Multiple Choice
Edited
Product-market fit is achieved when
a. some customers buy the product.
b. the team builds a product to fit the needs of customers.
✓
c. the product offering profitably meets target customers’ needs.
d. the business starts scaling.
RATIONALE
The reading defines product-market fit as "a product that profitably meets the
needs of the target market's customers..." Businesses should scale only when
they have achieved product-market fit, but plenty of businesses have
mistakenly scaled prior to achieving product-market fit.
REFERENCE
1 Introduction
LEARNING OBJECTIVES
Understand the concept of product-market fit.
KEYWORDS
Entrepreneurship, Startup, Business model generation
HIDE DETAILS
2
Multiple Choice
Edited
Which of the following is NOT part of the lean startup philosophy?
a. Rapid iteration
b. Small batches
✓
c. Cross-functional teams
d. Short cycle times
RATIONALE
The lean startup philosophy includes the ideas of rapid iteration, small
batches, and short cycle times. While many lean startups choose to employ
cross-functional teams, doing so is not a key component of the philosophy.
REFERENCE
2.1 The Hypothesis-Driven Approach
LEARNING OBJECTIVES
Understand the concepts that underpin the lean startup approach.
KEYWORDS
Entrepreneurship, Startup, Project management
HIDE DETAILS
3
Multiple Choice
Edited
The primary purpose of a minimum viable product (MVP) is to:
✓
a. test falsifiable hypotheses.
b. determine how much it may cost to produce the product.
c. determine the minimum feature set that can be built into the product.
d. attract early adopters.
RATIONALE
As the reading explains, the purpose of the MVP is to test falsifiable
hypotheses and to create validated learning from that. While some--but not
all--MVPs may achieve some of the other objectives listed, they do not reflect
the purpose of an MVP.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Uncertainty, Experimentation
HIDE DETAILS
4
Multiple Choice
Edited
What kind of change would NOT constitute a pivot?
a. Modifying the target customer set
b. Modifying the product features and value proposition
c. Changing the go-to-market plan
✓
d. Selling the business
RATIONALE
A pivot keeps some of the key bases of the business model in place and
changes others. Selling the business is a different kind of decision altogether
and would not constitute a pivot.
REFERENCE
Step 6: Persevere, Pivot, or Perish
LEARNING OBJECTIVES
Understand the concepts that underpin the lean startup approach.
KEYWORDS
Entrepreneurship, Market research, Startup, Experimentation, Business
model generation
HIDE DETAILS
5
Multiple Choice
Edited
Which of the following would be a good reason NOT to use the hypothesis-
driven approach?
a. It might take too much time.
b. Demand for the product is already proven.
c. The company is short on cash.
✓
d. The product is used in a life-or-death situation.
RATIONALE
As the reading explains, one circumstance in which the hypothesis-driven
approach may not be best is when mistakes must be limited, for example,
when the product is used in a life-or-death situation. Even when demand
uncertainty is low, it still makes sense to use the hypothesis-driven approach
to test alternative engineering approaches.
REFERENCE
2.4 Limits to the Hypothesis-Driven Approach
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Startup, Hypothesis testing, Uncertainty,
Experimentation
HIDE DETAILS
6
Multiple Choice
Edited
Which of the following would be a good hypothesis to test with an MVP?
a. Customers will like our product features.
b. We can manufacture the product in China at a good price.
c. We can expect to get customer leads through viral marketing.
✓
d. We expect 1.5% of customers will become repeat buyers.
RATIONALE
This answer choice is the only hypothesis that is truly specific enough to be
falsifiable and subject to adequate testing by the MVP approach. The other
answer choices are too general.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Startup, Hypothesis testing, Uncertainty,
Experimentation
HIDE DETAILS
7
Short Answer
Edited
What is the key element of a hypothesis-driven approach?
RATIONALE
As the reading explains, the key element of the hypothesis-driven approach is
to develop and test falsifiable hypotheses. "Test, then invest," "lean": all of
these concepts relate to developing validated learning based on the testing of
falsifiable hypotheses.
