Entrepreneurship Essentials

Entrepreneurship
Essentials
Lean Startups - Value Proposition
Entrepreneurship Essentials

 Product adoption curve

 Crossing the chasm

 How change is accelerating.

 Traditional linear process and lean process of product development

 What is minimum viable product?

 How to make minimum viable product?

 Example of minimum viable product

Entrepreneurship Essentials
Leaders in Socially active, Look for validation Geofrey Moore:
take calculated Crossing the chasm.
respective and revalidation,
Adventuresome, segment, risk, need a lot concerned for Complacent,
usually highly of validation to
educated and value for money. averse to try
educated, trust a new
knowledgeable, product. Averse to new lesser known
inquisitive, ok with risk. experiment. product, risk
innovative mind, averse.
risk takers.

Innovator Early Adopters Early Late

Laggards 16%
2.5% 13.5% Majority Majority
34% 34%
Product Adoption Curve
Types of consumers from new product adoption perspective
Entrepreneurship Essentials
Leaders in Socially active, Look for validation
take calculated Moore, G. A., &
respective and revalidation, McKenna, R. (1999).
Adventuresome, segment, risk, need a lot concerned for
of validation to Crossing the chasm.
usually highly educated and value for money.
educated, trust a new
knowledgeable, product. Averse to new Complacent,
inquisitive, ok with risk. experiment. averse to try lesser
innovative mind, known product,
risk takers. risk averse.

Innovator Early Adopters Early Late

Laggards 16%
2.5% 13.5% Majority Majority
34% 34%
Product Adoption Curve
Types of consumers from new product adoption perspective
The theory posits that the rate and extent of adoption are influenced by the characteristics of the innovation, the social system,
and the communication channels used to promote the innovation.
Entrepreneurship Essentials
Series C Series D or IPO Geofrey Moore:
Series B Crossing the chasm.
Buyers want Buyers do not
Series A proven value(s) want any risk
Bootstrap, Seed
Wait until it
Buyers need to becomes a
see value household
Buyers are okay
product
with some risk

Innovator Early Adopters Early Late

Laggards 16%
2.5% 13.5% Majority Majority
34% 34%
Product Adoption Curve
Types of consumers from new product adoption perspective
Entrepreneurship Essentials

Crossing the Chasm

• Moore's concept is about diffusion of innovation and is essential
element of tech entrepreneurship.
• Early adopters of a product are mostly technology enthusiasts
and visionaries and the early majority are the pragmatists. The
stimulation does not work for them. So, there exists a chasm.
• Visionaries and pragmatists have different expectations.
Techniques to successfully cross the "chasm”:
• Plan the growth much ahead, prepare to put in place the
required infrastructure including manpower, deep
understanding of the product concept, position, build marketing
strategy, choose the most appropriate distribution channel and
price attractively.
Entrepreneurship Essentials

Waterfall Approach of Product Development

Requirements Product requirement document

Business analysis

Design Software architecture

Implementation Software

Verification

Maintenance
Linear Process
Entrepreneurship Essentials

Waterfall Model

Sales
Time
Build
Build
Resources, Risk & ₹

Build
Build

Build

Time Release and Validate

Entrepreneurship Essentials

Agile model Validation

Sales
Validation

Validation

Build Time
Validation
Build
Resources, Risk & ₹

Build
Customers Build
Validated
Build Learning

Time Release and Validate

Entrepreneurship Essentials

Agile System (Build-Measure-Test Validated Learning)

Entrepreneurship Essentials
Waterfall Method: Linear process of product development
Plan &
analyze Design Build Test Correct Test again Deploy

Agile Framework: Non-linear process with constant validation

Design Design
Design
Build Build Build
Redesign Redesign Redesign
Deploy/
Launch after
Analyze Plan Analyze Plan customers-
Analyze Plan
acceptance
Learn Test Learn Test Learn Test

Deploy Deploy Deploy

Entrepreneurship Essentials

Agile System (build, measure, learn cycle)

An enabling factor in an agile manufacturer is that it allows the
marketers, the production personnel and the designers to share a
common source of information so that any correction in product can
originate from the design itself.
A small initial problems may have larger downstream effects. It is a
general proposition of manufacturing that the cost of correcting
quality issues increases as the problem moves downstream.
It is cheaper to correct quality problems at the earliest
possible point in the process.
Entrepreneurship Essentials
An agile system is a flexible and iterative approach to project management and product development. It
prioritizes collaboration, customer feedback, and adaptability to deliver high-quality results. Key characteristics
of an agile system include:

1. Iterative Development: Agile systems break down projects into small, manageable increments
or iterations. Teams work on these iterations, allowing for continuous improvement and
adjustment.
2. Collaboration: Agile emphasizes close collaboration among cross-functional teams, including
developers, designers, and stakeholders. Frequent communication helps address issues promptly.
3. Customer-Centric: Agile places a strong focus on customer satisfaction and involvement.
Customer feedback is regularly sought and incorporated into the development process.
4. Adaptability: Agile systems are adaptable to changing requirements, allowing teams to respond
quickly to new information, shifting priorities, and evolving customer needs.
5. Transparency: The progress of work, challenges, and successes are made transparent to all team
members and stakeholders. This transparency fosters trust and accountability.
6. Empowerment: Agile teams are often self-organizing and empowered to make decisions, which
enhances productivity and innovation.
7. Short Iterations: Work is divided into short timeframes called iterations or sprints (typically 2-4
weeks). This allows for regular inspection and adaptation.
8. Minimal Documentation: Agile values working software or product over extensive
documentation, although documentation is still important for clarity.
Entrepreneurship Essentials

Lean Concept

• Define the problem as completely as possible.

