“Most business owners ‘sort of’ want the customer feedback but not really”
Steve Blank
“A Start-up is „a human institution operating in conditions of extreme uncertainty”
Eric Ries
and it remains so until it reaches a “repeatable and scalable business model”
Steve Blank
What does that mean?
A human institution -it does not have to be a company, it can be a project, a division of the company or a group of people. What is important is the criterion of innovation – hence the extreme uncertainty – in the case of innovation, we are not able to predict market reaction or a long-term action plan.
A Start-up will not be another internet store, application or a company that produces a 3D printer. Unless it stands out as something so innovative that it is not possible to rely on market analysis to determine the chances of success. How can we examine competition or the need for something that does not exist? This task is extremely difficult for innovation.
In the case of classical business, we are able to study and determine the size of the market, competition, opportunities and threats, in order to decide on the profitability of the project.
In the case of business innovation, the only thing we have for sure is the idea, passion and a lot of questions. At the beginning the following is not clear:
1. Who is our customer?
2. Does he/she want what we offer?
3. How do we get to him/her?
4. What actions do we need to take to get to him/her and deliver value?
5. Do we have sufficient resources (financial, intellectual, human) to achieve this?
6. Are we able to make money and how much will it cost?
These are standard questions on which we can create a business model. We treat these questions in the Lean Start-up method (“lean” management innovation) as a hypothesis, and the start-up task is: first their positioning, secondly their test and thirdly conclusions. Success is for those who quickly get answers to these questions. The role of the idea is overestimated in this context and it is not as important as the product itself or its quality. It is crucial to achieve a product-market fit (finding the market and satisfying demand) as soon as possible.
Classical methods of work on new technologies, i.e. waterfall (building and a refining the product until it is perfect, only then releasing it on the market) can only be successful in situations where we cannot predict or program the reactions of the recipient in advance. For example, this is the case with Apple brand products – even by launching something new, you can plan market capacity. But it is a strategy that requires substantial costs, a recognizable brand and to be abreast with the latest trends.
In the case of a Start-up which starts in the proverbial garage, such a strategy could mean a huge loss of time. Start-ups using this strategy frequently take 18-36 months to create and tune the product before going to the market. It is justified by the risk of “stealing” an idea or a reluctance to release a low-quality product that does not discourage customers. This approach is associated with a high risk. At best, the final product may pass by the expectations of customers. Then it is necessary to sacrifice additional time and resources to adapt it to the needs of customers. In the worst case scenario, it may not hit the target at all in need or may become obsolete – somebody came up with it sooner or market need has been resolved in other ways (such as mobile printers, for which demand decreases with the proliferation of mobile devices that allow the transfer and read documents in digital forms). The answer to this is the Lean Startup method, or the connection of Customer Development (product creation as a response to customer need) and agile methodologies).
Product development takes place in cycles (i.e. sprint or iterations), where in each subsequent cycle another test and validation of hypotheses is undertaken. It is important from the earliest stages of development followed by early customer involvement. As a result, we get feedback from real people who represent real needs and a real audience. The extent to which this approach reduces the cost, risk and time when implementing innovation is not to be underestimated.
Starting from 12 o’clock (clockwise) Idea-CreationProduct-Measurement-Done-Learning
What if someone ‘steals’ your idea?
If only others saw such genius in our ideas as we do! Unfortunately, it is directly the opposite, so to speak – “good ideas are paved to hell” – it is estimated that the idea itself is worth about $ 1, a good idea around $ 10. This is what has real value, then the idea of an MVP (minimum satisfactory product), which was successfully verified by a series of tests on groups of early recipients. Positively verified means that is solves an important issue to a specific target group so that it is able to generate profit (paid by customers or third party).
For founders:
“Get out of the building!” Determine the target group first then the proposed value; after that test and learn. Draw conclusions, test again and again to learn. Accept failure, provide refunds and learn more! It’s difficult, but it’s the quickest way to verify the business model in the heat of audience feedback.
For investors:
Make sure that the Start-up has a created and constantly revised business model. “We have a great idea, but we lack the means” – these very common words herald a long and hard way to your destination and a great risk of failure. Of the five major factors that determine whether a startup will succeed or fail, the idea and funding are in last place! Timing (ready market), the band (complementary qualities and competencies) and a business model – are the three factors playing a key role. But you can only verify them in the heat of the recipients’ feedback.
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