llp week -2 class slides part 1 · “week -2” agenda • introductions & working definitions...

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Spring 2015 Semester Week # 1 Course Lesson: “Week-2”

Topic: Course Overview & Introductions

MGMT 421 – New Ventures ENGIN 597H - Technology Management:

Innovation and Entrepreneurship 1/20/15 Evening

1/21/15 Day

“Week -2” Agenda

•  Introductions & working definitions •  Lean Launch Pad Approach to

Entrepreneurship •  Meet your Instructors •  Syllabus, course flow, administrative issues

and course mechanics •  Meet each other •  Prep for next week: Teaming & Ideation 1

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ENGIN 597H- Technology Management: Innovation & Entrepreneurship and MGMT 341- New Ventures

Instructors: Professors David McLaughlin, Karen Utgoff, and Bill Wooldridge

Teaching Assistant: J a r ed Rand

Days and Times: Tuesdays, 5:30pm – 8:30pm and Wednesdays 10:10 -12:30

Office Hours: TBA Location: Isenberg SOM 106 and ILC S311 Texts: Startup Owner's Manual: Blank & Dorf; K&S Ranch Publishing LLC,

1st Edition, 2012. Business Model Generation: Osterwalder & Pigneur, John Wiley & Sons, 1st Edition, 2010.

Class web site: http://blogs.umass.edu/leanlaunchpad Online Lectures: http://www.udacity.com/view#Course/ep245/CourseRev/1 Software: Launchpad Central: https://launchpadcentral.com Prerequisites: Passion for discovering how an idea can become a real company. Willingness to engage in experiential learning about how

start-ups are built.

Course Description This course provides real world, hands-on learning on what it’s like to actually start a company. This class is not about how to write a business plan. It’s not an exercise on how smart you are in a classroom, how well you write code or what your patent is, or how well you use the research library to size markets. And the end result is not a PowerPoint pitch deck for a VC “demo day.” And it is most definitely not an incubator, hackathon, or senior design project where you come to design and build the “hot idea” that you have in mind.

This is a practical class – essentially a lab, not a theory or “book” class. Our goal, within the constraints of a classroom and a limited amount of time, is to create an entrepreneurial experience for you with all of the pressures and demands of the real world in an early stage startup. The class is designed to give you the experience of how to work as a team and turn an idea into a company.

You will be getting your hands dirty talking to customers, partners, and competitors, as you encounter the chaos and uncertainty of how a startup actually works. You’ll practice evidence-based entrepreneurship as you learn how to use a business model

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What Is Innovation? •  Fresh thinking that adds value – The Economist •  Transforms ideas etc. into valuable and useful applications

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Innovation Outcomes: Customers

Products Companies

Improved living conditions

Jobs Wealth

Customer and Financial Considerations

Technical Inputs & Considerations

Idea

Invention

Knowledge

Research

Need

Problem

What Is Entrepreneurship? “entrepreneurship is the willingness to pursue opportunity, regardless of the resources under control” (Stevenson and Jarillo, 1990)

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Pursuit: singular, relentless focus, sense of urgency; perceived short window of opportunity. Opportunity: an offering that is novel: pioneering a truly innovative product; devising a new business model; creating a better or cheaper version of an existing project; targeting an existing product to new sets of customers.

From Entrepreneurship: A Working Defini;on, by Thomas R. Eisenmann, Harvard Business Review, January 10, 2013. hKps://hbr.org/2013/01/what-‐is-‐entrepreneurship

Beyond resources controlled •  Resource constraints. •  At the outset: its just the human, social, and

financial capital of the founders. •  Many entrepreneurs bootstrap: keep

expenditures to bare minimum, investing their own time & funds

•  Typically need to mobilize more resources than they control personally: production facilities, distribution channels, working capital, etc…

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Pursuing opportunity when not controlling resources brings risk

•  Demand risk: will the prospective customers be willing to adopt the envisioned solution?

•  Technology risk: will the engineering & science breakthroughs -- needed to bring a solution to fruition -- actually happen?

