How to Raise a Lean Startup – II
September 26, 2013 2 Comments
Learning is the centrepiece of Lean Startup. So much so that the the progress of a Lean Startup is defined in terms of learning milestones and people are held accountable to the same rather than organising them in traditional departments and holding them accountable to individual responsibilities.
The real motive of an MVP is to generate learning. This is because more important than building something efficiently is building the right thing. No point building a great product with a greater process that no one desires. Thus learning helps in validating the hypotheses the entrepreneur makes when building his product.
This product is refined based on the feedback generates from the market through the use of MVP. In the face of this feedback, which might not always be positive, the entrepreneur, might have to decide whether to continue to work on the same product or choose a different strategy. But such decisions are less frequent than than the tuning done to the product. Even less frequent, if at all, are changes to the overarching vision with which they set out to become an entrepreneur.
As Ries says, “…a startup is a portfolio of activities. A lot is happening simultaneously: the engine is running, acquiring new customers and serving existing ones; we are tuning, trying to improve our product, marketing, and operations; and we are steering, deciding if and when to pivot. The challenge of entrepreneurship is to balance all these activities.“
Not just startups but even existing organisations need to learn and innovate continuously in order to maintain their competitive edge or gain one. In this ever changing technological landscape, such edges get eroded very fast. Consider Blackberry that had long enjoyed the image of a premium, enterprise mobile handset company. It had two major advantages over its competitors: push mail service and Blackberry Measenger. With the rise of smartphones and their numerous apps, both these advantages were laid to waste. The result, Blackberry’s share in the market, which has already reduced to a minimum, is shrinking rapidly. The company is desperately looking for someone to buy it out but nobody wants to.
There is a trap in trying to learn what customers want. An entrepreneur should be able to distinguish between what the customer is asking for and what he really wants. This is because a lot of times customers don’t know for sure what they want. Identifying the real wants and working on the same causes the startup to grow and evolve. This is what Ries calls Validated Learning.
The question is not “Can this product be built?” In the modern economy, almost any product that can be imagined can be built. The more pertinent questions are “Should this product be built?” and “Can we build a sustainable business around this set of products and services?” – Ries
Mark Cook, Vice President of Kodak Gallery says the same thing in his own words:
- Do consumers recognize that they have the problem you are trying to solve?
- If there was a solution, would they buy it?
- Would they buy it from us?
- Can we build a solution for that problem?”
All the above is based on the cornerstone of experiments. I had read somewhere (I think it was Stephen Hawking’s “A Brief History of Time”) that an experiment cannot be considered a failure if it disproves your hypothesis. It’s a failure when it is inconclusive. Therefore even if the product fails, the experiment is still a success because we know what the customer doesn’t want.
Now, how to structure the experiment, the hypothesis. Ries considers two hypotheses to be structured: value hypothesis and growth hypothesis.
Value Hypothesis tests whether the product / service being built would actually deliver value to the customer. This hypothesis helps in answering the question would there be customers (early adopters) who would buy the initial versions of the product (MVP) and find it useful.
Growth Hypothesis tests whether the product’s purchase and usage would spread from early adopters to the masses. This helps in answering the question would the business grow from the initial success with early adopters.