Lean Startup Business Room

Have you ever been looking around your house for one thing but found something much more interesting in the process? This most likely happens because you're looking at every item individually and determining one-by-one whether it's the item you're looking for. It's because you're looking at every item that allows for something more interesting can grab your attention.

 

Having a Business Room for your startup, where the walls have your Business Model Canvas, customer interviews, product ideas, market ideas, sales ideas, investor information, contacts, and many other business related items, you can give your startup the same opportunity to discover otherwise forgotten information. For example, say you're looking for the interview with a customer who had a new feature suggestion. In your Business Room your customer interviews are tacked to one wall, dozens of them. While looking for the customer interview of interest you'll probably be quickly looking at all the other customer interviews until you find the right one. Now if you had these all on the computer you would probably just search under the folder "\Startup\My Business\Customer Interviews\" for the particular feature. The computer might find the particular item faster but it also denies you the opportunity to discover a different customer's suggestion for an even better feature that you've forgotten.

 

When your business is in its infancy you can't possibly keep everything in your mind ready for immediate recall, especially if the link between items is tenuous at best. By having a Business Room you can see the status of your business by simply glancing at the walls. The Business Room gives the startup team a greater opportunity the find nuggets of precious information that may have been forgotten.

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Lean Startup Testing With B2B Customers

Split testing (also called A/B testing) allows for two versions of something to be tested between two distinct but equal groups of customers and the results compared to find the best way forward. If you've read anything on Lean Startup then you could be forgiven if you thought that split testing is only used for web based products. It's not. The split test can be used with two versions of a web site but can also be used with a physical product, sales campaigns, marketing campaigns, or most anything else that is related to changes that potentially adds value for the customer and grows the business. But what if your product is sold only to a couple hundred customers (a common occurrence with B2B)? Almost certainly traditional split testing with the product is not practical with so few niche customers. The problem then becomes, how can you tell if any product change is truly adding value for the customer and the business?

 

Niche Testing

 

You can do a thing I'll call 'Niche Testing'. Unlike split testing where you conduct simultaneous testing between two groups, niche testing is done before and during a product change with the key customers. Niche testing is conducted using the Build-Measure-Learn loop format and should work with as few as 30 customers. I picked 30 customers rather arbitrarily but is a number that is probably the high end of what the company will be capable of interviewing in a short period of time (3 people doing 2 interviews a day each in one week).

 

What I propose doing is conduct a customer satisfaction survey using your proven survey format to ascertain the current customer feelings toward the product. You will need to determine how you measure the customers' responses to the survey beforehand and identify specifically what you hope to learn from it. The survey would also contain questions relating to the area that the team is considering changing and improving. Don't use leading questions to promote your proposed change since this will almost certainly result in skewed responses; find out what your customers can't live without rather than what they can live with. The survey should be conducted face-to-face with the customer if at all possible so you can read their body language as they relate their experiences with the product and answer questions. The customer survey is your earliest MVP.

 

After the customer surveys are complete, you measure the response and consider your next step. There are four major categories of responses:

1. the customers love the product as is and will continue paying support fees without any changes,
2. the customers have no need for the changes you're considering,
3. the customers have stopped using your product or are switching to a competitor's product, or
4. the customers have a need for the type of changes you're considering.

In the first and second category of responses you need do nothing for now except cash the customers' annual support fee checks, right? Although this sounds nice and easy, it is most probably the recipe for business failure in the long run. Doing nothing means you're not innovating, not anticipating your customers' future needs, and not trying to grow your business. So what do you do if no one has the problem you envision to solve? The answer lies within the product team and the character of the customers' responses to your questions-the customers may have indicated a completely different problem than what you envisioned. The product team should weigh their hunches, insights, wisdom, intuition, and world experiences against customers not having or not knowing they have the problem you envision to solve. With either of these responses the team will probably need to pivot, find a different feature, unless you think the customers are unaware of the problem you want to solve.

 

In the third case you've lost your customer.  This may be OK if, and only if, the customer's business has changed where they no longer have a need for your product. In all other circumstances you may have missed the customers' true needs or not innovating as aggressively as you should. With this response not only should the team pivot but they may need to reassess their product and customer segments.

 

In the forth case the team will 'perservere' and start building a demo, prototype or begin implementing the new features into the product. I would suggest a demo of the new features as a time and cost saving measure until you know, through innovative learning, that this feature will solve the customers' problem.

 

Throughout the Build-Measure-Learn loop you need to keep the focus on what your goals are. For B2B customers Retention, Referral, and Revenue metrics are king with maybe Retention being the most important. Each iteration through the Build-Measure-Learn loop adds more knowledge to what the customers want and need as long as you are measuring the right metrics.

 

Summary

 

Niche testing begins with conducting a survey with your key customers. From the survey results you then begin further and more detailed testing of your product innovation concepts, measuring the customers' responses and learning what changes to the product adds value for them. You may need to pivot to a different feature if customer responses are tepid. Continue through the Build-Measure-Learn loop until your learning goals are met.

 

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Post-Product/Market Fit: Vision and User Stories

Lean Startup provides a framework from which a new business starts with a strong, central vision and grows into a sustainable, and profitable, business. This new business begins life with only the vision being known; customers and the product are unknown and must be ‘discovered’ through experimentation of hypotheses and assumptions found in the startup’s business plans. When the customers are identified (market segments), the minimum viable product is completed (MVP), the sales plan validated, the marketing plan validated, and enough customers exist to make for a profitable business, the startup will have achieved product/market fit.

