I’ve been spending a lot of time reading Eric Ries lately. If you haven’t read The Lean Startup, you should get it and check it out. Working in early-stage consumer-facing products, this book is as close to a bible as I’ve ever read and it helped me reframe the way I think about business-building.
In product, when you apply development resources towards a course of action, it can take a while to see if your strategic decisions were correct. Any efforts you can apply up front to validate your hypothesis can help save time and resources. When it comes to new ideas, at K2 we tend to do this in a few ways before we even start the development process. I like to think of this as lean vetting:
- Have a bazillion conversations with everyone you know, in the market and out of it: I never really understood why entrepreneurs bother to keep their ideas under wraps. It’s one thing to be in stealth mode and not release your idea on the web for everyone to look at before it’s ready. It’s an entirely different situation to not tell anyone what you’re doing because you’re afraid of someone stealing it. Your current napkin idea is definitely wrong. Not in the sense that it won’t succeed, but if you are successful your final product will be entirely different from your paper idea. Speaking to people who understand the market is helpful for obvious reasons, but speaking to people who know nothing about the industry makes you zero in on the value proposition and simplify what you’re trying to do. At the end of the day, technology is an enabling layer – the value proposition is the business. You don’t have to write a single line of code to define a value proposition, so try doing more of it.
- Try selling it: This doesn’t work for every idea, but we’ve used variable ad copy and test landing pages to try out different value propositions and it’s given us interesting feedback. For a few hundred bucks this is a simple test to do. It may not net you any insights, but you may be shocked by what you find out. Use your CTR, reach and conversions as a data point in your decision making. Make sure to isolate your variables to ensure that you know what you’re testing. For enterprise, sell to your b2b customers before you build.
- Take your thinking to its logical conclusion: At the end of the day, most successful companies must exit. Understand the three or four publicly traded companies that you look something like, or that you would be accretive to, and think about what has to happen for you to get there. Again, you’re not going to get a ‘go / no go’ decision from this exercise, but this step is so valuable and too few entrepreneurs ever get past their first milestone goal of getting active users.
- Avoid fair fights: Everyone has a core set of assets: be it experience, a team, relationships, ability, understanding of a market, etc. Try to figure out which of your ideas you are better suited than 99% of people to execute on and why. Of note, building businesses that are completely dependent on big business development deals are super risky. If your competitive advantage is a distribution deal, you should heavily discount it.
- Don’t time the market: Market timing seems to have so much to do with success, but it’s also like the weather – impossible to control. Try not to build businesses because they are what everyone is investing in. When everyone tics, you should probably tac, or at least move in isolation to the market trends. So much can change so quickly and you cannot control macro forces. If you take any market timing into account, try to think about where your customers will be in three years and build for them, otherwise you’re wasting your energy.