Humans Cannot Predict the Future.

Posted by on Aug 20, 2013 in Business, Enterprise, Lean Startup | 0 comments

We would all love to be able to predict which ideas are going to be the big ones.  You just got done with an incredibly powerful brainstorming session and you look over to see one of your senior leaders with a scowl on his/her face.  They are annoyed because they don’t feel like there are any “big” ideas the team came up with.   The problem with this perspective is that, at from this early vantage point,  it is impossible to predict which ideas will be big and which ones will be flops.

image0You have no idea which idea will work best until you are able to get the ideas in front of real customers and begin running behavioral experiments to see what sticks for them.  But — If you can’t predict which ideas will be the biggest and the baddest, how do you decide which ideas to start with?

 

Searching

Since the path to a successful new venture is never linear, I would recommend that you start with the idea that you BELIEVE will have the biggest impact on your customer and that the team is most passionate about.

I recommend these two criteria assuming that the team understands that they cannot predict the future, and that it will be very likely that they will be exploring MANY of the ideas they just came up with.  They are merely tying to choose a place to start.

The diagram to the right shows a small portion of a typical search for a business.  You start with a single idea, run some experiments with customers, conduct some customer development, etc.   You stand back and look at all of the data and try to generate some insights.  Next, you apply these insights to your original business idea.   This process ends up leading you down an entirely new path.

Since my background is in software development, I like to think of this like branches in a code repository.   Since you have no idea which ones the customer is going to love, you build a few and let the customer’s behavior tell you which branches to merge and which ones to prune.   The great thing about this is that you get to drop the code, but keep the insights you gleaned about your customers in the process.


Search Milestones

I plan to write on this topic at length, but I thought it was important to showcase some of the milestones in the search.  As you communicate with leadership it will be extremely important for you to be able to showcase where you are.  Otherwise, from their perspective, it will look like they have a schizophrenic team with a complete lack of focus.

Find a consistent customer problem – At this phase you should be focused solely on the customer and the opportunities that exist for them.  Once you can identify a SPECIFIC customer segment that has a specific problem then you can move to the next milestone.   For the customer segment, you should be able to describe the customer and a day in their life, their budget, workarounds, etc.  You should be an expert about that customer segment and have deep empathy for them.

Prove that your solution will solve the customer’s problem – (MVP) – Using rapid experimentation and prototyping you must now prove that your Minimum Viable Product (MVP) will actually solve the customer’s problem.  This typically only requires 1-2 features in a product to do so.  I would recommend using the Lean Entrepreneur Value Stream exercise to design your MVP based on customer needs.

Prove that customers will pay for it – Now that you have proven that you can solve the customer’s problem with your MVP, you should move to testing your pricing model and strategy.   If you can’t get customers (that you’ve already spent significant time learning about and working with) to pay for your product, how will you get customers that don’t know you to pay?  
In this phase you should also determine the upper and lower boundaries of what customers will spend on this solution.    If you have leadership asking you about ROI and how big this business could be before you’ve hit this phase then you’ll need to educate them about these milestones and show them when to expect to see financials enter the picture.

Prove that you can acquire customers – Next, you need to test your possible marketing channels.  Which channels work best for your customer?   Which ones are least expensive?  Most expensive?   Can you consistently acquire customers through your marketing channels?

Prove that you can deliver the solution for less than the customer will pay (ROI) – Now that you’re able to acquire paying customers you need to start looking at your costs to market and deliver the solution.   What can you optimize to deliver positive ROI?  Are your margins large enough to warrant moving forward with this business model? 
In this phase you’re likely to be doing a lot of optimizations to the sales & marketing channels you discovered in previous phases.

Prove that you can scale this into a business worth running – The final milestone is to test your business model to ensure that it can scale up.  As you add more customers do you maintain similar margins or do they increase as you leverage economies of scale?  Is this still work pursuing?

 

I hope that this perspective is valuable for other intrapreneurs out there.  In the comments below;  please let me know how you’re able to apply it and what you get hung up on in your enterprises.

With Google+ plugin by Geoff Janes