•  Execution risk: can the employees & partners needed to implement the plans be recruited?

•  Financing risk: will the external capital be available on reasonable terms?

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Tech Startup Success Rate •  90% of startups fail •  75% of startups fail •  For every 10 start-ups,

•  3 or 4 will fail completely •  3 or 4 will return the original investment •  1 or 2 will produce substantial returns

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“How well a failed entrepreneur has managed his company, and how well he worked with his previous investors, makes a difference in his ability to persuade U.S. venture capitalists to back his future start-‐ups says Charles Holloway, director of Stanford University's Center for Entrepreneurial Studies.” – The Venture Capital Secret: 3 out of 4 start-‐ups fail, The Wall Street Journal, 9/20/12, hKp://www.wsj.com/ar;cles/SB10000872396390443720204578004980476429190

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#1 reason for failure: they make products no one wants.

“Why startups fail, according to their founders.” Erin Griffith, Fortune, 9/25/24, hKp://fortune.com/2014/09/25/why-‐startups-‐fail-‐according-‐to-‐their-‐founders/

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New product disappointments •  Kodak Photo CD. Offered film camera customers

ability to put pictures on CD, view them on TV. 10 years ahead of customers, who weren’t ready. $500M

•  Segway. Mobile device for everyone in the world who walked. Diffusion limited to niche markets. $200M.

•  Apple Newton. 5 years too soon for PDA market. $100M

•  Motorola Iridium Satellite System. Built to support a customer base of millions that didn’t materialize. $5B.

•  Webvan. National-scale groceries on demand. Customer demand didn’t materialize at rate needed to cover buildout expenses & scale. $800M.

Success Stories

•  Proctor & Gamble Swiffer. Swiveling, disposable mop-on-a-stick. Several $Bn.

•  Toyota Prius. Electric Hybrid Car. Multi $B market.

•  General Mills Yoplait GoGurt: Yogurt in a tube; customer base of toddlers extended as kids grow.

•  Apple Ipod/Iphone & Itunes platform

Stereotypical Approach to Technology Business Planning

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Key Steps

•  Write a business plan •  Prove technical feasibility •  Secure investment •  Develop and field test an early product •  Refine and launch first commercial product •  Generate sales

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Product Development Orientation

Concept/Business Plan

Product Development

Alpha/Beta test

Launch 1st ship

Product Development Orientation


Product Development

Alpha/Beta test

Launch 1st ship

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Problems with that model

1.  Where are the customers???? 2.  Focus on First Customer ship date 3.  Emphasis on execution instead of

Learning & Discovery

Weaknesses

•  New venture teams often become so focused on addressing technical risks or so enamored of their own ideas that they overlook customer related risks

•  Key questions –  If you build it, will they come? – What product/service meets the needs/wants

of customers?

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Lean LaunchPad Approach* to Startups

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* Pioneered by Steven Blank (http://steveblank.com/about/)

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How to Build a Startup

•  Idea •  Size the opportunity •  Business model •  Customer development •  Lean product development

Course working defini/on of a startup: a temporary organiza/on formed to search for a repeatable and scalable business model.

Discover: Who is your customer, what does the customer value, and how do you deliver value at an appropriate cost?

Iterations & Pivots along the way to discovery.

Customer Discovery

•  …finding out who the customers for your product are and whether the problem you believe you are solving is important to them.

•  Technology (or a novel idea) is an essential element for building innovation-driven businesses but only as part of the value proposition for customers

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Business Model

… describes the rationale of how an organization creates, delivers, and captures value …shows the logic of how a company intends to make money … describes the flows between company and customers … connects 4 main areas of a business: customers, offer, infrastructure, financial viability A founder-driven construct that is created iteratively

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9 Building Blocks in the Lean Launch Pad Business Model Canvas

•  Customer segments •  Value propositions

•  Channels •  Customer relationships

•  Revenue streams •  Key resources •  Key activities •  Key partners •  Cost structure

What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

What type of relationship does each of our CustomerSegments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

Day Month Year

No.

