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University of Michigan in Silicon Valley 030211
This document summarizes the differences between startups and large companies. It explains that startups are focused on searching for a business model through customer development and validating hypotheses, while large companies focus on executing an established business model. Startups use agile development and metrics to guide their search, rather than traditional accounting and planning used by large companies. The transition between startup and large company occurs when a startup finds product/market fit and a repeatable sales process.
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University of Michigan in Silicon Valley 030211
- 1. The Entrepreneurial ExplosionSteveBlankStanford - School of Engineeringwww.steveblank.comTwitter: @sgblank
- 2.
- 3. I Write aBlog www.steveblank.com
- 4. A Few ShortStories
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- 6. High Cost toFirst ProductStartup Constraints
- 7. Buy expensive workstationsBuyexpensive development tools
- 8. Low Cost to1st ProductEntrepreneurial Explosion
- 9. Develop on inexpensivePC’s/Mac’sUse Open Source Software
- 10. High Cost toFirst ProductLong Time to First ProductStartup Constraints
- 11. Use Waterfall DevelopmentFirstCustomer Ship in months/years
- 12. Low Cost toFirst ProductShort Time to First ProductEntrepreneurial Explosion
- 13. Use Agile DevelopmentFirstCustomer Ship in weeks/months
- 14. High Cost toFirst ProductLong Time to First ProductStartup ConstraintsSlow Customer Adoption
- 15. Customers – Gov’t/Businesses#of customers - hundreds/thousands
- 16. Low Cost toFirst ProductShort Time to First ProductEntrepreneurial ExplosionFast Customer Adoption
- 17. Customers – Consumers#of customers - millions
- 18. High Cost toFirst ProductLong Time to First ProductStartup ConstraintsSlow Customer AdoptionHigh Startup Failure Rate
- 19. Startups are smallversions of large companiesFocus is on execution of business plan
- 20. Low Cost toFirst ProductShort Time to First ProductEntrepreneurial ExplosionFast Customer AdoptionLower Startup Failure Rate
- 21. Startups are notsmall versions of large companiesFocus is on Search for a business model
- 22. High Cost toFirst ProductLong Time to First ProductStartup ConstraintsLimited Number of Venture CapitalistsSlow Customer AdoptionHigh Startup Failure Rate
- 23. 3000 Sand HillRoad
- 24. Low Cost toFirst ProductShort Time to First ProductEntrepreneurial ExplosionLarge Pool of Risk CapitalFast Customer Adoption RateLower Startup Failure Rate
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- 26. High Cost toFirst ProductInnovation Limited to a Few RegionsLong Time to First ProductStartup ConstraintsLimited Number of Venture CapitalistsSlow Customer AdoptionHigh Startup Failure Rate
- 27. 3000 Sand HillRoadMenlo Park, California
- 28. Low Cost toFirst ProductGlobal InnovationShort Time to First ProductEntrepreneurial ExplosionLarge Pool of Risk CapitalFast Customer Adoption RateLower Startup Failure Rate
- 29. Menlo Park, SanFrancisco New York, Shanghai, Israel, Chile, Singapore
- 30. Low Cost toFirst ProductGlobal InnovationShort Time to First ProductEntrepreneurial ExplosionThis talkLarge Pool of Risk CapitalFast Customer Adoption RateLower Startup Failure Rate
- 31. Why Startups AreNot Small Versions of A Large Company
- 32. Startups Search, CompaniesExecuteScalableStartupTransitionLarge CompanySearchBuildExecute
- 33. Startups Search andPivotThe Search for the Business ModelScalableStartupTransitionLarge Company Business Model found by founders customer needs/product features found i.e. Product/Market fit Repeatable sales model- Managers hired
- 34. Startups Search, CompaniesExecuteThe Execution of the Business ModelThe Search for the Business ModelScalableStartupTransitionLarge Company- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 peopleBusiness Model found
- 35. Product/Market fit-Repeatable sales model- Managers hired
- 36. Metrics Versus AccountingTheExecution of the Business ModelScalableStartupTransitionLargeCompanyTraditional AccountingBalance Sheet
- 37. Cash FlowStatement
- 38. Income StatementMetricsVersus AccountingThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyStartup Metrics Customer Acquisition Cost
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- 40. Customer LifetimeValue
- 41. Average SellingPrice/Order Size
- 42. Monthly burnrate
- 43. etc. Traditional Accounting Balance Sheet
- 44. Cash FlowStatement
- 45. Income StatementCustomerValidation Versus SalesThe Execution of the Business ModelScalableStartupTransitionLargeCompanySalesSales Organization
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- 47. Price List/DataSheets
- 48. Revenue PlanCustomerValidation Versus SalesThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyCustomer Validation Early Adopters
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- 50. Not yetrepeatable
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- 52.
- 53. Price List/DataSheets
- 54. Revenue PlanEngineeringVersus Agile DevelopmentThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.
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- 56.
- 57. Tech PubsEngineeringVersus Agile DevelopmentThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.
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- 59.
- 60. Tech PubsAgileDevelopment Continuous Deployment
- 61.
