-vision.html

69. The Pivot
• What do successful startups have in common?
• They started out as digital cash for PDAs, but evolved into online
payments for eBay.
• They started building BASIC interpreters, but evolved into the world's
largest operating systems monopoly.
• They were shocked to discover their online games company was actually
a photo-sharing site.
http://startuplessonslearned.blogspot.com/2009/06/pivot-dont-jump-to-new-vision.html

70. The Pivot
• What do successful startups have in common?
• They started out as digital cash for PDAs, but evolved into online
payments for eBay.
• They started building BASIC interpreters, but evolved into the world's
largest operating systems monopoly.
• They were shocked to discover their online games company was actually
a photo-sharing site.
• Pivot: change directions but stay grounded in what we’ve learned.
http://startuplessonslearned.blogspot.com/2009/06/pivot-dont-jump-to-new-vision.html

71. The Pivot
PIVOTCARTOON_http-//www.newyorker.com/humor/issuecartoons/2010/04/26/cartoons_20100419#slide=2

72. On Pivots
@dbinetti

73. On Pivots
@dbinetti

74. On Pivots
• Pivots are restatements of your business model; not synonymous with
product change
@dbinetti

75. On Pivots
• Pivots are restatements of your business model; not synonymous with
product change
@dbinetti

76. On Pivots
• Pivots are restatements of your business model; not synonymous with
product change
• Pivots are a consequence of learning about your business, not just your
product
@dbinetti

77. On Pivots
• Pivots are restatements of your business model; not synonymous with
product change
• Pivots are a consequence of learning about your business, not just your
product
@dbinetti

78. On Pivots
• Pivots are restatements of your business model; not synonymous with
product change
• Pivots are a consequence of learning about your business, not just your
product
• Pivots are vision-driven, not testing driven
@dbinetti

79. Speed Wins ...

80. What about management process?

81. Leading & Managing Lean

82. Leading & Managing Lean
• People don’t rally around experiments - “It’s the vision stupid”

83. Leading & Managing Lean
• People don’t rally around experiments - “It’s the vision stupid”

84. Leading & Managing Lean
• People don’t rally around experiments - “It’s the vision stupid”
• Everything starts with vision then rigorously test against actual results

85. Leading & Managing Lean
• People don’t rally around experiments - “It’s the vision stupid”
• Everything starts with vision then rigorously test against actual results

86. Leading & Managing Lean
• People don’t rally around experiments - “It’s the vision stupid”
• Everything starts with vision then rigorously test against actual results
• Optimize Total Time through the loop

87. Leading & Managing Lean
• People don’t rally around experiments - “It’s the vision stupid”
• Everything starts with vision then rigorously test against actual results
• Optimize Total Time through the loop

88. Leading & Managing Lean
• People don’t rally around experiments - “It’s the vision stupid”
• Everything starts with vision then rigorously test against actual results
• Optimize Total Time through the loop
• Traditional management tools are not built for extreme uncertainty

89. Leading & Managing Lean
• People don’t rally around experiments - “It’s the vision stupid”
• Everything starts with vision then rigorously test against actual results
• Optimize Total Time through the loop
• Traditional management tools are not built for extreme uncertainty

90. Leading & Managing Lean
• People don’t rally around experiments - “It’s the vision stupid”
• Everything starts with vision then rigorously test against actual results
• Optimize Total Time through the loop
• Traditional management tools are not built for extreme uncertainty
• Iteration speed is governed by speed of learning not “building”

91. Start with Vision and adjust

92. Unit Economics & Biz model
NOT projections

93. Openness NOT command and
control

94. Learning Can Be Scary

95. Innovation accounting

96. Innovation accounting
• Establish the Baseline
• Build the minimum viable product
• Measure how customers behave right now

97. Innovation accounting
• Establish the Baseline
• Build the minimum viable product
• Measure how customers behave right now

98. Innovation accounting
• Establish the Baseline
• Build the minimum viable product
• Measure how customers behave right now
• Tune the Engine
• Experiment to move metrics from baseline to ideal

99. Innovation accounting
• Establish the Baseline
• Build the minimum viable product
• Measure how customers behave right now
• Tune the Engine
• Experiment to move metrics from baseline to ideal

100. Innovation accounting
• Establish the Baseline
• Build the minimum viable product
• Measure how customers behave right now
• Tune the Engine
• Experiment to move metrics from baseline to ideal
• Pivot or persevere
• When experiments reach diminishing returns some distance from goal

102. In Action - Stanford Lean Launchpad

109. Tactical fun with MVPs

110. Minimum Viable Product
• Minimum set of features needed to learn from earlyvangelists - visionary
early customers
• Avoid building products that nobody wants
• Max learning per $
• Probably much more minimum than you think

111. Minimum Viable Product
• Visionary customers can “fill in the gaps” on missing features, if the
product solves a real problem
• Allows us to achieve a big vision in small increments without going in
circles
• Requires a commitment to iteration
• MVP is only for BIG VISION products; unnecessary for minimal products

112. Minimum Viable Product

113. Minimum Viable Product
• Smoke testing with landing pages, adwords

114. Minimum Viable Product
• Smoke testing with landing pages, adwords
• SEM on $5 per day

115. Minimum Viable Product
• Smoke testing with landing pages, adwords
• SEM on $5 per day
• In-product split testing

116. Minimum Viable Product
• Smoke testing with landing pages, adwords
• SEM on $5 per day
• In-product split testing
• Paper prototypes

