We are in the middle of a big transformation in digital revolution where “software is eating the world “, as defined by Marc Anderssen. One of the driving forces behind this phenomenon is the affordability of writing your first digital product completely for free.
The real driving force for this revolution, however, is the widespread adoption of“Lean Startup“ and “Customer Development“ methodologies. These complementary methodologies encourage experimental and iterative approaches by getting early and often feedback from customer bases with “Minimum Viable Products“ (MVPs). This iterative approach requires being flexible enough to “pivot“ when there is not enough traction. The ultimate goal is to find the ideal business model configuration with trial and error.
Startup Founders as Techno-PlayDough Players
Startups’ experiments remind me of a child’s play dough. My proposition here is that, if done properly, startups are in a very advantageous position as opposed to established companies with existing customer base and cash flow that are unable to make bold changes in their business model configuration, which reminds me of rigid entities.
When the play-dough is still soft, a startup team can (and should) try to make completely different shapes and measure the traction for each one of them.
This cannot be achieved by an established company where there is an existing customer base and cash flow, which prevents them from being a completely different product to their customers the next day. In search for an ideal business model configuration, startups shouldn’t be content with a good-enough traction level and aim for a hockey stick curve while they are flexible enough to make major changes in their strategy. Flickr, at first, was a massive multi-player online gaming site till they introduced a photo-upload feature. That feature made such a big impact that they decided to throw away everything else and be just a photo upload site. Twitter first attempted to become a podcasting company. It was a complete failure until they decided to make a radical pivot to a text-only model.
For your techno-playdough experiments to take effect, there are two prerequisites.
- Business Model Innovation
The first requirement is a tool where you can quickly and easily iterate through different business model configurations. Alex Osterwalder’s Business Model Generation is exactly for this purpose. You can depict every idea to business model canvas with 9 building blocks. The idea is to make different versions of the canvas with changes in one or more blocks and testing how each version performs in real life. As opposed to Business Planning, this approach is highly suitable in startup phase where the ideal customer segment and ideal product configuration is largely unknown.
- Test Bed – An Analytics System with Defined Metrics
To systematically conduct the experiments and see whether each experiment performs well, you need an analytics test bed. Additionally you should clarify the metric that matters most and start with improving that metric. Determining which metric to look at is largely dependent on which phase you are in, the product category etc. If you don’t reduce the metrics to one or two, most of the time, you feel lost in the oceans of data and hence you discourage, not encourage, the experimental approach of the lean startup philosophy.
This is the initial problem of most of the companies I’m giving consultancy to. Being lost in data leads to lack of feeling of sense and direction and inability to make data-driven decisions.
If startups make a small investment in building an effective analytics test bed, they can not only get more motivated to try their next experiment and feel on the track, they can also easily persuade potential investors to invest in them. The key point here is measuring wisely while you’re experimenting.
On playing with their play dough, children should be left free to come up and experiment with completely different shapes . It’s exactly the same for techno-play dough, quick & cheap experiments that are only possible in startup phase should be tried.
Isn’t it the real essence of lean startup philosophy? Quickly built cheap MVPs that allow startup teams to make many pivots on their journey before running out of money.
One single caution, if children run out of their passion, they give up playing. It’s even so with startup teams. And lean methodology doesn’t help here – if you run out of passion, game is over for you!
So having an idea you’re always passionate about is the key to your startup’s success.