REFERENCE
2.3 Hypothesis-Driven Entrepreneurship: Seven Steps
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Uncertainty, Experimentation
HIDE DETAILS
8
Short Answer
Edited
What three outcomes are possible from the hypotheses-driven approach?
RATIONALE
The three possible outcomes, as explained in the reading, are persevere, pivot,
or perish.
REFERENCE
Step 6: Persevere, Pivot, or Perish
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Uncertainty, Experimentation
HIDE DETAILS
9
True/False
Edited
True or false: The MVP is the simplest possible offering required to disprove a
hypothesis.
✓
a. True
b. False
RATIONALE
The minimum viable product (MVP) is defined as the "simplest possible
offering required to disprove a business model hypothesis," with respect to the
offering's functionality and the operational capabilities needed to deliver it.
REFERENCE
Step 3: Specify MVP Tests
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Uncertainty, Experimentation
HIDE DETAILS
10
True/False
Edited
True or false: A lean startup is a startup that raises as little outside equity
capital as possible.
a. True
✓
b. False
RATIONALE
The word lean is used in the term lean startup not in reference to the absolute
amount of resources raised but to the fact that the startup tries to minimize
waste. It minimizes waste by squeezing the most amount of validated learning
out of successive rounds of MVPs and by going through the persevere, pivot,
or perish cycle.
REFERENCE
2.1 The Hypothesis-Driven Approach
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Experimentation, Project
management
HIDE DETAILS
11
Short Answer
Edited
How does the notion of test then invest relate to the philosophy of the lean
startup?
RATIONALE
Test then invest refers to the cycle of MVPs and the validated learning they
produce. These cycles allow the venture to invest its scarce resources in
producing the most important insights; they also give the venture the option
to abandon--perish--and cease spending money if the idea is determined not
to be viable.
REFERENCE
2.1 The Hypothesis-Driven Approach
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Uncertainty, Experimentation,
Project management
HIDE DETAILS
12
Multiple Choice
Edited
The lean startup approach does NOT include which one of the following ideas?
a. It evaluates the startup’s entire business model.
b. It balances the founders’ vision with input that comes from market
feedback.
✓
c. It divides product development work into phases and completes each phase
in sequence.
d. It provides a rigorous framework for experimentation.
RATIONALE
Waterfall planning is the approach that divides work into phases and
completes each phase in sequence, and it is the one approach that is not part
of the lean startup concept.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Project management
HIDE DETAILS
13
Multiple Choice
Edited
Which of the following concepts is NOT compatible with the lean startup
approach?
a. Test then invest
b. MVP
c. A/B testing
✓
d. Waterfall planning
RATIONALE
Waterfall planning is an approach that is incompatible with the lean startup
approach. Waterfall planning proceeds in a lockstep fashion and fails to
capture customer feedback until late in the process.
REFERENCE
3.1 Alternative Approaches for Launching Startups
LEARNING OBJECTIVES
Understand the concepts that underpin the lean startup approach.
KEYWORDS
Entrepreneurship, Project management, Startup
HIDE DETAILS
14
Multiple Choice
Edited
Which of the following aspects of a product is not consistent with a typical
MVP?
a. A product with the smallest set of features required to test a hypothesis
b. A product with constrained functionality
✓
c. A product with the lowest customer acquisition cost
d. A product with constrained operational capability
RATIONALE
The one aspect that is not compatible with the MVP is “a product with the
lowest customer acquisition cost (CAC).” It may well be an objective of the
successive waves of MVPs to get to a minimum CAC, but it is not a typical
feature of an MVP.
REFERENCE
Step 3: Specify MVP Tests
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Experimentation
HIDE DETAILS
15
Multiple Choice
Edited
It makes sense to create an MVP with constrained functionality when:
✓
a. some segments of early adopters would never use certain features that are
costly to develop.
b. there is no doubt about the ultimate demand for the product.
c. it is uncertain if the market exists at all.
d. only power users desire the full feature set.
