Validate your business idea: THE LEAN STARTUP by Eric Ries

I recently read the book Lean Startup by author Eric Ries in 2004 Eric Ries was a chief technology officer of a Silicon Valley startup called IMVU I am V used 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 to 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 him 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 earn 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 swim Warren tested the assumption that customers were willing to buy shoes online instead of building a website and collecting a large inventory of shoes swim Warren 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 his shoes at full price then go to the post office and ship the shoes to the customer eventually swim Warren 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 you're confident about your idea but there is still one fundamental assumption that you haven't tested my target customers will 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 swim Warren 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 its marketing your product in collecting pre-orders before you have a finished product 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 I've included a link to a Kickstarter campaign for a card game called exploding kittens in the description below they raised eight million dollars off a basic video and description of their car 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 that was the core message at I gathered from Lean Startup Eric Ries has many more examples and details on how you can conduct an MVP test and innovate your way to success I highly recommend it if you would like a one-page PDF summary of insights that I gathered from this book just click the link below and I'd be happy to email it to you if you already subscribe to the free productivity game email newsletter this PDF is sitting in your Inbox thanks for watching and I hope you have a productive week

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Id: QaoVWtLX038

Length: 8min 48sec (528 seconds)

Published: Wed Apr 19 2017