• Build the MVP with the key features that define the value
proposition or product differentiation.
• Eliminate all features that you think customers may not attribute
value. Cut cost.
• Eliminate waste in all possible ways.
• Try charging the early customers. That is better validation and keep
the cash flowing.
Entrepreneurship Essentials

An Example
Entrepreneurship Essentials

The Lean Start-up Process

• Identify a suitable business model around a compelling pain (people are crying for a better
solution).
• Identify essential components for customer to appreciate.
• Build a Minimum Viable Product (MVP).
• An (MVP) is a product with just enough features to give the customers the sense of value proposition.
It helps early customers evaluate the core functionalities and to provide meaningful feedback for
future product development.
• Validate your hypothesis and thus the business model.
• Use the data and learning to repeat the process.
• Add more features and reduce some and repeat the process.
• Optimize and avoid waste.
• Gather data, learn, refine.
• Charge early customers
Entrepreneurship Essentials

Lean and Agile

• Lean recommends elimination of waste of all kinds of resources and waste

is defined as the use of that part of resources, which does not add
incremental value to customers.
• Agile requires processes, tools and training so as to quickly and
economically respond to customers’ needs and market changes.
• Applying both Lean and Agile can ensure better success of business.

Lean Startup
• Eric Reis seems to have combined the idea of elimination of wastes in lean
manufacturing with the validated learning of Agile method and expounded
the Lean startup process.
Entrepreneurship Essentials

How to Validate?

• Validation is assessing the possible product-market-fit through user

testing.
• Validation is early test of your hypothesis.
• The process, when done early, helps to make faster, informed, and
de-risked decisions.
• For validation of early prototype, develop Minimum Viable Product
(MVP).
Entrepreneurship Essentials

Creating the MVP

• Identify the most critical feature of your product or service that would
help the customers decide about your value proposition.
• You need to understand the user stories – their pain point.
• Suppose you are planning to prepare contents for school kids that would
engage them in hands-on learning. The user story is that “The school does
not have the infrastructure to demonstrate practical experiments for
wholesome understanding of many topics.”
• One can design and develop a full course and give that to students. But
what if the students don’t appreciate it?
• Alternately -
• Prepare one module and evaluate its power to engage kids by asking
them to use it.
Entrepreneurship Essentials

Hypothetical Example

• You prepare a few tools using which students can learn a small
topic.
• Present it to a batch of students, check their response, and evaluate
levels of learning (ease) and retention.
• Decide on further course of action based on the data.
• You can postpone the huge investment to create content and make
informed decisions.
Entrepreneurship Essentials
The Lean Startup – by Eric Ries
The five key constituents

01 Lean thinking: shrinking batch sizes, just-in-time inventory &

production management, and acceleration of cycle times.
02 Measure the progress: through validated learning.
Productivity: Make things that people like and pay profitable
03 price and do it fast and economic way.
Build-measure-learn feedback loop: instead of building
04 based on lot of assumptions, keep adjusting with a steering wheel
called build-measure-learn. Through this process we can learn if
and when to make a sharp turn – a pivot.
Charge early – a paying customer is a real validation of the
05 hypothesis and it helps the most critical element: the cash flow.
Entrepreneurship Essentials

Validated Learning: Build-Measure-Learn Cycle

Build with minimum key

Test your hypothesis about features so that customers
product-market-fit.
Pivot or persevere
Learn Build can comprehend usefulness
and comfort.

Analyze data on customer

feedback.
Measure
Usability.
Experience.
Performance for each feature.
Entrepreneurship Essentials

The Lean Startup – by Eric Ries

Learn
 Experiment with two hypothesis
Value hypothesis
Growth hypothesis
 Leap-of-faith assumptions
 Steer
Minimizing the total time
Minimum Viable Product
Learning milestones
Entrepreneurship Essentials

The Lean Startup – by Eric Ries

• We must always ask: what if the user doesn’t care about the design
in the same way we do?

