Running Lean: Iterate from Plan A to a Plan That Works

no title has been provided for this book
Author: Ash Maurya
Publisher: O'Reilly Media
Published: 3/6/2012
We live in an age of unparalleled opportunity for innovation. We’re building more products than ever before, but most of them fail—not because we can’t complete what we set out to build, but because we waste time, money, and effort building the wrong product. What we need is a systematic process for quickly vetting product ideas and raising our odds of success. That’s the promise of Running Lean.

Key Points

There are risks when starting a startup.

Try to avoid product risk - Make sure you focus on finding the right product to launch that addresses a problem that people care about. Test the MVP with real customers.

Try to avoid customer risk - Work on finding the right customers. Figure out who your early adopters are and find them. Determine what channels you will use. Start with outbound channels like paid advertising and then move inbound to blogs and such.

Try to avoid market risk - Understand your competitors and cost and figure out the right pricing strategy. Test different prices with your customers to determine which price is best.

Friends would come to Riley about the latest business news. He was a frequent reader of the Wall Street Journal but found that the paper caters to older people. One friend suggested that he start his own news site. Riley wanted to identify his “unique value proposition”. He created a webpage where people could sign up for a newsletter with links to relevant business news. The newsletter was simple with no design just the links. Over 1000 people signed up and received a newsletter in the mail.

Riley needed to determine whether his idea had product-market fit. Riley started the iterative process. He started working on his news website. He asked for feedback at every stage. Early sales showed that he had a product/market fit. His website became viral because of word of mouth and started getting over 1 million visitors per month. Eventually, revenue came when sponsors came.

Your startup can be successful as Riley’s

When starting a startup, focus on a small group of customers at first. Facebook focused on Harvard students at the beginning. In the beginning, don’t go about planning the stages and steps of your startup because that will change. Start with a blank canvas and list the segments of the marketplace that you want to target.

Determine the problems that you’re trying to solve for your customers and how they are currently going about solving the problems now. Your Unique Value Proposition explains why people will buy your product and what makes it different and better than other products out there. Your Unique Value Proposition should attract early adopters. It should sell the outcome, not features. For example, Udemy’s UVP is “Learn on your schedule” instead of the features that it provides.

Next, identify the features that your solution will have. Determine the channels that you will use to obtain sales. What are the costs and revenue streams for your startup? What are the metrics that you will use to determine success? What is your unfair advantage? This is not feature that competitors can copy, but what deep understandings or hard to find skills that your team may have.

Now that you have a plan - What part of your plan has the most risk? Come up with different versions of your plan for each type of customer. Which customers can you reach most easily? Which ones are most likely to pay? What is the size of each customer segment? How does your solution fulfill their needs? Ask your mentors to help you analyze risk and how to handle this risk.

Work with an in-house team to obtain advice and run tests. Then iterate, building products or services based on learnings. You’ve determined the customers that are easy to target. Now your team can start going after them. Try to have a team with tech, design, marketing skills.

Talking to customers is key to making your startup a success. When you talk to them, tell them the problem. Don’t tell them a solution. Don’t ask them what they want. Instead, test and observe. Use LinkedIn, your inner circle, referrals to find people to interview. Use scripted interviews and interviews in pairs. Meet customers in person. Introduce your self, reasons for the interview, confirm their target group. Follow up with them later to see if they would refer more people. Talk to 30 to 60 people. Stop when there isn’t anything new to discover.

Try to understand the problem that you’re trying to solve. You can do that by having customers tell you what problems are important to them. They might be different than the problems you think you’re trying to solve. What problems are customers excited about? Also, keep refining your definition of what your target customer group should be.

Now that you’ve determined what problems you’re trying to solve, having solution interviews will help you determine what the solution looks like. Show a mockup or prototype to potential customers. Slides, pictures, and videos are good too. Use user feedback to iterate on the solution. Tell them your price and see how they react. Adjust your pricing strategy based on that reaction. Ask them what features they would like to see? Keep the MVP limited when it comes to the feature set. Only have features that are needed. Features should connect to the problems that customers are facing.

During “MVP interviews”, show your MVP to potential customers and convince them to pay. Run them through the landing pages to determine whether the experience satisfies the UVP. Do users get lost on your pricing page? After five interviews, iterate on the MVP but not too much. Once you’ve got 80% of your potential customers to pay, release your product to the public. Your MVP should solve the top issues that customers have. The goal is not to have nice to have features. Limit the features to a minimum.

Now you are ready to release your product to the public. Your initial goal isn’t to scale up. You want people to come to the site, test, and for you to learn from their experiences. Talk to your initial customers. Visit them and call them. Pay attention to what they do and what obstacle they find. Why do people drop off? A customer lifecycle is the journey customers take from arriving on the landing page to becoming a paid customer. Examining the lifecycle will help you determine where you’re losing your customers. Use analytics to determine where the problem areas are. If it’s not clear, another round of interviews will help clear things up.

Fix bugs and problems that users come across. When it comes to adding features, don’t add too many, but do keep track of the features customers want. Talk to customers and team members about the features they want. Mockup and test features before pushing them live and measuring results. Remember customers get distracted and exhausted if there are too many new features. However, if there are fixes to be made, prioritize and make them.

You’ve reached product-market fit when enough people want to buy the product. Is your customer retention rate at 40%? Do 40% of customers say they would be disappointed if you cancel your product? That’s product-market fit.

The Main-Takeaway

In his book, Ash Maurya shows us how to use Lean Methodology for building a successful startup. The proper way to build a startup is to come up with a problem that customers are actually trying to solve and find the best way to solve it by talking to customers every step of the way. Only through testing and iteration, can you make it.

About the Author

Ash Maurya is the author of Running Lean and the creator of the one-page business modeling tool Lean Canvas. His ideas have been featured in Forbes, Fortune, and Inc. He speaks to people around the world about lean methodology. He is on the advisory board of many startups and has also advised many successful companies.


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