117. Minimum Viable Product
• Smoke testing with landing pages, adwords
• SEM on $5 per day
• In-product split testing
• Paper prototypes
• Keynote products

118. Minimum Viable Product
• Smoke testing with landing pages, adwords
• SEM on $5 per day
• In-product split testing
• Paper prototypes
• Keynote products
• Concierge tests

119. Minimum Viable Product
• Smoke testing with landing pages, adwords
• SEM on $5 per day
• In-product split testing
• Paper prototypes
• Keynote products
• Concierge tests
• Cohort and Engagement

120. MVP Fears

121. MVP Fears
• False negative: “customers would have liked the full product but the MVP
sucks, so we abandoned the vision

122. MVP Fears
• False negative: “customers would have liked the full product but the MVP
sucks, so we abandoned the vision

123. MVP Fears
• False negative: “customers would have liked the full product but the MVP
sucks, so we abandoned the vision
• Visionary complex “Customers don’t know what they want”

124. MVP Fears
• False negative: “customers would have liked the full product but the MVP
sucks, so we abandoned the vision
• Visionary complex “Customers don’t know what they want”

125. MVP Fears
• False negative: “customers would have liked the full product but the MVP
sucks, so we abandoned the vision
• Visionary complex “Customers don’t know what they want”
• Too busy to learn: “it would be faster to just built it right, all this measuring
distracts from delighting customers”

126. Lean Startup Principles

127. Lean Startup Principles
• Innovation & Entrepreneurship is management

128. Lean Startup Principles
• Innovation & Entrepreneurship is management

129. Lean Startup Principles
• Innovation & Entrepreneurship is management
• Validated Learning

130. Lean Startup Principles
• Innovation & Entrepreneurship is management
• Validated Learning

131. Lean Startup Principles
• Innovation & Entrepreneurship is management
• Validated Learning
• Build - Measure - Learn

132. Lean Startup Principles
• Innovation & Entrepreneurship is management
• Validated Learning
• Build - Measure - Learn

133. Lean Startup Principles
• Innovation & Entrepreneurship is management
• Validated Learning
• Build - Measure - Learn
• Speed through the loop beat quality

134. Lean Startup Principles
• Innovation & Entrepreneurship is management
• Validated Learning
• Build - Measure - Learn
• Speed through the loop beat quality

135. Lean Startup Principles
• Innovation & Entrepreneurship is management
• Validated Learning
• Build - Measure - Learn
• Speed through the loop beat quality
• Innovation Accounting

136. People and Resources
Text
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

137. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
Text
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

138. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
- Book: 4 Steps to the Epiphany
Text
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

139. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
- Book: 4 Steps to the Epiphany
• Eric Ries - www.startuplessonslearned.com
Text
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

140. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
- Book: 4 Steps to the Epiphany
• Eric Ries - www.startuplessonslearned.com
- Book: The Lean Startup Text
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

141. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
- Book: 4 Steps to the Epiphany
• Eric Ries - www.startuplessonslearned.com
- Book: The Lean Startup Text
• Patrick Vlaskovits & Brant Cooper - Vlaskovits.com, market-by-numbers.com
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

142. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
- Book: 4 Steps to the Epiphany
• Eric Ries - www.startuplessonslearned.com
- Book: The Lean Startup Text
• Patrick Vlaskovits & Brant Cooper - Vlaskovits.com, market-by-numbers.com
- The Entrepreneurs Guide to Customer Development
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

143. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
- Book: 4 Steps to the Epiphany
• Eric Ries - www.startuplessonslearned.com
- Book: The Lean Startup Text
• Patrick Vlaskovits & Brant Cooper - Vlaskovits.com, market-by-numbers.com
- The Entrepreneurs Guide to Customer Development
• Meetup.com, local Lean Startup Circle Meetups - ~20,000 members globally
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

144. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
- Book: 4 Steps to the Epiphany
• Eric Ries - www.startuplessonslearned.com
- Book: The Lean Startup Text
• Patrick Vlaskovits & Brant Cooper - Vlaskovits.com, market-by-numbers.com
- The Entrepreneurs Guide to Customer Development
• Meetup.com, local Lean Startup Circle Meetups - ~20,000 members globally
http://lean-startup.meetup.com/
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

145. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
- Book: 4 Steps to the Epiphany
• Eric Ries - www.startuplessonslearned.com
- Book: The Lean Startup Text
• Patrick Vlaskovits & Brant Cooper - Vlaskovits.com, market-by-numbers.com
- The Entrepreneurs Guide to Customer Development
• Meetup.com, local Lean Startup Circle Meetups - ~20,000 members globally
http://lean-startup.meetup.com/
• Lean Startup Circle online - ~4,000 members with active discussions
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast

146. People and Resources
• Steve Blank - www.steveblank.com, includes the Standford Lean Launchpad
- Book: 4 Steps to the Epiphany
• Eric Ries - www.startuplessonslearned.com
- Book: The Lean Startup Text
• Patrick Vlaskovits & Brant Cooper - Vlaskovits.com, market-by-numbers.com
- The Entrepreneurs Guide to Customer Development
• Meetup.com, local Lean Startup Circle Meetups - ~20,000 members globally
http://lean-startup.meetup.com/
• Lean Startup Circle online - ~4,000 members with active discussions
https://groups.google.com/group/lean-startup-circle
john@blueleaf.com - @johnprendergast - About.Me/JohnPrendergast