Part IV. 03. The Lean Startup Process

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Fakultät Informatik - Institut Software- und Multimediatechnik - Softwaretechnologie – Prof. Aßmann - Software as a Business„We have only started on our development of our country—we have not as yet, with all ourtalk of wonderful progress, done more than scratch the surface.“Henry Ford. My Life and Work. [www.gutenberg.org EBook #7213].Part IV.03. The Lean Startup ProcessProf. Dr. Uwe AßmannSoftwaretechnologieFakultät InformatikTechnische Universität Dresden2019-0.1 2)3)4)5)6)What is „Lean Startup”?On the Way to the MVPCustomer InterviewsTriple SCRUM in a Lean StartupEvaluating Customer InterviewsMetrics are the Key

Obligatory LiteratureSoftware as a Business, Prof. Uwe Aßmann2Software as a Business http://theleanstartup.com/ startup https://en.wikipedia.org/wiki/Lean startup [Blank-HBR] Steve Blank. Why the Lean Start-Up Changes Everything. HarvardBusiness Review, May 2013. Free to read here: [SteveBlankBlankininBlank-HBR]Blank-HBR] . e[SteveBlankBlankininBlank-HBR]Blank-HBR]

Internet Links3Software as a Business Course with videos on startup foundation Software as a Business, Prof. Uwe Aßmann ot-my-firstcustomers-without-having-a-product/

LiteratureSoftware as a Business, Prof. Uwe Aßmann4Software as a Business Henry Ford. My Life and Work. [www.gutenberg.org EBook #7213]. [Osterwalder/Pigneur] Alexander Osterwalder. Ives Pigneur. Business ModelGeneration. Wiley. !Fantastic! Ash Maurya. How to Create Your Lean Canvas.http://leanstack.com/LeanCanvas.pdf [Oddoy] Manuel Oddoy. Softwareentwicklung mit natürlicher Sprache (“Lean Modelling”),Belegarbeit, TU Dresden, Jan. 2014. Supervised by Christian Wende,www.devboost.de [Korger] Christina Korger. Organisierte Software-Startups mit kollaborativenCanvases. Großer Beleg. Technische Universität Dresden, 2014. 60539Chris Rupp. Dirk Schüpferling. Warum Sie in Interviews nie die ganze Wahrheiterfahren. Artikelreihe, http://jaxenter.de 77

Books5Software as a Business [BlankDorf] Steve Blank, Bob Dorf, Nils Högsdal, Daniel Bartel. Das Handbuch fürStartups – die deutsche Ausgabe von 'The Startup Owner's Manual'. DeutscheÜbersetzung von Kathrin Lichtenberg. 2014. O'Reilly.Software as a Business, Prof. Uwe Aßmann artups.html [Ries] Eric Ries. Lean Startup: How Today's Entrepreneurs Use Continuous Innovationto Create Radically Successful Businesses. O'Reilly, 2011 [Maurya] Ash Maurya. Running Lean. Iterate from Plan A to a Plan That Works. O’Reilly,2012. Ash Maurya. How to Create Your Lean Canvas. http://leanstack.com/LeanCanvas.pdf [LeanAnalytics] Alistair Croll, Benjamin Yoskowitz. Lean Analytics. O'Reilly, 2013 [LeanUX] Jeff Gothelf, Josh Seiden. Lean UX: Applying Lean Principles to Improve UserExperience. O'Reilly, 2013. [LeanCD] Cindy Alvarez. Lean Customer Development: Building Products YourCustomers Will Buy. O'Reilly, 2014 [LeanAML] Lutz Finger, Soumitra Dutta. Ask Measure Learn. Using Social MediaAnalytics to Understand and Influence Customer Behavior. O'Reilly 2014 [SW-Industry] Peter Buxmann, Heiner Diefenbach, Thomas Hess. The SoftwareIndustry. Economic Principles, Strategies, Perspectives. Springer 2012

Mentorings of Software Start-Ups6Software as a Business6 Ubigrate 2008-2012 Boxes with RFID-Tags to automate logisticsMentalmotive (2008-2015)Software as a Business, Prof. Uwe Aßmann Environment for multimedia exchangeWww.mentalmotive.deDevBoost (2012-today) Software quality management tools Consulting Domain-specific languagesWww.devboost.deWandelbots (2017-today) Www.wandelbots.de Co-working robotics Demonstration-based teaching of robots

Fakultät Informatik - Institut Software- und Multimediatechnik - Softwaretechnologie – Prof. Aßmann - Software as a Business03.1 What is „Lean Startup”?Lean Startup Lean Customer Modeling BMC development Lean Software eSoftwareDevelopment.Development.