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Customer Segments

Which customers and uses are you serving? Which jobs do they really want to get done?

Adapted from Steve Blank’s Lean LaunchPad Course hKp://steveblank.com/2011/03/08/a_new_way_to_teach_entrepreneurship

Value Propositions










Day Month Year

No.



•  What are you offering your customers?

•  What does your offer do for them?

•  Do they care?

Dic/onary Defini/on:

Value Noun 1.  Rela;ve worth, merit,

or importance: the value of a college educa;on; the value of a queen in chess.

2.  Monetary or material worth, as in commerce or trade: This piece of land has increased in value.

3.  The worth of something in terms of the amount of other things for which it can be exchanged

Newness – Performance – Customization – Design – Brand/Status – Price – Risk Reduction – Convenience

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Channels










Day Month Year

No.



•  How does each customer segment want to be reached? (through which interaction points?)

Sales force – Web sales – Stores – partner stores - wholesaler


Customer Relationships










Day Month Year

No.



•  What relationships are you establishing with each customer segment? Personal? Automated? Acquisitive? Retentive?

Personal assistance – Dedicated personal assistance – Self Service – Automated Service – Communities - CoCreation


Revenue Streams










Day Month Year

No.



•  What are customers really willing to pay for? How? Transactional or recurring revenues?

Asset Sale – Usage fee – Subscription fees – Renting – Licensing – Advertising


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Key Resources










Day Month Year

No.



•  Which resources underpin your business model?

•  Which assets are essential?

Physical – Intellectual – Human – Financial - Platform


Key Activities










Day Month Year

No.



•  Which activities do you need to perform well in your business model?

•  Which are crucial?

Production – Problem Solving – Platform/Network Adapted from Steve Blank’s Lean LaunchPad Course hKp://steveblank.com/2011/03/08/a_new_way_to_teach_entrepreneurship

Key Partners










Day Month Year

No.



•  Which partners & suppliers leverage your model? Who do you need to rely on?

Non competitor strategic alliance; buyer-supplier relationships; joint ventures


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Cost Structure










Day Month Year

No.



•  What is the resulting cost structure?

•  Which key elements drive your costs?

Cost-driven; value-driven; fixes & variable costs; economies of scale & scope


Business Model Canvas: your newCo










Day Month Year

No.




Business Model Canvas: your newCo










Day Month Year

No.



discover discover

discover

discover

-  discover

-  discover

-  discover -  discover

-  discover


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New Venture Key Idea

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“…treat starting a company as another research project that can be solved by an iterative process of hypotheses testing and experimentation.”

http://steveblank.com/2011/07/28/eureka-a-new-era-for-scientists-and-engineers/

The Scientific Method

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•  Make an observation or observations. •  Ask questions about the observations and gather

information. •  Form a hypothesis — a tentative description of what’s

been observed, and make predictions based on that hypothesis.

•  Test the hypothesis and predictions in an experiment that can be reproduced.

•  Analyze the data and draw conclusions; accept or reject the hypothesis or modify the hypothesis if necessary.

•  Reproduce the experiment until there are no discrepancies between observations and theory.

Turn Hypotheses into Facts










Day Month Year

No.



Formulate & Test hypotheses about: •  Product •  Market type •  Competition


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Day Month Year

No.




Formulate & Test hypotheses about: •  Problem •  Customer •  User •  Payer


Customer Development

The founders GET OUT OF THE BUILDING











Day Month Year

No.




Formulate & Test hypotheses about: •  Channel


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Turn Hypotheses into facts










Day Month Year

No.



Product Market type competition

Problem Customer

User Payer

Channel

Demand creation

Customer Development

Team

Channel patners other

Pricing model Size of opportunity/market Validate business model

Agile Development


Companies and Startups

What is a company? •  A business organization

that sells a product(s) or service(s) in exchange for revenue and profit

•  Companies are organized around business models

What is a startup? •  A temporary organization

designed to search for a repeatable and scalable business model

•  Startups seek ways to create businesses around ideas and sizeable opportunities

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Class emphasis: scalable startups

•  Not all startups are designed to scale. •  Small business startups have different

goals. •  Scalable startups are designed to grow

large – Typically require venture capital – The size of the opportunity needs to be in the

$100’s of millions to billions of $.


