For the life of me, I CANNOT retain information accurately. I am usually eager to read but sometimes I forget things. I’m just human, okay!?
Well, our final class of New Venture Planning is in a few hours and we will be having our last “pop” quiz.
It’s not a surprise that we will have a quiz because we need to complete one more and today is the last class. (Problem solver, I know!)
Anyway, let’s get down to business. In this post I will be swaying away from the usual things that I blog about – fitness and travel – and blog about what I learned in the 4 chapters we were assigned to read for class. I will summarize what I learned in Chapters 9 – 12 in “The Lean Startup” by Eric Ries.
Note: I read Chapter 9 – 11 on my transit rides to work, Chapter 12 is still pending. I’ll try to take a quick look through while I write this post.
Chapter 9: Batch
- Shigeo Shingo (innovator at Toyota) created SMED (Single-Minute Exchange of Die) to enable a smaller batch size of work in early Toyota days
- Andon cord – allows any worker to ask for help as soon as they notice a problem;
- Envelope-stuffing example – working in small batches is more efficient than working in large batches
- Continuous deployment – when the company immune system detects a problem, the company removes the defective change immediately
Continuous deployment beyond software
- Hardware becoming software
- Fast production changes
- 3D printing and rapid prototyping tools
Reducing Batch Size
- By reducing batch size, companies can get through the Build-Measure-Learn feedback loop more quickly than competitors can
- Ability to learn from customers is the essential advantage that startups much process
- Education example: School of One – students have daily “playlists” of their learning tasks that are attuned to each student’s learning needs (student working at his or her pace)
- Large-batch death spiral – large batches tend to grow over time; no limit to large batches
- Just-in-case inventory or work-in-progress (WIP) inventory – best way to produce your supplies
Chapter 10: Grow
- Engine of growth – startups use to achieve sustainable growth
- Sustainable growth is characterized by: New customers come from the actions of old customers
Four ways to drive sustainable growth:
- Word of mouth
- As a side effect of product usage
- Through funding advertising
- Through repeat purchase or use
Sticky Engine of Growth
- Companies have the expectation that once you start using their product, you will keep using it (repeat purchase); high-customer retention rate; companies track the attrition rate or churn rate very carefully
- Churn rate – the fraction of customers in any period who fail to remain engaged with the company’s product
- RULE: If the rate of new customers acquisition exceeds the churn rate, the product will grow
- Speed of growth is determined by rate of compounding, which is the natural growth rate minus the churn rate
Viral Engine of Growth
- Examples) Hotmail, Tupperware
- Viral coefficient – how many customers will use a product as a consequence of each new customer who signs up aka.. how many friends will each customer bring with him or her?
- Viral coefficient of 0.1 = one in every ten customers will recruit one of his or her friends
- More sustainable when viral coefficient is 1! For every customer, they bring one or more friends.
- Products are rarely charged up front to avoid friction of recruiting friends (revenue is generated another way – through advertising mainly)
Paid Engine of Growth
- Life time value – amount customer pays for product over his or her life time
- Cost per acquisition – costs required to onboard a customer
Chapter 11: Adapt
- Adaptive organization – one that automatically adjusts its process and performance to current conditions
- The Wisdom of Five Whys – Why
- Make a Proportional Investment – invest little effort into minor problems, invest more into larger problems
- Quickbooks Example – Year 1 – Achieving Failure; Year 2 – Muscle Memory; Year 3 – Explosion
Chapter 12: Innovate
All right, guys. So I have to catch my bus to school soon, but I will update the last 2 chapters when I get the chance. Thoughts about writing this blog.
The amount of information I learned (and relearned) was surprising! I didn’t know I would spend so much time typing up this blog and thought each Chapter would only have two or three takeaways but writing out the key terms and definitions helped me understand some concepts more clearly. Sorry if it looks long, as long as I understand it in my head, it will help me pass my quiz!!
Sorry to my regular blog viewers, now you know that I’m an university student who cares somewhat about my grades. Running and exercising is still higher on my priority list 😉