Better Boards GOVERNING IN DISRUPTIVE TIMES August 2016
POLLENIZER Some of our current clients... Pollenizer is Australia s first tech startup incubator, now 8 years old. We have helped thousands of startups to grow including founding over 20 of our own. We have almost 6,000 entrepreneurs across Asia Pacific in our community. Other companies we have worked with Pollenizer are pioneering enterprise incubation in Asia Pacific. We use our extensive knowledge and experience to help big companies quickly unlock entrepreneurship and create new growth. NEW GROWTH WITH STARTUP SCIENCE v
#ONE The world that made startup practice
THINK ABOUT IT... A lot has changed in the past 5 years... NEW GROWTH WITH STARTUP SCIENCE v 4
HOW WE READ...
HOW WE WATCH TV...
HOW WE BUY...
HOW WE TRAVEL...
HOW WE TURN ON A LIGHT BULB...
HOW WE WORK...
HOW WE TALK TO EACH OTHER...
THE CLASSIFIEDS BUSINESS Whole industries collapsing and forming. Where Fairfax once stood... Carsales Seek NEW GROWTH WITH STARTUP SCIENCE v
UNBUNDLING BANKS
UNBUNDLING DELIVERY
DISRUPTION IS ACCELERATING The innovation lifecycle is getting shorter. Innovations have a larger impact. Impact NEW GROWTH WITH STARTUP SCIENCE v Time
MUSIC Impact Live Radio Vinyl CD itunes Spotify Soundcloud, etc Time NEW GROWTH WITH STARTUP SCIENCE v
TV Once simple to describe as TV is fragmenting into thousands of digital channels. Cinema Broadcast Cable DVD YouTube, Smart TV, Upworthy, etc Impact Time NEW GROWTH WITH STARTUP SCIENCE v
WHAT IS A MEDIA COMPANY? The whole idea of a media company is fragmenting. Look how big Upworthy grew in 2 years but how long will it last? NEW GROWTH WITH STARTUP SCIENCE v
HERE COMES EVERYBODY 80% of the adult world in next 5 years will have a smartphone. NEW GROWTH WITH STARTUP SCIENCE v 19
THEY HAVE HIGH EXPECTATIONS! 4 billion humans with a smartphone by 2020 x Taken anywhere, sense (place + orientation, + temperature+ movement + etc), connected to thousands of friends, payment = 10x NEW GROWTH WITH STARTUP SCIENCE v
THEY ARE FICKLE AND WANT TO HELP US Now there are only 2 groups: trial users, who often participate in product development, and everyone else. Big Bang Disruption NEW GROWTH WITH STARTUP SCIENCE v
MORE PEOPLE CAN HELP THEM GET WHAT THEY WANT 2000 100 Staff 1M Users $10M raised Today 10 Staff 10M Users $1M raised Yo 1 Staff 1M Users $0 raised NEW GROWTH WITH STARTUP SCIENCE v
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$1,000 COMPUTER NEW GROWTH WITH STARTUP SCIENCE v
2025
NEW GROWTH WITH STARTUP SCIENCE v IT S GOING TO GO FASTER NOW...
HOW WE TRAVEL
HOW WE POWER OUR HOMES...
HOW WE STAY HEALTHY...
WHAT MONEY IS...
WHAT STARTUPS DO The world that made startup practice
WHAT IS A STARTUP?
