Four Steps to Lean Startups Using 3WH
Apply 3WH Value Propositions to Develop Your Lean Business
This article describes how the 3WH value proposition method may be used to develop your customers and grow your revenues the same way the noted venture capitalist Steve Blank described in The Four Steps to the Epiphany, and Eric Reis did for IMVU.com in The Lean Startup. I recommend reading my brief article, Design Value Propositions as User Stories, on the 3WH method for developing sound value propositions as background for this article.
In his book, The Four Steps to the Epiphany, Steve Blank first described the notion of ‘customer development,’ from which Eric Ries created his “Build Measure, Learn” process in his book The Lean Startup. Steve Blank described his “Customer Development Model” as four steps to reach an epiphany of customer insight and build a viable business through:
(1) Customer Discovery;
(2) Customer Validation;
(3) Customer Creation; and
(4) Company Building.
These four steps identify customer pain points your products and/or services try to resolve, and describes how to learn what best solves them to create a viable business. The 3WH value proposition method described in Value Propositions as User Stories not only assists with developing user stories for product development, but also maps to this Four Steps customer development model through the ‘who,’ ‘why,’ ‘what,’ and ‘how’ methodology as follows:
Who: Customer Discovery- Discovering ‘who’ your customers
are and want to be by buying your products and/or services;
Why: Customer Validation- Identifying ‘why’ your customers
want to buy your products and/or services;
What: Customer Creation- Determining ‘what’ makes your customers become who they want to be with your products and/or services. (Note here that Eric Reis’ “Build, Measure, Learn” methodology fits within this ‘what’ element of 3WH); and
How: Company Building- Constructing ‘how’ your customers become who they want to be by buying your products and/or services.
You can see that ‘who,’ ‘why,’ and ‘what’ form the substance of what customers care about as you discover what they really want, and ‘how’ describes the technical details that satisfy their demand. Those ‘how’ details of your 3WH value propostion could just as easily be as organizational as they are functional, such as your customers interacting with your customer service department just like they would with your website.
You can see the connection between Steve Blank’s book Four Steps and Eric Ries’ book The Lean Startup through this 3WH customer development model in the following analysis. This example shows how your company can follow this same 3WH value proposition model to reach customer and business insights:
- Who: In Four Steps to the Epiphany, Steve Blank says that, “The goal of Customer Discovery is just what the name implies: finding out who the customers for your product are and whether the problem you believe you are solving is important to them.” Likewise, Eric Ries discovered after building his Minimum Viable Product that his customers wanted to assume an identity so they may relate that persona to other people they did not know. Eric discovered this as a result of his “Build, Measure, Learn” method described in The Lean Startup after guessing what products and/or services his customers might value.
- Why: In Four Steps, Steve Blank says that, “Customer Validation is where the rubber meets the road. The goal of this step is to build a repeatable sales roadmap for the sales and marketing teams that will follow later.” Identifying and solving for ‘why’ your customers buy or use a product and/or service is the only way they will repeatedly use it after the initial purchase or trial. In The Lean Startup, Eric Ries validated ‘why’ his customers wanted to use his products and/or services by conducting A/B analysis after building a functional version of IMVU as a Minimum Viable Product.
- What: In Four Steps, Steve Blank says that the goal of customer creation, “… is to create end-user demand and drive that demand into the company’s sales channel.” In The Lean Startup, Eric Ries created what his customers demanded by providing a way for his customers to assume their own or different personas, and then interact with various unknown people using those personas. As indicated above, Eric Ries’ “Build, Measure, Learn,” methodology is contained entirely within ‘what,’ which Eric backed into by discovering ‘who’ and ‘why’ through the trial and error of his Lean Startup process. ‘How’ Eric applied what he learned from what he built and measured is described in item 4 below.
- How: In Four Steps, Steve Blank says that, “Company Building is where the company transitions from its informal, learning and discovery-oriented Customer Development team into formal departments… focus[ed] on building mission-oriented departments exploiting the company’s early market success.” In The Lean Startup, Eric Ries said, “Sixty million avatars later, IMVU is still going strong. Its legacy is not just a great product, an amazing team, and promising financial results but a whole new way of measuring the progress of startups.” Eric Ries built the lessons he learned from IMVU into a viable online business that provided an online chat portal that allowed users to create customized personas and navigate them in three dimensions while chatting with one another.
Let’s apply this 3WH customer development model more specifically to the example of IMVU from Eric Ries’ book, The Lean Startup. According to Eric, IMVU started got traction when he discovered that his customers wanted to make new friends online rather than connect with old ones when using his 3D instant message service. Applying 3WH to what Eric Ries was discovering about his customers, we can see:
- Who: Customer Discovery- Eric Ries discovered in retrospect that his customers were a wide demographic and cross section of people that used the internet and knew how to chat;
- Why: Customer Validation- Eric Ries discovered in retrospect that his customers were people who wanted to assume personas to discover how new people would interact with them without risking their existing, real-world relationships;
- What: Customer Creation- Eric Ries discovered through his “Build, Measure, Learn” process that created IMVU as a Minimum Viable Product that a lot of IMVU’s customers actually assumed personas and interacted with others (sometimes anonymously) who had also assumed personas when provided the ability to do so; and
- How: Company Building- Based on what he discovered about ‘who,’ ‘why,’ and ‘what,’ Eric Ries further built out the online web portal IMVU.com with a browser-based 3D graphics rendering engine that was integrated with instant messaging capability, which provided for communication and discovery of other members…. i.e. all the details his customers didn’t care about but were critical to providing his customers with satisfaction.
I would like to note here that The Lean Startup “Build, Measure, Learn” process advanced the state of the art of thinking about how to find out what really satisfies customers in an iterative fashion. However, I believe 3WH value propositions strongly complement “Build, Measure, Learn” by providing a way to complete the first two steps — the ‘who’ of customers discovery and the ‘why’ of customer validation — before jumping straight to the ‘what’ of customer creation. Whether admitted or not, every follower of The Lean Startup methodology assumes ‘who’ and ‘why’ when they build their first MVP for testing. 3WH provides a mechanism to start the user story process in a more disciplined fashion so that Agile/LSU/SCRUM organizations can create better and more accurate MVPs so they can more quickly focus on those products and/or services, features, functions and benefits that truly leapfrog the competition.
I hope this article made clear how the 3WH value proposition method can not only improve new product development with Agile/LSU/SCRUM techniques, but it can also serve as a framework for building your business and profits. If you would like more details about how you specifically determine ‘who’ your customers are, ‘why’ they want to buy your products and/or services, and ‘how’ you can best satisfy them, please see my article, “Induce, Deduce and Devise your Lean Startup with 3WH: Innovate and Increase Your Revenues with Inductive, Deductive and Instrumental Logic.”
Thank you for reading!