Learning from “lean start-ups”
I've just read an interesting article in the HBR about "lean start-ups", thanks to a tip off from Jonathan, who was in my year at P&G. Jonathan is himself running a start-up called Open Goal; if you have kids who kick a football around in the garden (and over the fence into your neighbour's garden), you should really check it out.
The lean start-up is a methodology "favours experimentation over elaborate planning, customer feedback over intuition, and iterative design," according to the author, Steve Blank. Some of the concepts have become quite buzz-wordy, including “minimum viable product”, "failing fast" and “pivoting”. It's an approach I've seen first hand on the Collider business-to-brand accelerator program for Madtech start-ups that I'm investing in.
So, what are lean start-ups, and what can we learn from them?
1. Don't waste time on a business plan
Rather than spending months on polishing a perfect business plan, a lean start-up creates an initial idea for a value proposition and then tests out their hypotheses with customers. As Steve explains, "They go out and ask potential users, purchasers, and partners for feedback on all elements of the business model, including product features, pricing, distribution channels, and affordable customer acquisition strategies."
Funnily enough, it seems the brandgym was a lean start-up, even though the term hadn't been invented back in 2001! The only business plan we had back then had in it answers to two questions:
1.What will we sell: brand strategy coaching
2. Who can be our first customer: I had a list of c. 40; it ended up being Peter de Kruif on the Bertolli brand (thanks again Peter)
Steve suggests capturing your idea in a framework called a business model canvas (see below). This is a nice framework that can be found in a cool book called Business Model Generation.
2. Be ready to "pivot"
During customer development, a lean start-up is searching for a business model that works. If this process suggests that the founder's hypotheses are wrong, it either revises them or “pivots” to new model. Only after this initial phase of experimentation is complete is a more formal organization established. Importantly, each stage is iterative; a start-up may fail several times before the right approach is discovered.
For example, Steve tells the story of Blue River Technology, a company with a vision of building robotic lawn mowers for commercial spaces. They talked to 100+ customers in 10 weeks and discovered that their initial customer target of golf courses weren't interested in their idea. So they changed tack, as Steve describes: "They began to talk to farmers and found a huge demand for an automated way to kill weeds without chemicals. Within 10 weeks Blue River had built and tested a prototype. Nine months later the start-up had obtained more than $3 million in venture funding".
3. Quick, Responsive Development
Traditional product development has a series of linear stages, with each one lasting months. In contrast, a lean start-up uses a process called "agile development" which originated in the software industry of short, repeated cycles. Each cycle creates a “minimum viable product" containing only critical features. This is then used to gather feedback to guide development of a revised minimum viable product.
This is exactly the approach used by the Collider start-ups. The cool thing about Collider is the way it allows the start-ups to pilot their products with partner companies such as Diageo, Unilever and Camelot.