2015-10-30

Clean Faillure

As a nice play on the name of this site, here is an article about a clean startup :-) The article talks about Homejoy and why it failed. Ultimately, they never really validated their #solution.

Link:
https://medium.com/backchannel/why-homejoy-failed-bb0ab39d901a

And if you like more, here is a discussion on Hacker News:
https://news.ycombinator.com/item?id=10451143

2015-10-29

Validation Pyramid

A sequence of 5 steps for validating business ideas/models. It is named pyramid, because each step builds upon the steps before. 

The steps are:
  1. Customer Segment
  2. Relevant Problem
  3. Accepted Solution (Problem-Solution-Fit)
  4. Viable Channel
  5. Monetization (Product-Market-Fit)

Whenever a step is validated, all steps with a smaller number are validated as well. E. g.: if your customers can imagine to use your prototype in reality and pay money for it, they must have a relevant problem.

2015-10-28

Lean Startup

A process for systematically reducing risks in innovation projects.
The core idea of lean startup is to minimize risks by actively collecting data for risky parts of your plan. Lean startup is a process for any risky projects, not just startups.

2015-10-27

Validation

Hypotheses can be validated. This is done by designing and running an experiment, then interpreting the results. If the data does not falsify the hypothesis, the hypothesis is validated. The main effect is, the probability of an assumption goes up (which you hope) or down (which you fear, but should know the sooner the better).

2015-10-26

Experiment

An experiment is a way to collect data, which could falsify a hypothesis (H). If the amount of data is so large that it could falsify the hypothesis, but it doesn’t, then the hypothesis is considered true. Or: How much data do you need to convince yourself, a team mate, or a VC of H or its contrary?
Most experiments measure user behavior, for which customer conversations is the main technique. Others kinds of experiments are data research and technology tests.

Example:


  • Go to the central cafeteria of the university and ask 20 students how much they spent on their bike-lock.

2015-10-23

Hypothesis (H)

Each assumption can be formulated as falsifiable hypotheses = there exists an experiment, which proves or disproves the hypothesis. Formulating good hypotheses is an art.

Example:
  • At least 20% of students paid more than 100 € for their bike lock.

Assumption (A)


In your plan, you implicitly have the assumption that the risks are not risky and all goes well. It won’t: Some of the risks will certainly cause problems – you just don’t know yet, which. Each risk is an assumption and each assumption is a risk.

Example:
  • Risk: Students may not pay over 100 € for a secure bike lock
  • Assumption: Students pay more than 100 € for a secure bike lock

Risk

There is always the risk that something you will do does not achieve the intended success. Or something you believed about the world turns out to be false.

Risks can be described on a number of dimensions:
• Impact: If the risk becomes a reality, what do you do? Is the whole plan useless, or can it be adapted? Very often, it can. How much work is it to adapt the plan? Example: Find a new customer segment for your business idea.
• Probability: How likely is the risk? Very likely? Rather unlikely? What do you think?
• Data: Why do you estimate the probability this way? What data is your estimation really based on?

2015-10-22

Plan

You need a plan. A plan describes the future – and the present on which it builds. Such a plan is great for identifying risks. Great tools for planning are BMC and a financial model.

2015-10-21

Mental Energy

No process, no metric can determine, when its time to give up on a startup idea. Running out of money might just be a temporary state. There are far more good ideas and investor money, than you think.
Mental energy, desire and passion for a project are the ultimate resources you need. Mental energy is the most limited resource in the whole startup ecosystem. Therefore it is essential (for you, and for the society) to validate business ideas and pursue only promising ones.

Startup

Is an expedition to find a repeatable business model. The goal of a startup is to stop being a startup.
In contrast, an established organization (i.e. enterprise, or other institution) has chosen a certain customer segment, offers a certain range of solutions, and has a defined business model.

Customer

The most important part of a business model.  A customer can be a person or an institution.

Business Idea

Often just a solution to an implicit problem for an implicit customer segment.