Imagine that you wake up tomorrow with this great idea: a new web app that helps cost-conscious, time-strapped families put “food on the table.”
People will sign up for the service on the Web or their phone, and select their favorite types of meals and their local grocery store. Then each week, they’ll get a personalized recipe and grocery list based on their preferences and sales at their store.
How would you go about launching it?
The Usual Approach to Launching Products
If you’re like a lot of people, you might spend 1 year doing basic market research, writing a business plan, and building a product. You need the product to be great out of the gate — so that you get strong PR and word of mouth. And your product is complex, because it has to integrate with hundreds of grocery stores across the country, and match that data against your customer’s preferences. Among other things. So you spend $100,000 and countless hours on the product. Once the product is ready, you promote it with a national PR splash and a multi-channel ad campaign.
Or maybe you’re not like most people.
You believe in the “release early and often” philosophy. So you spend 3 months and $15,000 building a ‘good enough’ version of a web app. You focus the product and your marketing on 5 states and on working moms. Once it’s launched, you promote it through Google AdWords and social media. Then you adapt and add features based on customer feedback.
Food on the Table: The Lean Approach
A couple guys did have this very product idea and they’ve built it into a successful online service and mobile app: Food on the Table. But they didn’t use either of the approaches above. Far from it. Here’s what they did:
- Before building anything — before investing in a single piece of technology — the founders went to a grocery store and started talking to shoppers, one at a time.
- They asked each shopper a bunch of questions related to their idea — and then they described their service and asked if they wanted to buy it … on the spot.
- Eventually 1 customer signed up. Each week they met that customer at Starbucks, interviewed her, and provided personalized recipes and a grocery list. They did all of this manually. And each week, they collected their check for $9.99.
- Over time they added a few more customers, and provided the same “concierge” service to them.
- Along the way they were testing their core business assumptions with paying customers — and adapting the product accordingly.
- Only when they had too many customers to handle manually did they start designing and coding technology-based pieces of a product that could scale.
- They’ve continued to follow the mantra “code should only remove bottlenecks” since their launch.
Why Most Startups and New Products Fail
The approach used by Food on the Table probably sounds cute to you, but also really inefficient. Meeting a single customer at Starbucks each week? Manually creating grocery lists for $10?
And yes, these things are a waste of time if you know everything you need to know about your market: their pain points, what they’re currently using as a solution, what percentage of them will buy your idea and for how much, and so on.
But startups almost never know these things. They assume them. The critical insight of Eric Ries’s new book The Lean Startup is that most startups fail not because they didn’t build a good enough product, but rather because no market exists for that product. The same goes for many larger organizations trying to launch new products, services, or other initiatives. They make huge assumptions about their market without realizing it, and then proceed to build and launch products without testing these assumptions in a rigorous way.
Build, Measure, Learn
How do you test assumptions about your market?
Not through focus groups, surveys, or other traditional market research techniques. These are too hypothetical and prone to bias to give you accurate insights.
Instead you start by having one-on-one conversations with potential customers to validate whether the problem you think they have really exists. Once you validate the problem and come up with a product idea, you quickly build what Ries calls a minimum viable productor “MVP”. This is probably not an early version that you spend months building, but rather a shell of a product that you spend days or hours creating. It could be a single web “landing” page, a demo video, or a “concierge” service that you pitch in a grocery store. Then you try to start selling it or getting people to commit in some other way — like giving you their email address for when it launches.
Chances are high that you won’t see the results you want with your first attempt. So you talk to your early adopters, learn more about what they want, and optimize your offer — for example, by A/B testing different landing pages with different pricing, messaging, and features. After you’ve optimized for a while, if you still don’t have a viable business model/conversion rate, you pivot — making a more radical change to your product or target market.
Then you go through it all over again. You do all of this before making any real investment in your product. Because you haven’t spent a year and $100,000 building a product, you can learn and adapt quickly until you find the right product/market fit — or until you realize there’s no market for your original vision.
The result: you’re much more likely succeed, and if you fail, you find out quickly and cheaply.
Not Easy, But Worth It
Anyone who has used the Lean Startup approach will tell you that it’s really hard work. You’re constantly testing and measuring. You’re “out of the building” talking to real customers. You’re making tough decisions about whether to persevere or pivot away from a product you were passionate about.
It’s much easier to just start building, coding, or designing. That’s what we’ve always done.
Told through stories about companies like Food on the Table, Dropbox, and Groupon, The Lean Startup offers a powerful alternative for entrepreneurs at startups, big companies, government agencies, and any other type of organization. It’s had more of an impact on me than any business book I’ve read in a long time. And we’re using the lean approach with more and more of our clients. I hope you’ll check it out.
We recently attended Lean Startup Machine DC, a weekend bootcamp for applying lean principles in the real world. Read Karan’s blog post on what we did and what we learned.
Share your thoughts on — or experience with — Lean Startup principles on the Marketade blog.
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