7 Things I’ve Learned About Lean Startup
I was hooked because he just made sense. Eric put a language to concepts I had believed in ever since the first startup I joined in 1999 pivoted from B2C to B2B. Of course we didn’t call it a pivot back then, nor did we base it on any meaningful data. When we realized we were B2B, then that’s when things took off, we survived the dot com bubble and were acquired in 2006.
Since 2009, I’ve read everything I could find from Eric Ries / Steve Blank / Kate Rutter / Laura Klein / Janice Fraser / Alexander Osterwalder / Ash Maurya / Dave McClure / Brant Cooper / Patrick Vlaskovits / Jeff Gothelf / Josh Seiden / Giff Constable and then went off and tried these ideas, in the real world, with my clients.
I’ve been advising startups and corporations on Lean Startup for about 5 years now, and I wanted to report back on some of my findings:
- Minimum Viable Products are optimized for learning, not scaling. This is one of the hardest things to convey to people who’ve spent their lives building to build, not building to learn. These are people who’ve been burned in the past and told to release a half baked prototype to thousands of customers. These directives come from management who thought that if you throw enough people at the prototype, then everything would be fine. So be patient when people aren’t eager to adopt the MVP concept right way. This is the main reason I start with Learn in the Build Measure Learn loop. What do you need to learn about the customer? The market? The problem? When you start with learn, it helps soften the blow.
- The second hardest thing about Minimum Viable Products is that while you decide what’s Minimum, the customer determines if it is Viable. You’ll need to lead your team out of the trough of sorrow after they experience this despair for the first time. Never have I experienced a team where they released an MVP and on the first try, had wild success and then made millions of dollars. It takes weeks or months of experimentation to see if there is a there, there. Remember that the goal of the MVP isn’t to scale or generate revenue, it’s to learn in the market by generating qualitative & quantitative data. You use that data combined with your vision to then, in turn, make a more informed investment decision. Not many people understand this nuance yet. *Update: Many responses to the revenue comment here by me. To clarify, if your riskiest assumption is that you can generate revenue, then that is worth testing with an MVP. Rarely do I meet startups where this is the riskiest assumption. If you solve a real problem and have customers returning to your product time and time again, I’m confident you’ll figure out a revenue model that works.
- The most common pivots I see in practice are Customer Pivot, Problem Pivot and Solution Pivot. A Customer Pivot is when you are passionate about the problem, but during customer discovery you find it is a different segment that has the problem. You pivot from one customer segment to the other, based on what you’ve learned. A Problem Pivot is when you are passionate about the customer, but the problem you thought they had isn’t their most painful one. You pivot from one problem to the other, and stay locked in on that customer segment. A Solution Pivot is when you are dialed into the customer and problem, but your solution isn’t a good fit. The value proposition resonates and yet still no one uses it. You pivot from one solution to another, based on what you’ve learned, in hopes of solving the problem in a sustainable manner.
- Almost no one is using Innovation Accounting correctly. Startups aren’t using it because they don’t take time or lack the skills to instrument analytics and create a baseline. Corporations don’t use it because they either aren’t allowed to use the proper analytics tools or can’t trace the metrics across fiefdoms of functional silos. One of the most powerful concepts in Lean Startup, Innovation Accounting, has yet to even be fully realized.
- As a founder, it can be harder to raise big money if you use Lean Startup. All of that experimentation you’ve done to learn about the market, the customer and the solution essentially means you are no longer the sexy unicorn founded on a team and a dream of 1B valuation. However, don’t get too depressed that Lean Startup won’t help you land home run funding, because it will still significantly increase your chances of raising base hit funding.
- Customer discovery never stops. Have a landing page and people are signing up? Great, go interview them and ask them why they signed up. People love your new mobile app and are referring all of their friends? Awesome, go ask them why they are so passionate about it. You cannot uncover why people are signing up, using and evangelizing your product by just looking at metrics. Quantitative metrics tell you the what, not the why. You still need to go talk to them.
- Lean Startup is not a fad and is here to stay, in one form or another. It reminds me very much of Extreme Programming (XP). Both had “theory of relativity like” ideas and a small, but passionate following. XP became the catalyst for modern software practices like Pair Programming, Test Driven Development and Continuous Deployment. I believe Lean Startup is similar, in that it is the catalyst for the next generation of entrepreneurship and modern product development.
David advises companies on finding product market fit. If you would like to learn more or need help, schedule a free session.