Hi,report should be no longer than two pagesThe goal is for you to demonstrate what you have been doing and learning.self-assess the:growth and development of your solution(s) to the crazy problemdiscuss the steps in regard to their advancing the competency of your group members in regard to entrepreneurship and course learning objectivescritically discuss, assess and your groups’ progress through Aulet’s 24 stepswhat your group learned from the step about solving the crazy big problem
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20190128191511disciplined_entrepreneurship_24_steps_to.pdf
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Contents
Preface
Acknowledgments
Introduction
Six Themes of the 24 Steps
Step 0: Getting Started
Three Ways to Start a New Venture
How to Go from “I Have a Passion” to “I Have an Idea or Technology”
Finding a Founding Team: Entrepreneurship Is not a Solo Sport
Where You Go from Here
Step 1: Market Segmentation
In This Step, You Will:
The Single Necessary and Sufficient Condition for a Business
Create a New Market That You Will Dominate
When “Paying Customers” Lead You Astray
Complex Paying Customers: Primary Versus Secondary Customers
and Two-Sided Markets
How to Do a Market Segmentation
How Long Should I Spend on Market Segmentation?
Example
Summary
Step 2: Select a Beachhead Market
In This Step, You Will:
How to Choose Your Beachhead Market
Your Beachhead Market Still Needs to Be Segmented Further
Example
Summary
Step 3: Build an End User Profile
In This Step, You Will:
Why Target a Specific Demographic?
Does Your Founding Team Include Someone in the End User Profile?
Examples
Summary
Step 4: Calculate the Total Addressable Market (TAM) Size for the
Beachhead Market
In This Step, You Will:
Bottom-Up Analysis
Top-Down Analysis
From “How Many End Users?” to “Show Me the Money”
What Should My Tam Be?
Examples
Summary
Step 5: Profile the Persona for the Beachhead Market
In This Step, You Will:
How to Choose and Profile Your Persona
The Persona Is more than Just an Exercise
Should I Create Multiple Personas? If so, When?
The Persona Helps You Focus on What to Do—and What Not to Do
Examples
Summary
Step 6: Full Life Cycle Use Case
In This Step, You Will:
What to Include in a Full Life Cycle Use Case
Examples
Summary
Step 7: High-Level Product Specification
In This Step, You Will:
Creating a High-Level Product Specification
Then, Make a Product Brochure
Examples
Summary
Step 8: Quantify the Value Proposition
In This Step, You Will:
Aligning Your Value Proposition with the Persona’s Priorities
Keep it Simple: The “as-is” State Versus the “Possible” State with
Your Product
Examples
Summary
Step 9: Identify Your Next 10 Customers
In This Step, You Will:
How to Complete This Step
Is the Current Persona Valid?
Dealing with Negative Feedback
Examples
Summary
Step 10: Define Your Core
In This Step, You Will:
A few Examples of Core
How to Define your Core
What about Intellectual Property? or Culture?
