Make sure your new start-up fails better to succeed sooner

“ Make something that people want.” Y Combinator motto

Figure 1: Evan Kirby - Unsplash

It seems obvious, right?

The traditional way to launch a product is to have an idea, develop a business plan, get approval and funding, and execute on the plan.  You spend hours, weeks, months perfecting your product before take-off, where you unveil it to the customer for the first time.

But just because you have a working solution, doesn’t mean customers want to use or buy it.

This is a huge risk and can sink any business. Is there a way to determine, before you invest time and money, if people are actually interested?

We’ve spent the last few years helping start-ups and established businesses reduce the risk of building something people don’t want. Our framework is based on a combination of the

• Scientific Method (process of experimentation to answer questions in Science)
• First Principles Reasoning (the fundamental concepts or assumptions on which a theory, system, or method is based)
• Lean Start-up Methodology (business-hypothesis-driven experimentation, iterative product releases, and validated learning)
• Design Thinking (creative customer-focused problem -solving process)

The brilliance is that you try and ‘break’ your idea as quickly and as cheaply possible, and if it survives, you might be on to something.

As entrepreneurs, we must answer the following two questions:

• Should the solution be built?
• How can the odds of success be increased?

We make assumptions based on our environment and biases about what we think people need. Your job as a potential entrepreneur is to test these assumptions by constantly iterating through the following steps:

1. Problem: What problem are you solving?
2. Immersion: Understanding your customer - research
3. Hypothesising: Identifying your assumptions about the business idea
4. Experimentation: Test your assumptions and business idea
5. Measure and Learn: Quantify outcomes. What did you learn?

Here is how you will do this:

1.     Problem Statement

 What problem do you want to solve? Before you start anything, sit down and draw up a problem statement.  

2.     Immersion: Understand your Customer

You must make sure that the problem you solve is real. You do this by immersing yourself in your customer’s world, you want to become customer centric, to get to know them deeply. Initially, when you speak to potential customers, you’re not allowed to mention your solution because you might influence their response. If you’re too set on the solution, you could end up reverse-engineering the problem and it might not be a real problem.

You must gain empathy into your customer’s world by:

• Connecting and spending time with potential customers and step into their shoes
• Observing how potential customers are currently solving the problem without your solution available to them
• Interviewing customers and find out what stresses them out, what frustrates them and what’s inefficient in their world

Update your problem statement after the research.

3.     Hypothesising: Identify Assumptions

The most common assumptions entrepreneurs make in the early stage of their start-up are:

• Customer: Customers will use or buy this solution 
• Solution: The solution will work technically
• Business Model: The business will make money and be able to deliver to the customer

Your next step is to identify one to three assumptions, which describe the riskiest assumptions you make about your solution. These assumptions are guesses, and become your value hypothesis, which will be tested through experiments. 

You are becoming a scientist.

4.     Experimentation

The Lean Methodology is based on a scientific method. It encourages entrepreneurs to continuously try new assumptions after one is rejected. You’re allowed to get the assumption wrong, as long as you are learning from it.

Figure 2: Andrew Jay - Unsplash

Next you set up little experiments to test each assumption. These experiments will look different for each business and at each stage of the business’ development. In the early stage of testing your idea, these experiments come in many forms:

• Observing customers to gain empathy and insights into their lives
• Basic advertisement (or landing page) to see if potential customers react (click on it, call you etc)
• Presentation slideshow or mock brochure to share the concept
• A storyboard or video that illustrates what you offer.
• Dummy prototype, front-end works (to test the users reaction), and the back-end is done manually

Learn to test your ideas quickly and move on if it doesn’t work.

5.     Measure and Learn

Next you measure the feedback from the experiments you set up. How does what happened compare with your assumption?

• Is there sufficient interest in your idea to continue developing it?
• Does the data show that you'll be able to build a sustainable business around your product or service?

From the insights you have gathered, there are three ways forward:

• Iterate: You’re making small changes to your solution, based on the feedback you received.
• Pivot: Your assumptions were incorrect, and you must change your solution.
• Persevere: You proved the hypothesis correct and you continue with the solution

This framework is about spending minimal time, effort and resources (money) in the early stages, so that when the idea isn’t wanted by the customer, you can move on to another potential solution.

In a scientist’s mind, failure is just one way that doesn’t work.

By continually experimenting with your assumptions, you fail better, and succeed sooner.