Stabbing in the dark | Meli 2017

Why startups should stop searching for their business model by taking stabs in the dark…

Meli Axford
Jul 28, 2017 · 5 min read

As a design thinking and business model canvas devotee, I always encourage the startups I work for to use these methodologies because together they dramatically increase the chance of the team finding product-market fit, or in other words, a viable, repeatable business model.

At Hostfully David, Margot, Tom, Noah and I put together our first business model canvas the week after I joined the team. That initial business model canvas helped set us on the path of building our minimum viable product and signing up customers. Now we’re building our V2 product and we’re finding ourselves revisiting some of the initial hypotheses through our customer development process. It’s made me think about a lot of the mistakes I’ve seen startups make which a process like this can help avoid.

Believe it or not most startups don’t use these techniques or they don’t do it to wholeheartedly. And it’s not because people don’t know about it. These ideas have been widely dispersed by Tim Brown, Alexander Osterwalder and Steve Blank for years. Steve has taught hundreds (maybe thousands) of graduates how to do it (our Head of Analytics, Angela Lau studied with Steve at UCLA), made all of his teachings available on Udacity for free (I did this course in mid-2012) and provided a comprehensive website of resources for people who want to learn how to use it.

Yet still many startups take “stabs in the dark”, rather than masterminding their model. Why is this so? I’ve thought about this a lot. Partly it could be because it isn’t easy — and as Homer says:

“If something’s hard to do, then it’s not worth doing!

Perhaps there is some of that. But I think another reason people don’t do this is because their dreams and expectations are tied up in their current business model. Even if they don’t explicitly state what that model is, they believe it implicitly, otherwise they wouldn’t be doing this.

And those implicit beliefs have a lot of power so it’s hard to take them down. It’s easier to maintain the current model — denial is a wide river — and keep moving forward, than to examine it and potentially tear it apart, turn it upside down, throw it out or redesign it.

Another problematic time comes when a startup moves past the first “free thinking” phase and starts to sell its product, the implicit or explicit assumptions that make up the business model now become entrenched in the organisation and can be really difficult to challenge. You’ve now got sales people who need to meet sales targets and when they can’t do so, the first port of call seems to be a hunt for additional features to throw in to “make the sale”. A bit like “buy now and we’ll throw in a free set of steak knives”.

But this can be misdirected and result in you building edge case features. Sure, sometimes you can’t make sales because you haven’t achieved product market fit. And maybe the problem is that your current value propositions don’t provide enough value for the customer.

But that is only one of the hypotheses in your business model! Any of the other underlying building blocks for your business could be wrong as well.

Maybe the price is to high? If the perceived value of the product is less than the asking price — sales will be hard to close.

Maybe the customer relationship isn’t right? If you’re expecting customers to want personal assistance, when in fact your target market is currently being bombarded with new products and can’t cope with evaluating another supplier before entering into a relationship with them, your going to miss the mark.

Perhaps you’d gain more customers if they could buy your product via a self-service model accessed through one of their current suppliers, who is therefore a potential partner in your model? Suddenly, rather than having to enter into a relationship with a new SAAS provider, they just need to click a button inside their existing product and they have the features they need, at an added cost but not with no new relationships to manage?

What if the customers you’re trying to sell to are actually your partners and their customers are your customers?

Failure to sell the product is actually providing great fodder for iterating through your business model but unless the team sees this as a failure with potentially any of the hypotheses in the business model there can be a tendency to see building more features as the only possible solution.

This can be a real trap which prevents you from seeing the big picture. You might actually miss out on finding the most successful business model for your product because the market may not need more features, it might just need a lower price or a different relationship or access via a different channel?

Design thinking and a process around iterating on your business model can help you avoid the trap of continually building edge case features to make sales. A team that lives this will be more “mastermind” and less “stab in the dark” and in my opinion that will increase the chances of success.

A recent analysis of 200 failed startups found that the number 1 reason for failure what that the “Business model was not viable” — don’t become a statistic!

Previously published on LinkedIn: https://www.linkedin.com/pulse/why-startups-should-stop-searching-business-model-taking-axford

Please Connect and Share: If you found this article interesting and would like to connect with me on LinkedIn please do so — send me an invitation. Please feel free to comment or share this article.

Meli Axford

Written by

Designer, I write about fashion, travel, design, cx, ux, value propositions, business models

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