The Lean LaunchPad Class at Stanford: Class 2- Business Model and Customer Discovery Hypotheses

Our new Stanford Lean LaunchPad class was an experiment in teaching a new model of startup entrepreneurship. This post is part two.

By now the nine teams at our Stanford Lean LaunchPad Class were formed, and in the four days between the team formation and this class session we tasked them to:

Write down the hypotheses for the 9 parts of their company's business model.
Come up with ways to test:

each of the 9 business model hypotheses
is their business worth pursuing (give us an estimate of market size)
Come up with what constitutes a pass/fail signal for the test (e.g. at what point would you say that your hypotheses wasn't even close to correct)?
Start their blog/wiki/journal for the class

The Nine Teams Present

Every week every team had to present a 10 minute summary of what they did and what they learned. As each team presented the teaching team would ask questions and give suggestions (at times pointed ones) for things they missed or might want to consider next week. (These presentations counted for 30% of their grade, and graded them on a scale of 1-5, posted our grades and comments to a shared Google doc, and had our Teaching Assistant aggregate the grades and feedback to pass on to the teams.)

Our first team up was Autonomow. They were going to develop a robot lawn mower. Off to a running start, they not only wrote down their initial business model hypotheses but they immediately got out of the building and began interviewed prospective customers to test their three most critical assumptions in any business: Value Proposition, Customer Segment and Channel. Their hypotheses when they left the campus were:

Value Proposition:  Labor costs in mowing and weeding applications are significant, and autonomous implementation would solve the problem.
Customer Segment: Owners/administrators of large green spaces (golf courses, universities, etc.) would buy an autonomous mower.  Organic farmers would buy if the Return On Investment (ROI) is less than 1 year.
Channel: Mowing and agricultural equipment dealers

All teams were keeping a blog – almost like a diary – of what they were doing. Reading the Autonomow blog for the first week was interesting, you could see their first hypotheses already starting to shift: "For mowing applications, we talked to the Stanford Ground Maintenance, Stanford Golf Course supervisor for grass maintenance, a Toro distributor, and an early adopter of an autonomous lawn mower.  For weeding applications, we spoke with both small and large farms.  In order from smallest (40 acres) to largest (8000+ acres):  Paloutzian Farms, Rainbow Orchards, Rincon Farms, REFCO Farms, White Farms, and Bolthouse Farms.

We got some very interesting feedback, and overall interest in both systems.  Both hypotheses (mowing and weeding) passed, but with some reservations (especially from those who's jobs they would replace!)  We also got good feedback from Toro with respect to another hypothesis – selling through distributor vs. selling direct to the consumer."

The Autonomow team summarized their findings in their first 10 minute, weekly Lesson Learned presentation to the class.

Autonomow team members:

Jorge Heraud (MS Management, 2011) Business Unit Director, Agriculture, Trimble Navigation, Director of Engineering, Trimble Navigation, MS&E (Stanford), MSEE (Stanford), BSEE (PUCP, Peru)

Lee Redden (MSME Robotics, Jun 2011) Research in haptic devices, autonomous systems and surgical robots, BSME (U Nebraska at Lincoln), Family Farms in Nebraska

Joe Bingold (MBA, Jun 2011) Head of Product Development for Naval Nuclear Propulsion Plant Control Systems, US Navy, MSME (Naval PGS), BSEE (MIT), P.E. in Control Systems

Fred Ford (MSME, Mar 2011) Senior Eng for Mechanical Systems on Military Satellites, BS Aerospace Eng (U of Michigan)

Uwe Vogt (MBA, Jun 2011) Technical Director & Co-Owner, Sideo Germany (Sub. Vogt Holding), PhD Mechanical Engineering  (FAU, Germany), MS Engineering (ETH Zurich, Switzerland

Personal Libraries

Our next team up was Personal Libraries. They wanted to help researchers manage, share and reference the thousands of papers in their personal libraries. We increase a researcher's productivity with a personal reference management system that eliminates tedious tasks associated with discovering, organizing and citing their industry readings. What was unique about this team was that Xu Cui a Stanford postdo in Neuroscience had built the product to use for his own research. By the time he joined the class it was being used in over a hundred research organizations including Stanford, Harvard, Pfizer, the National Institute of Health and Peking University. The problem is that the product is free to use for end users and few Research institutions purchased site licenses. The goal was to figure out whether this product could become a company.

The Personal Libraries core hypotheses are:

We solve enough pain for researchers to drive purchase
Dollar size of deals sufficient to be profitable with direct sales strategy
The market large enough for a scalable business

Personal Libraries Team Members

Abhishek Bhattacharyya, creator of WT-Ecommerce, an open source engine, Ex-NEC engineer, Masters EE candidate

Xu Cui Stanford Researcher Neuroscience, postdoc, PhD in Neuroscience from Baylor College of Medicine and a degree in biology from Peking University

Mike Dorsey B.S. in computer science, environmental engineering and middle east studies from Stanford, Austin College and the American University in Cairo MS/MBA candidate

Becky Nixon BA mathematics and psychology Tulane University Ex-Director, Scion Group, Stanford MS&E candidate

Ian Tien . MS in Computer Science from Cornell, Microsoft Office Engineering Manager for SharePoint, and former product manager for SkyDrive , Stanford MBA/MPP candidate

Teaching Team Week 2 Lecture: Value Proposition

Our working thesis was not one we shared with the class – we proposed to teach entrepreneurship like you would teach artists – deep theory plus immersive hands-on.

Our lecture this week covered Value Proposition – what problem is the customer going to pay you to solve?  What product and service you were offering the customer to solve that problem.

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Deliverable for Jan 18th:

Find a name for your team.
What were your value proposition hypotheses?
What did you discover from customers?
Submit interview notes, present results in class.
Update your blog/wiki/journal


Filed under: Business Model versus Business Plan, Customer Development, Teaching