The art of Lean Startup in driving customer choice

Lean Startup is the best practice methodology for ensuring you ‘don’t bet the house in an unproven idea’. But how do you do it and ensure the incremental value you’re creating will ultimately drive customer choice?

When sports teams and athletes compete, they compete to win. But when you look at a team or athlete in a vacuum it’s impossible to tell how good they are.

Take our favourite team, Team NZ who won the America’s Cup and then successfully defended it – again. They developed their 2017 boat in secret down in the Hauraki Gulf, thousands of miles away from all the other competing teams. When assessing the teams and boats prior to the 2017 Cup it was impossible to say who was going to win – the smart money was all with the Americans, the current holders of the Cup. It was only when the boats lined up against each other in a race that it became clear how good the NZ boat was. They totally destroyed the competition on just about every dimension – speed, control, manoeuvrability, tactics. But this wasn’t at all clear until the boats competed. And, although it seems obvious, it’s worth stating that it was the relative performance of the NZ boat when compared to their competition that enabled them to win.

The same holds true in business when launching a new product. Products get chosen by customers because they solve the customer’s problem better than the available alternatives – incremental value (the added value relative to the competition) is being delivered and the incremental value is directly helping the customer solve their problem.

Over the last few years, the product community has embraced Lean Startup methodology to improve the success rate of new product launches: an approach pioneered by Eric Ries in the United States. Lean Startup has changed the whole mindset and approach to product development with a big focus on getting “validated” learnings from customers by testing the assumptions about how the new product is going to create and capture value. But to test these assumptions, it’s pretty important to first define what they are.

This sounds crazy but, as with the Team NZ anecdote, it is critical to understand what particular elements or dimensions of the new product are the ones that are going to make it a “better” solution for the customer. Typically, much of the “value” that the new product will create is similar to that of other products that already exist in the market. This "value" is “me too” functionality that is necessary for the product to compete but is not what will drive customer preference - in the anecdote, the boat floats, it will fly on its foils and it has sails that the sailors can control. It is the new value relative to the existing products that has the potential to differentiate the new product and it is this new value that needs to be tested using Lean Startup experiments.

So our advice when embarking on Lean Startup for your new product idea is:

  • List all of the value that your new product will deliver to customers – what functional, emotional and social benefits it will provide.
  • Critically assess the “next best alternatives” that already exist in the market and list all of the benefits that these products already deliver to customers.
  • Identify the unique benefits that your new product will deliver that you hope your customers will recognise and value and hence will drive their buying decision.
  • Decide which of these benefits/value assumptions is the biggest leap of faith – the assumption that, if proven to be false, would mean that your new product idea is pretty much dead (there is no possible pivot).
  • Design a Lean Startup experiment that tests this assumption and only this assumption – it has to only test this particular element of your idea to see if it is actually going to be valued by your customers.
  • Capture the learnings and use these learnings to refine your idea and persevere with testing the other unique benefits/value assumptions until you have a validated product idea (or an idea that has proven to be worthless).

This part of Lean Startup methodology is often the most overlooked. Product managers want to get into running experiments before clearly defining what is new and different about the new product idea. Running experiments on the wrong things will lead to very confusing outcomes that may get you going round and round without any clear and conclusive learnings.

Give Chris a shout at chris@purpleshirt.co.nz if you want to chat about this stuff – this is what we get excited about so we’re all always up for a chat and a coffee.

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