Lean Startup

If I had to pick the single most important nugget of knowledge I picked up while getting my MBA, the Lean Startup concept would probably be it. The “Lean” startup process applies a very scientific effort to starting a business and eliminates a tremendous amount of risk by forcing the entrepreneur to actually engage with his/her market way before any product is built much less finished or polished. Below is a summary.

Step 1: Identify a problem you think a large group of people has. 

Step 2: Come up with a solution for that supposed problem. 

For many of you reading this blog, you probably find problems and solutions several times a day. It is easier for some than for others. If coming up with great new ideas is not a problem for you, then you are off to good start. What I was missing, until I went back to school, was what to do next.

The old model was to take the problem and solution, find money to invest into the project (your own or someone elses) and build out a finished solution that you can then launch and sell. If you got it right, you would make money. If you got it wrong, you would lose it all. Here is the better way to do it.

Step 3: Go out immediately and talk to 5 people who are in the group you think has the problem. Ask them if they actually have the problem you think they do. More often than not, you will be wrong. Either you will have misdiagnosed the problem, or the problem exists but is not nearly as painful or pervasive as you thought. In the off chance that you do get the problem and who has the problem correct, go to the next step.

Step 4: Ask them if your proposed solution would solve the problem.Again, your chances of success here are slim to none.

Step 5: Change one or more of your assumptions and repeat step 3 and 4. 

In less than 10 minutes you could go from an idea to a solution to testing it out on 5 potential customers. Based on your potential customer feedback, you then need to either change your market you think has the problem, your problem you are trying to solve or your solution. It is likely you got one of those three things wrong. Once you change one or all of these then you go out and talk to 5 or more people in the market and “test” out the idea with them. Below is an example that I actually did for a class.

Market: Mom’s with kids
Problem: Grocery shopping
Solution: Grocery delivery service

I went to the grocery store and talked with 10 Mom’s with kids. I found out most actually liked to get out and shop, but dragging the kids along was a challenge. So I changed our problem and thus our solution to:

Market: Mom’s with kids
Problem: Grocery shopping with kids
Solution: Babysitting service at/next to the grocery store

When I talked to Mom’s about a babysitting service I got a very positive response. But when I asked about price they would pay for such a service, and did the math, I quickly figured out that the opportunity was small. The problem of shopping with kids did not hurt parents enough to pay much money for. So I went back to original problem and change the market to:

Market: College kids
Problem: Grocery shopping
Solution: Grocery delivery service

Surprisingly to me, the college students I talked to faced numerous challenges when shopping for groceries including lack of a car and lack of time which validated the problem. It also introduced a new potential market as parents could easily guy groceries for their kids in school, rather than just sending money.

The semester ended and I had bigger ideas to work with, so I abandoned the project, but I hope you can see the value in all of this. Upon having my first idea, I could have asked friends and family what they thought of it. I probably would have gotten a lot of “that’s a great idea!” and “you should totally do that!”. All of this positive feedback would have likely come from people who are not potential customers. I could have spent millions on creating a delivery system that included every store in the country and bought huge warehouses to house the groceries and vans to deliver it. I also would have lost millions of dollars. See Webvan.

All one needs to do is to get out and talk to their potential market to realize where problems actually exist and where they do not. Doing this, reduces the unknowns of starting a business to really low levels and increases ones chances of success.

Below you can see me and my company following the process.

21. January 2014 by Salem Stanley
Categories: Entrepreneurship | Leave a comment

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