by Bill Aulet
BILL AULET
Illustrations by
Marius Ursache
Edited by
Chris Snyder
Cover image: © Marius Ursache
Cover design: Wiley
This book is printed on acid-free paper.
Copyright © 2017 by Bill Aulet. All rights reserved
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with the respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for damages arising herefrom.
For general information about our other products and services, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Library of Congress Cataloging-in-Publication Data has been applied for and is on file with the Library of Congress.
978-1-119-36579-2 (paperback)
978-1-119-36577-8 (ePDF)
978-1-119-36578-5 (ePUB)
I DEDICATE THIS BOOK TO ALL MY STUDENTS WHO MAKE MY SO-CALLED “JOB”
THE GREATEST ONE IN THE WORLD. YOU GIVE ME ENERGY EVERY DAY. THIS ONE IS FOR YOU.
CONTENTS
Preface
Introducing the Disciplined Entrepreneurship Canvas
Step 0 How Do I Get Started? Should I? Your Passion
Your Team
Coming Up with an Idea or a Technology
Hybrid Idea: Mix of Market Pull and Technology Push
Notes
Step 1 Market Segmentation What is Step 1, Market Segmentation?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
Bonus Topic A Practical Guide to Primary Market Research What Is Primary Market Research?
Worksheets
Notes
Step 2 Select a Beachhead Market What Is Step 2, Select a Beachhead Market?
Why Do We Do This Step, and Why Do We Do It Now?
General Exercises to Understand Concept
Worksheets
Step 3 Build an End User Profile for the Beachhead Market What Is Step 3, Build an End User Profile for the Beachhead Market?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheet
End User Profile for Beachhead Market
Step 4 Estimate the Total Addressable Market (TAM) for the Beachhead Market What Is Step 4, Estimate the Total Addressable Market (TAM) for the Beachhead Market?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Advanced Topics: Bottom-Up TAM Analysis
Notes
Step 5 Profile the Persona for the Beachhead Market What Is Step 5, Profile the Persona for the Beachhead Market?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Advanced Topic: Persona Profiles for Multisided End User Market
Notes
Step 6 Full Life Cycle Use Case What Is Step 6, Full Life Cycle Use Case?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Sketch of How the End User Currently Solves The Problem (or Doesn’t)
Step 7 High-Level Product Specification What Is Step 7, High-Level Product Specification?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Advanced Topic: High-Level Product Brochure
Notes
Step 8 Quantify the Value Proposition What Is Step 8, Quantify the Value Proposition?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Step 9 Identify Your Next 10 Customers What Is Step 9, Identify Your Next 10 Customers?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Step 10 Define Your Core What Is Step 10, Define Your Core?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercise to Understand Concept
Worksheet
Step 11 Chart Your Competitive Position What Is Step 11, Chart Your Competitive Position?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercise to Understand Concept
Worksheet
Step 12 Determine the Customer’s Decision-Making Unit (DMU) What Is Step 12, Determine the Customer’s Decision-Making Unit (DMU)?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheet
Step 13 Map the Process to Acquire a Paying Customer What Is Step 13, Map the Process to Acquire a Paying Customer?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Bonus Topic Windows of Opportunity and Triggers What Are Windows of Opportunity and Triggers?
Why Are They Important and Why Now?
Process Guide
General Exercises to Understand Concept
Worksheet
Note
Step 14 Estimate the Total Addressable Market (TAM) Size for Follow-on Markets What Is Step 14, Estimate the Total Addressable Market (TAM) Size for Follow-on Markets?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Co
ncept
Worksheet
Step 15 Design a Business Model What Is Step 15, Design a Business Model?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheet
Step 16 Set Your Pricing Framework What Is Step 16, Set Your Pricing Framework?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheet
Note
Step 17 Estimate the Lifetime Value (LTV) of an Acquired Customer What Is Step 17, Estimate the Lifetime Value of an Acquired Customer?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheet
Note
Step 18 Map the Sales Process to Acquire a Customer What Is Step 18, Map the Sales Process to Acquire a Customer?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Example
Step 19 Estimate the Cost of Customer Acquisition (COCA) What Is Step 19, Estimate the Cost of Customer Acquisition (COCA)?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Step 20 Identify Key Assumptions What Is Step 20, Identify Key Assumptions?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheet
Step 21 Test Key Assumptions What Is Step 21, Test Key Assumptions?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercise to Understand Concept
Worksheet
Step 22 Define the Minimum Viable Business Product (MVBP) What Is Step 22, Define the Minimum Viable Business Product (MVBP)?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercise to Understand Concept
Worksheet
Step 23 Show That “The Dogs Will Eat the Dog Food” What Is Step 23, Show That “The Dogs Will Eat the Dog Food”?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercise to Understand Concept
Worksheet
Note
Step 24 Develop a Product Plan What Is Step 24, Develop a Product Plan?
Why Do We Do This Step, and Why Do We Do It Now?
Process Guide
General Exercises to Understand Concept
Worksheets
Beyond the 24 Steps What Is Missing in the 24 Steps?
Worksheet
Note
Exercise Answers Step 2
Step 5
Step 6
Step 7
Step 9
Step 10
Step 14
Step 15
Step 16
Step 17
Step 18
Step 19
Step 20
Step 24
Index
EULA
PREFACE
THE ORIGINAL DISCIPLINED ENTREPRENEURSHIP book laid out a rigorous but practical pedagogy for innovation-driven entrepreneurship. It has fundamentally changed the course of entrepreneurship education from a storytelling approach to a toolbox and systematic framework. But there is only so much that can be accomplished in a single 250-page book. This workbook builds off Disciplined Entrepreneurship to provide a way to more easily engage with the 24 Steps.