Core Is Different than Competitive Position
First-Mover Advantage Is not a Core
Locking Up Suppliers Is Typically not a Core
Example
Summary
Step 11: Chart Your Competitive Position
In This Step, You Will:
The Toughest Competitor of all: The Customer’s Status Quo
How to Chart Your Competitive Position
Examples
Summary
Step 12: Determine the Customer’s Decision-Making Unit (DMU)
In This Step, You Will:
Primary Roles in the Decision-Making Unit
Additional Roles in the Decision-Making Unit (DMU)
How to Determine the Decision-Making Unit
Examples
Summary
Step 13: Map the Process to Acquire a Paying Customer
In This Step, You Will:
How to Map the Process
Budgeting/Purchasing Authority
Time Is of the Essence
Consumer Versus B2B
Examples
Summary
Step 14: Calculate the Total Addressable Market Size for Follow-on
Markets
In This Step, You Will:
How to Calculate Broader Tam
Example
Summary
Step 15: Design a Business Model
In This Step, You Will:
A Business Model Is not Pricing
Key Factors When Designing a Business Model
Free Is not a Business Model
Generalized Categories of Business Models
Think Outside the Existing Categories
Summary
Step 16: Set Your Pricing Framework
In This Step, You Will:
Basic Pricing Concepts
Example
Summary
Step 17: Calculate the Lifetime Value (LTV) of an Acquired Customer
In This Step, You Will:
Key Inputs to Calculate the LTV
How to Calculate Lifetime Value
How to Calculate the LTV: “Widget” Plus Yearly Maintenance Fee
Important Considerations
Summary
Step 18: Map the Sales Process to Acquire a Customer
In This Step, You Will:
Four Factors Entrepreneurs Often Overlook about Customer
Acquisition Costs
Your Sales Process Changes over Time
How to Map Your Sales Process
Sales Process Comparisons: Zynga, Groupon, Linkedin, Facebook
Example
Summary
Step 19: Calculate the Cost of Customer Acquisition (COCA)
In This Step, You Will:
Why Coca Matters
How not to Calculate Coca: A bottom-up Perspective
The Right Way to Calculate Coca: A top-down Perspective
How to Reduce Coca
Examples
Summary
Step 20: Identify Key Assumptions
In This Step, You Will:
How to Identify Your Key Assumptions
Example
Summary
Step 21: Test Key Assumptions
In This Step, You Will:
Now That We Have Identified The Assumptions, Let’s Test them
Examples of Easily Testable Assumptions: Student Teams
Summary
Step 22: Define the Minimum Viable Business Product (MVBP)
In This Step, You Will:
Three Conditions of a Minimum Viable Business Product
Examples
Summary
Step 23: Show That “The Dogs Will Eat the Dog Food”
In This Step, You Will:
Examples
Summary
Step 24: Develop a Product Plan
In This Step, You Will:
Example
Summary
Postlude: A Business Is more than 24 Steps
Glossary
About the Author
Index
Praise for Disciplined Entrepreneurship
“Entrepreneurship is not only a mind-set but a skill set. The 24 Steps present a practical step-by-step
process to channel the creative spirit to maximize the chances of success and ultimate impact.”
—Mitch Kapor, Founder, Lotus Development Corporation
“While I am not a big fan of business plans, I am a big fan of the business planning process. This book
provides an invaluable comprehensive framework for innovation-driven entrepreneurs to execute the
business planning process.”
—Brad Feld, Managing Director of the Foundry Group, Co-Founder of TechStars, and Creator of the
Startup Revolution book series
“We have had Bill working with entrepreneurs in Scotland for the past three years using the 24 Steps,
and we have been delighted with the results. Not only is the framework an extremely helpful road map,
it has also given entrepreneurs the confidence to go on the journey and take their businesses to the next
level. This is a very valuable approach that works across borders.”
—Alex Paterson, Chief Executive, Highlands and Islands Enterprise Scotland
“This is the book I wish I’d had when I was starting out—concise, great examples, in plain English,
combining classic entrepreneurship theory with what’s happening in today’s startup world. If you’re a
serious entrepreneur, read it carefully and keep it close at hand for the journey ahead.”
—Frederic Kerrest, Co-Founder, Okta, and MIT Patrick J. McGovern, Jr. Entrepreneurship Award
recipient
“According to conventional wisdom, entrepreneurship is solely an innate trait. Nothing could be further
from the truth. Entrepreneurship is a learned skill which can be honed through crisp execution. This
book can help every entrepreneur dramatically increase the likelihood of success by providing step-bystep guidance on how to approach starting a new business. I recommend it to all ambitious
entrepreneurs.”
—Doug Leone, Managing Partner, Sequoia Capital
“Invaluable. This book superbly summarizes the lessons taught to us at MIT. It is the book I wish I had
when we were launching HubSpot six years ago.”
—Brian Halligan, Co-Founder and CEO, Hubspot, and author of Inbound Marketing
“Bill and I have had many discussions about entrepreneurship, and I really respect his perspective on
the topic. While the spirit of entrepreneurship is often about serendipity, the execution is not. This book
takes you through a systematic approach to significantly increase your odds of succeeding in making a
world-changing and sustainable company. I loved the content and the simple nature of the book.”
