The Very Lean Startup

Here is a cleaned up and more formal version of the below.

I decided to follow my own advice and publish the following online before it was finished.  This is a very rough first draft, so please excuse the blemishes and mistakes.  I am looking for feedback and your thoughts on what I have outlined below.

Brief Introduction

The Very Lean Startup Method© or perhaps the Really Lean Startup Method© is but a natural extension of the Lean Startup Method. This approach to entrepreneurship has been articulated exhaustively by Eric Reis in his eponymous book as well as by many others. In fact, there is now an industry around the philosophy expressed in the book. Any aspiring or practicing Entrepreneur must read it. I strongly recommend that you read it right after you read this blog and certainly before you start using the ideas in this blog. You want to be prepared for success – once you start getting customers, you need to develop the product and there is no better source than Eric’s book.

I will elaborate more on the process but let me explain the concept in a few words. The Very Lean Startup Method focuses on finding customers before you build or perhaps even define a product.

Why that’s good and why that’s not so good

Now, in reality that is difficult to do because most entrepreneurs and innovators work from passion first – they have an idea and then try to make a business of it. In some cases they may not have an idea, but their experience, skills and interests determine what kind of business they are inclined to do. In fact, the latter is more useful than just an idea – experience and interest will often point you to the problems that need to be solved in order to have a real business with real customers.

In fact, I often meet entrepreneurs who are looking for help, and they have already built a product! They just want Sales & Marketing services (which we provide) because they think their product or service is so great, they just want someone to get in front of the customer. And very often, they will say in a self-deprecating manner “Oh, I am not a sales(wo)man, I am just an innovator…” Or worse “I am just an ideas person…” Well, they don’t realize how unclued they are.

Eric Reis has already talked in detail about the Lean Startup Method and how you create a Minimum Viable Product, so I won’t (re)address those. I think though that process will come after the process I am going to outline below.

The Very Lean Startup Method

Brainstorming and Informal “Research”

The rule is “Tell everybody about your idea”. This is a fail point and a possible innovation point. I say innovation is (only) possible because your idea may be so hare-brained as to defy possibility of any innovation to circumvent its fail point.

Identify possible customer demographics

First, identify who might be the customer for the product or service you want to create. This is fairly easy and at this stage you can afford to be broad. Remember that you are most likely to be wrong, unless you have been in that market before, so try to be as exhaustive as possible. Our goal is test various customer demographics and find a “product-market fit”.

Make a brochure or website

The next step is to create collaterals to engage the various segments you have identified. Depending on whether you customers are online or offline you would make a website or a brochure or both. Provide details of the features you plan to provide but at the same time, sell the benefits. Much has been written about this, so I am not going to go into too much depth on this. Suffice it to say that you need to convince people to want the benefits and they won’t give a damn about the features.

Send it out to a few specific target customer types/demographics

This has to be broad. And don’t get into the trap of asking your friends or your mother. They may not tell you the truth. And even if they do, you may not believe them! Talk to strangers online and offline. Don’t hesitate to talk to potential customers in real life, even if your product is online.

Send out variations with different pricing or offers

For each segment you will have to experiment with various offering and price points. Your website can for example have a landing page that leads to the pricing for that particular demographic. Important: None of these pricing pages should be linked from any public page on your website. Naturally, if you do, people will soon discover that you have different pricing schemes and different offerings! That will obviously not have a very pleasant fallout.

Identify the ones that respond and why

If you are lucky, some of your targets will respond. Find out why. Easy to say, harder to do. You obviously don’t want to look a gift horse in the mouth, but you do need to know what color it is. In other words, it’s great that you got a few responses, but you need to know why you got those responses so that you can get more of them. Even at the expense of losing a few of them.

However, it is very likely that you won’t lose them. By engaging them, you are more likely to create an unshakeable bond, because people like to connect. And you will be surprised how many people respond if you ask the right questions.

Find out why the non-responses didn’t respond

It’s perhaps more important to find critics than friends in business. The critics keep you honest. There may be many reasons or even a single small reason that people didn’t respond. Maybe the message was not appropriate for that target demographic, maybe the timing was off, maybe the price was wrong and so on. But it could be that there is a very small piece of the puzzle that is missing and adding that could turn the tables, so to speak. This little piece may be easy for you to implement and may not even be a feature – it could, for example be financing, an external option.

Note that in any campaign to acquire customers, there are always many times more people who don’t respond than those that do. So, if you don’t go after the silent majority, you are missing out on getting some very valuable feedback.

Ask the responding customers to pay

This is perhaps the most important step – this is where you get to see whether your idea for a product or service can actually be a viable business.

Take this life example as a parallel to what happens when people have to actually commit to some time or expense. Let’s say you are putting together a trip to a holiday location with your friends or relatives. You are sitting talking about it and you all agree that it would be fun to go to the Bahamas or the Grand Canyon for a holiday. It’s not very expensive, but the cost is not trivial. Everybody is excited and agree to go. Now you ask them to decide on a date and also ask them to fork out the money, so you can book the tickets and the hotels. Suddenly everybody finds an excuse, or they find another topic of discussion.

This is also true when people buy products or services. If you explain your offering to people, they most likely tell you they are definitely for it. How many times have you heard “Sure, I’ll buy that for $X!”. However, when you ask them to pull out their wallets and actually buy it, they have various excuses – “Let me think about it some more” or “Hmm, I’m a little short of cash right now, but maybe in a couple of months…”. Alternately, if you are lucky, they will start asking questions, for example about warranties, about specific features they want (and you probably don’t have).

In fact, their objections, if real, are a great form of feedback that could significantly improve your product/service. Listening at this stage and asking more questions could be a goldmine of market research information.

Do the math on cost of acquisition of customer

Okay, so you got people to pay. But wait! Don’t jump for joy quite yet! Sorry, to be a wet blanket but the next important question is… Are you charging enough? It’s easy to get customers if you low-ball your price. But that price may not be enough to make a profit. If you have made a business plan with some pricing (and cost) assumptions, it’s now time to revisit that. Is the promised service level doable in the cost structure you had previously assumed?

This is a fail point and an innovation point.

Apply the above and the cost of development to the business model

Modify offering – product/price/placement/target customer

Repeat

…till you have a viable business model

Now read Eric’s book on The Lean Startup Model and it will go a lot quicker and a lot smoother.

Conclusion

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2 Responses to The Very Lean Startup

  1. Vikram says:

    Interesting article. Practical approach which should be implemented by any wannabe entrepreneur.

  2. Ramesh Adavi says:

    Anil,
    Initially I thought that “lean’ to”very lean” was only a gimmick.
    But, there is really a lot of muscle to your very lean body of knowledge.

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