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Small business startup

Startup Small business


•  Business model found •  Profitable business •  Existing team •  <$10M in annual revenue

•  5.7 million small businesses in the US having < 500 employees •  99.7% of all companies •  ~ 50% of total US workforce

Scalable startup

Startup Large Company > $100M/yr


•  Total available market > $500M •  Company can grow to $100M/yr •  Business model found •  Focus on execution & process

•  Designed to grow big •  Typically needs risk capital •  What Silicon Valley means by “startup” •  This is where Venture Capital firms invest

Agile Development


Product Development

Alpha/Beta test

Launch 1st ship

From this mentality/approach

to this…

•  User stories

•  Architectural spike

•  Release planning Itera;on Acceptance

tests Small releases

•  spike

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Customer discovery

Customer valida;on

Customer crea;on

Company building

Agile Development Product & Customers

Pivot

•  User stories

•  Architectural spike

•  Release planning Itera;on Acceptance

tests Small releases

•  spike

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•  You will be getng your hands dirty talking to customers, partners, and compe;tors, as you encounter the chaos and uncertainty of how a startup actually works.

•  You’ll prac;ce evidence-‐based entrepreneurship as you learn how to use a business model to brainstorm each part of a company and customer development to get out of the classroom to see whether anyone other than you would want/use your product.

•  Finally, based on the customer and market feedback you gathered, you will use agile development to rapidly iterate your product to build something customers would actually use and buy.

•  Each block will be a new adventure outside the classroom as you test each part of your business model and then share the hard-‐ earned knowledge with the rest of the class.

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!

Class%Roadmap!%The!timetable!for!the!15!weeks!of!the!Spring!2015!semester!is!shown!below.!The!core!of!the!course!is!a!set!of!10!Lean!Launch!Pad!sessions,!each!focused!on!a!different!part!of!the!business!model!canvas.!We!will!hold!2!preliminary!sessions!(WeekD2!and!WeekD1)!to!get!ourselves!ready!for!the!LLP!sessions.!!%

%!

%Each!LLP!session! is!organized!around! student!teams!hypothesisDtesting! their!business! model!assumptions!outside(the(classroom:!• Talking! to!10D15! customers.!• Capturing! their! Customer! Discovery! progress! by! using! the! LaunchPad!

Central! Software! (https://launchpadcentral.com/)! and! updating! their!Business!Model! Canvas.!

• Taking!what! they! learned!and!assembling!a!10Dminute!Lessons!Learned! presentation.!

• Engaging!with! their!mentors.!• Attending!mandatory! office! hours.!• Watching!the!Udacity! lecture!for!the!week!and!preparing!

questions!for! discussion.!

• Receiving!comments!and!suggestions! from!other!teams!and!the!teaching!team! on!the! lessons! learned.!

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Meet the instructors – why we’re here… Go thru syllabus piece by piece

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William Wooldridge Managing Director of the Berthiaume Center for Entrepreneurship Professor of Management in the Isenberg School of Management at the University of MassachuseKs Amherst. Ph.D. in Management, Leeds College of Business at University of Colorado, Boulder. Research foci: business and strategy development, strategy process, and building sustainable business models in organiza;ons. Co-‐author two books on middle managers and their role in strategy making and corporate entrepreneurship. Research published in leading academic journals including Entrepreneurship Theory and Prac/ce, Strategic Management Journal, Journal of Management, and Journal of Management Studies. Extensive experience teaching management principles and strategy at the undergraduate, MBA, and doctoral levels. Served, on two different occasions, as Chair of the Management Department at the Isenberg School, driving new curriculum ini;a;ves related to entrepreneurship and sustainability.

