With this presentation I'm trying to give a broad overview of available startup strategy frameworks. If I have accidentally violated any copyrights please contact me first. The presentation is still in draft status. Will be extended further. happy for feedback

1. S³
Startup Strategy Stuff
Draft 0.3 – 22.9.2012
Jan-Hendrik Adolphs
T @twabou

2. Feedback/Comments/Disclaimer
• This version is still in draft status. For
feedback/comments contact me via twitter
(@twabou), e-mail (jhadolphs@gmail.com) or
on slideshare
• I try to post sources everywhere. If I have
violated any copyrights, please contact me
immediately. Didn’t mean to. Thx

3. What is a startup?
• A startup is a human institution that desires
to create value for customers in an
environment of high uncertainty and risk.
You don‘t know anything until you have
tested and proven your product/
customer/ market hypothesis *
9 out of 10 startups fail**
* I also don‘t know anything ;)
** so listen to your customers

4. So why try it then? And how?
• Because its fun, creative, challenging and
fulfilling! => And it‘s YOU!
• There are strategies and frameworks that can
lower the chance of failing and wasting your
time … but it‘s a lot of work …

5. Big Picture
• Business Model Canvas* (Alexander Osterwalder)
– Visual presentation of end-to-end business model
– Focuses on the internal of a business model (no
PESTIELD**!)
– Separated in creation and consumption side
– Excelent for group discussion and brainstorming
– Don‘t get to excited about massive planning, focus on few
details and keep it high-level!
A good foundation for business model discussion and
enhancement with additional models / frameworks /
tools
* Business Model Generation (Osterwalder, A.; 2010) / http://www.businessmodelgeneration.com
** External factors = political, economic, social, tax, international, ecological, legal, demographic (can be
mission critical)

7. Other Frameworks
• Strategy Diamond
• Porters 5 Forces
• Porters Generic Strategies
• PESTIELD
• Bowman’s Strategy Clock
• SWOT/TOWS
• These and more can be found at
http://www.mindtools.com/pages/main/newMN_STR.htm
(check back-up slides for few examples)

8. • Remember: Its mostly business internal stuff. Also consider external factors
• Work with it from right to left and keep it simple
• Start with customer segment and value proposition (or CPS)
• Leave costs and revenues for the end

9. Focus
• CPS Hypothesis
– Who? Is there a customer & scalable market?
– Why? Is there a problem/need/desire that can be
solved?
– How will we solve this? With what?
• What you want is a product/service that serves a
customer as a solution to a problem/need that is
perceived as a desirable value-creation.

10. „Create something people love!“*
• Compelling product that people love to use more than
once and recommend to others
make it contagious and sticky!
activation / retention / referral
• Product / market fit
Right set of features (not more than necessary)
for identified customer segment
• Customer Value Canvas (Link)
– Pain => Gain
* Service design and entrepreneurial mantra

11. Economic Logic
• A happy user…
– Is willing to pay for your product (revenue)
– Talks good about your product (referral)
– Sticks with your product (customer lifetime value up)
Scale revenue and user-base

12. Source:
http://www.businessmodelalchemist.com/2012/01/the-customer-value-canvas-v-0-8.html

13. Service Design Thinking
• A multidisciplinary approach to design better
user-centered services/products
• Service-dominant logic (Stephen Vargo and
Robert Lusch)*
=> There is no sole product or service, always
look at product & service as one for better
user experience! (gives you higher retention
and refferal)
Source:
http://courses.ischool.berkeley.edu/i210/f07/readings/VargoLusch.pdf

14. Service Design Tools*
• Always ask for the ultimate solution for a
customer – not the product (there is a
difference!) Explore it!
– 5 Why‘s Root Cause Analysis
– User Journey / User Day Walkthrough
– Stakeholder Maps / Decision Maker Analysis
– Customer Lifecylce Map
– Design Scenarios
...
Source:
This is Service Design Thinking: Basics, Tools, Cases (Schneider, D.; Stickdorn, M.; 2011)

15. How (not) to waste time…
• You don’t want to build a product for a market
that does not exist or is not willing to pay for
your product.
• Gather feedback from customers as early as
possible.
• Iterate as often as possible in small
measurable steps.
• Customer Development vs. Product
Development

16. Customer Development vs. Product
Development
• Why startups fail*: consistent vs. inconsistent
– Scalation before proven CPS / MVP / business
modell
– Waste time on product development instead of
unterstanding customers
Source:
http://visual.ly/why-startups-fail

17. Customer Development
• Talk, listen, research, refine, talk, listen, research, refine …
do, refine … do, refine … tune, talk, tune … profit
• Steve Blank: 4 Phases
– Customer Discovery
– Customer Validation
– Customer Creation
– Business Creation
• Its all about product / market fit and proving assumptions /
hypothesis
• Don’t burn marketing/sales budget on unproven products
Source:
http://www.amazon.com/The-Four-Steps-Epiphany-Successful/dp/0976470705

19. MVP
• Minimum Viable Product = minimum set of
features of a product or service for that a user
is willing to pay (best is money, time also good
for hypothesis validation hint)
• Philosophy: Adress only one specific problem
that is solved by your solution for províng your
problem / solution hypothesis
• 80:20 rule -> spent 80% of your time on
existing features and 20% on new ones

20. A-B / Split Testing
• Marketing and product development term for
improving / refining a component
– Can be color of design element, wording, feature, tag
• Two alternatives run and tested at the same
time by the same targeted audience
• Whichever shows better results will be used in
the future
• The other one is abandoned (BUT not forgotten!)
validated learning

