Did you know most startups fail to take off due to high risk business decisions (startup risk)? Well, we do! And here’s what we have to say about it!
Instead of detailing the specifics of your product from the get-go, why not run it on a lean loop? The build-measure-learn model will help you learn if what you did was right or not, at the blink of an eye.
No more long waits for the results to come in. And it’s more cost effective, too! So, why wait and compound your risk? Try it out and you’ll feel all the better!
How risky is your business?
An excellent question, indeed! Well, it depends on various things. And it depends on what kind of business you’re running. But, to name a few, here are some factors that greatly affect your risk levels:
- How good your team is. A complete skill-set (for your stage, at any given time) and great communication does most of the work for you.
- The type of your market. Is it a new market, an existing market, or some market you’re trying to re-segment?
- The level of disruption. Is your business highly disruptive in how you solve problems? Is it in how you develop your product? Or is it your pricing model?
- Your time window. Do you have to achieve mainstream status in a few months to a couple of years? Is there a reason for that, be it economical, political, contractual or so?
- The timing. Is the available technology all you need right now? Do people know they have the problem you’re solving? What’s more, is the market ready for you?
- Your reality. How stable is political, social and economical status in the country where your target market resides.
So, your business may be slightly risky, or all the way to extremely risky. But don’t get discouraged. There are ways to mitigate that startup risk, no matter how great.
Why you should keep an eye on startup risk mitigation
During customer development and while building a business around your product, you will come up against numerous opportunities to perform reality checks. You should take these opportunities and you should use them to your benefit. Failing at any stage of customer and business development, may mislead you or, even worse, keep you in the dark about where you’re standing, indefinitely.
Instead of succeeding in reaching a zombie state, try to keep your company alive by adjusting to change, compensating for any unwanted deviation. Keep your team’s spirit high, while running a tight ship. Don’t let the ship veer off-course; not if this isn’t intentional.
Mitigating your risk of failure will buy you time to improve and optimize your processes, build your sales engine, grow your team and learn how to support your customers best; Even recover from failure, during a considerably business-altering pivot.
Going with Lean Methodology for better results
Startup risk mitigation is an ongoing process that requires constant attention and some very hard decisions. And doing it the Lean way, ensures you don’t waste any time putting in the effort to do things that don’t matter to your audience.
Starting with a few healthy assumptions, you build something small, you test it, talk to people and learn all you can before carrying on with your build. The sooner you’ve learnt what matters and what doesn’t, the better. You get better psychology for your team; and less of your budget withering away to oblivion. You get to find out where there’s room for improvement and you have more time left to act on more opportunities that might lead you to success.
Lean Methodology for longer runways
Oh, yes? Lean Methodology can do that for you; with the Build – Measure – Learn model. It’s easy to grasp, but a bit harder to implement. And you do have to keep your eyes peeled for changes, in your market and your current reality, which might affect your business.
How does it work?
Many people in the business world are advocates of the Pareto Principle. It can help you understand that only about 20% of your efforts will yield around 80% of your results; which is more than enough to make or break your company.
By that token, starting with a few assumptions that you work on validating as soon as you can, will give you the best chance at obtaining a viable direction for your product. Working on a version of it, which will barely sufficiently solve your customers’ problems, will provide you with the required validation for your development backlog and your roadmap, in general. And talking to people up front, will help you better understand them (almost entirely), early on in the process.
That way, you can create better communication and distribution channels and you will be able to get started on developing a viable sales cycle that will keep people coming back. And, as a bonus, you will have the chance to get started on your pre-sales and after-sales support processes, improving on them and fine-tuning them along the way, for optimal results. How’s that for startup risk mitigation?
The Build – Measure – Learn model and how to use it
Let’s try to explain the Build – Measure – Learn model, using an example of sorts. Suppose you’re developing a platform for a somewhat vertical market. It could be doctors, lawyers, government officials, truck drivers, restaurant owners, or whatever audience you might need. Chances are, your specific audience (or your first audience), will suffer from problems that are entirely different from what everyone else is facing. You have an idea of what those problems might be, but you can only validate or invalidate your assumptions by talking to these people.
You can use the Build – Measure – Learn model to develop an incrementally better understanding of what direction you need to take, what to make, how to make it better and how to create value for your customers in a way that makes sense for the better part of your market.
