Lean Startup

Jul 03 2013

Lean Startup for Nonprofits

Last October, I had the privilege to go back to Wesleyan University as a speaker. I gave a one-hour talk on how lean startup principles can be applied to nonprofits and social ventures. My talk was part of the inaugural speaker series of the Patricelli Center for Social Entrepreneurship.

Wesleyan has recently made the video publicly available, so I wanted to share it with anyone who is interested in the intersection between nonprofits and lean.

[iframe width=”560″ height=”315″ src=”//www.youtube.com/embed/bJphXf3j8JY” frameborder=”0″ allowfullscreen]

Thanks again to the PCSE for hosting me. It’s always nice to be asked to speak at my alma mater, and I look forward to coming back in the future.

Jun 14 2013

Opportunity Cost

Let me tell you two stories.

Bob and Misha are both entrepreneurs. They each have startups in the software-as-a-service (SaaS) space. Each started with the same initial investment of their own money. They started their companies at the same time. They both had trouble finding product/market fit, and they each spent 3 months iterating, trying to develop a service customers would pay for.

Bob was determined to persevere, and kept his burn rate low and his company running for 6 months on his initial investment before eventually running out of runway and failing to find product/market fit. He finally shut down the business and moved on to his next project.

Misha took a different approach. After the first 3 months, Misha hired a few people to help him with customer development. He paid higher advertising and staff costs, and he ran lots of experiments quickly. After just one month, Misha determined that there wasn’t actually a need for his product. He shut down his company, having spent nearly all of his initial funds, and was ready for the next challenge.

Which entrepreneur would you rather be?

Bob’s company floundered for nine months as he tried to find product market fit. Misha’s only lasted four months, and he ended up at the same place. In fact, by the time Bob’s company failed, Misha was 5 months into his next project.

When you’re thinking about the costs of running a startup, don’t forget to factor in the cost of your own time – and how you could be spending it.

Photo Credit: ToniVC via Compfight cc

May 30 2013

How to Pick a Customer Segment

Customer Service Desk — Photo Credit: nffcnnr

In a lean startup, we like to say that it is better to pick the customer you want to serve and figure out what problems they have than to come up with a solution and then figure out who needs it. Entrepreneurs following this advice often ask me how they should decide which customer to choose and whether they should worry about targeting something too narrow. Specificity is good. Picking a small segment (e.g., parents of grade school aged children in the Washington, DC area) so that you can get enough penetration to start seeing network effects is usually better than biting off a segment that is too large for you to have any real impact (e.g., parents). With regard to what segment to choose, there are a few different approaches:

market sizing,
customer development, and
passion.

I’m going to lay them out from most to least traditional, ending with my favorite method.

Market Sizing

This is your traditional business school approach. Find some research on the sizes of various markets, maybe take a look at which ones already have similar offerings floating around, and pick whichever market has the best combination of size and untapped potential. As a baseline, this is not a bad way to go, but I prefer focusing on either customer development or passion as a way to pick your market.

Customer Development

Form a hypothesis about which market has the biggest problem doing whatever you’re good at doing. For instance, if you’re offering an online service to help customer find places to buy widgets, ask yourself who has trouble finding information about local stores, catalogs, and places to shop. Then, before building anything, go talk to some customers in that segment and ask them about how they currently find the information that you hope to offer, and whether that method satisfies them. Don’t tell them about your solution; just see if they actually have a problem with their current solution. If they don’t, you’re going to have a hard time getting them to use your option. If your first hunch about a market doesn’t pan out, try a few more and see which one yields the most frustrated customers. Start with that market, because it will be easier to attract your early adopters if they are actively looking for a solution.

Passion

The third school of thought, and the one I most often favor, is a variant of following your passion. Let’s take as a given that, barring lottery-like success, you will be working hard on this startup for 5-10 years before you see real returns. If that’s the case, who do you want to spend that time with? Which customer segment is the one you want to spend 5-10 years talking to, learning about, and empathizing with? When you pick a customer whom you like, you’re much more likely to stick with the startup long enough to find the right formula. If, for example, you hate sculptors but love musicians, you probably already know who you want your customers to be.

This post was adapted from an answer I wrote to a user’s question on Quora.

Apr 14 2013

The Ideal Profile of an Early Adopter

When you’re doing customer development, you are specifically NOT trying to understand and satisfy all of your possible users, or the total addressable market. You can deal with the whole market after you get off the ground, but you’ll never get there unless you understand and satisfy (or better yet, thrill) your early adopters. You need to find the people with your problem who feel it so acutely that they are willing to try your imperfect solution, and to help you see where it needs to be improved. These early customers are worth their weight in gold once you find them. They will be your greatest source of insight into why the product isn’t working, the most supportive when it seems like you’ll never get it right, and your loudest evangelists when you finally nail it.