—Joi Ito, Director, MIT Media Lab
“Ideas are a dime a dozen but great entrepreneurs are what create value. They have to be passionate
and skilled. Maybe passion can’t be taught, but execution skills can, and this book does a wonderful
job providing a structure and wisdom with each step to help entrepreneurs be more successful. I highly
recommend it.”
—Paul Maeder, Founding Partner of Highland Capital and 2012 Chair of the National Venture
Capital Association
“Bill’s concept of a team creating an entrepreneur is intriguing but also validated by research and
experience. This list of disciplined steps to creating a venture can not only help entrepreneurs increase
their likelihood of success, but also identify the skills and people he/she will need on the team in the
crucial early steps in a company’s life, and to create a common language the team can share in talking
about the tasks before them. I might have suggested that he call his book The Holistic Entrepreneur.”
—Thomas A. McDonnell, President and CEO, Ewing Marion Kauffman Foundation
“Social entrepreneurs must develop business models which balance social impact with business
sustainability. Soko focuses on building a successful and scalable business model, which will lead to
scaled social impact in the communities where we work. The 24 Step process outlined by Bill Aulet is
a very useful framework for any type of business to get from an idea to full realization.”
—Ella Peinovich and Gwen Floyd, Founders of ShopSoko.com, Africa’s first mobile marketplace
“I had the great pleasure to work with Bill and see how his methodical mind breaks down complex
problems to their essence and then logically solves them to build a great company. This book will be a
great help to entrepreneurs worldwide, which is very important because the world needs more
entrepreneurs like Bill.”
—Thomas Massie, current member of Congress, and Founder, SensAble Devices and SensAble
Technologies
“Entrepreneurship is becoming increasingly scientific each day as the body of knowledge and research
grows. This book is a valuable addition in that it provides an end-to-end guide to the product marketing
process across multiple industries. It is what you would expect from MIT.”
—David Skok, Partner, Matrix Partners
“Training our young engineers to be entrepreneurs is an imperative for the future and this book will
help in that regard. It provides a road map for getting the product-market fit as tight as possible. There
are many considerations in this process and this book captures them well and provides practical
guidance on how to resolve them.”
—Tom Byers, Entrepreneurship Professorship Endowed Chair in the Stanford School of Engineering;
Faculty Director, Stanford Technology Ventures Program
“This is an excellent practical guide for entrepreneurs so they can see the whole process and not miss
critical steps as they bring products to market. Growing out of the actual experience of teaching MIT
students, it adds to the growing body of thoughtful literature in the field that bodes well for the
consistent development of young entrepreneurs.”
—Joe Lassiter, Faculty Chair of the Harvard Innovation Lab, and Heinz Professor of Management
Practice at the Harvard Business School
“I am just so excited to see now that entrepreneurs everywhere are going to get what I got at MIT to
help hone my entrepreneurial skills. It is years of knowledge and wisdom in a box that every
entrepreneur should read, even if you already have a business.”
—Sal Lupoli, Founder of Sal’s Pizza and Lupoli Companies
“As an intuitive entrepreneur, I prefer less structure. That being said, after having worked through the
steps in this book to launch Lark, I realize that some structure is very valuable. This book provides
enough guidance to help you succeed but not too much to stifle creativity. It is a must-have for
entrepreneurs to read the first time but also as a reference.”
—Julia Hu, Founder and CEO of Lark Technologies
“Disciplined Entrepreneurship is highly relevant and is on my recommended reading list for
entrepreneurship students and entrepreneurs. It moves the reader forward through practical and
important steps that they might otherwise miss, in their innovation-driven startup journey.”
—Professor Gregory B. Vit, Director, the Dobson Centre for Entrepreneurial Studies, McGill
University
Cover image: Marius Ursache
Cover design: C. Wallace
Copyright © 2013 by Bill Aulet. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
Adaption of figure [“Bowling Alley Market Development” (p.38)] and brief quote from pp. 22-3 from
INSIDE THE TORNADO by GEOFFREY A. MOORE. Copyright 1995 © by Geoffrey A. Moore
Consulting, Inc. Reprinted by permission of HarperCollins Publishers.
