Course Curated By: Dr. G. Danford (London Business School MBA, Helsinki School of Economics PhD)
Before Starting Session
The only proven method for measuring learning is to take a pre-quiz and post-quiz of the content.
Content: Building Product
- Critical things founders often do incorrectly.
- The purpose of the business idea.
- The benefit of ‘mapping the user experience’.
- The ‘Minimal Viable Product’ concept.
- Different methods for tracking user feedback.
- The process of adding user features to a product/service.
- The three types of growth.
- Novice Error: “I don’t want to tell anyone about it. I’m going to launch it, and I’m going to get lots of users’.
- The Build-Measure-Learn product development process helps startups to be: faster, more agile, and more efficient.
- Minimum Viable Product MVP is: product with the highest return on investment, versus risk.
- Focusing on the essential product/service features, which are critical for each stage of growth.
- The three forms of growth are; sticky, viral, and paid.
- Innovation Accounting: optimistic growth plan, while at the same time grounded in reality.
1. The Novice
Adora Cheung (Co-founder, Homejoy)
Homejoy was an online platform connecting professional cleaners with clients for $20 per hour. The company had raised $39.7 million in 5 rounds of funding from 15 investors (Google Ventures, Andreessen Horowitz etc.).
What are the things most founders do incorrectly when starting a startup? The first of these is the novice error, “I don’t want to tell anyone about it. I’m going to launch it, and I’m going to get lots of users’. However, due to the fact that you will not get a lot of user feedback when taking this approach (you might get people to visit your site & try your product etc.), no customers will stick around because you neglected to get vital user feedback. Another neglected matter when starting is the the idea (problem) you are really trying to solve has not been defined.
Founders must be able to describe that ‘user problem’ in just one sentence. When you have defined that problem, and you are able to state it (remember, in just 1 sentence), then and only then should you think about the industry that you are getting yourself into.
In certain situations (context) where there is a service element in the business you are exploring, you must first of all get out of the office and do that service yourself (learn the ropes or learning-by-doing). For example, if your thing is about restaurants, you should become a waiter. If it is about painting, become a painter. In this very concrete way you can ‘get into the shoes of your customers’. Furthermore, being obsessed, and wanting to know everything and everybody in that space (market), is essential.
2. Validated Learning
The Build-Measure-Learn product development process is a radical improvement on the traditional Waterfall model which has been used throughout the 20thcentury to build and ship products. Waterfall Development is focused on execution of the requirements document. The purpose of early customer access to the product (Waterfall) was to uncover bugs and not to provide feedback on features or usability.
The Build-Measure-Learn product development process helps startups to be: faster, more agile, and more efficient.
The goal of Build-Measure-Learn is not to build a final product or to ship or even to build a prototype of a product. The goal of Build-Measure-Learn is to maximize learning through incremental and iterative engineering. Learning can include: additional/fewer product features, customer needs, pricing and distribution, etc.) “Build” in the process, refers to building a Minimal Viable Product (MVP). MVP is not the product with less features. MVP is the simplest thing that a startup can show to customers in order to maximize learning at that point in time. (Steve Blank). Therefore, the MVP helps a startup better understand what they are trying to test and measure.
However in a lean-startup, in addition to incorporating the Build-Measure-Learn process, the startup must also have a hypothesis (guess) which they are testing (or multiple hypothesis’s). That hypothesis is an educated guess which requires experimentation and data to validate or invalidate.
In a lean startup, building minimal viable products involves: Hypotheses – Experiments – Tests – Insights.
Unknown Problem & Solution (5:00)
Eric Ries (The Lean Startup)
NOTE: this video will start and stop at the pre-assigned times 18:18-23:07
Take a Pomodoro Break
- At the beginning, you want to realistically slice off (segment) part of the customer base, in order that you can optimize for that segment.
- The MVP helps a startup better understand what they are trying to test and measure.
- It is essential that you are tracking some key metrics on how you are performing on both a general and macro level.
- Attempting to achieve product perfection is irrelevant in the early stage. However, you must continuously gather user feedback.
- For viral growth, you need to deliver a really, really exceptional user experience.
- When there is no growth or backwards growth, maybe that’s time consider a pivot (course correction to test a new hypothesis for the customer, value proposition, position etc.).
