We cannot take credit for the below. This is an extract from Marius Ursache, MIT teaching fellow, former doctor and current entrepreneur. These are some notes, that should be read from time to time, to keep you on track. Links to his work below. Enjoy.
Being an entrepreneur is the new cool thing. And as a result, a lot of books and gurus pop up. But is there sufficient understanding of the topic?
Successful entrepreneurship requires people to work hard and work smart. We all know people who work hard, oompa-loompa, cut+paste repetition. But what about those who work smart? They have a lean startup – learn & build & measure.
Business model canvas – what are you key activities, value proposition, customers, relationships, revenue, channels, key resources, costs, key partners? Start with your MVP, or do not start with your MVP.
Smart entrepreneurs have the spirit of a pirateand the skills of a navy seal. Smart = Discipline. What is disciplined entrepreneurship? Check out this framework, by Bill Aulet, and used by MIT, hubspot, lark, kayak, kiva systems and more. Its a common language – framework, highly iterative & toolbox.
There are six themes & 24 steps
- Who is your customer? #1,2,3,4,5,9
- What can you do for your customer? #6,7,8,10,11
- How does the customer acquire your product? #22,23,28
- How do you make money off your product? #15,16,17,19
- How do you design & build your product? #20,21,22,23
- How do you scale your business? #14,24
Lets tackle the 24 steps in detail.
1. Market segmentation
What – brainstorm and identify how your idea can serve a variety of potential end users. Then use primary market research to fill out the mix. Why – it is crucial to start the process with your customers and work backwards from there.
2. Beachhead market
What – select 1 market segment from the first step where you feel you have the best odds of success and it has strategic value. Why – as a startup you will have limited resources and focus is essential.
3. End user profile
What – using primary market research techniques, build out a description, including demographic information & increasingly specific info about their needs and wants. Why – it keeps the focus on the end user; to deepen your understanding of the primary customer; and to calculate the TAM in the next step.
4. Total addressable market for beachhead market
What – estimate of the dollars per year you will get in your beachhead market if you achieve 100% market share. Why – to make sure your beachhead market is not too big or too small.
5. Persona for beachhead market
What – identify one actual real end user in your beachhead market that best represents your end user profile. Why – creates great focus in your organization and serves as a touchstone for all decisions going forward.
6. Full life-cycle use case
What – understand & describe how your product will fit into the persona’s work flow. Why – this will provide valuable information for future steps and also help the team understand potential barriers to adoption from a sales perspective.
7. High level product specification
What – create a visual description of the product as well as making a simple draft brochure. Why – you need to make sure your team all has a common agreement on what the product is.
8. Quantified value proposition
What – summarize in as concrete a way as possible the value your product will create for the target customer. Why – customers buy based on value and it needs to be clear that you can show it.
9. Next 10 customers
What – create a list of the next 10 customers after the persona who closely fit the end-user profile. Why – this validates the persona and all the assumptions you;ve made so far.
10. Product core
What – determine the single thing that you will do better than anyone else that will be very difficult for others to copy. Why – having a clear definition of your core will allow you to focus your limited resources to build & reinforce it.
11. Competitive position chart
What – visually represent your position relative to other alternatives in the persona’s top two priorities. Why – customers don’t care about your core, but they do care about the benefits relating to their priorities.
12. Decision making unit
What – determine all the people that are involved in the decision making process to acquire your product, including influencers. Why – this starts the process to determine the cost of customer acquisition.
13. Customer acquisition process map
What – details of the members of the DMU (decision making unit) make a decision to buy your product. Why – this will be a critical input to determine the length of the sales cycle & identify critical bottlenecks in the process.
14. TAM for follow-on markets
What – calculate the annual revenues from the top follow-on markets after you are successful in your beachhead market. Why – it shows the potential that can come from winning your beachhead and motivates you to do so quickly & effectively.
15. Design business model
What – review different ways to get paid for your product and choose one best aligned with all key stakeholders’ interest. Why – wise selection of a value extraction business model can dramatically reduce COCA (cost of client acquisition), increase LTV (lifetime value) and provide you with a competitive advantage.
16. Pricing framework
What – determine a framework to test pricing for your new product and decide what the initial price will be. Why – small changes in pricing can have a huge impact on your profitability.
17. Lifetime value of an acquired customer
What – estimate the NPV (net present value) of the total profits you will get from a new customer over the life time of that customer. Why – to complete the unit economics you need to estimate & understand the drivers of the LTV and it should get to at least 3x the COCA.
18. Sales process map
What – visually map the ST / MT / LT (short, medium and long term) ways you will create and fulfill demand for your product. Why – this is critical to calculate the COCA over time.
19. Cost of customer acquisition
What – estimate the total marketing and sales expense in a given period to get new customers and then divide this by the number of new customers. Why – the unit economics are a simply but effective proxy for how sustainable & attractive your business will be as it scales.
20. Identify key assumptions
What – identify key assumptions to be tested before you begin to make heavy investments in product development. Why – it will be faster and much less costly now to test the assumptions and allow you to preserve valuable resources and make adjustments as needed.
21. Test key assumptions
What – use a series of small and inexpensive experiments to test each of the individual assumptions you have identified in step #20. Why – this scientific approach will allow you to understand which assumptions are valid and which ones not – giving you time to adjust while the cost/time to do so is minimal.
22. Minimum viable business product
What – define the minimum product that you can use to test whether your customer gets value from the product and whether you can get paid for it, and that starts an iterative feedback loop with the customer. Why – you must reduce the variables in the equation to get the customer feedback loop started with the highest possibility of success with simultaneously the most efficient use of scarce resources.
23. Show dogs will eat the dog food
What – offer your MVBP (minimum viable business product) to your target customer and obtain quantitative metrics regarding the adoption rate of the product, the value the target customer is getting from the product and proof that someone is paying for the product. Why – numbers don’t lie: show concrete evidence and don’t simply rely on anecdotal evidence.
24. Product plan
What – develop a longer term plan to add functionality so you can address additional markets. Why – it is important to think ahead and have a plan so people are ready to keep moving forward after the MVBP.
Complicated, isn’t it?
Who ever said it was easy? The effort & resources needed to launch a successful startup is much more than you thought at first. It takes months – but saves years! Disciplined entrepreneurship applies to hybrid innovation, not only to software (hardware, software, business model, process).
I am as proud of the things we haven’t done as the things I have done. Steve Jobs.
Want more? Off course. Check out http://detoolbox.com/. It’s brilliant.