keep it lean …. how to develop a lean start up business

1994 price guide to Star Wars collectibles

The Mack is one of those guys whose CV starts at age 8: picking up unsold comics from the school summer fete and reselling them to his mates.  This was followed by a stint in events and catering (holding discos in his parent’s garage and selling orange squash and mum’s home-baked biscuits to the little ravers) and personal services (car washing).  His career peaked aged 15, when he made a killing in commodities trading: flogging his friends’ classic star wars figures to collectors old enough to know better.

It was one of those early conversations when we were getting to know each other.   It highlighted the difference between The Mack’s instinctive capitalist tendencies and my more liberal leanings.  He was making money swindling his school-mates out of their once-cherished toys.  I had a block printing press, which I used to create a free local paper for the kids in my street.  I didn’t even sell advertising.

So, you can imagine, he was pretty excited to discover that Lean Startup Machine, an Apprentice-style workshop, was coming to London.  Over the course of a weekend, this workshop aims to teach you how to apply the Lean Startup principles to get your product to market faster and more effectively.  Let’s see how he got on…

the Lean Startup philosophy

The term “Lean Startup” comes from a book by Eric Ries: The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.

The philosophy is based on creating an efficient ideation / assumption / validation / modification workstream.  In simplest terms, it’s all about getting customer feedback at an early stage in the product development life-cycle and using that feedback to make a more market-ready product.

Sure, you may think that your idea is genius.  Foolproof.  A dead cert.  But the fact is, you simply don’t know.  Those pesky consumers are a fickle bunch.  And Mr Ries doesn’t want you wasting your precious time and hard-earned money developing a product if you haven’t checked if anyone wants to buy it.  What a nice man. 

learn to be lean

The guys at Lean Startup Machine have taken this philosophy and turned it into a step-by-step process.  Their workshop involved pitching a new product, working in teams to find the best ways to test consumer feedback to the product and modifying the product, target consumer or delivery method in line with that feedback.   

This makes sense to me.  As much as I loved the film Field of Dreams as a kid, I get that in today’s world of overwhelming consumer choice, the days of “build it and they will come” are long gone.  No more dreaming.  Just build what they want.

the validation game

The entire process revolves around a validation board.  It looks like this:

You can download a copy of the validation board at www.leanstartupmachine.com and there’s a great tutorial on how to use it here.

It is deceptively simple.  You work with post-it notes, fat marker pens and a limit of 10 minutes per task and 5 words per post-it.

When The Mack described it to me, I was pretty dismissive.  My reaction involved a lot of eye rolling and “yeah, yeah, yeahs”.  And then I tried to apply it to a business idea I had.  I didn’t get out of box one.  I couldn’t define my customer or the problem that my idea was supposed to solve.  Like pretty much everyone, I’d started with a solution based on a whole load of untested assumptions.

Back to the validation board I went.  And this time I got The Mack to walk me through it:

Step 1 – Define your Hypotheses:  Who is your customer? (note, there could be more than one customer, e.g. if your idea has both a B2B and a B2C element to it: where you have a 2 or 3 sided customer group, you always validate the riskier side first).  What problem do you think that customer has?  Write these down (in max 5 words) and stick them on the board.

Step 2 – Define your Core Assumptions:  What assumptions are you making about the customer or their problem?  You need to get pretty basic with these – you are looking for assumptions that you’ve made in your mind that, if you’ve got them wrong, your business idea fails.  At this stage, all of your assumptions should be around whether or not the problem that you’ve identified actually exists for those customers.  If your initial assumptions are around things like “do they like my brand name?” or “is this the right pricing model?”, you’ve got ahead of yourself.  Write your core assumptions down (in max 5 words) and stick them on the board.

Step 3 – Identify the Riskiest Assumption:  So now you look at your 5 or 6 core assumptions that you’ve jotted down on the board.  You look for the single riskiest assumption. i.e., which is the assumption with the highest level of uncertainty?  This will normally be the key assumption on which your business idea hangs.  The reason for testing this one first is obvious.  If you’ve got this one wrong, then you’re dead in the water and all of the other assumptions are irrelevant.  Move this post-it note into the Riskiest Assumption box.