BUILD IT AND THEY WILL COME? 7pm Get dumped 8pm Start coding 9pm Launch Midnight Go viral Magic Etc NEW GROWTH WITH STARTUP SCIENCE v
A STARTUP IS NOT A SMALL VERSION OF A BIG COMPANY Steve Blank
A STARTUP IS A TEMPORARY STATE SEARCH EXECUTE Startups do this Companies do this NEW GROWTH WITH STARTUP SCIENCE v
MUCH TO LEARN A startup is a company that is confused about: What its product is Who its customers are How to make money Dave McClure - 500 Startups NEW GROWTH WITH STARTUP SCIENCE v
WATERFALL IS SEDUCTIVE Requirements Design Build Launch Maintain NEW GROWTH WITH STARTUP SCIENCE v
WHAT HAPPENS IF THIS BIT IS WRONG? Requirements Design Build Launch Maintain NEW GROWTH WITH STARTUP SCIENCE v
THE STARTUP LIFECYCLE Skip a stage, and the chances are you will fail. 1 Proof of Problem Problem Solution Fit 2 Proof of Market Product Market Fit 3 Proof of Scale Ready to scale NEW GROWTH WITH STARTUP SCIENCE v
WEBVAN Case Study Raised $800M Ex-Anderson consulting CEO at the helm. BUT Prematurely scaled. Failed to learn DEAD IN 2 YEARS NEW GROWTH WITH STARTUP SCIENCE v
COLOR Case Study Raised $41M Serial exit entrepreneur at the helm. BUT Prematurely scaled. Failed to learn DEAD IN 1 YEAR NEW GROWTH WITH STARTUP SCIENCE v
WHAT WE DO IN A LEAN STARTUP The true product of an entrepreneur is not the solution, but a working business model. The real job of an entrepreneur is to systematically de-risk that business model over time. Ash Maurya - Spark59 NEW GROWTH WITH STARTUP SCIENCE v XPERIMENT
EXPERIMENTS NOT LAUNCHES Product "The most important thing scientists do - first and foremost, scientists build models. They they run experiments to validate those models." Build Measure #startupscience from Ash Maurya Ideas Data Learn NEW GROWTH WITH STARTUP SCIENCE v
LEARN FAST AND EXPLICITLY Product Build Measure Startups that succeed are those that iterate enough times before running out of resources Ideas Data - Eric Ries Learn NEW GROWTH WITH STARTUP SCIENCE v
FACEBOOK... Didn t launch with all these features NEW GROWTH WITH STARTUP SCIENCE v 47
CIRCLES OF MOMENTUM Create a path to #MASSIVE NEW GROWTH WITH STARTUP SCIENCE v Harvard Directory Other universities in US Workplaces Global Apps Social web 48
BALANCE INTUITION AND EVIDENCE Like a great scientist
THE STARTUP LIFECYCLE 1 Proof of Problem Problem Solution Fit 2 Proof of Market Product Market Fit 3 Proof of Scale Ready to scale Skip a stage, and the chances are you will fail. 50
The most common cause of failure is self destruction through premature scaling
MODEL NOT VALIDATED No startup that scaled prematurely sustained growth rates to reach 100K users. 52
MODEL NOT VALIDATED Few startups that grow prematurely reach $100K monthly revenue. 53
MODEL VALIDATED Startups that grow consistently, grow 20x faster and get higher valuations. 54
INCREASE CHANCE OF FAILURE Action Problem Resistance to change after the initial plan Urge startups to grow quickly Too good at execution. Jump to that Focus on revenue Startups that pivot once or twice are less likely to fail and have 3.6x user growth Premature scaling Avoids search and all startup phases Not doing customer development. Not focusing on value 55
TRADITIONAL PROGRAM Most large organisations attempt the leap from idea to scale in one step. We call this premature scaling and we know that most startups attempting it will fail. NEW GROWTH WITH STARTUP SCIENCE v
SUCCESS CORE Central to our approach is identifying where each venture sits on the SUCCESS CORE lifecycle and running a process which maximises the unique context of that phase. Decreasing risk Increasing investment 57
Proof of Problem Proof of Market Proof of Scale B B B Idea Scale L M L M L M We have proven that people have a problem we can solve with a product that attracts and retains we have maximised scalability now are ready... 58
STAGE 1 / IDEA Team Anyone from any team can decide to run an idea stage project. 1 or 2 people Purpose To develop a prioritised war chest of ideas to move into Stage 2. Funding Up to $1,000 can be claimed in expenses. Activity Develop the first hypothesis and get some customer validation. Product Lean canvas + lessons learned from customer tests. Customer Must involve at least 1 customer. Example Exit Criteria Lean canvas completed. Some LIGHT evidence that Problem, Customer, Solution OR Unique Value Proposition assumptions on lean canvas are valid through things like: Positive click through from teaser ad campaign LOI from customer Landing page conversion from interested customers Time Next 2 weeks. Can be part-time. Share at quarterly Dragon s Den sessions and submit to Innovation Council. Assessed for priority queue into next stage. These are principles and not rules. 59