RATIONALE
As the reading explains, an MVP with constrained functionality offers only a
subset of the features envisioned for subsequent versions of the product. This
makes sense when the features are costly to develop and are not required to
penetrate some early adopter segments. With less than the full feature set, the
MVP can still develop important customer learning.
REFERENCE
Step 3: Specify MVP Tests
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Experimentation
HIDE DETAILS
16
True/False
Edited
True or false: The use of a web landing page to advertise a nonexistent product
is a form of smoke test.
✓
a. True
b. False
RATIONALE
A smoke test is a test for a product that does not yet exist. A landing page test
is a form of smoke test in which potential customers are directed to a landing
page that describes a yet-to-be-built product or service, and asks visitors to
leave an e-mail address if they wish to be contacted when the product or
service is available. This is a low-cost way of gauging potential customer
interest.
REFERENCE
Step 3: Specify MVP Tests
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Market research, Hypothesis testing, Uncertainty,
Experimentation
HIDE DETAILS
17
Multiple Choice
Edited
An entrepreneur has an idea for a new web service to broadcast overseas
soccer games in the United States. She builds an MVP—a website that can
stream several games from Italy on the weekend of a big national contest. She
sets as a hypothesis that 1% of the visitors to the site will pay $1.99 to watch a
match. On the weekend when the games are to be broadcast, the company
hosting the entrepreneur’s website experiences problems, the broadcast
quality of the soccer matches is very poor, and the signup rate is 0.1%. The
entrepreneur concludes that there is insufficient demand for this service and
decides instead to get into the business of providing very reliable server
capacity to startups. This is an example of a:
a. false positive.
✓
b. false negative.
c. pivot.
d. smoke test.
RATIONALE
This scenario is an example of a false negative. The negative result was
experienced because of the poor server performance, not the fundamentals of
the idea itself. It's not a pivot because no single element of the idea remains in
place: neither the customers (US soccer enthusiasts) nor the product (overseas
soccer content).
REFERENCE
Step 3: Specify MVP Tests
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Uncertainty, Experimentation,
Market research
HIDE DETAILS
18
Multiple Choice
Edited
Which one of the following defines a false positive?
a. Consumers signal their positive interest in a product even when they know
they really are uninterested.
✓
b. A hypothesis appears to be confirmed even when it is really not valid.
c. A poorly executed MVP is the reason that the test fails, even though the
underlying product itself may still be appealing.
d. The conversion funnel shows that the cost of customer acquisition is greater
than the lifetime value of the customer.
RATIONALE
The results of the hypotheses being tested by MVPs can be false in one of two
ways. False positives occur when the results are interpreted to mean that the
hypothesis has been confirmed when in reality it has not. This can occur, for
example if entrepreneurs recruit enthusiasts as test subjects. False negatives
occur when the hypothesis is interpreted to be disconfirmed when in fact it
has not. A false negative can occur when poor execution delivers a sub-par
consumer experience.
REFERENCE
Step 3: Specify MVP Tests
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Startup, Hypothesis testing, Business
model generation, Uncertainty, Experimentation
HIDE DETAILS
19
Short Answer
Edited
Define the term false negative.
RATIONALE
As the reading explains, a false negative indicates that a hypothesis has been
disconfirmed when in reality it may be valid. For instance, if the MVP is poorly
built, it may garner poor customer adoption, but this is a reaction to the poor
execution, not the quality of the idea itself.
REFERENCE
Step 3: Specify MVP Tests
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Uncertainty, Experimentation
HIDE DETAILS
20
Multiple Choice
Edited
In testing MVPs, entrepreneurs should prioritize tests that
a. can be conducted in parallel.
b. determine the preferences of early adopters.
c. are inexpensive.
✓
d. can eliminate considerable risk at a low cost.
