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Lean Startup: 7 tips to teams using quick hypotheses test method

wrote this on Мар 16, 2016

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An analyst David Bland has written in his Medium blog a note with advice on how to use Lean Startup principles - a method allowing to test ideas and business models quickly. Olga Shishkova has shared the material on VC.ru.

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I’ve been using Lean Startup principles for a long time. I’ve got addicted to it since Eric Ries started sharing his thoughts on Startup Lessons Learned Blog.

I got addicted to it because his words made sense. Eric has expressed the concepts I believed in ever since I joined the first startup in 1999 and changed the strategy from B2C to B2B.

We didn’t call it a pivot at that time and there weren’t any significant data. We realized that we were B2B only when things got better,  survived a dot com bubble and were acquired in 2006.

Since 2009 I read everything I find from Eric Ries, Steve Blank, Kate Rutter, Laura Klein, Janice Fraser, Alexander Osterwalder, Ash Maurya, Dave McClure, Brant Cooper, Patrick Vlaskovits, Jeff Gothelf, Josh Seiden, Giff Constable and then try the ideas in real world, with my clients.

I’ve been consulting startups and corporations on Lean Startup for 5 years already and I’d like to tell you about what I’ve found out.

  1. MVP (Minimum Viable Product) is optimized in order to learn, not to scale. It’s very difficult to explain this to people who have spent all their lives on creating for the sake of creation, not learning. These are the people who suffered a lot in the past because they were made to release a half-baked prototype and sell it to thousands of customers. Such directives came from managers who thought that if you could attract enough people to a prototype, everything would be OK. So be patient when people aren’t ready to adopt the MVP concept straightaway. That’s why I start with “Education” section in Build-Measure-Learn cycle. What else should you know about your client? About market? About possible problems? If you start with “Education”, you’ll be able to soften many blows.
  2. The second difficulty in MVP concept is that when you decide what’s a minimum functionality for your product, your customer decides what’s viable in it. You’ll have to lead your team out of the lowest graph indices after they experience despair for the first time. I have never met a team who would release an MVP and achieve success straightaway getting millions of dollars. It will take weeks and months for experiments in order to understand the product totally. And remember, that an MVP’s goal isn’t to scale or generate revenue but to learn the market by collecting quantitative and qualitative data. Then, you can use the data along with your own vision of the product and market and can make an informed decision concerning investments. There are very few people who realize this peculiarity.
  3. The most widespread pivot types I deal with in practice are Customer Pivot, Problem Pivot and Solution pivot. A Customer Pivot is a situation when you’re drawn by a problem but during customer segment discovery you find out that a different customer segment has a problem. In this case, on the basis of information you’ve got, you change your strategy from one customer segment to the other. A Problem Pivot is a situation when you’re passionate about a customer concept but you learn that the problem you thought your customers had wasn’t as painful as it seemed. You pivot from one problem to the other and concentrate on one customer segment. A Solution Pivot is a situation when you are totally absorbed by the customer and problem but solution doesn’t fit well. A suggested advantage resonates with customer needs, however nobody uses your product. You pivot from one solution to another, basing on what you’ve found out and hope to solve the problem in a sustainable manner.
  4. Almost nobody uses Innovation Accounting correctly. Startups doesn’t use it as they lack time or skills to use analytic tools and create a baseline. Corporations don’t use it because they are either not allowed to use proper analytics tools or can’t track metrics on the whole territory of their functional silos. Thus, one of the most powerful concepts in Lean Startup - Innovation Accounting - has still to be realized.
  5. If you’re a founder, it may be more difficult to earn money with the help of Lean Startup. All the market, customer and solution investigations you’ve conducted actually mean that you’re not a unicorn-company founded on a team and a dream that your company will be evaluated in 1 billion dollars. However, don’t get disappointed because of the fact that Lean Startup won’t help you to get financing in a very short period of time, as it will significantly increase your chances on getting long-term funding.
  6. Customer investigation never stops. Do you have a landing page and people subscribe to your service? Cool! Now go and ask them why they signed up. People like your new app and suggest it to all their friends? Wonderful! Now try to find out what exactly they like about your app. You won’t be able to understand why people subscribe to your app and spread it looking at metrics only. Quantitative metrics answer a question “What?” without answering a question “Why?” In order to answer it, you’ll have to talk to your clients.
  7. Lean Startup can’t be called a fleeting passion. It will stay with us for a long period of time in this or that form. It reminds me of extreme programming (XP) very much. Both of the projects had ideas like “theory of relativity” and a great many of devoted fans. However, XP has become a catalyst for modern software practices like Pair Programming, Test Driven Development and Continuous Deployment. I believe that Lean Startup is very similar to XP as it can become a catalyst for next generation entrepreneurship and modern principles of product development.
Leonid Zverugo
About the Author

Leonid Zverugo is the CEO of 32dayz (task and time tracking).