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ISBN 978-1-118-69228-8 (cloth); ISBN 978-1-118-72081-3 (ebk); ISBN 978-1-118-72088-2 (ebk)
Throughout my entrepreneurial career, my family has been a rock of Gibraltar that I could always
count on with unconditional support and love, and I dedicate this book to them. First, I had the best
parents a son could ever have in the now-deceased Becky and Herb Aulet. I was blessed with four
wonderful sons, Kenny, Tommy, Kyle, and Chris, who wondered why their father couldn’t be like
others but put up with it . . . and have excelled in spite of this.
Most of all, I dedicate this book to my wonderful and patient wife of 30 years, Lisa, who married a
young corporate soldier so many years ago and ended up with a crazy old entrepreneur and stuck
with me the whole time. This book is for you.
PREFACE
THIS BOOK IS DESIGNED as an integrated toolbox for first-time and repeat entrepreneurs so that they
can build great enterprises based on new innovative products. Serial entrepreneurs with deep experience
in a particular field or industry will also find this 24-step guide useful to more efficiently bring products
to market.
As an entrepreneur, I have found many sources to be helpful, from books to mentors, and most of all, my
own experiences. However, I have not found a single source that pulls everything together and does it
well.
Many of the books I have found are excellent and have great material, including: Geoffrey Moore’s
Crossing the Chasm, W. Chan Kim and Renée Mauborgne’s Blue Ocean Strategy, Brian Halligan and
Dharmesh Shah’s Inbound Marketing, Steve Blank’s Four Steps to the Epiphany, Eric Ries’s The Lean
Startup, Ash Maurya’s Running Lean, and Alex Osterwalder and Yves Pigneur’s Business Model
Generation. These are valuable books and I will reference many of them in this book. However, they are
focused in depth on a few key points without providing the more fulsome roadmap that I have felt
appropriate when teaching my students at the Massachusetts Institute of Technology (MIT) and in my other
workshops. I believe that each is an important tool at the right time during product conception,
development, and launch, but what was needed was a toolbox that contained these and more.
Using the analogy of a toolbox, a screwdriver is a great tool for certain situations, but it does not
function as well as a hammer in other situations. Likewise, to choose one example, the ideas and
techniques in Inbound Marketing are extremely valuable, but they are even more helpful as part of a
broader context used at the right time.
The goal of this book, then, is to provide guidance in a messy and sometimes confusing process where
you, the entrepreneur, are attempting to do something that has never been done before. What a terribly
difficult task to take on, but what an incredibly important one. This book comes out of my workshops
around the world and MIT courses where I built and refined this approach over years with hundreds of
great entrepreneurs.
Certainly, there are other elements to consider when working toward a successful new venture, from
culture and team to sales, financing, and leadership. But the foundation of an innovation-driven enterprise
is the product that is created, and so that is the focus of this book.
This process will not necessarily be sequential in nature. I tried to make a logical linear process of 24
steps to get you started, but you should realize that when you gain knowledge in one step, you may need to
reevaluate previous steps, and refine or even redo your previous work. This iterative process of
“spiraling” toward the optimal answer is important because you do not have unlimited time to perfect
your work on a particular step. You will need to make first-pass estimates based on research, and they
will often need revision.
Each of these steps has rigorously evaluated whether a customer would benefit from your product,
regardless of whether an analyst, potential investor, or technology writer standing on the sidelines can see
the value. As someone once said to me, “In concept, concept and reality are the same, but in reality,
concept and reality are not the same at all.”
This book also provides a common language to discuss key aspects of venture creation so that you can
more effectively discuss your new venture with advisors, mentors, and fellow entrepreneurs. I have
carefully defined each step to refer to a discrete part of the process. I recall my father getting very
frustrated when he would ask for a pair of pliers and I would give him a wrench. Now I feel the same
way he did when I ask my students what their “business model” is and they talk about their Total
Addressable Market or Pricing.
The result of this integrated toolbox with a common language is what we at MIT like to call
“disciplined entrepreneurship.” Some people tell me that entrepreneurship should not be disciplined, but
chaotic and unpredictable—and it is. But that is precisely why a framework to attack problems in a
systematic manner is extremely valuable. You already have enough risk with factors that are beyond your
control, so the framework provided by disciplined entrepreneurship helps you succeed by reducing your
risk in factors that you can have c …
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