Based in part on the book: The Lean Startup by Eric Ries.
What is the most important indicator of the potential future success of a new business venture? Some may say it is the quality of the idea behind the business. Others may be swayed by the presentation of the Business Plan, complete with stunning graphics, elaborate financial projections, and rock star backers. Or it could be a highly developed marketing team backed by media advertising on a national basis.
But in each of the above, there is one indicator which is the most important of all, and it is not included in any of them. That is a customer who has seen the product, liked it, and wants to buy it when it is available. The reason why the customer is so important is that there is no business without a customer. You might ask why the customer isn’t at the center of every business plan. The answer to that question lies in the framework of thinking based upon the old theory, ‘build it and they will come’. Remember that one from ‘The Field of Dreams’?
A much better approach is ‘build an initial design’ (sometimes called the MVP, which stands for minimum viable product) and experiment with customer reaction and then re build, revise, innovate, and keep doing so until you reach the point where the potential customer is absolutely thrilled with excitement about the product. And that comes from trial and error, continuous innovation, not in some far off secluded laboratory, but right in front of the customer, and listening to what you hear, then acting upon it.
This is the basic concept behind the Lean Startup methodology as developed by Eric Ries and elaborated upon in his book, ‘The Lean Startup’.
So here are some of the hallmarks of this new thinking:
1. EVERY ACTIVITY MUST ADD VALUE TO THE CUSTOMER
Point 1 addresses an important aspect of business organizing and staffing. What jobs need to be done and who do we need to do them? Rather than thinking in terms of organization charts, head count, and reporting relationships, we should think in terms of what the customer needs and how it can be provided, in what manner, schedule, and timing, and who will do it. In this way the company remains laser focused on successfully engaging, developing and maintaining its most important asset: The customer.
2. THE BUSINESS PLAN IS AN EVOLVING DOCUMENT
Point 2 addresses a key aspect in planning, which is that plans rarely end up the way they start. Plans are or at least should be revised according to experience, which is the same idea about products as explained above. And of course as products change, so too do plans. Plans should not be considered as final until the customer has signed off on them be expressing keen interest and not only willingness but desire to buy the product. No product is perfect from day one in its development. And the more you respond to customer’s ideas and even complaints by reworking the product to more nearly meet the expressed (or even the unexpressed needs) of the customer, the more likely it is that the product and your company will be successful.
3. PIVOT OR PERSEVERE, THAT IS THE QUESTION
Point 3 is taken directly from Eric Ries, The Lean Startup to signal that there may be a time when it becomes clear that you cannot develop a product that meets the needs of the customer, and that it is time to pivot in a new direction rather than persevere in the original direction. The problem is the potential for the entrepreneur to be so committed to a single idea that is simply not viable and must be dropped in favor of a new idea that is viable and can be tested, refined and made market ready. The best indicator of when you have reached this inflection point, go or no go is when you see no progress despite numerous attempts to validate the product and an unwillingness or disinterest on the part of the customer to assess the changing features of the product being made. Then it is indeed pivot time.
4. ENTREPRENEURS ARE EVERYWHERE
Point 4 is part of a general theory of current management thinking that seeks to engage the full complement of organizational talent in search of customer satisfaction through entrepreneurial effort. No one has a monopoly on good ideas, and the more widely we cast the net seeking information and collaboration, the more likely we are to find new ideas and solutions to long standing problems. This does not mean that entrepreneurs automatically come up with brand new thinking and solutions never thought of previously. There does need to be an organizational culture that values company wide participation in the satisfaction of customers through constant product improvement, and only then will those entrepreneurs in waiting rise to the occasion.
Before finalizing a well designed Business Plan, and seeking funding for your new venture, seek credibility in the marketplace by working directly with customers to provide them with what they want, when and how they want it and of course, at a profit to the firm.