Focus on Needs

• I come across many startups that are struggling to answer the following questions:
• Which customer opinions should we listen to, if any? How should we prioritize across the many features we could build? Which features are essential to the product’s success and which are ancillary? What can be changed safely, and what might anger customers? What might please today’s customers at the expense of tomorrow’s? What should we work on next?
• If the plan is to see what happens, a team is guaranteed to succeed at seeing what happens but won’t necessarily gain validated learning.
• This is one of the most important lessons of the scientific method: if you cannot fail, you cannot learn.

From Alchemy to Science

A true experiment follows the scientific method. It begins with a clear hypothesis that makes predictions about what is supposed to happen. It then tests those predictions empirically.

• Think Big, Start Small
• Zappos is the world’s largest online shoe store, with annual gross sales in excess of $ 1 billion.Founder Nick Swinmurn was frustrated because there was no central online site with a great selection of shoes. He envisioned a new and superior retail experience.To test it, he began by asking local shoe stores if he could take pictures of their inventory. In exchange for permission to take the pictures, he would post the pictures online and come back to buy the shoes at full price if a customer bought them online.Zappos had to interact with customers: taking payment, handling returns, and dealing with customer support. This is decidedly different from market research.By building a product instead, albeit a simple one, the company learned much more:It had more accurate data about customer demand because it was observing real customer behavior, not asking hypothetical questions.It put itself in a position to interact with real customers and learn about their needs.It allowed itself to be surprised when customers behaved in unexpected ways, revealing information Zappos might not have known to ask about.Zappos’ initial experiment provided a clear, quantifiable outcome: either a sufficient number of customers would buy the shoes or they would not.
• For Long-Term Change, Experiment Immediately
• Caroline Barlerin is a director in the global social innovation division at Hewlett-Packard (HP).Corporate guidelines encourage every employee to spend up to four hours a month of company time volunteering in his or her community.That volunteer work could take the form of any philanthropic effort: painting fences, building houses, or even using pro bono or work -based skills outside the company. Encouraging the latter type of volunteering was Caroline’s priority.Caroline’s project faces extreme uncertainty: there had never been a volunteer campaign of this magnitude at HP before.Here’s what it might look like if Caroline were to treat her project as an experiment:
• The first step would be to break down the grand vision into its component parts. The two most important assumptions entrepreneurs make are what I call the value hypothesis and the growth hypothesis.The value hypothesis tests whether a product or service really delivers value to customers once they are using it. What’s a good indicator that employees find donating their time valuable? What could we see in real time that would serve as a proxy for the value participants were gaining from volunteering? How many of them sign up to volunteer again?For the growth hypothesis, which tests how new customers will discover a product or service, we can do a similar analysis. Once the program is up and running, how will it spread among the employees, from initial early adopters to mass adoption throughout the company? Would the early participants actively spread the word to other employees?The point is not to find the average customer but to find early adopters: the customers who feel the need for the product most acutely. Those customers tend to be more forgiving of mistakes and are especially eager to give feedback.Next, using a technique I call the concierge minimum viable product (described in detail in Chapter 6 ), Caroline could make sure the first few participants had an experience that was as good as she could make it, completely aligned with her vision.If the numbers from such early experiments don’t look promising, there is clearly a problem with the strategy. It means it’s time to get some immediate qualitative feedback about how to improve the program.Experimentation has an advantage over traditional market research. We don’t have to commission a survey or find new people to interview.Also, it can happen in parallel with strategic planning while the plan is still being formulated. Even when experiments produce a negative result, those failures prove instructive and can influence the strategy.

An Experiment is a Product

• In the Lean Startup model, an experiment is more than just a theoretical inquiry; it is also a first product.
• By the time that product is ready to be distributed widely, it will already have established customers. It will have solved real problems and offer detailed specifications for what needs to be built.
• Instead of just rushing a product, I try to push my team to first answer four questions:
• Do consumers recognize that they have the problem you are trying to solve? If there was a solution, would they buy it? Would they buy it from us? Can we build a solution for that problem?”
• Success is not delivering a feature; success is learning how to solve the customer’s problem.

The Village Laundry Service

• In India, due to the cost of a washing machine, less than seven percent of the population have one in their homes.