Check your idea

November 14th, 2016 by Patricia Jehle Leave a reply »

 

Scaling Lean

amleancanvas

 

A week ago I had the opportunity to go hear Ash Mauyra (AM) speak on scaling businesses and trying out new business ideas. I have had a week to digest his talk and have read some of his new book, Scaling Lean, so I have some questions for you if you are working on new – or old – business ideas, especially with respect to marketing and getting those customers. Much of this blog is based on his talk and on the book. The quotes are from his book.

 

Who are your key customers and which of their problems do you plan to solve? Are those problems painful enough for them to want them solved? What are they already spending on that pain?

 

That pain is your gold mine, but you have to remember that for your potential customer to spend on your solution they have to give up something else, and the question is not whether your solution is better than that of the competitive solutions, but that the customer thinks it’s a better solution. Thus, you have to love (and live) that pain more than your solution. With that your solution can get tested on customer validation.

 

What is your MVP?

By that I don’t mean most valuable player, but the minimum viable product, in other words, what is your lowest amount of sales your company can live with in a period of time.

 

How are you creating your marketing experiments?

How can you shorten your feedback loop to find out where your customers are buying and most importantly, why? Are you looking at the correct numbers to keep those customers coming? Do not fixate on a fictitious/unrealistic business plan – remember that according to AM, “traditional measures of progress are unhelpful” because in start-ups:

 

  1. “Because revenue is near zero during the early stages, we settle for building velocity as a measure of progress. But measuring progress as execution of untested plan is no better.

 

  1. Investing heavily in quantitative metrics doesn’t automatically give you solutions. Metrics can only tell you what’s going wrong, not why. The more you invest in quantitative metrics, the more you end up drowning in a seat of non-actionable data.

 

  1. Even when you are generating revenue, unless you can connect cause and effect, you can’t leverage the elements that are bring you success, and you can easily be led down the wrong path.”

 

The AM Solution: GOLEAN: Goal, Observe and Orient, Learn-Leverage-Lift, Experiment, Analyze and , Next Actions

 

Think and act like a scientist- they do not run experiments, but create models (and check them with experiments). The key idea is that there needs to be one single measure of progress for all people involved, for the entrepreneurs and business leaders and the stakeholders, and that is GOLEAN.

 

The model has three parts: Defining progress (set your Goal), prioritizing waste (Observe and Orient) , and achieving breakthrough (Learn-Leverage-Lift, Experiment, Analyze, and Next steps) .

 

 

But remember, “No methodology can guarantee success. But a good methodology can provide a feedback loop for continual improvement and learning.”

 

Part of the solution is lies in trying to avoid our “innovator’s bias”, the bias that knows our idea is the best. Your potential customer and your investors may not believe that, and more importantly, they don’t necessarily care about your solution. They have a different perspective, which is usually for the customer found in their problem(s).

 

What your potential investors want to know is what the market opportunity is (how big is the market). They want to know how you will generate revenue and what your margins are. Finally, they will want to know how you will keep your competitive edge. Are you a blue ocean kind of idea? Do you have patent(s) pending? Is there a secret sauce that can’t be easily discovered?

 

So, what is your metric for indicating reliable (and not fake or vanity) measurement? How do you create, deliver and capture value? What is your unique value proposition (value creation)? What is your cost structure (value delivery)? And, what are your revenue streams (where you capture your value for the company)?

 

And the (AM) value creation formula looks like this:

 

Created Value > Captured Value > = Cost (Value Delivery)

 

In the end, the issue is generating revenues and as Ash Maurya says, “There is no business in your business model without revenue.” The idea is to maximize the difference between the value captured and the cost of delivering the value (your margins). But even not-for-profits have a need for revenue, although their model aims to keep the difference between those two (cost and value) as close to zero as possible.

 

Final questions

 

What is your product value? What does it cost you to deliver this value? How much do you receive for that delivery and does it reach your MVP goals?

 

Maybe I will blog next about traction and how you get customers, but for today, this is enough.

 

Have a very successful week!

 

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