Portrait of an Early Adopter

To find people with the problem you’re solving, look for five simple criteria:

They have the problem,
They know they have the problem,
EITHER they are paying for a solution currently
OR they have hacked their own together,
AND they are still unsatisfied.

If you’re talking to people who don’t meet all of these criteria, they are probably not your early adopters. They might be future customers. They might think they’ll buy your product at some future point, but that point may never come. If they aren’t willing to buy until the product is perfect, you can’t afford to focus on building the product just for them. Keep looking until you find the people who need your solution so badly they will climb on board with you before you’ve finished building the boat.

Feb 22 2013

Interview with Elliot Susel: Tech Risk + Agile

An interview with Agile expert Elliot Susel about using agile to mitigate tech risk.

Full Transcript

Teague Hopkins: Welcome. I’m Teague Hopkins. Today I’m here with Elliot Susel, the senior project manager and primary Agile evangelist for Taxi Magic, an app that helps people book ground transportation. Elliot’s an expert on Agile has worked on it for five years at Accenture and now you’re at Taxi Magic. Is that right?

Elliot Susel: That’s right.

Teague: To start off, what is Agile for people who are not familiar with it?

Elliot: The core idea behind Agile is a series of practices that help you to develop software iteratively. That’s the core idea behind the Agile methodology.

Teague: For some of our entrepreneur listeners, how can Agile help ameliorate tech risk, this idea that we’ve talked about as the challenge of whether we can actually build the things that we’re trying to build?

Elliot: As you’re working toward a technical solution there’s a number of tools from the Agile methodology that you can use to help you work iteratively and to work your way toward a solution rather than having some grand vision and being unable to test that vision until you’ve got this final product and it may fall on its face. The idea is that by having value that you can deliver incrementally by using Agile processes and working iteratively you can test your assumptions as you move along and then also refine your ideas. As it relates to technology specifically, there’s a couple things that you can start to accelerate by working iteratively. The first is that not only are you able to improve the product, you’re also able to improve the team that’s working on the product. So, one of the core Agile practices is this idea of a retrospective where the team talks about what’s going well, what’s not going well, and specific actions that we can do to improve in the future.

Teague: I know that you’ve got a couple of retrospectives that you use on a regular basis. Can you explain what your favorite one is and how it works?

Elliot: Yeah. One of the favorite retrospectives that I’ve ever done was oriented towards gaming and I said, we can make this retrospective not just an exercise where we make some columns on a whiteboard and say here’s what we liked, and here’s what we didn’t like, but we could get really creative. So, we turned it into this game where you would draw on the whiteboard anything that would accelerate us, and you would draw on the whiteboard anything that would impede us, and we were represented as a ship in the ocean. We ended up with giant squid, and fire-breathing monsters, and anchors, and airplanes, and sails, and party cakes, and all kinds of representations, and

Teague: And that still helped you get towards the goal you were getting at?

Elliot: Each one was not just a fun thing to draw, but also had with it an association. I think that the giant squid had to do with our testing, and the team then had to figure out well how do we solve this issue of testing and then they also drew something in to deal with the giant squid which was a fun exercise.

Teague: Great.

Elliot: It kept it light-hearted and it got everyone really engaged.

Teague: Uh huh. (affirmative) It sounds like a lot of this idea of working on the technology in an iterative way sort of dovetails with a lot of the Lean startup methodologies. In your experience have you seen any byplay there?

Elliot: I would say yes and no. You can do Agile without being Lean, which is unfortunate, but I would say that there’s really three roles on an Agile team. One role is the product person, the product owner more formally, where their vision and their goal is to set the vision for the team and define what the team should be building. Now a product owner may or may not be working according to Lean principles and can march the team in a direction that may or may not be consistent with Lean. There’s the scrum master whose job it is to remove impediments and to help the team move as quickly as possible.

Teague: Uh huh. (affirmative)

Elliot: And, the team whose job is ultimately to be in the iteration.

Teague: Uh huh. (affirmative)

Elliot: And the more time they spend in the iteration and not on distractions, the better.

Teague: If you were talking to somebody who’s adopting Agile for the first time or trying to adopt Agile for the first time, what would be the most important piece of advice you can give them in terms of taking their first steps?

Elliot: Find a really good coach. Find the best possible practitioner that you can actually spend time with. And, to use the words of the scrum master and practitioner that I learned from, to spend time in their dojo.

Teague: Uh huh. (affirmative)

Elliot: A scrum master really is creating an environment and it’s not just this series of practices; although the practices are important, but it’s an organizational mindset where yes the team can build incrementally and that’s lovely and that mitigates your tech risk. But, also, it helps if the product team is also thinking incrementally and how can we test our assumptions incrementally, and how can we incrementally work toward our solution in the best possible way?

Teague: Excellent. Well, thanks, Elliot, for joining us today. You can find out more about Agile, and Elliot, and Taxi Magic at Elliot’s website at www.elliotsusel.com. Thanks for listening.

This interview originally appeared in The Three Biggest Risks to Your Startup.