• Pivot and Preserve

• Pivot – course correction based on learning. Pivot early if you must.
Vanity metrics prevent pivoting.
• Preserve resources
• Charge early
Entrepreneurship Essentials
Useful Metrics
• Actionable - when cause and effect is clearly understood and leads to effective
decision making.
• Accessible - Understandable and measurable.
• Auditable - meaningful to understand real performance, employees get insight of
the output of their efforts.
Ideally speaking, each corporate, department, and section objective should be:
SMART objective or criteria

• Specific – get specific data on what to accomplish, which resources, why is it important, who
are involved.
• Measurable – can you express the requirement in numerical value for all team members to
clearly understand.
• Assignable – You may need to improve multiple things. Who should do what will make the
process seamless.
• Realistic – Given available resources, try to be realistic of the goal. Else pivot.
• Time-bound – set a goal when the result(s) must be achieved.
Entrepreneurship Essentials

• The Lean Startup process is a way to test your hypothesis

continuously, to adapt and adjust before it’s too late.
• It is a scientific approach to creating and managing successful
startups in an age when companies need to innovate too
rapidly.
Entrepreneurship Essentials

Lean and Agile Process

• Lean startup process derives the waste reduction ideology of the

lean manufacturing and the validated learning process of Agile
method. It adds a few more such as ‘charge early’, ‘eliminate
features that customers do not perceive to be of value’.
• Lean manufacturing is about cutting wastage of all resources as far as
possible and continuously creating better value for customers.
• In Agile process, execution moves forward with validated learning and
handles uncertainty on the way.
• Agile is directly in contrast with the traditional linear models
such as waterfall model.
Entrepreneurship Essentials

MVP
• A key premise behind the idea of MVP is that you produce a product
with essential features, say a landing page with minimum features
or a product with no aesthetics, that your customer can use and give
you feedback.
• Sometimes, just watching people using a product reveals much
more reliable information than asking people what they would do.
Entrepreneurship Essentials

Charge Early

• Start with a prototype of essential but minimum features.

• Try charging customers early, preferably from day one.
• Some early cash inflow goes a long way.
• If customers are paying for the MVP, that is the real validation.
Entrepreneurship Essentials

⮚ https://unsplash.com/s/photos/background for images

 Ries, E. (2011). The lean startup: How today's entrepreneurs use continuous innovation to create
radically successful businesses. Crown Books.
 Book Summary: The Lean Startup By Eric Ries
 Kander, Diana. All in Startup: Launching a New Idea when Everything is on the Line. John Wiley & Sons,
2014.
 http://info.boardofinnovation.com/hubfs/Validation%20Guide%20compressed.pdf
 Various Wikipedia pages
Moore, G. A., & McKenna, R. (1999). Crossing the chasm.
Entrepreneurship Essentials

Thank you
Entrepreneurship Essentials

The Lean Startup – by Eric Ries

Transform
your venture
Innovation factory: Use lean startup technique and
01
into an
continuously create disruptive innovations. innovation
factory by
empowering
people to
Culture and systems: Empower people to think out of the think out of
02 box without risk and innovate at the speed of the the box and
inculcating a
experimentation system.
culture of
lean startups
Entrepreneurship Essentials
Example
After limited success in multiple startups, Nick Swinmurn wanted
to start a business of online shoe selling. He was driven by his
own frustration of not finding a suitable pair of shoes in couple of
stores he visited.
People did not believe - customers would buy shoes without trial.

• But Nick believed that people do not see what he can see.
• His hypothesis was - people have limited choices when they visit a store.
• His ‘leap of faith’ was - given a chance to choose from thousands of designs,
most people would not mind buying online.
• Instead of putting in place huge logistics, hiring people, buying huge number
of shoes to display on his portal to start his business, Nick decided to pilot
his idea through an MVP.
• And he had a unique plan.
Entrepreneurship Essentials

Traditional Process of Product Development

• Epiphany, serendipity, eureka or just a problem.

• Identify product to be developed based on market
survey.
• Frequently, the problem is faced by the entrepreneurs.
Phanindra Sama of redBus. Burr to Velcro. Sticky notes.
• Tilak Mehta identified a pain from his own experience
and has created a ₹100 crore venture.
• Ideation and idea screening based on technical
feasibility and market potential. Only a few ideas would
eventually emerge as a marketable product.
Entrepreneurship Essentials

Tilak Mehta: Paper n

parcel

• Tilak's company has achieved a

staggering turnover of over Rs 100
crore in 2021.
• As of 2021, his net worth stands at
an impressive Rs 65 crore.
• His MONTHLY income in 2021 was
Rs 2 crore.
• He is expanding across India.
Entrepreneurship Essentials
Traditional Process of Product Development
… cont’d.

1 2 3 4 5 6
Design & Develop, Test Check the design for Cost & demand Create awareness. Launch - manufacture, Maintain or improve
and refine. manufacturability. analysis, pricing, Go-to- distribute through quality.
market strategy. distributor network or
sell online.
Entrepreneurship Essentials

Developing a New Product

The strategy is to understand

The longer it takes for the
the pain, the product/service,
product to reach to the
the competition, and to create
customers the longer is the
value proposition by evolving
time to know whether the
solution that serves the
product is acceptable by the
customer better than that of
customers or not.
the competitors.
Entrepreneurship Essentials

The Lean Startup – by Eric Ries

• How Today's Entrepreneurs Use Continuous Innovation to Create

Radically Successful Businesses