Inside the Lean Startup

Very late notice, but I have been busy running a startup. I’m joining my friends Leila Boujnane (@leilaboujnane) and Satish Kanwar (@skanwar) tonight at the Inside the Lean Startup event at MaRS. We’ll be chatting about our startups. The customer development process. And some of the tools we use. If you’re not in Austin for SxSW, and you need to get out of the garage/basement/office and chat with others that are struggling/succeeding/striving/doing it to. Come out tonight.

You might also consider checking out the AppSumo Lean #SxSW Bundle which includes access to a set of tools I use including:

Plus there are some new tools that I’m excited to try:

The 2 books that are not included in the Lean SxSW Bundle that are must reads:

 

Speed and Growth

Icarus
Icarus by exper

I had coffee yesterday with Mark Organ. Mark is a serial entrepreneur and the founder of Eloqua. We were talking about the 2 advantages that startups bring which are:

  • Speed
  • Growth

Speed and growth are what the startup is all about. You have the opportunity to be faster, more nimble and achieve greater growth rates than larger companies. The discussion around speed focused on the ability of startups to adapt to their environment more quickly than their larger more established competitors. Mark talked about the OODA loop and the ability for startups to make the loop tighter and make better decisions and more effective actions. 

“The key is to obscure your intentions and make them unpredictable to your opponent while you simultaneously clarify his intentions. That is, operate at a faster tempo to generate rapidly changing conditions that inhibit your opponent from adapting or reacting to those changes and that suppress or destroy his awareness. Thus, a hodgepodge of confusion and disorder occur to cause him to over- or under-react to conditions or activities that appear to be uncertain, ambiguous, or incomprehensible.”  Harry Hillaker

OODA by John Boyd
From Curtis Gale Weeks

Being able to compress the OODA loop is one of the advantages of a startup is to “operate at a faster tempo or rythym than our adversaries”. This is all very similar to the concepts introduced in the lean startup (see Eric Ries’ The Startups Rules of Speed).

” Applying lean thinking to entrepreneurship requires a new definition of progress, one that is focused on measuring learning rather than measuring objects. The day-to-day process that startups build should also attempt to maximize speed of learning.” Eric Ries

Building in tools and methods into the process that let founders and team members observe, orient, decide and act faster is key. The more I think about the need to build metrics into applications and marketing solutions. I want to be able to understand the performance of my design decisions relative to previous experience/performance, new information, competitive analysis and traditions. This is the Orient part of the OODA loop but it requires the codification of new performance data and the existing business metrics and the cluster immune system. Check out Bradford Cross’  experiences using lean, he cuts through a lot of the hype, mysticism and talks about it in practice.

This is very different than the using the OODA loop to keep ahead of your enemy’s decision making cycle. Your enemy early on is time and a lack of customer data. But I’m becoming a big believer in customer development. It’s becoming clearer for me that if you are able to automate your observations and data collection that you’ll have better data about the performance of your application to make informed decisions. The same is true of the inbound marketing campaigns and tools. Time to look at what can be captured and how to automate the “orient, decide and act” phase for application development.

Marketing metrics 101

Reposted from my original on StartupNorth.ca

Photo by Darren Hester
Photo by Darren_Hester

Mike McDerment from FreshBooks gave  a great presentation on the basics of web application marketing metrics. He focuses on the metrics, systems and reporting that all companies should be building into web and mobile applications. It is a must read for any entrepreneur building a web application.

Metrics

Cost Per Acquisition (CPA)
How much does it cost you to get a customer? It’s a simple enough calculation, how much do you spend on sales and marketing to acquire each customer. Roll up your staffing costs, your ad buys, your outbound marketing, etc.
Average Revenue Per User (ARPU)
How much revenue do users generate? How do you track it? Does it change based on segment? How do you increase it?
Churn
What percentage of your existing customer base leave every month? This is different than CPA because this is about customer satisfaction and retention. Don’t think this is important? According to April Dunford churn is a killer. “The probability of selling to an existing customer is 60-70%. The probability of selling to a new prospect is 5-20%”
Lifetime Value (LTV)
How long does a customer continue as a subscriber? Does their ARPU change over time? Do you have ways to increase their spend or reduce their churn?

These basic metrics are expanded by Dave McClure in AARRR! Startup Metrics for Pirates. Where the metrics are divided into 3 main categories:

  1. Get Users (Acquisition, Referral)
  2. Drive Usage (Activation, Retention)
  3. Make Money (Revenue)
View more presentations from Dave McClure.