RATIONALE
Once hypotheses are generated and MVPs are specified, entrepreneurs should
prioritize tests that can eliminate considerable risk at a low cost. In this way,
entrepreneurs can maximize the money they are spending to prove the
viability of their venture. In general, the objective of spending on tests is to
reduce the most risk per dollar of spending. This may mean doing very
inexpensive tests that reduce risk a bit or expensive tests that reduce risk a lot.
REFERENCE
Step 4: Prioritize Tests
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Hypothesis testing, Uncertainty, Experimentation,
Project management
HIDE DETAILS
21
Multiple Choice
Edited
Entrepreneurs should scale their business as soon as
a. they can demonstrate that lifetime customer value exceeds customer
acquisition cost.
✓
b. they have achieved product-market fit.
c. they have proven their MVP.
d. their conversion funnel demonstrates viable economics.
RATIONALE
The reading explains that entrepreneurs should scale their business once they
achieve product-market fit. This means that the venture has the right product
for the market, a product with demonstrated demand from early adopters and
with solid profit potential.
REFERENCE
Step 7: Scale the Business and Optimize the Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Startup, Startup stage, Hypothesis testing, Uncertainty,
Experimentation
HIDE DETAILS
22
Short Answer
Edited
Define the term runway.
RATIONALE
The term runway refers to the number of months required to exhaust a
startup's cash balance based on its expected burn rate, or rate of negative cash
flow. As the reading explains, Eric Reis also defines runway as "the number of
pivots a startup can complete with available resources."
REFERENCE
Step 7: Scale the Business and Optimize the Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Project management, Startup, Startup stage, Hypothesis
testing, Uncertainty, Experimentation
HIDE DETAILS
23
Short Answer
Edited
Give an example of a product or service with low demand uncertainty, one for
which it may make sense to skip the iterative hypothesis-driven approach.
RATIONALE
The classic answer here would be a cure for cancer or a machine that could
make gold out of lead. Basically, such a product or service would be one where
there would be no question of the ability to sell the product and therefore little
value added from the iterative cycles of launching and learning from
customers. Companies may well still benefit from the hypothesis-driven
approach as it relates to testing various approaches to engineering or
distribution, but not with respect to underlying demand.
REFERENCE
2.4 Limits to the Hypothesis-Driven Approach
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Startup, Hypothesis testing, Business
model generation, Uncertainty, Experimentation
HIDE DETAILS
24
Multiple Choice
Edited
Which of the following is NOT one of the sequential steps in the waterfall
planning approach?
a. Product specification
b. Product design
✓
c. Incubation
d. Internal testing
RATIONALE
The reading lays out the six steps, which include all of the answer choices
listed here except incubation. Specification, design, and internal testing are all
elements of the waterfall planning approach.
REFERENCE
3.1 Alternative Approaches for Launching Startups
LEARNING OBJECTIVES
Understand the concept of product-market fit.
KEYWORDS
Entrepreneurship, Project management, Startup, Startup stage
HIDE DETAILS
25
Multiple Choice
Edited
Which of the following is NOT a cognitive bias that can have an impact on an
entrepreneur’s thinking about a new venture?
✓
a. False negativity
b. Confirmation bias
c. Sunk cost fallacy
d. Planning fallacy
RATIONALE
Confirmation bias, the sunk cost fallacy, and the planning fallacy are all
cognitive biases that can effect an entrepreneur's thinking. False negativity is
not such a cognitive bias.