STAGE 2 / PROOF OF PROBLEM Team Purpose Funding About $200K Activity Customer Development Team - 2 or 3 people full-time and autonomous. To validate that customers find specific value in a solution. Detailed customer interviews. Experiments that show the customer taking action. Prototype building. Product Simple minimum viable product. No technology choices to take longer than 1 day to get started with. No dependencies. Customer As close as possible to real customer context. Customer likely knows they are in a trial. May only be one customer. Example Exit Criteria Evidence that Problem, Customer, Solution AND Unique Value Proposition assumptions on lean canvas are valid through things like: Successful tender from customer study Pilot customer using a manual version of the experience with metrics showing problem solved. At least crudely. Prototype testing leading to customer signing license deal. Time Next About 3 Months Exit > Stage 3 / Proof of Market What is the riskiest hypothesis and can you prove OK? What would you need to see to invest your own money? These are principles and not rules. 60
STAGE 3 / PROOF OF MARKET Team Customer Development Team - About 5 people full-time and autonomous + other resources as needed to scale the parts of the business that are becoming known Purpose Funding Up to $3M Activity Product Strengthen value proposition to be more sticky and work in other use-cases. Search for channels, revenue models. Proven business model by exit. Building higher resolution product, testing model with more customer segments. Search for repeatable and scalable sales and marketing mechanics. Full, high resolution product. Still may have manual processes but the customer should not notice. Customer B2B - Clear path to $100K monthly revenue. Consumer - Clear path to 100,000 users Example Exit Criteria Evidence that ALL parts of lean canvas are valid through things like: Path to $100K MRR for B2B solutions Path to 100K users for consumer solutions Proven, repeatable acquisition channels. Known cause and effect for growth, These are principles and not rules. Time Next About 12 Months Exit > Stage 4 / Proof of Scale 61
MINDSET Individual purpose
I AM AN ENTREPRENEUR
I PURSUE IMPACT Otherwise why bother?
I LIKE TO HAVE SOMETHING AT STAKE Risk and reward
I ALWAYS NEED TO MOVE FORWARD Because traction is the only metric
I NEED THE ABILITY TO CHANGE THINGS TOMORROW Because I will need to to succeed
KAOS phil@pollenizer.com Phil Morle Chief Startup @philmorle Scientist @pollenizer @philmorle
"This economy is built on art, the art that is created by emotional labour, by bringing risk and joy and fear and love to the table. Emotional labour scales in that a little more emotional labour is worth a lot" Seth Godin CARUS NEW GROWTH WITH STARTUP SCIENCE v
MANAGERS DO THIS Select a given mean to achieve a predetermined goal M M M Given Goal M M Source: What makes an entrepreneur entrepreneurial?(hbr) NEW GROWTH WITH STARTUP SCIENCE v www.pollenizer.com
STRATEGIC MANAGERS DO THIS Generate new means to achieve a predetermined goal M M M Given Goal M M Source: What makes an entrepreneur entrepreneurial?(hbr) NEW GROWTH WITH STARTUP SCIENCE v www.pollenizer.com
WHAT HAPPENS IF THIS BIT IS WRONG? Requirements Design Build Launch Maintain NEW GROWTH WITH STARTUP SCIENCE v
ENTREPRENEURS DO THIS Imagine new ends with given means E M M M E E M M E Source: What makes an entrepreneur entrepreneurial?(hbr) E NEW GROWTH WITH STARTUP SCIENCE v www.pollenizer.com
"The pursuit of opportunity beyond resources controlled" Professor Howard Stevenson - HBR
PURSUIT Startups that succeed are those that iterate enough times before running out of resources. Eric Ries INKEDIN NEW GROWTH WITH STARTUP SCIENCE v
PURSUIT Entrepreneurship is like jumping off a cliff and assembling a plane on the way down. Reid Hoffman INKEDIN NEW GROWTH WITH STARTUP SCIENCE v
ONLY THE OUTPUT CAN FLEX Resources are fixed 3 months Hustler 3 months Product Manager $200K 3 months Engineer NEW GROWTH WITH STARTUP SCIENCE v
IZ BIZ STONE "A personal belief is that if you are not personally invested in what you are working on, you'll fail." Financial Times February 2, 2013 NEW GROWTH WITH STARTUP SCIENCE v