- 62. Self OrganizingTeams
- 63.
- 64. PivotsStartups Model,Companies PlanThe Execution of the Business ModelScalableStartupTransitionLarge CompanyBusiness Plan describes “knowns”
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- 66.
- 67. business modelStartupsModel, Companies PlanThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyBusiness Model
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- 71.
- 72. found byiteration
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- 74. Known featuresfor line extensions
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- 76. Known businessmodelHow Do Startups Search For A Business Model? The Search is called Customer Development
- 77. The Implementationis called Agile DevelopmentCustomer Development
- 78.
- 79. More startups failfrom a lack of customers than from a failure of product development
- 81. Customer Problem: known ProductFeatures: known
- 82. No Business Plansurvives first contact with customers
- 83. So Search fora Business Model
- 84. The Business Model:Anycompany can be described in 9 building blocks
- 85. CUSTOMER SEGMENTSwhich customersand users are you serving? which jobs do they really want to get done?
- 86. VALUE PROPOSITIONSwhat areyou offering them? what is that getting done for them? do they care?
- 87. CHANNELShow does eachcustomer segment want to be reached? through which interaction points?
- 88. CUSTOMER RELATIONSHIPSwhat relationshipsare you establishing with each segment? personal? automated? acquisitive? retentive?
- 89. REVENUE STREAMSwhat arecustomers really willing to pay for? how? are you generating transactional or recurring revenues?
- 90. KEY RESOURCESwhich resourcesunderpin your business model? which assets are essential?
- 91. KEY ACTIVITIESwhich activitiesdo you need to perform well in your business model? what is crucial?58
- 92. KEY PARTNERSwhich partnersand suppliers leverage your model? who do you need to rely on?
- 93. COST STRUCTUREwhat isthe resulting cost structure? which key elements drive your costs?
- 94. value propositioncustomer relationshipskeyactivitiescustomer segmentskey partnerscost structurerevenue streamskey resourceschannels61images by JAM
- 95. sketch out yourbusiness model
- 96.
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- 101.
- 102. Customer DevelopmentThe founders^GetOut of the Building
- 103. Product DevelopmentConcept/Bus. PlanProductDev.Alpha/Beta TestLaunch/1st Ship+CustomerDevelopmentCompanyBuildingCustomerDiscoveryCustomerValidationCustomer CreationCustomer DevelopmentPivot
- 104. Customer DiscoveryCustomerDiscoveryCustomerValidationCompanyBuildingCustomerCreationTest yourbusinessmodel hypothesesContinuous DiscoveryDone by founders
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- 106.
- 107. CompetitionTurning Hypothesesto Facts
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- 109.
- 110.
- 111. PayerTest Hypotheses:ChannelTestHypotheses:Demand CreationTest Hypotheses:Problem
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- 117.
- 118. (Problem)Test Hypotheses:ChannelTestHypotheses:Pricing Model / PricingTest Hypotheses:Size of Opportunity/Market
- 119. Validate BusinessModelTest Hypotheses:Demand CreationTest Hypotheses:Problem
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- 121.
- 122. PayerAgile DevelopmentTestHypotheses:Product
- 123.
- 124.
- 125.
- 126. (Problem)Customer DevelopmentTeamTest Hypotheses:ChannelTest Hypotheses:Pricing Model / PricingTest Hypotheses:Size of Opportunity/Market
- 127. Validate BusinessModelThe Minimum Viable Product (MVP) Smallest feature set that gets you the most …orders, learning, feedback, failure…
- 128. MVP + Customerare the first two you need to nail
- 129. MVP isjust 1 of the 9 parts of your modelThe PivotThe heart of Customer Development
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- 131. Fast, agile andopportunisticWrap UpStartup are not small versions of large companiesTraditional big company planning tools failStartups are built on hypothesesYou need to test each one of themBusiness Models help you keep scoreCustomer Development is how you test hypotheses
- 132. Why Startups Aren’tRun By Accountants
- 133. Inventor of theModern CorporationScalableStartupTransitionLarge Company
- 134. Inventor of theModern CorporationScalableStartupTransitionLarge CompanyAlfred P. Sloan
- 135. Alfred P. SloanScalableStartupTransitionLargeCompanyGeneral Motors, President/Chairman Cost Accounting
- 136. MIT SloanSchool
- 137.
- 138. etc. Founderof General MotorsScalableStartupTransitionLarge Company
- 139. Founder of GeneralMotorsScalableStartupTransitionLarge CompanyBilly Durant
- 140. Billy DurantScalableStartupTransitionLarge CompanyLeader in horse-drawn buggy’s
- 141. Fired by board,starts Chevrolet
- 142. Regains controlof GM
- 143. Fired by board,GM ~$3.6 billion** GM Net sales in 1921 $304.5M = $3.6 Billion today
- 144.
- 145. Durant Versus SloanDies,rich, honored and famousDurant Versus SloanDies managing a bowling alley
- 146. Dies, rich,honored and famousDurant Versus SloanAccountantDies managing a bowling alley
- 147. Dies, rich,honored and famousYou are hereScalableStartupTransitionLarge Company
- 148.