A startup can be broken down into three parts
1) a human institution designed to
2) create a new product/service under conditions of
3) extreme uncertainty.
Contrary to popular belief a successful start-up is not a consequence of an oxbridge education or being in the right place at the right time. Success can be engineered by following a winning process.
The biggest mistake startups make is they create products founded on assumptions. We start building a product assuming people want it. We spend time trying to build the perfect product – once complete – we offer it to customers. Then we find out that customers don’t actually want the product.
The products failure it is likely because we never spoke to prospective customers and determined whether or not the product was valuable. When customers communicate through indifference – the startup fails.
The Lean Startup provides a scientific approach to building startups. Get your product in customers hands faster. It is a principled approach to new product development.
Define success
Success in product development is not delivering a feature; success is learning how to solve a users problem.
For a new product you are affecting by the “Audacity of Zero”. When you have zero revenue and zero customers – you are still on your way. Everyone is fascinated by the idea of overnight success at this stage. You see zero is always a more comfortable place to be than a very small number of users – that may or may not like your new idea.
Don’t expect to scale fast – we need to be in learning mode at ground zero. As Charles Eames said “Never delegate understanding”.
Value comes before growth. The value a product provides is the only reason someone uses it.
Your value hypothesis
Why will people will want your new product? A value hypothesis tests if a product is valuable to potential customers.
a) Do consumers recognize they have a need you are trying to address?
b) Will they pay money for it?
c) Will they buy it from you?
d) Can you build it?
Your growth hypothesis
A growth hypothesis is an assumption on how users find your product. Whats your best guess for gaining customers and sales? Only focus on growth after you’ve nailed value. Never grow a product without value or you will destroy your brand.
Build Measure Feedback
The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere.
Start-ups should focus on management, process, and discipline – opposite to the conventional idea that start-ups should have a ‘just-do-it’ maxim.
We need to develop Build-Measure-Feedback loops. Our company should develop an MVP to test market hypotheses.
An MVP (minimum viable product) is a product that lacks some feature because it is developed quickly with minimum resource expended. With an MVP, your start-up can see customers reaction to the product. Test the riskiest assumption first.
Validating learning is critical
A startup is not a smaller version of a bigger company. Equally your startup does not exist not produce stuff, make money, or serve customers. We are learning how to build a sustainable business. Importantly this learning can be validated scientifically, by running experiments that allow us to test each element of our vision
Why you need validated learning?
Validated learning has powerful advantages over a traditional product release methods
-Time
The development process can be shortened significantly. Using validated learning, you can avoid developing unwanted features.
-Cost
A shorter development process means the cost of building version one of your product can be significantly lower.
-Better products
The process puts the focus on meaningful and actionable metrics, which leads to creating a better, more customer-oriented product.
-Agility
Validated learning facilitates agility. The foundation of the minimum viable product means you can develop more of flexibility to adapt to customer demands.
The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere.
Business models still matter
Beyond making stuff people want, another key lesson from the lean startup movement is that business models matter. This means testing our business model in the market before we scale. Our product prototypes can be used to test our assumptions about the costs of production, price points and potential routes to market.
The enterprise product development lifecycle
In todays fast changing world, larger businesses often discover that they aren’t good at changing. Change is essential to success — you need to keep up with customers, beat out competitors and dive into new markets.
Businesses must change how they change — they must enhance and rebalance their transformation capabilities to cope with uncertain environments.
Part of the problem is that big companies have historically changed in one ‘big bang’. This approach worked in the past, but required a future that is understood with certainty. This certainty does not exist in the digital world.
Mature companies that continue to waste their peoples talents with meaningless tasks are bound to lose those talents and will only be left with individuals that are too comfortable produce anything new or original.
Thomson Reuters embraces innovation
In 2013, Thomson Reuters made an announcement: “Our 100-year-old media corporation was no longer going to rely on growth through acquisition”. The Thomson Reuters Catalyst Fund funds 30 projects every year and supports them with lean startup coaching and best practices.
A panel comprised of the CEO and 5 senior managers come together once a month to listen to pitches and evaluate ideas presented. The benefit is: The employees get an audience with the CEO and an opportunity to raise their profile internally. The company gets to tap into its talent and turn the ideas generated into revenue opportunities.
So what are Thomson Reuters building? New products and new business lines. One example; take data available in one business unit and using it for another. Take the health care analytics data from Thomson Reuters IP and science business and use it to help investors in Thomson Reuters financial business. Historically the two business lines within the company were collecting the same data — and wasting time.
The company is moving from growth fueled by acquisitions to growth built on innovation.