It seems so simple on surface, but as CEOs and startups we need to be committed to building the systems and metrics into our products. I was just floored at MeshU when I heard Dan Martell talk about the Flowtown.com Startup Immune System where they are beginning to use the lower level business performance metrics to automatically rollback design changes based on performance against the baseline. You can only start doing if you’re building on top of metrics. The idea of having automated your software deployment and sufficiently built business metric baselines that you could autoroll back poor performing changes. At Nakama, I wanted this so much. Not because I had bad developers but because we often made design decisions based on limited customer feedback and I wanted the system to protect me from my own hubris.

Metrics are good place to start. One of the best ways to understand how your company is performing is to begin measurement. Mike has done a great job

MeshU – It’s worth the price of admission

MeshU, May 17, 2010It’s time again for MeshU. I wrote about why startups should consider attending MeshU over on StartupNorth. This is a great opportunity to learn and connect.

Learning

There are a lot of smart, talented, successful and engaging people at MeshU. You want my list of who I can’t wait to see:

  1. Bill Buxton
    Bill is a colleague of mine at Microsoft. He also had a profound influence on my career. I was training to be an academic. I wanted to do research like my idols (including Bill Buxton), but Bill’s session at CHI’97 in Atlanta is where he espoused that we’re all designers. We’re all designing and building and shipping software that people use. Imagine that. He is an exciting, engaging speaker that any startup, executive, designer, developer should listen to.
  2. Sean Ellis
    The #leanstartup thing has become a movement. Whether you’re lean or you’re fat, you there’s something to learn about product development and marketing from the guy that brought Xobni, EventBrite and Dropbox to market. I think every startup and every marketer needs to at least listen to what Sean Ellis is saying.
  3. Aza Raskin
    I’ve never met Aza, but he works with 4 people that I think are top notch at Mozilla (I’m looking at you Beltzner, Shaver, Lilly and Surman). I’ve written about his work at Humanized, I used his product Enso as my launcher in Vista. And one of my close friends actually worked on the Canon Cat with Aza’s father, Jef. Aza is the creative lead for Firefox. If you were looking to learn from someone that is helping to build the fabric of every web experience (well technically 24.69% of all web experiences ;-), there’s a good chance that Aza will teach you something.
  4. Diana Clarke
    Diana is a developer rockstar. She’s moving the entire backend at Freshbooks from PHP to Python. This is a crazy project. Switching languages in real-time with the application still running. This is like performing a heart transplant with the patient still conscious. You can learn something about engineering complex systems from Diana.
  5. Dan Martell
    Profitable in 2 months at Flowtown, that’s crazy. Hopefully that includes founder salaries. But you get to hear from the trenches about building a startup using customer development. You’ll learn about “customer development, feature prioritization, split testing, product metrics and agile development as approaches to increase your probabilities of succeeding”.
  6. Joe Stump
    Geolocation infrastructure startup with “the” set of investors (Ron Conway, First Round Capital, Chris Sacca, Kevin Rose, Tim Ferriss, Shawn Fanning people). He was the lead architect at Digg. So if you don’t think you can learn something from the guy who built the infrastructure that created the tsunami that spawns “The Digg Effect“. Then forget about scalable architectures and ask him about raising money.

And this is only 6 of the 13 speakers. There are world class people coming to Toronto. Hopefully everyone from Montreal to Waterloo realizes that this a big deal. The speakers are of the calibre that you’ll find at a conference in Silicon Valley, San Francisco, New York , Austin, Vegas, where ever.

Connecting

MaRS only hold 400 attendees. This is an incredibly small conference venue. If you’re smart, lucky, outgoing without being douchey, you have a pretty good chance of meeting the speakers and other attendees that are pretty awesome.

The thing to remember is that a chance meeting at a conference with any of these individuals isn’t going to change the course of our startups. You’re looking to make some initial connections. I feel like I tell a lot of entrepreneurs that you don’t have to get everything about your startup on the table in 30 seconds. None of these people have the power to change your life in 30 seconds. It’s like dating, as much as you want to “hop on the good foot and do the bad thing”, it does require a little bit of conversation. (If you really need instant gratification, there are a lot of consultants/charlatans/snakeoil salesmen that will take your money and tell you that if you do these 3 things you’ll be more awesome). 

Events like MeshU aren’t tradeshows. You’re not likely to find customers. You’re not going to find booth candy. You’re probably not going to find an investor (though if I was a Canadian angel or early-stage investor I’d be there just to meet the entrepreneurs and maybe learn something to help my portfolio). You’re there to meet potential hires, other entrepreneurs that you can share war stories and lessons. The whole point of an ecosystem is to enable the exchange of value. The value can only be exchanged between connected nodes in the network. The ecosystem gets strong and more valuable the more connections we build.  

My advice is to start thinking about the connections and the learnings that will justify the price. Then go register for MeshU.

I’ll see you there.