February 16, 2011 –
Cooper (left) and Vlaskovits shared the lean startup philosophy.
Lean is an oft-repeated buzzword and a desired result in cuisine, muscle mass and manufacturing. It’s also a key concept in the evolving startup environment, as would-be entrepreneurs learned at this month’s TechPortal Entrepreneurs Series from business development specialists Brant Cooper and Patrick Vlaskovits.
The authors of “The Entrepreneur’s Guide to Customer Development” told audience members that that the startup environment is changing dramatically. Lower costs, easier access to funding, social media marketing and improved savvy have led to a new paradigm. “There is money flowing to startups like never before. This is a global phenomenon,” Cooper said.
The lean startup philosophy increases a company’s chance of success. The approach focuses on developing products and customers simultaneously, using feedback gleaned from customers to continually refine the startup’s offerings. “The vast majority of failures were not because a company couldn’t build a product; it’s because they had no market,” said Cooper.
In addition, most successful startups abandoned their initial plans and “pivoted” in a new direction after learning through experience what would and would not succeed in the market.
The lean startup utilizes an integrated approach. Its basic tenet: maximize the number of changes required to your product or service with the smallest investment possible.
“Your business model will change and you have a limited amount of money. You have to find out what works before you run out of money,” Cooper stated.
The best way to achieve this goal is to build a small amount of product and present it to potential customers, continually making refinements based on their reactions. “Don’t build something for 2-3 years in a cave and then present it to the customer and wonder why you didn’t get traction. You have to integrate the product development with the customer development. It’s a continuous loop.”
“Get out of the building,” added Vlaskovits. “Interact, validate, figure out your clients’ reality before you build to scale.”
The pair doesn’t advocate a specific step-by-step approach or rigid methodology. They simply advise entrepreneurs to constantly question their assumptions, frequently interact with their potential customers and continue to iterate through learning – making changes to their products based on what the market tells them.
When it comes to market assessments, it’s important to know the difference between “top-down” and “bottom-up” approaches. Top-down assessments rely on numbers gathered by large market research firms and can be misleading. “Use those numbers wisely,” Cooper said.
By contrast, the bottom-up approach is more realistic and informative. It leverages the cost of the average transaction, the number of customers in the market and the number of potential annual transactions, allowing the entrepreneur to better understand where his/her product needs refining.
“You can build the best mousetrap ever, but if no one wants to buy it, you’ve failed,” Vlaskovits said. “Again, get out of the building and validate your core assumptions.”
— Anna Lynn Spitzer
