An academically rigorous, actionable roadmap for innovation and business success in 24 steps. 

“It’s more fun to be a pirate than to join the navy,” Steve Jobs once famously said.

In fact, the main characteristics associated with an entrepreneur are that of a charismatic and larger- than-life lone hero with a certain degree of showmanship—if not even craziness—and propensity for risk-taking.

Yes, entrepreneurs need the can-do spirit of a pirate that makes them believe they can be successful. But to succeed they also need the precision and follow-through skills of a Navy Seal. And these can be taught.

Bill Aulet, Managing Director of the Martin Trust Center for MIT Entrepreneurship and Senior Lecturer at the MIT Sloan School of Management, developed a comprehensive 24-step framework which is taught at MIT and used by MIT ventures and spinoffs with high success. The total annual revenue from MIT alumni-founded companies taken together would make them the 11th largest economy in the world (E. Roberts and C. Eesley, Entrepreneurial Impact: The Role of MIT—An Updated Report, 2011).

An academically rigorous yet actionable roadmap in 24 steps

What sets the MIT framework apart from other approaches like the Lean Startup, Customer Development, Business Model Canvas, or Growth Hacking among others is that it combines them with an academically rigorous yet actionable roadmap.

Start at step #1 and while there are many iterative loops along the way, you have enough sequential structure to not get lost.

1. Market Segmentation
1. Market Segmentation

Brainstorm potential customers, narrow the list to top markets, and gather primary research on them.

1. Market Segmentation
1. Market Segmentation

Brainstorm potential customers, narrow the list to top markets, and gather primary research on them.

2. Select a beachhead market
2. Select a beachhead market

Analyze your top market opportunities and choose one to pursue. Further segment that market to determine where to establish your beachhead.

2. Select a beachhead market
2. Select a beachhead market

Analyze your top market opportunities and choose one to pursue. Further segment that market to determine where to establish your beachhead.

3. Build an end user profile
3. Build an end user profile

Flesh out a detailed description of the typical end user.

3. Build an end user profile
3. Build an end user profile

Flesh out a detailed description of the typical end user.

4. Calculate the total addressable market (TAM) size for the beachhead market:
4. Calculate the total addressable market (TAM) size for the beachhead market:

Use demographics from the end user profile to determine how large your beachhead market is.

4. Calculate the total addressable market (TAM) size for the beachhead market:
4. Calculate the total addressable market (TAM) size for the beachhead market:

Use demographics from the end user profile to determine how large your beachhead market is.

5. Profile the persona for the beachhead market
5. Profile the persona for the beachhead market

Choose one end user from one potential customer to build a description of that real person.

5. Profile the persona for the beachhead market
5. Profile the persona for the beachhead market

Choose one end user from one potential customer to build a description of that real person.

6. Life cycle use case
6. Life cycle use case

Describe how the persona finds about your product, acquires it, uses it, gets value from it, pays for it, buys more, and tells others about it.

6. Life cycle use case
6. Life cycle use case

Describe how the persona finds about your product, acquires it, uses it, gets value from it, pays for it, buys more, and tells others about it.

7. High level product specs
7. High level product specs

Create a mock-up of your product with a focus on the benefits created by its features.

8. Quantify the value proposition
8. Quantify the value proposition

Determine how the benefits of your product turn into value that the customer gets out of your product.

7. High level product specs
7. High level product specs

Create a mock-up of your product with a focus on the benefits created by its features.

9. Identify your next 10 customers
9. Identify your next 10 customers

Pinpoint and validate 10 potential customers, besides your persona, who fit your end user profile.

8. Quantify the value proposition
8. Quantify the value proposition

Determine how the benefits of your product turn into value that the customer gets out of your product.

10. Define your core
10. Define your core

Outline why your venture can provide customers with a solution that others cannot.

9. Identify your next 10 customers
9. Identify your next 10 customers

Pinpoint and validate 10 potential customers, besides your persona, who fit your end user profile.

11. Chart your competitive position
11. Chart your competitive position

Show how well your product meets the persona’s top priorities and how well the persona’s priorities are met by existing products. Analyze whether the chosen market opportunity fits well with both your core and your persona’s priorities.

10. Define your core
10. Define your core

Outline why your venture can provide customers with a solution that others cannot.

12. Determine the customer’s decision-making unit (DMU)
12. Determine the customer’s decision-making unit (DMU)

Learn who makes the ultimate decision to purchase your product, and who will be advocating for it.

11. Chart your competitive position
11. Chart your competitive position

Show how well your product meets the persona’s top priorities and how well the persona’s priorities are met by existing products. Analyze whether the chosen market opportunity fits well with both your core and your persona’s priorities.