What have we found?
You should avoid development on a mere concept
Suppose you were a doctor, a lawyer or a trucker in the past. Despite the fact you can already understand your audience relatively well, consider that:
- A problem you had and wished you could solve, does not mean it’s everyone else’s problem
- Likewise, if you used to solve a problem a certain way, it doesn’t mean this is a universally acceptable way to solve it
- Even if you have a proof of concept, it doesn’t mean the world is ready for it or cares for it
You shouldn’t worry about anyone stealing your idea
Many teams will keep their idea for a product to themselves, in fear of someone stealing their idea. Well, we don’t think you should worry too much about any amount of ideas. Besides, ideas usually come for a dollar a pound; and there’s a reason for it.
For someone to successfully steal your idea, they have to be able to actually develop the product. This means, they should have the time, money and willpower to get started on such an endeavor. They’d have to have the required skill-set and the appropriate team available and standing by to come into the picture. And they’d have to have access to a relevant network of experts, influencers, partners and supporters, for your idea to make sense to them, business-wise. So, it’s fairly safe to say, there is not reason enough to focus your startup risk mitigation efforts on that notion.
Obstacles are good
It is conceivable that you yourselves may initially have neither the appropriate team available, nor access to a relevant network of experts, influencers, partners and supporters. You may not even have the money to fund the entire endeavor. Well, it doesn’t matter that much, either. Let’s see why.
As you try to find your way to your audience, sifting through the noise, you’ll most probably come up against a few obstacles.
- What is the most important problem my customers are facing? How can I get them to tell me?
- Is it the same problem for all customers? How do I find out?
- How are they currently solving it? Is it a workaround? Is it a good solution? Can I make it better?
- How can I solve it better? How can I do it more efficiently than my competition? And how can I do it more affordably?
- And then, how can I get people to buy from me instead of the competition? How do I create a brand for myself and how do I leverage brand awareness to my advantage?
- Most importantly, how do I get to do all these in time and on budget with the small team I have?
Obstacles mean progress in mitigating startup risk
All these questions are valid. However, try to not look at them as obstacles, but as progress. You can always create the most simple thing you can, and try to answer one of them. Be it a product feature, a landing page, a brief presentation, an explanatory animation, or a revised mission statement, you can always get some answers out of it. But keep in mind that a result won’t only be useful if something you tried worked. After all, the most useful knowledge comes from things you tried and didn’t work.
Of course, learning from other people’s mistakes is the greatest benefit you could have in speeding things up. But, since you won’t always be able to have access to that, creating your own reality is the next best thing. And, of course, that’s probably taking you one step closer towards mitigating your startup risk.
Connecting Lean Methodology to Business Value
As you develop your product, learning from what worked and what didn’t and why, you will inevitably get a better understanding of how your audience thinks, how they react to different situations and what they find valuable. You will be able to use this knowledge to improve your processes and, especially, your sales cycle.
A question you should ask yourself at every step is this:
“How valuable will my customers find this?”
To help you understand the essence of this question, here’s a tip:
If you’re getting strong signals that customers will find a specific feature (or offering) of a value ten-fold of what they paid for, you’re on the right track.
The perceived value
Now, don’t go thinking you’re maybe charging too low. That value your customers perceived as 10 times what they paid for may be the reason why they keep coming back or why they keep referring new people to you.
Don’t waste this knowledge. This may be your brand asset; the actual reason why most of your customers prefer you over competitors.
Now that you know what your customers find valuable, try and prioritize your backlog accordingly, so that you create what makes sense to them first and what you think is needed, last. This process might affect your road-map, as well. But this is actually a good thing; it will make you better at what you do. And this means happier customers!
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If you’re going with the Lean Methodology to build a business around your product, there is no one thing to do next. You’ll be receiving all kinds of useful information to help you improve your processes and mindset. That said, we’re sure you have many more questions that need to be answered. They might be crude or basic, or they might be refined and crystal clear. We’ve included a short list of useful articles for you, right below:
- What’s a startup nowadays?
- Habit forming products
- Tenfold value perceived
- Prioritization and Cost of delay
- Opportunity cost and market type
In any case, keep it up! You’re one step closer to success, every day. And, hopefully, with a lower startup risk than ever!