The Lean Start up methodology has a mathematical formula for success
The Lean Startup is a methodology that captured the digital industries attention. You have probably heard about it before. Investors also like this method; they want us to push ourselves to the limit and prove to them that we can deliver. They want proof that there is a need for our product. That’s fine and dandy, but in the course of my work, I too often meet entrepreneurs who spend too much time testing their product the Lean Startup way and come out with vague and incoherent conclusions. When they step into my office they are looking for marketing advice, they are astonished when I tell them that it may be too soon. If Lean Startup methodology was applied and not tested properly, marketing at this stage would be a temporary band-aid.
Since the phenomena of “incoherent results” occurred too many times and too often on early stage products, I decided to explore the Lean Startup method through reverse engineering research. I looked into many cases and mapped out the successful Lean Startup study cases. The conclusions are amazing. Apparently, a mathematical formula could be set for a successful methodology.
In 2008 Eric Ries, published his book: “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” which became an instant bestseller. Ries’s message was that the free market is the best place to test your Lean Startup. Release a lean product; let the users toy with it and only then use the data and feedback to improve it. That is how the Minimum Product Value (MPV) came into being.
First, I found out that if you don’t want to find yourself drowning in the vicious sea of numbers, you have to know what you are looking for. Otherwise, you are not that different from a spring break college boy who had too much to drink, running like around like a crazy person and getting into trouble. To get better results for my clients, I developed what I call: the Stress Test method. Just think about a typical “House” episode. It begins with a patient who is suffering from all kinds of symptoms. Those symptoms could be rooted in several kinds of diseases. To find the right cure, the medical team has to find out first what the disease is. Aspirin will not help a cancer patient who suffers from fever and muscle weakness. Radiation will do more harm to someone who’s got the flu and showing the same symptoms. To find out what the disease is, the medical team puts the patient through all kinds of crazy treatments. Those treatments are Stress Tests. They take the symptoms to the extreme. Only when Dr. House finds the right question (usually 30 seconds after the last commercial break) the right answer pops up. A lame product is not that different from a sick person. Put it through my Stress Test and you will figure out the answer.
The Stress Test Method
The Lean Startup’s premise is very simple: “test your riskiest assumptions.” The research I performed shows that companies who found success in the Lean Startup methodology, tested the extremes, i.e. the parameters of their assumptions.
Therefore, I applied QA methods to the Stress Test; after all, a constructive QA tests the extremes. This is no different. If I were to map this out graphically, it would probably look like this:
Each square represents your assumption and your job is to test the borderline cases.
Extrapolating from Start-ups that became part of the Billion Dollar Club (that is the nickname I gave the companies that broke the digital ceiling – became Internet Billion dollar companies in a just few years or less), the Stress Test is based on their amazing experience. That is my mathematical equation for the secret of success.
Here are some examples:
Three guys, Brian Chesky, Nathan Blecharczyk and Joe Gebbia changed the tourism industry forever, but first they had to change their product. Their journey began with uploading a picture of their apartment to the web. They were looking for short-term guests who prefer homely accommodations to hotels. When the first guest actually paid for his stay at their apartment, they wanted to scale up the product. Additional photographs of apartments were uploaded to the website and nothing happened. The trio’s next move was breaking down their MPV. When focused on the photos, they ultimately concluded that something is not working with the apartments’ photos. They had to find a way to differentiate their product and make it stand out. Professional photographs made all the difference. As trivial as it may seem these days, back then it was not such an obvious conclusion. I take from this test case the lesson that zooming in on this parameter and maximizing it made the difference between a failure and a killer app. With the improved photographs came improved conversion rates. Today, an Airbnb seal of approval of a photo is one of its trademarks.
The founders like to talk about the importance of zooming in and focusing on your most important aspect. Here is a beautiful presentation that they uploaded on this subject:
Here’s another example: I guess there is no need to introduce Instagram. There was a time, not so long ago, when Instagram was just another obscure social network out of dozens. The company was doing just ok – not really scaling up. The founders then decided to break down the usage of their product. Data and user feedback showed, surprisingly or not, that the pictures uploaded to the app consumed most of the users’ attention and engagement. Applying here the Stress Test, the founders boosted up this parameter, i.e. taking their mostly used arena to the extreme. They created filters – but NOT just your ordinary Joe frames. If you go through the pictures you took with Instagram, you will probably find out that some of the filters make you look 10lbs skinnier. Yes! They do. This is instant art. Bringing together an amazingly looking person to the attention of others = sharing more pictures. Once the users had the option to look like celebrities, they started craving for attention like celebrities. That is the perfect trap. Users got hooked on creating flattering filtered pictures, they were craving for the positive attention that came with it.
If this is not extreme testing – then really what is?
Groupon is the last example for the day. It started as a blog for putting together buying groups who want to maximize their collective purchase power. i.e. – a greater number of people in a group will be able to get a lower price. Once they saw that the groups were rapidly growing, Groupon tested this parameter to the extreme – they reversed the product’s model. Instead of looking for people willing to join a buying group, they focused on obtaining the best deal and then attracting the buyers. Needless to say, it worked.
This last rare case shows how a Stress Case can turn you product on its head. The other examples prove that testing the extremes can make your product work even if it shows failure signs at the beginning. All you have to do is ask the right questions.
Eric Ries deserves all the credit for introducing the Lean Start up methodology. The companies who tested that method to the extreme laid the foundation for us to learn that the right testing can turn your product from OK to a great success. Use the Stress Test the right way.
Thank you to Limor Shiloni and Lizi Schein for assisting with the research here and contributing to this post.