In the post-product/market fit era, the efforts of startups with a new product or legacy businesses with a legacy product are virtually the same: continue to scale up the demand for the product by promoting strategies for encouraging and sustaining innovation. The first of these strategies, the vision and user stories derived from the vision, are discussed below. I also provide a brief background on the innovator's dilemma.

 

Innovators Dilemma

In his book, "The Innovator's Dilemma", Clayton M. Christensen summarises the innovator's dilemma as businesses focusing their efforts on immediate customer needs rather than adopting new technologies or learning and solving customer's future needs. For the new business that has recently achieved product/market fit, this can mean addressing only those customers that brought the business to product/market fit in the first place, early adopters, and not discovering new mainstream customer segments. For established businesses, those that achieved product/market fit some time ago, this may mean following market trends and technology changes rather than leading; being reactive, not proactive.

 

The "innovator's dilemma" occurs once product/market fit is made and the company focuses its efforts on maintaining the product/market fit rather than innovating. Businesses can use lean startup in a deliberate effort to ensure product and market innovation continues to occur in parallel with product/market fit maintenance.

The Profitability Trap
 

If a business, either new or well established, is profitable, it might not feel any urgency to find new customers for their product, build new features for their product, or investigate new, spin-off products their customer may want. Essentially the business has determined to maintain their product/market fit based on old data that gets older every day. Whether you're an established business or a new business that has achieved product/market fit, continuing forward with an innovate business strategy is important to survival and following the lean startup in the post-product/market fit environment can be a great help.

Post-Product/Market Fit Using Lean Startup

As with pre-product/market fit, post-product/market fit efforts start with a vision.

This vision differs from the initial startup vision in that it is more product/business specific and is short-lived. What does remain the same is the business/development team sharing the vision and being inspired to do great things by it.

 

The specificity of the vision will centre around customer value and business growth and encompasses product or business innovations. Product innovations include: making the product better, faster, easier to use, or cheaper. Business innovations include: better sales strategies, better marketing campaigns, better product support, and improved business best practices.

 

The vision is short-lived, usually to coincide with the product release cycles. If your release cycles are shorter than quarterly, you might not create a new vision for each release but have one vision with enough goals that covers several releases.

The product roadmap holds ideas from customer feedback, sales, marketing, support, development, product management, or from corporate management and is usually the source of the vision for a release.

 

From this vision will emerge the goals which are documented in the release plan, business plan, or project plan. I would suggest having a release plan as it implies a finite project that ends with a release. It also ties in neatly with Agile by using common terminology.

 

User Stories Reflect the Release Plan Hypotheses

 

User stories are how the business documents the goals of their vision. In the traditional Agile implementation the user stories reflect only product changes and acceptance criteria only validates that a customer (usually the product owner acting as the customer) accepted the product changes. What wasn't validated was whether the user story added value for the customer or growth for the business.

 

If the business is following the Lean Startup framework then each user story not only has acceptance criteria but also identifies the metrics and measures to be collected and analysed in the Measure and Learn phases of the Build-Measure-Learn loop. We want to know exactly how to know if the user story has added value. This is the distinction between running Agile and running Agile within the Lean Startup framework.

 

The user stories represent the hypotheses and assumptions that need to be validated. If you are to validate all facets of the product and those business areas that are linked to the product, you not only create user stories for the product but create user stories for marketing, sales, support, and other components of the business model and best practices that require validation.

 

Legacy businesses are very likely to believe that their the collection of best practices, sales and marketing plans have been proven because they’ve been active for some period of time. This may be somewhat true in a broad sense but individual bullet list items, procedural steps, and other line-items of the sales and marketing plans and other business practices may have yet to be proven or have not been re-validated in some time. To assess whether a line-item, say an ongoing e-mail campaign, requires validation, ask the marketing person what effect upon the metrics Acquisition, Activation, Revenue, Referrals, and Retention that specific e-mail campaign had last week or month (don’t make it too easy for the marketing person and watch out for vanity metric data). If they can show specific [positive] cause and effect for the particular line-item of the plan, then that item can be assumed validated. Everything else, where no empirical data exists, must be tested.

 

In Summary

 

Start with a unique vision for each release and then treat each release as a mini-startup business. From the vision, develop goals for the release and document these as user stories in a release plan. User stories document innovative product features and improvements. User stories also document innovations and improvements for marketing, sales, business model and business best practices. Each user story has acceptance criteria to validate the user story was implemented correctly. Each user story will also identify the metrics and measures required to validate the user story actually adds value for the customer and growth to the business.
 

Future Posts

 

I would like to solicit any suggestions for future articles. Please let me know if there's an area of lean startup that you feel needs further exploration. - Bob Boyd

 

References

 

These are the books and blogs used for this article:

• Ries, Eric. "The Lean Startup: How Constant Innovation Creates Radically Successful Businesses"
• Blank, Steve; Dorf, Bob. "The Startup Owner's Manual: The Step-by-Step Guide for Building a Great Company"
• Christensen, Clayton. The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail
• Hoque,Faisal. "How Successful Companies Sustain Innovation," http://www.fastcompany.com/3002324/how-successful-companies-sustain-innovation (accessed February 2, 2013).

 

 

 

 

 

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