The Proponents8Software as a Business8Steve Blank http://steveblank.com/Eric RiesAsh MauryaAlex OsterwalderIves PigneurProf. U. Aßmann, TU DresdenSoftware as a Business, Prof. Uwe Aßmann Lean Startup develops the business model of astartup with lean development techniques

Lean Startup, Lean Innovation, and Startup MaturityLevel (SML)9Software as a BusinessSoftware as a Business, Prof. Uwe severalfitsthematurity of the canvases with hypothesis testing about several fits - n are lean innovation processes withStartupMaturityStartup vel.

Software as a Business, Prof. Uwe Aßmann10Software as a rucker[LeanAnalytics]Peter Drucker [LeanAnalytics]

Lean Startup acc. To Ries11Software as a BusinessSoftware as a Business, Prof. Uwe Aßmann [Ries] defined three “engines of growth” a startup can use to accelerate: First, theproduct must be sticky; then viral; then people will pay.Paid EngineViral EngineSticky hree-engines-of-growth-with-eric-ries11

Lean Startup acc. To Mauryaand its Lean Models in the Incubation ProcessProf. U. Aßmann, TU DresdenSoftware as a Business, Prof. Uwe Aßmann12Software as a Business Startups have to work on several flat Lean Canvases, in a canvas cactus (with evolutioncanvas megamodel) Three phases in [Maurya]Problem-SolutionFit Lean Canvas ProblemAnalysisCanvases, e.g.,ZOPP CustomerProblemInterviews withSPIN, SolutionSelling, LeanCanvas CustomerSolutionInterviews MVV, MVFSProduct-Market Fit Business ModelCanvas Value PropositionCanvas NABC Feature Trees CustomerInterviews withMVPScale Lean ChangeCanvas Idea variationwith FeatureTrees Inside the boxlean (SITcanvas) Domainporting Product Linesand Matrices12

Phase 1 “Problem-Solution Fit”Software as a Business Working out a “minimal viable vision (MVV)”, i.e., a value proposition and businessmodel in a MAPE-loop (Measure, Analyze, Predict, Evaluate) MVV-MAPE runs in several iterations and is driven by customer interviews Input: Cloudy idea Result: MVV - low-fidelity Business Model Canvas 0.1Software as a Business, Prof. Uwe Aßmann1313

Phase 2 “Product-Market Fit”Software as a Business, Prof. Uwe Aßmann14Software as a Business Working out a minimal viable product (MVP) in a MAPE-loop (Measure, Analyze,Predict, Evaluate) MVP-MAPE loop runs in several iterations and is driven by customer MVP interviewsand other metrics Input: Minimal viable vision (MVV) in form of green VPC, BMC Result: Feature Tree of Product with one configuration being implemented (MVP) All other variants are postponed, but ranked14

Phase 3 “Scale”15Software as a Business Software as a Business, Prof. Uwe Aßmann Working out scaling business model and product or product line in a MAPE-loop Work on stickiness (pressure * awareness) Work on virality (pressure * awareness * UCA) MVP Feature tree of product Feature Tree of Product Line Business Model of Product Line Horizontally ported product line Software ecosystemInput:Result:

Other Stage-Gate Processes for Lean Innovation16Software as a Business[Dresden exists]Software as a Business, Prof. Uwe AßmannUnderstandthe ProcessOrientationUnderstandProblemProblemSolution tMarket FitSellVerifyProductQuantitativelyScaleCustomer Development, a company-centric process [Blank/Dorf] 2008Customer DiscoveryCustomerValidationCustomer CreationCompany Building

Investment Readiness Level (IRL) Process of Blank17Software as a Business1. First-Pass BMC (Investment Readiness Level 0.1)Investment Readiness LevelSoftware as a Business, Prof. Uwe Aßmann2. Market Size and Compatitive Analysis3. Validate Problem-Solution-Fit4. Low Fidelity Prototype MVP (IRL 0.5)5. Validated Product-Market Fit1.Customer Development6. Validated Right Side of BMC7. High Fidelity Prototype MVP (IRL 0.9)8. Validate Left Side of Canvas9. Validate other MetricsMVP Development, a company-centric process [www.steveblank.com, Nov. 2013]First Pass BMCLow-FidelityPrototype MVPHigh-FidelityPrototype MVPProduct

The “Lean Analytics” Stages and Their MetricsSoftware as a Business, Prof. Uwe Aßmann18[LeanAnalytics]Software as a Business The Lean Analytics Stages are a simple stage system for product/service productmarket fit. [LeanAnalytics] contains metrics for every stageScale fitScaleRevenueViraility (real pain, real gain, UCA)Productmarket fitStickiness(will the dogs eat dog food? Real pain, real gain)Empathy (Tested Value Proposition)Problemsolution fit