21. Pivots
• Pivot: A switch from on X to another where X can
be a market, distribution channel, revenue
channel, partner, business modell, etc
• Generally a replacment or change of a larger
business modell component
• Often occurs when a business model doesn‘t
seem to be working or other option is more
profitable or customer oriented

22. Startup Feedback Loop
• Mantra: everything is
beta, get to market
asap for customer
feedback and refine
• Continuous iterative
process for product
refinement to achieve
and enhance
product/market fit
• One change per iteration so you don‘t mess up cause and effect
• Keep changes small and effects measurable (right KPI!)
Source: http://blog.octo.com/5-bonnes-raisons-de-deployer-en-continu/

23. Funnel Analysis
Your goal:
Customer uses/orders
product/feature you are trying
to sell.
Your task:
– Visualize / separate process steps
on getting there
– Use available tools to track user
journes, e.g. KISS metrics
Maximize step-to-step conversion
and minimize drop-rate
Understand what is important to Source:
customer and what is not => http://www.volacci.com/blog/ben-
finklea/2010/february/08/social-web-analytics-
simplify (don‘t make customer part-1

24. Cohort Analysis
• A cohort group is a group of people with
similar characteristics
• Dont‘t just look at your usergroup as a whole
but at subgroups at different stages of their
lifecycle
http://blog.kissmetrics.com/wp-
content/uploads/2012/01/cohort-
analysis.png

25. How can You grow?
1. increase new customers per month (obvious!)
2. decrease churn rate
2nd should be prio 1 because
– already using your product so no additional COAcq
– and this seems to be your target market
– and (once again) you want a compelling/sticky product
=> Once you achieved product/market fit and
decreased churn rate go back to 1 => SCALE!

26. Scaling customer considerations
• Different kind of users
– Visitor, no use of product
– One-time-user, no retention, no referral
– X-time-user, low retention, no referral
– X-time-user, high retention, no referral
– X*Y-time-user, retention, referral
=> You want the last type for scaling your business
for exponential growth (viral! = free marketing)
Source:
http://www.seedcamp.com/resources/startup-metrics-for-pirates-by-dave-mcclure

27. Measuring improvement over time
• Look at # of new customers per period
• NOT # of total customers
Increased # of marginal customers tells you if your
iteration was good for your business
It‘s nice to increase your total # of customers but
you want to find out if a certain product change is
worth keeping or reverting to original.

28. So how do I make money?
• 7 basic revenue streams on the internet *,**
– Service Sales (skype) scalable?
– Retail (amazon) warehouse/returns?
– Subscription (WOW) compelling offering?
– Commission (ebay) side deals/rate?
– Ads (google) annoying?
– License Sales (apple) quality content
– Financial (still emerging) trust
• Freemium and 5/95 rule
– On the internet it is possible to create a sustainable
business with only 5% of paying customers (-> the
long tail)
• Combinations and derivates possible
• Source: Simply Seven: … (Schlie, E et al, 2011)

29. Basic Revenue Calculation
• M Market Size (# of potential customers)
• m Market Share (your estimate, compare with competition)
• X Purchases per Period (month, year, day?)
• Y Periods (how often will one customer buy)
• P Price
R=m*M*X*Y*P
(very basic but a quick and dirty way to show revenues)
(when calculating revenue over time consider churn rate of 25%)

30. So what about costs?
• Fixed costs
– Not dependent on size/number of business output
– Capacity costs, Idleness costs, step costs
– Necessary for keeping the business operable at a minimum scale
– E.g. rent, administrative/general expenses, long term wages
• Variable costs
– Dependent on size/number of business output
– Economics of scale
– E.g. material, wages, traffic, storage, short term wages
• Generally C = Cf + n * Cv
– Where Cf = sum of fixed costs and Cv = variable costs per business
output

31. Other Frameworks
• Strategy Diamond
• Porters 5 Forces
• Porters Generic Strategies
• PESTIELD
• Bowman’s Strategy Clock
• SWOT/TOWS
• These and more can be found at
http://www.mindtools.com/pages/main/newMN_STR.htm
• Following are a basic complement to BMC

32. Strategy Diamond
• “Strategy is about what to do and what not to do”
Highlights choices and choice-gaps to str. Goals
• Arenas: Where will we compete? (external environment)
– Products, customer / geographic market, technologies, value creation stages
• Vehicles: With what we get there? (ratio internal activities /partners)
– Internal development, JV / M&A
• Differentiators: Why will WE be successful?
– UVP, value prop, brand, price, customization
• Staging & Pacing: How will we get there? What’s our actionplan?
– Sequence and speed of strategy implementation, decision points
• Economic Logic: R – C = $$$
– Lowcost (scale/scape), premium price (service quality / product features)
Sources:
http://www.strategyhub.net/2012/07/framework-of-week-84-strategy-diamond.html
http://www.provenmodels.com/598/strategy-diamond/donald-c.-hambrick--james-w.-fredrickson/
http://www.nwcor.com/NWCOR/Content/Readings/Chapter%2013-%20Strategy-%20AME%20CLassic.pdf

33. Porters 5 Forces
Source:
http://www.mindtools.com/pages/article/newTMC_08.htm

34. Book Recommendations
• Business Model Generation
• The Lean Startup
• Four Steps to Epiphany
• The Startup Owner’s Manual
• The Tipping Point
• From Good to Great
• Don’t make me think
• This is Service Design Thinking
• Venture Deals: Be smarter than your lawyer and
VC