The Launch Path: Step 2
Build something people want.
If your startup venture doesn’t start there, nothing else matters.
Sidebars:
➵ How to test your startup idea.
➵ The Truth about MVP’s.
➵ Can a startup be both B2B and B2C?
➵ Build the right MVP.
➵ You know what’s even better than PMF?
➵ Persevere or Pivot?
➵ The Value Prop Hierarchy.
Back in 1999, toward the end of the year, I had an awesome idea for a new startup. I was so excited I could barely contain myself — but I didn’t want to tell anyone about it, for fear someone would steal the idea. It was the height of the “dot com boom” in Silicon Valley, and all my friends were getting filthy rich.
I was sure that this new startup idea was my golden ticket. The San Francisco Giants were in the process of building a brand-new ballpark with its own sailboat marina, and I could already see myself with front-row season tickets and my 50-foot yacht parked next door.
So I spent late nights working on my pitch deck — a set of slides that would convince investors that my idea was totally awesome and investment-worthy. After many long hours, my pitch deck was finally perfect and I asked for a meeting with a friend of mine who had recently joined a venture capital firm. I walked into his conference room early on a chilly November morning with an intoxicating combination of terror and caffeine-powered confidence.
He loved every single slide. Every one. By the end of the meeting we were high-fiving each other about how awesome my idea was. His firm led a $5 million initial round of financing and I was off to the races.
With funding secured, I quickly recruited an all-star team of 30 software engineers to build my awesome idea. For two years we labored to build the product, 100% confident that our idea would be a big hit with customers. All the ingredients were in place — we had a great startup idea, we were obviously an incredibly smart team, we were backed by incredibly smart venture capital investors — what could go wrong?
You’ve probably already guessed where this story is going. After spending two years and $5 million building a product we thought was awesome, we released it only to find out that customers didn’t want it. It didn’t solve a problem they had. They didn’t care about all our hard work. My “awesome idea” was a complete failure.
This episode ended up being one of the most profound learning lessons of my career. If I could have a “do-over”, I would put most of that $5 million in the bank and then spend 6 months out talking to prospective customers before ever starting to build the product.
It’s a recurring issue in Startupland.
This has been a recurring issue since the dawn of entrepreneurship: how does one reliably create products that succeed? History’s most famous example of new product failure is the Ford Edsel, which has now been case study for MBA students for more than 60 years, and yet the same mistake gets made over and over again: building a product customers don’t want. I did it in 1999, and just this year the research firm CB Insights did a post-mortem survey of failed startups and found that “No market need” remains the leading cause of startup death.
How the hell do you build and fund an entire company without first determining whether there’s a market need? Seems ridiculous, and yet it happens over and over again.
Fortunately, there are three concepts today that will help you avoid my mistake. They are Product-Market Fit, Design Thinking, and Lean Startup — three concepts that I wish I had known about back in 1999.
Product-Market Fit
Marc Andreessen, in this seminal post, writes that, with regard to startups, “the only thing that matters is getting to product-market fit”. In other words, the only thing that matters is to get alignment between what the market wants, and what your product does.
Seems pretty simple, so do you move the market to get it to align with your product, or do you refine your product to make it align with the market? Well, the mythical Steve Jobs may have been able to move the market to align with his products, but most of us mere mortals have to move our product to align with what the market wants.
If the only thing that matters is getting to Product-Market fit, then the only thing we need to know is how do we get there efficiently? (unlike what I did in 1999).
That leads us to the next two frameworks — Design Thinking and Lean Startup — both of which are really methodologies for doing exactly that — efficiently getting to Product-Market Fit.
Design Thinking
Developed by David Kelley at Stanford’s d.school (and IDEO before that), Design Thinking is a human-centric process for developing products that succeed. There’s a whole industry now around leading Design Thinking Workshops, but the essence of it is this: Before you can develop a successful product, you have to develop “deep empathy” (understanding) of the customer/user you are building for, and then proceed to prototype and test, prototype and test, prototype and test. That’s all there is to it: Start with a deep understanding of the customer and the problems they face, then build a prototype of your solution, show it to customers to get feedback, then refine and repeat. It’s a very simple concept, yet many startups are in such a rush to get to market that start building a product without going through any sort of Design Thinking process (including me, I am now sorry to have to admit).
Lean Startup
Lean Startup was popularized by Eric Ries’s 2009 book, based on the previous work of Steve Blank and others. It’s a methodology for developing business and products by shortening development cycles via experimentation and validated learning. This Harvard Business Review piece by Steve Blank sums the whole thing up well.
Contrary to popular belief, the name “Lean” doesn’t mean cheap — you could use Lean Startup methodology with a $100M budget. The name comes from the auto industry, and the fact that Toyota revolutionized that sector with their Lean Manufacturing methodology, which preached shorter production cycles and a more iterative approach to making automobiles.
“No business plan has ever survived first contact with actual customers.”— Steve Blank
Lean Startup preaches the same thing — shorter production cycles and a more iterative approach to building products — combined with using the scientific method (your assumptions are just hypotheses, so find ways to test them empirically!).
Central to all of this is what Lean Startup advocates call a Minimum Viable Product (MVP). The notion is that every startup should test their product idea by first building a bare-bones prototype with a minimum set of features and put that out into the market to learn from. Based on those early learnings from your MVP, you can then develop a product roadmap that is informed by real users.
“As you consider building your own minimum viable product, let this simple rule suffice: remove any feature, process, or effort that does not contribute directly to the learning you seek”. -Eric Ries, The Lean Startup
The key thing that is missed by many, is that the point of building an MVP is learning, not showing. Mediocre entrepreneurs build an MVP to show something; great entrepreneurs build an MVP to learn something.
Think of how Facebook launched with just a bare minimum set of features, and today it has a zillion features, all informed by watching the interaction of real users. That is this concept, in a nutshell.
It’s just common sense, really.
These three terms — Product-Market Fit, Design Thinking, and Lean Startup — get tossed around a lot in Silicon Valley today. They form the gospel canon of accepted startup methodology in the 21st Century. But honestly it’s really just the common sense way that businesses have always been built.
Let’s say we wanted to open a neighborhood bakery. Our goal is to bake bread that our particular neighborhood wants to eat (“Product-Market Fit”). So we might begin by asking our neighbors about their taste in bread, so that we can understand what they care about (“Design Thinking”). And maybe, to make sure we understand those customers we might make some small batches for them to taste and give us feedback on (“Prototyping”). Now, before we lease an expensive building and build-out the bakery kitchen, maybe we should set up a booth at some farmer’s markets to learn a little more about the economics of selling bread (an MVP, using Lean Startup methodology).
The concepts are so simple, and yet so many startups have failed because they failed to build something people wanted. I did it myself. Be smarter than me.
This article was merged into my new book, The Launch Path, now available on Amazon.