13. Map the process to acquire a paying customer
13. Map the process to acquire a paying customer

Why will a customer decide to purchase your product? Estimate the sales cycle and identify budgetary and compliance hurdles.

12. Determine the customer’s decision-making unit (DMU)
12. Determine the customer’s decision-making unit (DMU)

Learn who makes the ultimate decision to purchase your product, and who will be advocating for it.

14. Calculate the TAM size for follow-on markets
14. Calculate the TAM size for follow-on markets

Consider and size which follow-on markets you’ll expand into after the beachhead market.

13. Map the process to acquire a paying customer
13. Map the process to acquire a paying customer

Why will a customer decide to purchase your product? Estimate the sales cycle and identify budgetary and compliance hurdles.

15. Design a business model
15. Design a business model

Use the results in previous steps to brainstorm a business model for your venture.

14. Calculate the TAM size for follow-on markets
14. Calculate the TAM size for follow-on markets

Consider and size which follow-on markets you’ll expand into after the beachhead market.

16. Set your pricing framework
16. Set your pricing framework

Use your value proposition and business model to determine an appropriate framework for your pricing.

15. Design a business model
15. Design a business model

Use the results in previous steps to brainstorm a business model for your venture.

17. Calculate the lifetime value (LTV) of a customer
17. Calculate the lifetime value (LTV) of a customer

Add up and discount the revenue you can expect from a customer.

16. Set your pricing framework
16. Set your pricing framework

Use your value proposition and business model to determine an appropriate framework for your pricing.

18. Map the sales process to acquire a customer
18. Map the sales process to acquire a customer

Develop a sales strategy for your product

17. Calculate the lifetime value (LTV) of a customer
17. Calculate the lifetime value (LTV) of a customer

Add up and discount the revenue you can expect from a customer.

19. Calculate the cost of customer acquisition (COCA)
19. Calculate the cost of customer acquisition (COCA)

Determine how much it costs to acquire a customer based on your sales process.

18. Map the sales process to acquire a customer
18. Map the sales process to acquire a customer

Develop a sales strategy for your product

20. Identify key assumptions
20. Identify key assumptions

Determine which assumptions about your venture have not been systematically tested and rank them in order of importance.

19. Calculate the cost of customer acquisition (COCA)
19. Calculate the cost of customer acquisition (COCA)

Determine how much it costs to acquire a customer based on your sales process.

21. Test key assumptions
21. Test key assumptions

Design empirical tests to validate or refute key assumptions

20. Identify key assumptions
20. Identify key assumptions

Determine which assumptions about your venture have not been systematically tested and rank them in order of importance.

22. Define the minimum viable product (MVP)
22. Define the minimum viable product (MVP)

Integrate your assumptions into a systems test consisting of an MVP that a customer will pay for.

21. Test key assumptions
21. Test key assumptions

Design empirical tests to validate or refute key assumptions

23. Demonstrate that customers will pay for the MVP
23. Demonstrate that customers will pay for the MVP

Develop metrics that indicate the use and virality.

22. Define the minimum viable product (MVP)
22. Define the minimum viable product (MVP)

Integrate your assumptions into a systems test consisting of an MVP that a customer will pay for.

24. Develop a product plan
24. Develop a product plan

Go beyond the MVP to determine features to build for the beachhead market.

23. Demonstrate that customers will pay for the MVP
23. Demonstrate that customers will pay for the MVP

Develop metrics that indicate the use and virality.

24. Develop a product plan
24. Develop a product plan

Go beyond the MVP to determine features to build for the beachhead market.

 

Download the above 24 steps (PDF)

Invention * Commercialization = Innovation

You’ve probably noticed that the framework is geared towards testing business and market hypotheses and little is dedicated to a product’s underlying invention. Innovation as defined by MIT and commonly understood in Silicon Valley is the product of invention (an idea, technology, intellectual property, etc.) and commercialization.

The invention is important but without widespread adoption it is deemed irrelevant. In fact, well known entrepreneur and investor Vinod Khosla recently shared at a VLAB—MIT Enterprise Forum of the Bay Area event that only a fraction (about 1/10th) of the startups in Silicon Valley fail because of the technology. Most startups fail because of a lack of product/market fit. If you have a closer look at the latest innovations you’ll see that at their core they are business model innovations enabled by technology (Google, iTunes, Netfix, Salesforce, Zipcar to just name a few).

For startups and corporations alike

This framework is useful for entrepreneurs and intrapreneurs (persons within a large corporation who take direct responsibility for turning an idea into a profitable finished product) alike. Although anecdotal by nature, my own experience when coaching startups and advising corporations is that it can be instrumental for reducing risk and ensuring success—or if failure was inevitable, moving faster to a better idea.

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