Theory of Venture Design

The lean Start-Up Methodology and a practical case study

Figure 1: sketch-up for a lean start-up strategy [public domain]

The main topic of lean start-up is the build-measure-learn loop. You might assume it is supposed to start with build, but actually you are supposed to start with learn, so you need high quality ideas that you are testing. But how to get started?

You can do it in 6 simple steps:

1. Start with a strong idea. Rethink about it and develop a high quality and testable idea.
2. Define hypotheses to structure your idea in a testable format.
3. Figure out how you’ll prove and disprove your hypotheses in order to save time and effort. Design your first experimental prototype: MVP
4. Test your hypotheses and collect all measures that make sense.
5. Conclude and decide: Is the idea sophisticated or is it time to put more resources at it? Do you need to readjust your idea and re-test? It’s no blame to do another lap of honor. The core virtue of lean start-up is the recognition that start-ups are high risk and it makes sense to avoid waste and convince the best effort of customers.
6. Revise and persevere your idea. Make sure to have a strong foundation in customer discovery so you can pivot in smart way on your understanding of the customer.

The six sections below describe these steps in more detail.

1. Idea! Develop high quality and testable ideas

Your fundamental job is to build empathy for your customer. Applying empathy to directed creativity is what the popular rubric of design thinking is about. Imagine what your customer think, see, feel and do in your area of interest. Following that, you’ll want to frame the value propositions you plan to deliver to the customer in terms of problem scenarios and alternatives. A typical start for a pitch in front of the customer could be “Hey, wouldn’t it be cool if …” and that is acceptable, but your understanding of the customer will be much more relevant, accurate, actionable and notably testable if you can relate the propositions to customer problem scenarios and current alternatives.

Considerations in respect to your idea as an aspect of your customers are:

• What are they like? Think? See? Feel? Do?
• What needs does your customers have? Habits? Jobs to do?
• How do they do it today?
• How will you deliver on the problem scenarios?

2. Hypothesis: Create testable hypotheses

If you organize your customer or persona discovery and resulting ideas as described above, it summarizes into a so called venture hypothesis. The form of a hypothesis could be “If we [do something] for [customer] they will [respond in a certain way]. Identify the pain-points of your persona and create hypotheses about your idea if it could minimize or solve the persona problems. Make sure to use a testable format you are able to verify after implementation and consider to group different hypothesis-areas such as persona, problem and value (motivation) hypothesis.

3. Experimental Design: First prototype — MVP

Build the prototype and focus on obtaining true/false results for one or more of you key hypotheses and be creative about how you can design the fastest and cheapest prototype that delivers the basics of your idea, the so-called MVP: A minimum viable product is a product with just enough features to satisfy early customers, and to provide feedback for future product development. An MVP is not the same thing as version 1.0 of your product. But what’s the difference between an MVP and a 1.0? The basic difference is that the MVP is a vehicle to test your value hypothesis and the 1.0 is a vehicle to execute on and scale a validated (positively tested) value hypothesis. A lot of the actual practice of lean start-up revolves around designing prototypes (including MVP’s) that are a good fit with your hypothesis and current understanding and then running those experiments to a definitive conclusion (and often iterating through that a few times).

4. Experimentation

The top determinant of successful experimentation (in new ventures) is focus. Stay focused on the experiments, get them done, and then move on to a decision about whether to revise or move forward. With lean start-up you have to be ready to resume already closed tasks. There are three hints to stay on track:

• While dealing with the experimental design make sure you’ve visualized the moment where you interpret the results and make a decision. If you can’t visualize that moment, you probably need to tighten up your experimentation or discovery plan. Make a checklist which describes a few key items you should verify within the persona and problem hypotheses.
• If you’re sceptic that an experiment is not going to deliver a definitive result, you might hit the sport. Stop it, fix it and repeat it.
• Everyday, notice what you accomplished yesterday. Make a plan what you’ll do today. How did those things tie to the outcome you’re facing on.

5. Pivot or Persevere?

It’s a good advise to set goals for your experiments and set a time limit for agile-type sprints (iterations) of 2–6 weeks. This will keep everyone on track. If the experiments are running well, you should arrive at a ‘pivot or persevere moment’ where you have the learning to decide whether to proceed or revise and re-test. Or you may find you need to tighten up your experiments and repeat them- that happens.

6a. Pivot!

Experiments disprove hypothesis, return to step 1. Pivots vary widely in size and number. Pivots in the area of customer creation and business model are just about inevitable. The worst thing you can do is limp along-organizing your experiments into iterations where you set a goal about conclusion will help you avoid that. A strong understanding of the customer will help you pivot much smarter.

6b. Perserve!

You got it — you have the initial spark of a successful start-up. Now it is time to scale up and steadily improve the recipe you’ve found. Consider to learn more about business model generation and using agile to tie the items we reviewed here to your actual product. With creativity and focus, it’s not hard to achieve substantial validation and with that the confidence to persevere.

All techniques were researched on the internet and referenced to Alexander Cowan, https://www.alexandercowan.com/creating-a-lean-startup-style-assumption-set

Case study: my own venture idea

1. Idea!

The main idea is to assist people in the kitchen while preparing food. This could be achieved by a augmented reality (AR) glasses equipped with a self-developed application for cooks in education or kitchen helpers, by giving them detailed instructions and enhanced overlay objects on ingredients in the real-world. Applying this, cooking would be much easier and feasible for everybody, even without previous knowledge.

Considerations in respect to my idea as an aspect of the customers are:

• What are they like? Think? See? Feel? Do?

Most kitchen personnel is not very familiar with deep-tech possibilities like AR glasses. They tend to be skeptical for such solutions. Advantages must be easily visible to our potential customers.

• What needs does your customers have? Habits? Jobs to do?

Save time and money while learning new cooking recipes and reduce training time for changing personnel.

• How do they do it today?

New cooking recipes are learned by traditional cookbooks. Changing personnel is trained by other personnel. Reduce this effort could save time and money.

• How will you deliver on the problem scenarios?

Directly address the pain-points of kitchen operator: save time and reduce costs for training periods.

2. Hypothesis

The form of a hypothesis could be “If we [do something] for [customer] they will [respond in a certain way]. Identify the pain-points of your persona and create hypotheses about your idea if it could minimize or solve the persona problems.

Persona hypothesis:

• If we assist new cooks in the kitchen, the operator will save time and reduce costs

Problem hypothesis:

• Time and money is limited, with our solution we could save both.

Value (motivation):

• Traditional ways of educate new cooks are time expensive and could be optimized with the help of AR glasses.

3. Experimental Design: First prototype — MVP

Based on the above hypothesis we’ve built the minimum viable product, the MVP. First milestone was to built an app for the AR glasses to give the user the ability to choose one type of a fried egg: well done or sunny side up.

Figure 2: Screenshot of MVP - Choosing the menu [own picture]

Figure 3: Screenshot of MVP — List of ingredients [own picture]

Figure 4: Screenshot of MVP — First instructions[own picture]

Figure 3 and 4 shows the necessary ingredients for the chosen cooking recipe and give first instructions to the user.

Note: The background on the AR glasses is transparent and not black. The user is able to look through the lenses beside the instructions.

4. Experimentation

We focused on the experiments, get the MVP done, and then moved on to a decision about whether to revise or move forward. We’ve chosen to revise, because the usability and appearance was unconvincingly so far and the initially claimed willingness was no longer present at the prospect customers, so we did not continue this business.

5. Pivot or Persevere?

With an ongoing time schedule we may could persevere. For lack of time we are still in this state and without a further development of the MVP there is a possible implication of a pivot.