Lean Startup — Helping to Design and Build Products That Customers Want

As I’ve said before, speaking about Lean Startup takes me all over the world, and I have the opportunity to speak with some very interesting people about this concept. Last week I was closer to home, in Drogheda, Ireland and Belfast, Northern Ireland.

I gave an introductory talk on Lean Startup to the entrepreneurs at The Mill, Enterprise Hub Drogheda on Wednesday evening (Feb 03), followed by a full day on Lean Startup the next day (Feb 04) with the UCD Innovation Academy students on the Postgraduate Diploma in Innovation, Entrepreneurship and Enterprise course and then another full day (Feb 05) with Northern Ireland’s newest accelerator, StartPlanetNI entrepreneurs.

@raomal Great to talk to you last night, and excellent presentation. More #startup information and guidance to fuel the fire. Thanks!

Lean Startup, customer development and business model innovation are transforming the way in which new products are built and how growth strategies are developed. I was at the Lean Startup conference in San Francisco last year and was surprised to see the number of enterprises attending what was originally a conference for startups. It seems like Lean Startup is starting to go mainstream! In response to this I have just started a meetup group for enterprise and our inaugural event is on Osterwalder’s book Value Proposition Design on Wednesday February 17 th. The meeting will be opened by Alex Osterwalder, live via Skype.

The key message in all of my talks and workshops and in the Lean approach is that organisations must design and build products that customers want.

Often (first-time) entrepreneurs feel that step 1 involves writing a business plan/building a slide deck and getting funded!

More startups fail from a lack of customers than from a failure of product development. We have all the processes to manage the engineering risk and no processes to manage the customer risk. The strategy for startups should be that ‘planning should come before the plan’. Use the Osterwalder Business Model Canvas (BMC) to do two things; organise your thinking and get out of the building to turn the hypothesis into facts. Search for the Business Model first and then write it up (the Business Plan).

Lean is essentially about eliminating waste (achieving efficiency), and was an idea originally developed by Eiji Toyoda and Taiichi Ohno at Toyota (known as the ‘Toyota Way’). Customer Development is a term that was popularised by Steve Blank in his book ‘ The Four Steps to Epiphany’, and takes a customer-centric approach to understanding customer needs and problems. Alex Osterwalder, in his book ‘ The Business Model Generation’, describes a business model as how an organisation creates, delivers and captures value. The Osterwalder business model canvas is a great tool for a startup to validate their assumptions. Think of the canvas as a set of hypotheses (guesses). It will help to organise your thinking. The real task is to change these guesses into FACTS. Alex’s follow up book Value Proposition Design, complements and perfectly integrates with the Business Model Canvas from Business Model Generation. Value Proposition Design gives you a proven methodology for success, with value propositions that sell, embedded in profitable business models.

Awesome Lean #startup talk tonight @TheMillDrogheda Thank you @raomal for sharing your time, insight & experiences

The issue is that many organisations focus on products and solutions versus understanding the problem or the need they are addressing for customers. Dave McClure has a great quote here when he says, “Your solution is NOT my problem.”

Steve Blank, the father of Lean Startup movement, talks about the big idea, which is really simple: “Get out of the building and talk to customers “. The first step in his four steps is ‘Customer Discovery”. Talking to customers is nothing new and is a very simple concept, but we don’t do enough of it. We make too many assumptions about customers’ needs.

Ash Maurya in his book ‘Running Lean’ (one of my favourite books on the subject of Lean Startup) talks about the 3 stages in product development.

The first step is to always ‘nail’ the problem. Ask yourself, “Do I have a problem worth solving?” If so:

  • Who has the problem?
  • What is the main problem?
  • How is it solved today?
  • Where do they have the problem or in what context do they have a problem? (see Clayton Christensen’s milkshake example)
  • When do they have the problem?
  • Why is it a problem? (This is known as root cause analysis. ‘Why?’ is the single best word for creating value in a start-up and an established business)

It is not possible to know what the main problem is without knowing where, when and why they have a problem. Bear in mind that the questions may not be answered in sequence e.g. will we find the problem and the person with the problem at the same time?

Great event — @raomal talked sense & has huge credibility while being very entertaining! #leanstartup

Once you’ve identified the problem, and then take a stab at defining the solution:

  • Build a demo (MVP)
  • Test it with assumed customers
  • Will the solution work? Can the proposed solution create customer value that exceeds the cost to produce and deliver the solution to the customer?
  • Who is the ‘Early Adopter’?
  • Does the pricing model work?

Then test it with a small sample (qualitatively) followed by a larger sample (quantitatively). Once this is validated, you have your Problem/Solution fit.

The next step is to find a Product/Market fit. Have I built something people want? Will people/businesses be willing to buy this? This is the first significant milestone in a startup!

Once you have established a ‘Product/Market’ fit then and only then should you look at scaling your business.

“Startups are not a smaller version of a larger company” — Steve Blank

Customer development is not easy and is often the task that entrepreneurs find the most daunting, but it will help you reduce your risk of failure. The challenge is always on getting out of the building and talking to customers. Hopefully a previous post I wrote may help you on this journey; The Art of Customer Interviewing.

“There are no shortcuts to any place worth going” — Beverly Sills

I wish you every success with your ventures! Good luck!

Raomal

You may download the presentation from SlideShare


Originally published at https://www.leandisruptor.com on February 8, 2016.