The Lean Startup Conference kicked off on Monday in San Francisco. In Toronto, entrepreneurial types, filled a room at MaRS to listen to their local peers present and discuss Lean Startup concepts before tuning in to the livestream of the main event.
Eric Ries, credited as the founder of Lean Startup, kicked off the conference by saying that a lot of people have jumped on the Lean Startup bandwagon in the past year and joked that it had “great vanity metrics” – Lean Startup speak for non-actionable metrics. He noted companies of all sizes are using it, including enterprise firms, such as GE, Toyota, and Intuit. In short, he argued that Lean Startup offers a better way to innovate, giving it broad appeal despite its seemingly limiting name.
According to Ries, Lean Startup is, “…not about entrepreneurs working in a garage, or a bunch of dudes (read executives, not Jeff Lebowskis) in a boardroom”. He went on to make the point that it’s about communicating and collaborating with our target audience (customers), even if that means getting out of our comfort zone. The rationale is — when you’re speaking with customers, you’re always learning and, if done with some discipline, your company can become what he calls a “learning company”; constantly learning from its environment and adapting to it.
Ries also took a jab at the common success metrics for software companies of delivering a project “on time and on budget”. He likened this way of measuring success to “driving a car off a cliff while bragging about the gas mileage”. In other words, you could be moving quickly in the wrong direction yet remain unfazed because you’re doing such a great job getting there according to your standards. He seems to believe that we should define success by customer satisfaction, not by meeting deadlines and budgets. This left me wondering, why not consider all of these factors when measuring success? If it is possible for a project to be considered a success that is over budget and behind schedule yet delivers greater than expected customer satisfaction, say through greater revenue than anticipated, is it not possible for the inverse to be true?
The first session at the local event was, “Building a Minimum Viable Product (MVP)”. MVP is an element of the Lean Startup approach that advises building a product with just enough functionality to give the customer an idea of what the product offers (Reid Hoffman, co-founder of LinkedIn, later stressed that you really need to think about what minimum viablemeans to you, implying that it’s likely less than you originally believe it ought to be). The presenter, Josh Borts, shared how he has built MVPs for startups: get out of the office and meet with the people who you believe would want your product; create bare bones documentation before getting in front of an external audience; and use key performance indicators (KPIs) that measure your daily success (e.g. customer conversions).
Some of the attendees voiced concerned about sharing their product concept early in the process for fear that someone will steal their idea. The logic seemed to be, if an MVP is little more than an idea, can’t someone else take that idea and move faster or better or both to win the market? In response, one of the speakers made the point that “traction is the new IP”; that 100,000 users, not a patent, is what provides competitive advantage. While that may offer some comfort to entrepreneurs who want to avoid the patent process, the door is still open for someone to take an idea that doesn’t yet have significant traction, copy it, and win the race to traction, no? But it seems to be a risk innovators need to both accept and take. Extensive upfront planning with minimal interaction with external audiences until you’re “ready” may seem safe because it is established practice. However, when you consider that 75% of all start-ups fail, perhaps a change in approach that focuses on validating your idea with your potential customers is worth a shot?
One of the challenges that presumably exists with Lean Startup is getting “problem interviews” with customers. According to Lean Startup methodology, after creating a hypothesis of need, you are to conduct face-to-face interviews with people in your target market, focusing on learning more about their problems so that you can create a solution to solve them. It seems as though the interviewer would derive much greater value out of this meeting than that of the interviewee. Would you take 20-30 minutes out of your day to share what problems you’re facing to someone who’s curious and may be able to help you? One panelist joked, (paraphrased) conferences are a great place to conduct interviews with 40 (plus) people, but don’t do that here (laughs)… It seems important to be able to structure these interviews in a way that is mutually beneficial, but that is likely easier said than done.
The second session was a Lean Canvas Workshop. A Lean Canvas is a blueprint for your startup idea. It’s like a business plan in that it enables you to communicate your business model with internal and external audiences. But it’s unlike a business plan in that it’s a short, dynamic document. Ash Maurya, author of Running Lean and creator of the lean canvas, said that it’s designed to be “as actionable as possible while staying entrepreneur-focused”. In the workshop, we each built a Lean Canvas, a 9-step process:
- Problem – what problem do you seek to address?
- Customer segments – who has this problem? (We were reminded that you can’t target everyone)
- Solution – what are the top 3 features of your solution?
- Unique Selling Proposition – template: For (insert target customer), (insert your product) provides (3 benefits)
- Channels – how will you reach your customers?
- Revenue Streams – how will generate revenue?
- Cost Structure – what costs will you incur?
- Key Metrics – what should you be measuring?
- Unfair Advantage – what do you have that your competitors do not?
In practice, you aren’t supposed to complete the canvas in one sitting. There are points at which you need to validate your plan with your audience. After completing the exercise in about 30 minutes, it was hard to determine how valuable a Lean Canvas would be to an entrepreneur. It helps simplify and order the number of things that an entrepreneur needs to consider when creating a business model or plan. But it’s the process of validating the various elements of the Lean Canvas that seems to be the most valuable part of the exercise.
Here were some of the other highlights from the day:
- Robin Chase, Co-founder and former CEO of Zipcar, and now founder and CEO of Buzzcar, talked about the collaborative economy and how Zipcar identified and solved a problem of excess capacity in the market. They solved this problem by creating a technology platform that enabled their customers to be peers, sharing the costs incurred of using a vehicle. She also spoke about how Airbnb is another example of a disruptive, collaborative company that saw a problem of excess capacity and solved it with a platform that enables their customers to also be producers.
- Members of Toyota’s software development team described how they went from Lean manufacturing to Lean StartUp. They began their presentation by acknowledging that Toyota is “still very much stuck in the Waterfall approach” and that they were getting customer feedback once every 3 years. Curiously, they looked to Lean Startup rather than Agile to improve their software development process. Their priority was getting closer to their customers to get feedback sooner. To do so, they posted on Craigslist that they were looking for people to provide feedback on a GPS system that they were creating. Much to their surprise, 300 people responded who were willing to provide in-person feedback.
- Reid Hoffman, Co-Founder of LinkedIn, was interviewed by Eric Ries. Hoffman said, “if you are not embarrassed by the first version of your product, you’ve launched too late.” When Ries asked Hoffman to provide advice to entrepreneurs on how to create the next LinkedIn, Hoffman said (paraphrased), think about your startup as a long-game…and a multiple-game strategy. The odds are your first venture will fail, but keep working towards the end goal.
Overall, Lean StartUp Day was a worthwhile event. We’ll continue to look into Lean Startup, specifically to get a better understanding of how it relates to Agile as well as how larger companies can apply Lean Startup practices. Keep an eye out for future posts on these topics.