McClure Pirate (Web) Metrics can be used asStage-Gate Process19Software as a BusinessSoftware as a Business, Prof. Uwe Aßmann Stage-inconsistent startups mix activities from different stages.Referral(does a visitor recommend your website)Revenue(does a visitor pay?)Retention (stickiness)(does a one-time visitor return?)Activation(which activities do they start on your website)Acquisition(how do customers know from you?)[LeanAnalytics][Dave McClure cs-for-pirates-long-version]

Marmer Report Stages20Software as a BusinessMarmer Stages from the Startup Genome Report, a product-centric process [Marmer-Genome]Discoveryof solutionSoftware as a Business, Prof. Uwe Aßmann5-7 monthsValidationEfficiencyof productOf customeraquisitionScale3-5 months5-6 months7-9 months20-27 months#employees1-2 empl.3-4 empl.4-10 empl.10 – empl. 500k-800k 800k-900k 900k-.10-15%15-25%25-50%Funds raised (!USA!)0- 500kUser growth0-10%ProfitmaximizationRenewal unclear

Max Marmer and Steve Blank in 2010Software as a Business, Prof. Uwe Aßmann21Software as a Business rop-out-the-startup-genome-project/ “The email closed by saying, “The project is a hybrid between academic andentrepreneurial circles and I’d really love to begin a dialogue with people in theacademic world also interested in solving this problem. Your name has come up a lot inthat regard. Let me know if this interests you and if you have any time to speak.” It was signed Max Marmer. I set up a meeting and at Cafe Borrone some kid who looked 18-years old came up to meand introduced himself as Max. “How old are you? I asked. “18,” he replied. Holy sx!t.”

Marmer Principle of Stage-Consistency22Software as a BusinessSoftware as a Business, Prof. Uwe ntdifferentstages.stages. Therefore, it is advised to always know exactly in which phase a startup is Clear milestones should mark the transition between the stages

The Lean Innovation (Startup) Spiral ModelSoftware as a Business, Prof. Uwe Aßmann23Software as a Business Instance of “Scientific Method” of Bacon and PDCA (Plan-Do-Check-Act) Plan - Build – Measure / Test – Learn – cycle [Maurya, Ries] Developing “Business Model Canvases” containing “Customer Hypotheses”PlanLearnBuildTest /Measure

Henry Ford about Service, Fear of the Future, and Thatthe Whole is More than the Parts24 Software as a BusinessHenry Ford. My Life and Work. [www.gutenberg.org EBook #7213].Software as a Business, Prof. Uwe AßmannThe institution that we have erected is performing a service. That is the only reason I havefor talking about it. The principles of that service are these:1. An absence of fear of the future and of veneration for the past. One who fears thefuture, who fears failure, limits his activities. Failure is only the opportunity moreintelligently to begin again. There is no disgrace in honest failure; there is disgrace infearing to fail. What is past is useful only as it suggests ways and means for progress.2. A disregard of competition. Whoever does a thing best ought to be the one to do it. Itis criminal to try to get business away from another man—criminal because one is thentrying to lower for personal gain the condition of one's fellow man—to rule by forceinstead of by intelligence.3. The putting of service before profit. Without a profit, business cannot extend. There isnothing inherently wrong about making a profit. Well-conducted business enterprisecannot fail to return a profit, but profit must and inevitably will come as a reward for goodservice. It cannot be the basis—it must be the result of the service.4. Manufacturing is not buying low and selling high. It is the process of buying materialsfairly and, with the smallest possible addition of cost, transforming those materials intoa consumable product and giving it to the consumer. Gambling, speculating, and sharpdealing, tend only to clog this progression.

Fakultät Informatik - Institut Software- und Multimediatechnik - Softwaretechnologie – Prof. Aßmann - Software as a Business03.2 Smoke Testing on the Way to theMVP Minimal Viable Smoke

Finding the Customer's Needs: Different Forms of MVP(From MVV to MVPL)Software as a Business, Prof. Uwe Aßmann26Software as a Business Minimal viable Vision (MVV) Minimal viable feature set (MVFS), aka low-fidelity MVP, with a feature tree in whichonly one configuration is selected Minimal viable smoke (MVS) Minimal viable products (MVP), a vertical prototype MaXimally viral feature (MXVF) Minimal viable Product Line (MVPL, with Feature Tree)MVV(Vision,Cloud)Vision inform kableTestableWord spreads by itselfScaling

