Lean Startup By ERIC REIS
In 2004, Eric Ries was a chief technology officer of a Silicon Valley startup called IMVU. IMVU’s vision was to create a new online product that would allow users to build 3D avatars and interact with friends using their existing instant messaging networks. Their product would combine two popular trends at the time: 3d gaming and instant messaging.
With complete confidence in their new business product, they got to work putting in crazy hours to bring their idea to life. After six months, Eric and his team had incorporated all the major instant messaging services like AOL and MSN Messenger into the product and it was finally ready to be released.
On launch day they eagerly awaited the thousands of people they thought would download their product but there was one problem: no one was willing to download it. In an act of desperation they invited target customers into their office and asked them questions. As they interacted with the product it became obvious after a few interviews that their base assumptions about what the customers actually wanted were completely wrong.
It turns out that people didn’t want to use existing instant messaging networks to invite their friends because they didn’t know if the product was cool or not. However, people were willing to install a new instant messaging service that would allow them to talk with strangers using their 3D avatar. That meant Eric’s work trying to integrate existing messaging services into the platform was a complete waste of time.
Eric was frustrated, having wasted nearly six months of work building something nobody wanted, but he was thankful for having learned what his customers actually wanted before the company ran out of money. However, Eric couldn’t help but wonder; did he really have to waste months of work to learn what his customers actually wanted?
He quickly realized the answer was: No! Of course not! Eric could have simply integrated one instant messaging add-on service and shown it to a handful of customers and learnt that no one wanted to use it.
Eric took a step back and saw that his approach to building an innovative product was fundamentally wrong. His focus shouldn’t have been on executing the perfect plan. His focus should have been learning which of his efforts were valuable to the end-user in the least amount of time instead of relying on past experience, intuition or focus groups to determine if what he was doing was valuable. He should have been deploying minimum viable products.
A minimum viable product or MVP for short is a product made with a minimal amount of effort that is used to test specific assumptions regarding the value of an idea.
The story of how Zappos, the online shoe company got started is a great example of how to conduct an MVP test. Before Zappos became a billion-dollar online shoe company, founder Nick Swinmurn tested the assumption that customers were willing to buy shoes online. Instead of building a website and collecting a large inventory of shoes, Swinmurn approached local shoe stores, took pictures of their inventory, posted the pictures on a simple website and then when a customer clicked on the Buy button under the image of a shoe, he’d go back to the store, purchase the shoes at full price then go to the post office and ship the shoes to the customer.
Eventually, Swinmurn was unable to keep up with the number of online shoe orders and at that point he knew his online shoe company was a good idea. Once he validated his idea he could be confident spending time and money hiring a team and collecting an inventory of shoes.
If you have an innovative business idea or you’ve been asked to work on an innovative project at work here are the steps that you can take to validate your idea without wasting a bunch of time and effort building something that nobody wants.
First, write out your vision for the user experience you wish to create after your business product or work project is complete.
Let’s say you have an idea for an innovative new board game that combines two popular board games, monopoly and risk. This game allows you to go around a board and collect properties while at the same time building up an army to take out your opponents. The first step in developing this product would be coming up with a brief step-by-step description of how the game is played, from the initial set up to the end of a single game.
After coming up with a high-level plan for your product, you need to step back look at your plan and identify any assumptions you’ve made that if wrong would result in a large amount of waste of time and effort. So let’s say that you’ve told your friends about your board game idea and they absolutely love it, they tell you that they’ll definitely buy your board game when you complete it.
At this point, you may be tempted to just go ahead and spend hundreds of hours making the board game. Although you’re confident about your idea but there is still one fundamental assumption that you haven’t tested ‘Will my target customers actually buy the product?”
It’s critical to remember that validation comes from measuring the behavior of your target audience not gathering opinions of the general public. People can tell you that they will buy your product all day long but that story often changes when it comes time for them to bring out their wallets.
The third step is determining how you can build an early version of your product to validate a critical assumption. The two most common ways to do this is build a concierge MVP or a smokescreen MVP. The concierge MVP is what Zappos did. Instead of trying to bring the vision of an online shoe company to life by buying a warehouse and automating a system of delivery, Zappos founder Nick Swinmurn started with a manual and labor-intensive process that was quick and cheap to set up. It was just enough to test his assumption and validate his business idea.
The smokescreen MVP is about creating a front; an illusion that you have a great product without actually building out the product. It’s marketing your product. In collecting pre-orders before you have a finished product e.g. for your board game. This could involve making a two minute animated video that walks people through how your board game works and why they should buy it. It’s like creating a Kickstarter campaign that crowd funds your idea before you spend major time and money building your idea.
A company launched a Kickstarter campaign for a card game called ‘exploding kittens’ they raised eight million dollars off a basic video and description of their card game before they actually got to work building the card game. The power of the concierge test that Zappos did and the smokescreen tests that exploding kittens did is that they built something in order to measure actual customer behavior by getting target customers to pull out their credit cards and make orders. This is infinitely more effective than sending out surveys and gathering opinions or simply trusting your gut and going off experience.
In the fourth step, it’s time to show your MVP to a small segment of target customers and then measure their behavior. At this point in the board game example you might buy a few ads on Facebook and target a small group of avid board game players. The ad would include the name of your game, catchy subtitle and a link to your animated video with the option to preorder your board game. After releasing your ad, you could measure the amount of clicks your ad gets versus a typical Facebook ad or the average time people are watching your video and the number of pre-orders you receive.
After allowing some time to observe these behaviors, you go into the last step, deciding to pivot or persevere. If your ad gets a lot of clicks and most people are watching your entire video but you don’t get a lot of pre-orders, it might be worthwhile to spend a bit more time tweaking the design of your board game. However, if after a few iterations and a few tweaks you still don’t get more than two or three pre-orders for every hundred clicks; it might be worthwhile to pivot to another board game strategy or an entirely different business idea.
Eric Ries says, “The sign of a successful pivot is that these engine tuning activities, these tweaks are more productive after the pivot than before.”
When Eric and his team at IMVU started using these steps to test and validate their products, they started rapidly acquiring new customers. Seven years later IMVU would become a 50 million dollar business.
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