Hi there -
Here is this week’s “1 principle, 2 strategies, and 3 actionable tactics” for running lean…
1 Universal Principle
“Don’t rush outside the building.”
(Share this on Twitter)
"Get outside the building" is one of the battle cries of the Customer Development/Lean Startup movement.
This is really a call for validating the riskiest assumptions in your business idea as early as possible with evidence-based facts you gather by interacting with customers.
The basic premise goes something like this:
- Before committing your limited resources toward building a product (or MVP), test your customer and problem assumptions using a customer/problem discovery process.
- Then, build the smallest solution (MVP) that addresses the top problems you uncover.
- Iterate and refine from there.
So what's wrong with this approach?
While it’s possible to get outside the building. uncover customer problems, and even build an MVP that gets some traction, the danger is getting stuck with a sub-optimal business model that doesn’t match up with your vision or ambition — a zombie startup.
In today’s issue, we’ll start by exploring why this happens and how to sidestep this pitfall by spending a little more time inside the building getting your business model design in order.
2 Underlying Strategies at Play
I. Focus on problems worth solving.
There is no shortage of customer problems. When you get outside the building and start interviewing customers, it’s easy to end up with a long list of problems to solve.
This list gets even longer if you’re exploring multiple candidate customer segments in parallel (as you should) for your idea.
But not all problems are created equal.
How do you prioritize which problems or which customer segments to tackle?
It’s important to recognize that:
Your goal isn’t just finding a problem but a problem worth solving.
Doing this requires starting with constraints.
II. Problems worth solving are shaped by business model design constraints.
The goal of a startup is to build a repeatable and scalable business model. This begs the question: “What is your definition of a successful business model?”
Next, every business model can be deconstructed into key metric assumptions. Do these assumptions hold up your definition of success?
Getting clear on your business model design constraints before rushing into validation is the key step to avoiding needless heartache later.
3 Actionable Tactics
I. Deconstruct your business model
Before taking on any complex project, like building a bridge, starting with a blueprint or architectural sketch would be wise.
Ideas are no different.
Start by deconstructing your big idea into a set of key assumptions using a 1-page Lean Canvas:
II. Stress-test your key business model assumptions
Next, before breaking ground on the bridge, engineers conduct many stress tests using models and simulations to ensure the bridge meets design specifications.
While aesthetics (desirability) and feasibility matter, a more fundamental stress test would be its load-bearing capacity (viability).
The same is true with a business model.
If a business model isn’t viable, does desirability or feasibility matter?
Suppose you can prove with a high degree of certainty that a given business model cannot deliver on your definition of success, even in a best-case scenario. Would you spend weeks running customer discovery or months building out an MVP?
The good news is that you can stress-test the viability of any business model using a simple five-minute Rapid Viability Test (RVT) I created.
As with any good rapid or stress test, the goal is to surface invalidation quickly.
- If your business model fails the RVT, fix the model before getting outside the building.
- If your business model passes the RVT, you’re not guaranteed success, but realizing your business model is now within the realm of possibility.
Passing the 5-minute Rapid Viability Test is a necessary precondition for getting outside the building.
III. Use your business model design assumptions to constrain your validation efforts
The first objective of the RVT should be obvious: To eliminate sub-optimal business models from consideration.
The more important second objective is to surface key metric assumptions that inform your "outside the building" validation activities.
One of these key metrics is pricing.
Most founders come up with pricing after a solution is defined. This is backward.
Your target pricing comes from your business model design, and it constrains the size of problems and the number of customers you need to find to make your business model work.
In other words, it helps inform who you seek and how big a problem you must find when you get outside the building.
This is one of the lessons I teach in The Business Model Design course.
In the full course, I will show you how to apply many more stress tests to your business model, which take minutes to administer but potentially save you months of heartache down the road.
If you want to lay a solid foundation for your business model, check out the course here. You'll also learn how to pitch your business model effectively to recruit co-founders, advisors, investors, and customers.
That's all for today. See you next week.
Ash
.
.
P.S. Spend 5 minutes now to save 5 months later.