Smoke Test PortfolioSoftware as a Business, Prof. Uwe Aßmann27Software as a g?w 487 of all the other tests to find out an MVP, from MVV to MVP Size of circle: length of feedback cycleProductFidelityReal MVPConcierge MVPMVP?PrototypeBMCSmoke VideoPaper MockupAd-WordsCampaignPaper SketchCoverage(# Customers)

Example on the Way to the MVP – And BeyondSoftware as a Business, Prof. Uwe Aßmann28Software as a BusinessPaperware MVVProduct with more FeaturesSlideware MVVCustomizable ProductSmoke Web Site MVSDomain-specific Product LineConcierge Product MVSDomain Product MatrixMVPSoftware Ecosystem

From MVV over MVFS to MVPSoftware as a Business, Prof. Uwe Aßmann29Software as a Business Slideware MVV vs. MVFS: A set of slides showing the value proposition of the MVV,and may be the MVFS NABC MVV: An NABC elevator pitch to tell the MVV to everybody in 2 min Feature Tree MVFS: a feature tree modeling the minimal viable feature set A smoke video is a video that shows customers how the MVP will behave. [Dropbox] Smoke Website MVS: A smoke website is a website that shows customers how theMVP will behave Concierge MVP (better: Concierge MVS): A concierge MVP is a product that is notautomated but performed by hand. Ex.: AirBnb uses photos to show the flat they rent out [Lean Analytics p 6]Initial hypothesis for MVP: use professional photography to attract morecustomersBuiding a Concierge MVP (website) resulted in three times more bookingsMinimal viable product (MVP), Minimal viable service (MVS): real product, butminimal vertical prototype

Basic, but Not So Yet Fantastic Web Metrics on SmokeMVS Concierge MVP and MVP30Software as a Business Landing page (smoke web site) metrics: Number of hits and pageviews Number of unique visitors Time of visitor on pageSoftware as a Business, Prof. Uwe Aßmann Churn measures the number of people that turn away from your website,stop using the service, never login again [LeanAnalytics p 95] Number of followers on twitter and friends on facebook Number of members of mailing list Number of downloads of test version or teaser version

MVP Development with Minimal Viable Feature Sets(Feature-based MVP Development)31Software as a Business First design the features MVP as feature model (minimal viable feature set MVFS) Software as a Business, Prof. Uwe Aßmann The MVP will be the implementation of the MVFSVertical prototyping means to implement one feature of the MVFS, and toincrementally increase feature mapping and implementationsWork with customers on the minimal feature set (MVFS) before doing prototyping Create a customer model.customer segmentation.pricing demandsPut up problem trees for all customers separatelyPut up a problem variability tree for all customers, and map it to the featuretree (hopefully a surjective mapping).The feature tree is the first solution model

Feature Model32Software as a Business A feature model is a and/or link tree with options, inclusion and exclusion constraints. It describes a combinatorial variant space and can be mapped to propositional logic. All possible features of the product or serviceSoftware as a Business, Prof. Uwe AßmannCoffee machineandSwitchKeep warmMugxorxor0.1Auto-OffManualHeatingplateGlas implies Thermo excludes

The MVP in the Feature Model33Software as a Business The MVP is a subset of paths in the feature model, selecting a subset of OR and XORsubtreesSoftware as a Business, Prof. Uwe AßmannCoffee machineandSwitchKeep warmMugxorxor0.1Auto-OffManualHeatingplateGlas implies Thermo excludes

MVP Development ProcessesSoftware as a Business, Prof. Uwe Aßmann34Software as a Business With SWOT assessment of deep BMC With customer interviews (problem interviews, solution interviews) with Smoke Tests, Web metrics to measure customer behavior with Pirate metrics on the landing page With concierge service with an Easychair-like reviewing portal in which MVP can be discussed by reviewers with an MVP readiness level metric

Fakultät Informatik - Institut Software- und Multimediatechnik - Softwaretechnologie – Prof. Aßmann - Software as a Business03.3. Customer Interviews as SimpleHypothesis Tests

Customer Interviews36Software as a BusinessSoftware as a Business, Prof. Uwe AßmannCustomer ProblemInterviewsCustomer SolutionInterviewsCustomer problem-solutionfit interviewrun in all phasesVPC left part (pain killers,run in the phase “Problem-Solution Fit”focus on problems of the customerVPC lower right part is about painsgain creators, andproducts/services)SPIN canvas (left part)

The Lean Startup Process Prof. Dr. Uwe Aßmann Softwaretechnologie Fakultät Informatik Technische Universität Dresden . w a r e a s a B u s i n e s s, . Running Lean. Iterate from Plan A to a Plan That Works. O’Reilly, 2012.

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