Our goal at the Martin Trust Center for MIT Entrepreneurship is to develop high-quality entrepreneurship education and make it accessible, not just to MIT’s full-time students but also to millions of people worldwide. That is why I wrote Disciplined Entrepreneurship, taught several online courses on edX, and with my colleagues write online articles and tools to help clarify key concepts about our methodical approach to entrepreneurship.
The demand from entrepreneurs and instructors for additional materials to help them implement the 24 Steps has been simultaneously rewarding and overwhelming. There needed to be a more scalable solution, and that is the purpose of this workbook.
In this book, I provide templates and additional advice on how to implement each of the 24 Steps. You can use these templates on your own startup or as classroom deliverables to assess your students’ understanding of the topics. This workbook is not a replacement for Disciplined Entrepreneurship but rather a complement to it. It is expected that you will go back and forth between Disciplined Entrepreneurship and this workbook in order to gain a full understanding of each step.
The 24 Steps is an iterative process, so always make sure you are proactively revising your work as you go through the steps. Something that you do in Step 23 is likely to affect Step 11, or Step 9 will affect Step 5, and so on. Also, do not feel confined by these templates if you need to make some modifications to better suit the needs of the industry or specific characteristics of your startup.
The 24 Steps approach is a toolbox of the best methodologies available for entrepreneurs, and I continually evolve it and survey the landscape to take in new and/or better tools to improve the framework. You’ll see two new chapters in this workbook, one on primary market research and another on windows of opportunity and triggers. I hope that many others around the world will continue to test and contribute to the 24 Steps to make the framework even better over time. The collective wisdom of the community is better than any individual—plus many hands make for lighter and faster work.
Since the time I first published Disciplined Entrepreneurship, it has become even more clear that we need high-quality, rigorous entrepreneurship education and training sooner rather than later. The critical need for a serious body of knowledge on innovation-driven entrepreneurship has never been greater—and it will only get more so in the future. Please “lean in,” as Sheryl Sandberg would say, and help us with this cause.
Additional materials, including electronic versions of some of the worksheets herein, will be available at www.disciplinedentrepreneurship.com.
INTRODUCING THE DISCIPLINED ENTREPRENEURSHIP CANVAS
THIS IS NEW MATERIAL that was not covered in Disciplined Entrepreneurship. The Canvas is a tool you will fill out as you go through the 24 Steps.
WHAT IS THE DISCIPLINED ENTREPRENEURSHIP CANVAS, AND WHY IS IT IMPORTANT?
The Disciplined Entrepreneurship Canvas is a one-page overview of the Disciplined Entrepreneurship approach to entrepreneurship. The Canvas functions like a synopsis of your current status so you can see what you have done and what you have not done, across 10 major areas that map to the 24 Steps.
I have seen the value in life of having a concise visual that gives a team feedback on their progress in the midst of the battle. I have also seen entrepreneurs building workarounds for just this function when trying to use the Disciplined Entrepreneurship approach, so there is clearly value in tracking your progress on the long journey through the 24 Steps.
The Disciplined Entrepreneurship Canvas will allow you to quickly assess the big picture of where you stand, and where your strengths and weaknesses are, so you can make adjustments.
HOW TO APPROACH THE DISCIPLINED ENTREPRENEURSHIP CANVAS
As Disciplined Entrepreneurship has been broadly deployed, a frequent question I get is how to integrate the 24 Steps framework with the Business Model Canvas made popular by Business Model Generation by Alexander Osterwalder and Yves Pigneur. In fact, before I wrote Disciplined Entrepreneurship, I used to use in my classroom the Business Model Canvas and then the Lean Canvas by Ash Maurya, but I did not find an easy, suitable way to integrate them with teaching the 24 Steps.
As nature abhors a vacuum,
numerous people have constructed their own canvases for the Disciplined Entrepreneurship framework, led by Laurie Stach (MIT Launch), Floriano Bonfigli (Istituto Adriano Olivetti Business School—ISTAO Startup Lab), Patrick Kirby (Michelin—vice president of innovation and entrepreneurship), Johannes Mutzke (Michelin—Global Innovation Council), Mateo Nakach and Jorge Sanchez (Build-Your-Business Consulting Group), and Michael McCausland (Leadership Institute for Entrepreneurs).
They have pushed and inspired me to see the value of a one-page canvas that shows how you are doing. In sports, a coach often tracks progress in the game in a summary fashion and then conveys key information to his team on what they are doing well and what they need to focus more on if they are to win the game. A basketball coach’s synopsis, for instance, will not only have the score but also the time left in the game, how many fouls each team and each player has, and other key indicators. Likewise, an entrepreneurship canvas gives you the big picture in one snapshot and allows you to see what you need to work on.
The simple summary does not capture the full richness of your situation, and as such it is not a perfect indicator of your success. Nor does the simple summary tell you why things have happened and how to fix things. So while it is limited in its usefulness, it does have the benefit of simplicity.
I have based the Disciplined Entrepreneurship Canvas off the Six Themes of the 24 Steps from Disciplined Entrepreneurship, expanding two of the themes and adding two more sections. The resulting Canvas maintains the specificity, logic, and rigor of the 24 Steps.