REFERENCE
3.3 Cognitive Biases
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Project management, Startup, Hypothesis testing,
Uncertainty, Experimentation
HIDE DETAILS
26
True/False
Edited
True or false: A conversion funnel is a useful tool because it forces
entrepreneurs to focus on early adopters.
a. True
✓
b. False
RATIONALE
A conversion funnel is a useful tool but NOT because it forces a focus on early
adopters. It is useful because it forces a focus on each stage in the customer's
buying process, and it allows entrepreneurs to measure customer behavior at
each step that may translate into a purchase. In so doing, it can illuminate
where new ventures are losing potential customers and can focus actions
accordingly.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Project management, Startup, Hypothesis
testing, Uncertainty, Experimentation
HIDE DETAILS
27
Multiple Choice
Edited
The statement “If you cannot fail, you cannot learn” relates most strongly to
which concept?
a. Optimism bias
b. MVP
✓
c. Falsifiability
d. Conversion funnel
RATIONALE
The concept relates most strongly to the term falsifiability. "If you cannot fail,
you cannot learn" captures the idea that only hypotheses that are specific
enough to be falsifiable can really be tested adequately. If you cannot fail, then
any result constitutes a good or encouraging result. And if any result can be
interpreted as encouraging, then there was no point in doing the test--and
spending the money--in the first place. To disconfirm the hypothesis, you need
to be able to "fail," that is, to disprove the hypothesis.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Startup, Hypothesis testing, Business
model generation, Uncertainty, Experimentation
HIDE DETAILS
28
Multiple Choice
Edited
Which of the following is NOT a good example of an A/B test?
a. Five hundred visitors to a website see a price of $110 for product X and 500
customers see a price of $120 for product X.
✓
b. One thousand visitors to a website for product X are asked to choose
whether they would prefer a 10% discount or free shipping.
c. Seven hundred visitors to a website are offered a package of 4 units for $10
and 300 visitors are offered a package of 7 units for $15.
d. Five hundred visitors to a website see a video testimonial from a satisfied
customer and 500 visitors see a text version of the same comments.
RATIONALE
An A/B test is a controlled experiment: Only one element is varied so that any
change in consumer behavior can be fairly attributed to the single change. In
the correct answer choice, where all visitors are offered the SAME choice, it is
not obvious that there is any real behavior change to be measured. The visitors
express their preferences, but there is no real behavior to back it up. In all of
the other answer choices, you can measure real purchasing behavior.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Project management, Startup, Startup
stage, Hypothesis testing, Business model generation, Uncertainty,
Experimentation, Value proposition
HIDE DETAILS
29
Multiple Choice
Edited
Which of the following is NOT a useful technique for entrepreneurial ideation?
a. Recombination
✓
b. Iteration
c. Collaboration
d. Immersion
RATIONALE
Iteration is the one process not described in the reading as useful for ideation.
While it is a useful process for refining an idea, it is not useful for inspiring
ideation in the first place.
REFERENCE
3.2 Guidelines for Entrepreneurial Ideation
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Project management, Startup, Business
model generation, Value proposition
HIDE DETAILS
30
Short Answer
Edited
Is the following hypothesis, “Consumers will like the high quality and low cost
of our Turkish terry cloth towels and will buy them on that basis,” useful for
testing via experimentation?
RATIONALE
This is NOT a good hypothesis to test because it is not specific. There is no
explicit notion of what the word like means in terms of what fraction of
potential customers or website visitors will actually purchase; thus, it is not
falsifiable.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Startup, Hypothesis testing, Business
model generation, Uncertainty, Experimentation, Value proposition
HIDE DETAILS
31
Short Answer
Edited
Most consumers now pay two separate fees for electricity. One fee is a flat
monthly fee for delivery that covers the cost of the connection of the power
grid to their homes. The other cost is for the kilowatt-hours of electricity they
use per month. (A kilowatt-hour is the unit in which consumption of electricity
is measured and billed.) Imagine that an entrepreneur has an idea for a new
power company that will provide 100% renewable energy (e.g., from solar or
wind) to consumers but for a higher price per kilowatt hour. What hypothesis
is demonstrated by this example?
RATIONALE
The key hypothesis embedded in this idea is that consumers are willing to pay
more for electricity if it is green, or renewable. It may be hard to ask people if
they are willing to pay more: An entrepreneur would really like to see
behavior, not just intentions. And if you ask people to sign up at a price of
$00/kilowatt-hour, many people may not even know the price they are
currently paying per kilowatt-hour from their existing power company.