NEXT Session 5/20: COMPETITION
CONTENT: In the next session topics include; competition (Peter Thiel, founder, Founders Fund), extreme binary view of businesses, survival, last-mover advantage, identifying un-recognized opportunities and more. LINK TO 5/20 BELOW
Presenter: Peter Thiel (Founders Fund)
All startups could benefit most from combining both Lean Startup methodologies and Design Thinking. However, according to Professor Bill Burnett (Stanford University), there are still significant philosophical and practical differences between these approaches. The common elements between Lean Startup vs. Design Thinking are that:
- Both assume extreme uncertainty.
- Both assume users don’t know what they want, and can’t tell you what to make.
- Both assume that a rapid cycle of building and learning is the only process that yields actionable data.
The Lean Startup paradigm assumes; most startups are technologically driven and founded by visionaries who are looking for product/market fit. The Lean Startup is therefore, focused on finding product/market fit as rapidly as possible (before running out of money). Unlike Design Thinking, the Lean Startup begins with a founder vision and a product-in-hand.
Design Thinking, on the other hand, is not reliant on the vision of the technologists/founders, and there is more early-stage empathy/needfinding. Design Thinkers find the need (market fit) first, and only then select appropriate implementation technologies. Design Thinking does not offer the entrepreneur a management blueprint for high uncertainty (startup) environments. Design Thinking does not (at the beginning of the process) have actionable measurements of processes. Furthermore, Design Thinking does not address down-stream issues (customer segmentation, technology platform choice, business architecture, channel strategy etc.).
Design Vs. Lean (4:00)
Professor Bill Burnett (Stanford University)
NOTE: this video will start and stop at the pre-assigned times 5:57-10:19
Design Thinking Stages
During this Design Thinking process, the designers mindset is driven by; curiosity, mindfulness of the overall process, re-framing of ideas, radical collaboration, and a bias-towards-action. ‘Needfinding’ is also a critical part of the Design Thinking process ‘getting beyond what people say and do, to what they think and feel’. However, some needs are apparent and easy to see, but others are latent and deep (like an iceberg):
- Explicit needs (above the water line) lead to incremental improvements.
- Implicit needs come from the meaning embedded in stories.
The Design Thinking philosophy also adheres to the belief that, ‘understanding implicit needs leads to unique insights and big new ideas’. This philosophy is based on the understanding that people (customers) often can’t tell you what is important, but they can signal what’s important with their behavior. Therefore, Design Thinking represents:
- A dynamic problem solving approach (ideal for poorly-bounded problems, and achieved through prototyping, iteration and rapid learning).
- A problem finding approach (involving re-framing, ethnography, and prototyping).
- A value-creation perspective (a human-centered, co-creation process focused on real end-user needs).
The Lean Startup is a human institution designed to create a new product/service under extreme uncertainty. The primary goal of the Lean Startup is to eliminate waste and increase value-producing practices. This approach is derived from lean-manufacturing practices (Toyota), and S. Blank’s customer development model. There are five lean principles which the Lean Startup adheres to:
- Entrepreneurs are everywhere
- Entrepreneurship is management
- Validated learning
- Innovation accounting
There are a number of practices which define the Lean Startup:
- MVP (Minimal Viable Product): A version of a new product which allows a team to collect the maximum the amount of validated learning about customers, with the least effort.
- Build-Measure-Learn: Turning ideas into products (MVP), measuring how customers respond, and learning whether to preserve or pivot.
- Actionable Metrics vs. Vanity Metrics: High levels of uncertainty make traditional accounting useless. Thus, Lean starts with the MVP (baseline), moves from that baseline towards the ideal, and then makes a decision (pivot or preserve). The riskiest assumptions are tested first.
- Pivot: A strategic hypothesis that is testable. The changes made are designed to test a new fundamental hypothesis about the product, business model, and engine of growth.
- Other: Continuous deployment (sw) and A/B (split) testing.
The Lean Startup is a management blueprint that influences; ways of managing, measurements, metrics for progress, places an emphasis on testing & learning, and is actionable. Design Thinking on the other hand, seeks to create a ‘culture of creativity’ and innovation… regularly, places more emphasis on empathy & collaboration, and is focused on a bias-to-action (plus prototype/test cycle). Professor Burnett (Stanford University) feels that all startups should consider combining Lean Startup methodologies and Design Thinking, to their benefit.