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Karen Utgoff AB from Oberlin College, MBA from The Wharton School at The University of Pennsylvania. Trained as a consultant at the Wharton Applied Research Center, then a program of The Wharton School. Teaching Technology Management: Innova;on & Entrepreneurship for the fiwh ;me at UMass Amherst. This year brings the special excitement of deepening the Lean LaunchPad experience, which is an increasingly important tool for entrepreneurs in startups and well-‐established companies alike. Market-‐oriented business strategist and Principal of Karen Lauter Utgoff Consul;ng. I help startups and exis;ng organiza;ons with a wide range of market-‐related challenges including entrepreneur development, new venture development, product/service defini;on, entrepreneurial/start-‐up marke;ng and sales, strategic marke;ng, market-‐oriented business strategy, and business planning. My consul;ng experience spans diverse domains including bioinforma;cs, sowware, distance learning, older consumers, elevators, nonprofits and technology commercializa;on. My other professional ac;vi;es include volunteer mentoring at the Cleantech Open Northeast and MassChallenge.

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David McLaughlin Professor of Electrical & Computer Engineering at UMass Amherst. PhD from UMass Amherst in 1989. Taught at Northeastern University ’89-‐’99 and have been on the UMass faculty since ’00. Director of MIRSL (2000 – 2003); Associate Dean of Engineering (2009 – 2012). My research is in the areas of microwave remote sensing and radar design, par;cularly weather radar design. Recently finished up 10 years at the helm of major $40M na;onal-‐scale CASA Engineering Research Center … beKer system for warning the public against tornadoes, flash floods, land-‐falling hurricanes, and similar hazards. Based on the idea of deploying thousands of small phased array (no moving parts) weather radars atop cellular phone towers, roof-‐tops, and other elements of our infrastructure. Since leaving the helm of CASA, I teach Fundamentals of EE and Innoa;on & Entrepreneurship and work to commercialize small, low-‐power, lost-‐cost, “no moving parts” weather radars. Collabora;on between UMass Amherst and Raytheon Company > 10 years of effort (!) is seeing very first commercial sales of produc;zed versions of these systems.

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Jared Rand – Course Teaching Assistant Jared is a current MBA student working with the Berthiaume Center For Entrepreneurship. He has a BS in astronomy and physics from UMass. He runs a tutoring marketplace called The Knowledge Roundtable that has over 750 registered tutors. His experience includes 2 years of math content development for textbooks, hundreds of hours of tutoring and teaching, full-‐stack web development, actuarial exam success, and all that comes with star;ng and growing a business. www.linkedin.com/in/jaredrand/

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Additional course elements: •  Udacity lectures hKp://www.udacity.com/view#Course/ep245/CourseRev/1 •  Course blog http://blogs.umass.edu/leanlaunchpad/ •  Launchpad Central https://www.launchpadcentral.com/#testimonials

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Team formation & project selection •  Class organized around 8-9 teams, each with 4 people. •  We’ve tried smaller teams in the past. It doesn’t work. •  Teams remain fixed through the semester. But your ideas will likely evolve

as you discover.

•  Teams will develop their business model by interviewing 100 “customers” (buyers, users, channel partners, other stakeholders) throughout the course.

•  Teams will develop & use a Minimum Viable Product (MVP) as an aid to customer discovery.

•  Team skills: hacker; hustler; designer; organizer

•  Next week will be devoted to team formation & ideation

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Speed Networking •  Your purpose is to find possible teammates to

meet with before the next class – Get better acquainted – Generate ideas – Support in-class team formation and idea selection

•  Introduce yourself in 60 seconds – Skills, interests and inclinations

•  Technical •  Business •  Interpersonal •  Work habits

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Assignments for next week

•  Reading: – Order the 2 course textbooks. – Read Business Model Canvas pp 1-50 (pdf of

first 75 pages of this book will be posted to course blog site)

•  Continuation slides from K. Utgoff…

llp week -2 class slides part 1 · “week -2” agenda • introductions & working definitions...

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