Ideally, the new venture could figure out what premium will be required to
provide this kind of green energy. Then, you would have to ask customers,
ìAre you willing to pay 10% or 20% or 30% (or whatever the actual premium
is) more for your electricity each month?î It would be even better to give
people the option to sign up for this new power service. This option could be
presented online via an e-mail campaign but might better be conducted door
to door, where people could be asked follow-up questions to learn more about
their motivations and behavior. For example, one question (ìWhy not?î) could
be directed to people who did not sign up.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Startup, Hypothesis testing, Business
model generation, Uncertainty, Experimentation, Value proposition
HIDE DETAILS
32
Multiple Choice
Edited
Which of the following is NOT a dimension of the business model?
✓
a. A/B testing
b. Cash flow formula
c. Go-to-market plan
d. Customer value proposition
RATIONALE
Cash flow formula, go-to-market plan, and customer value proposition are all
elements of a company’s business model, as described in the reading (see
Exhibit 2: Summary of Business Model Questions). A/B testing is not; it refers
to a process that a new venture may use to refine its business model.
REFERENCE
Step 1: Develop a Vision for Your Venture
LEARNING OBJECTIVES
Understand the concept of product-market fit.
KEYWORDS
Entrepreneurship,
Startup,
Business model generation,
Uncertainty
HIDE DETAILS
33
Multiple Choice
Edited
Which piece of data would be most useful in analyzing a conversion funnel?
a. Average price paid for the product
✓
b. Number of customers who purchased the product
c. Cost per click
d. Average household income of customers
RATIONALE
The purpose of the conversion funnel is to analyze the number of customers
who make it successively closer to the step of purchasing a product. The
average price paid for the product, the cost per click, and the average
household income of customers, while interesting, would not help with that
analysis. Only the number of customers who purchased the product would
help with that analysis.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Project management, Startup, Business
model generation, Experimentation, Value proposition
HIDE DETAILS
34
Multiple Choice
Edited
Imagine a conversion funnel for a product where there were 10 million unique
visitors to a website, 300,000 customers added an item to their carts, and
100,000 customers ended up buying 150,000 items in total. What is the
overall (or end-to-end) conversion rate?
a. Cannot be determined without additional data
✓
b. 1%
c. 3%
d. 1.5%
RATIONALE
The end-to-end conversion rate is the number of customers who bought the
product compared to the number of unique visitors to the website--100,000
divided by the 10 million unique visitors, or 1%. The number of actual items
purchased does not factor in to the percentage calculation. The 300,000 who
added an item to their carts do not count as "converted" because they didn't
actually buy the product.
REFERENCE
Step 2: Translate the Vision into Hypotheses About Your Business Model
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Market research, Startup, Business model generation,
Uncertainty, Experimentation, Value proposition
HIDE DETAILS
35
Multiple Choice
Edited
Which of the following advantages is NOT offered by a series of well-
constructed MVP offers?
a. Shorter product development cycles accelerate feedback.
b. Smaller-scale revisions make it easier to interpret test results and diagnose
problems.
c. Entrepreneurs can learn about customer requirements before investing time
and money in building features that customers do not need or want.
✓
d. Iterative cycles of MVPs make it easier to raise money in small amounts at
increasing valuations.
RATIONALE
A series of well-constructed MVPs does NOT necessarily offer the advantage of
making it easier to raise money in small amounts at an increasing valuation
because the MVPs may well not produce positive results; indeed, they may
make it more likely that the business perishes early in its life cycle. This is
nonetheless a good outcome from the point of view of lean principles because
it minimizes the wasting of resources on a bad idea.
REFERENCE
Step 3: Specify MVP Tests
LEARNING OBJECTIVES
Understand the minimum viable product (MVP) and the role it plays in the
hypothesis-driven approach.
KEYWORDS
Entrepreneurship, Project management, Startup, Startup stage, Hypothesis
testing, Business model generation, Uncertainty, Experimentation