Step 4 – Decide how to Test that Assumption:  There are 3 methods for testing.

  • Exploration (interviewing target customers; making sure you ask open, not leading questions – and remember, you’re asking them about their “problem” not necessarily your perceived solution).
  • Pitching (getting customers to “buy” into your product via a dummy landing page, email sign-up, advert or similar).
  • Concierge (actually delivering your product to a small number of customers to find out what makes them happy so they’ll spread the word).

Clearly, they get progressively more time consuming and costly as you move from Exploration to Concierge, so you start with the cheapest and easiest route available to you.  Write down your method for testing your assumption in the Method box.

Step 5 – Define your Minimum Success Criteria:  This is pretty tricky.  For the assumption that you are testing, you need to decide what is the minimum threshold of validation.  Write down your minimum success criteria.  

The Mack said that a lot of the people at the workshop set their thresholds too high and wrote off their businesses as failures when they weren’t.  I would say that whatever threshold you set (for example, you develop a landing page for your product and you want at least 50 people to register their interest within 24 hours), if you don’t hit that threshold, take a moment to think about what that actually means.  It may not be total invalidation, you just may need to test again with slight tweaks to your method or you may have set your threshold artificially high.  However, don’t dismiss evidence of failure just because you’re desperate for your idea to be proved “right” – that defeats the entire purpose of this process.

Step 6 – Get out of the Building!!!:  This is where you stop thinking and start doing.  Execute your testing method (exploration, pitch, concierge).  This doesn’t have to take long – it can be a matter of hours or days.  Remember, the workshop is taught over a weekend.  The message they drill home is that it’s better to move quickly and do something than to spend hours overthinking it.  Get that feedback fast and make sure you’re talking to the right customer base.  For this purpose, friends and family do not count.  Do not include them in your results tally.

Depending on the outcome of your testing, when compared against your minimum success criteria, you will have validated or invalidated your assumption.  Move your post-it from “Riskiest Assumption” to either the “Invalidated” or “Validated” box.

Step 7 – Pivot or Test the Next Riskiest Assumption: If you’ve met your MSC, great.  Now identify your next riskiest assumption from the remaining post-its in your core assumptions box and go through the same process.  Do that until you’ve successfully validated all of your core assumptions.  All successfully validated? Now go make some money….

If your assumption was invalidated, don’t panic.  This is the whole purpose of the exercise, to identify obstacles to your product’s success.  Here’s where it gets interesting, so pay attention.  You now need to pivot.  And by Pivot, they mean more than just a minor tweak to your product.  A pivot refers to a real change to either your customer hypothesis (i.e. you were targeting the wrong customers) or to your problem hypothesis (i.e. the problem you identified doesn’t actually exist) or both (through your testing, you’ve identified a new problem for a different set of customers).  Write down your new pivot hypotheses under 1st Pivot.

And then you start the process again using these new pivoted hypotheses, so you go through steps 2 – 6 and see where you end up.  You may have validation or you may need to pivot again.  It really doesn’t matter.  What matters is that you move quickly through the process.  Assumptions are validated and you build on them or they are invalidated and you move on to the next.  And if ultimately your great idea proves not to be so great, well you’ll have saved yourself plenty of time, cash and heartache in finding out.

why this changes things for me

I’ve said before that I don’t consider myself a natural entrepreneur.  I get ideas, but most times I dismiss them.  Usually after having tried to think of every reason under the sun why they will fail.  I’ve found that my biggest stumbling block has been going from idea to any form of execution.  I’m using my own money for my business ventures and I’m hesitant to spend money when I don’t have a roadmap.

Which is why this lean startup process appeals to me.  I like having a method to my madness.  I particularly like having a visual method that is very practical, focused and has a rapid turnaround.  I’m a bit impatient.  I want to know quickly if an idea has legs.

I’m finding it a little slow-going to get to grips with it this first time, but following the steps has given me so much structure to my thought process and it’s actually made me enthusiastic again for some of my dormant ideas.  I’m heading to Launch48 this weekend, so I’m going to test it out on a bunch of strangers and see if the machine works.  And if it doesn’t, I’ll just pivot.

Advertisements

2 thoughts on “keep it lean …. how to develop a lean start up business

Thoughts??

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s