Whether you are a government entity attempting to grow a startup ecosystem, a university trying to commercialize technology, a big business intent on reinvigorating (or saving) your business, or an entrepreneur seeking to change the world, you’re likely using old-school, 20th-century “innovation” methods in a new, unrecognizable, global economy.Read More »
Archive for Lean Startup
When you hear concepts over and over, you often wonder is it because it’s swarming or because your ear is newly attuned to it? Did you know there’s a lot of people who believe that the #11 has super powers and that’s why when they look at the clock, it’s always 11 after? Seriously.
UX is hip. And rightly so. I thought I’d share a theory why this is so and what impact it might have on your startup. This despite the fact that I’m relatively new to UX concepts.
As an early believer in Lean Startup movement, I can perhaps be excused for my unbridled enthusiasm for the release of Eric Ries’ new book, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Not however, for the reasons you might expect.
In fact, some early adopters of Lean Startups — those who have already bought into the framework to the extent that they’ve applied its practices into their high tech startup — might be a tad disappointed. They might have to look a little deeper; there’s no vanity steps to success herein.
Despite Dave McClure’s imploring to “kill a feature” and Eric Ries’ urging to “cut your product in half, then halve it again,” most startup founders I encounter are trying to work their way toward Product-Market fit by planning and building new features. The analytical mind of an entrepreneur, both engineer and business-side, naturally tends toward solving problems and ostensibly, features solve problems. But it’s the wrong approach for most startups.
At long last, here's the video from Steve Blank's presentation last month.
00:00 My Intro
03:17 Why Accountants Don't Run Startups
- Old constraints on startups
- Entrepreneurial explosion
- Startups vs Small Businesses vs Large Businesses
- IBM example of big company disruptive innovation
- What did my income statement say in month 1?
- "You've just washed ashore on an a deserted island with a knife in your mouth and a loincloth."
- Searching for a business model, not a business plan
- Customer Development
58:26 Atoms or Bits (New Material)
- Physical vs Online products
- History of Lean
1:03:26 Sloan vs Durant
1:29:50 My Conclusion
Be sure to come check out entrepreneur turned investor Mark Suster talk to San Diego Tech Founders March 31.
=> Startups RSVP here.
=> Investors, Service Providers, Professionals RSVP here.
Steve Blank and Alex Osterwalder have combined their respective methodologies, Customer Development and Business Model Generation, into a powerful business model generation and testing framework. There are several good sources for how these two mesh, including this Jan post on Osterwalder's blog, here and most recently, in Blank's SXSW presentation:
Blank's Customer Development is critical, otherwise speculating what comprises your startup's business model is just another academic exercise. Arguably, one could easily waste as much time documenting assumptions on your business model canvas as documenting them inside a 40 page business plan. The canvas exposes your hypotthesis and customer development tests them. It's a laudable ambition to document and test all of your business model canvas components.
But how much is necessary to get going?
All building blocks are not created equal. I believe there's a natural progression towards figuring out your business model and many blocks are directly dependent on prior blocks. Is it worth the time to document 2nd or 3rd tier blocks before establishing the reality of 1st tier? The answer, of course, depends on you and your business. It doesn't hurt to go as far as you can at the start, unless the activity inhibits you from getting started, i.e., "getting out of the building."
To use a rather simplistic example, you might presume that your customer is an enterprise-sized business that requires a field sales force and partnerships with highly technical systems integrators. What if your customer ends up being a medium-sized business that requires SaaS product distribution? Early customer development might very well point you down the correct path from the outset. Some business model components flow naturally from validated core hypotheses.
The real dilemma in my mind is, what do you test first? The key to getting started is to nail the validate of the core hypotheses: Customer, Problem, Solution.
Go to the #CustDev White Board
In our book, The Entrepreneur's Guide to Customer Development, Patrick Vlaskovits and I developed a white board exercise to help think through business model risk in order to determine what to test first. The key components are:
=> draw the ecosystem around your business as you imagine it, including partners, distributors, customers.
=> determine which are mission critical -- in other words, can you get going without any? Which are absolutely necessary?
=> state the value proposition for each mission critical participant -- what determines whether or not they join the ecosystem?
=> list the minimum product functionality necessary to get entities to participate.
=> prioritize the risks (technical and market) based on the above.
Ultimately, what you trying to prioritize is: what's the quickest way to fail your business model. The "value path" of testing your business model runs through testing the the core value proposition of each of your mission critical ecosystem entities. Easiest to test means: what you can test in the shortest time frame.
If building a landing page and driving traffic to it has the potential of killing your present business model hypotheses, then it's a legitimate "intermediate MVP" and worth testing. But be careful. Are you sure you're not testing your ability to drive some amount of traffic or your positioning? If a 3rd party API doesn't provide the hooks you need to develop a critical piece of technology and therefore your business model fails, maybe that's what you test first.
Documenting the building blocks of your business model = good. Using the #CustDev White Board exercise in conjunction helps you determine what to document and test first.
How do you determine what to test first?
I haven't weighed in on Customer Development thoughts for several hours, so it's about time. Interesting series of tweets in the last several days got me thinking about the biases we bring to Lean Startup Customer Development practices. Unfortunately, but perhaps inevitable, the biases often result in finger pointing and not a little bit of self-congratulation. To an objective user, however, such instances seem to be rather obvious forest-tree issues, rather than the profound insights they hope to be.
Here's a handy graphic illustrating source and bias:
If one looks closely, one can perhaps discern my bias. ; )
Let's go through these.
1. Those with marketing backgrounds are comfortable speaking with customers in a manner determined by their specific role. Product Managers talk about road map, collect feature requests and bounce ideas off customers, often in group settings (focus groups, advisory boards, etc.). Product Marketers communicate features and benefits and elicit feedback, often through surveys. Corporate marketers practice "branding" and spin. Feedback goes to info@ email boxes, twitter tweets, and Facebook 'Likes' (or not).
2. UX Designers are quick to tell you they invented Customer Development only called it something different. And frankly, they're right to a degree. When it comes to product design. Or parts of product design. Anyway, UX Designers are good at observing user behavior and interacting with them in a particular (not peculiar) way to determine if the product is "working." This is instrumental to today's products. (Not always the case, as I'll argue in another post.)
3. Engineers, in their lifetime quest to never have to actually speak to a live animal of the "Customer" species, utilizes analytics tools and product instrumentation to produce reams of data on user behavior, i.e., actual user interaction with the product. Instrumentation is instrumental, too.
4. Penultimately and leastly, are the investors, branders, Madison-Ave marketers, turn-key salespeople, high-tech gadflies and backseat pundits who declare that Vision is the only thing that matters. All you have to do is be like Apple and Ikea, get it? Do I have to spell it out for you? All you have to do is be just like A-P-P-L-E. There now, go to it.
5. Finally, what is the Customer Development bias? Customer Development needs all the practices above, but none of them help you understand the problem, the pain, the passion. That's the final leg or better yet, the first leg of Customer Development. Empathy. Whatever walk for mankind you need to do to walk a mile in your customers' shoes; whatever interview technique, lunch buying, drink toting, teatotaling, karaoke yodeling you must participate in to gain an understanding such that you feel empathy.
Now, then, can't we all just get along?
Please excuse the hyperbole and generalities and the tongue-in-cheek. Recuse yourself as you see fit. Feel free to post vitriol in comments. : )