How to run a successful startup? How to draft a product development plan, a minimal viable product and pivot to a successful business model? Plus, when have entrepreneurs reached product market fit and when should one scale?
An experienced entrepreneur, Ash Maurya addresses these topics in his foundational book, Running Lean.
Develop a startup plan and de-risk your business
Startups are a “risky business” and entrepreneurs’ real job is to “systematically de-risk startups” overtime. Founders confront 3 generic risks, including
- The product risk
- The customer risk
- The market risk
Mitigating these risks are part of a startup development plan. Ash Maurya suggests that founders test multiple hypotheses,see how each perform and go for the most promising one and less risky. For example, one critical question is finding the right customer segment. The author suggests not to focus just on one customer segment but instead look at multiple customer segments and develop a test to assess which one shows the most potential in terms of willingness to pay and market size.
Now let’s look at how to control each risk in more detail:
To avoid the product risk founders must set approximately 10 customer interviews that specifically tackle the problems that potential customers are facing. This involves looking at where or how customers trying to solve those problems now. List current resources because these are potential competitors. Press for details, explore any news problems that may come up. Ask why customers are happy with the given competitive offering and what may be changed. The idea is really understanding what customers do to solve the problem at hand. If no one ranks one of the founder’s problems, then entrepreneurs should remove it and replace it with a problem that people cite in several interviews.
A second set of 10 customer interviews to look at potential solutions to the problem: learn the minimum features the solution should build to attract early adopters and assess whether they’ll pay for them and how much. Show a mock-up or a prototype including slides, pictures and videos but the MVP doesn’t have to work. Even though the initial solution is an MVP, founders must not give it away. They should take a small group of paying beta customers and say that they will refund their money if they fail to deliver. Specifically spot some of the most relevant features in the solution that help address that targeted problem and compare each feature with one another in order to develop those that seem most promising.
Addresses customer risks with another round of 10 customer interviews focused on the MVP (minimum viable product). Turn early adopters into paying customers: test the landing page, site flow and show how the MVP delivers on the UVP. Show prospects the printing page and ask them to go through the sign-up process. To tackle customer risks, the author recommends that entrepreneurs spot early adopters through outbound paid channels (such as Google ads) or, inbound channels such as blog posts, free white papers and webinars.
Finally, to tackle market risks Ash Maurya recommends that entrepreneurs analyze competition and their pricing. And then, founders should test their pilot and listen to customers, assess their pricing sensitivity and changed their pricing points accordingly.
Draft multiple versions of the same plan and select the less risky one
Now, once a plan is drafted, the author recommends to determine the riskier components. Developing different versions of the plan for different set of customers is crucial in comparing different customer segments in terms of willingness to pay and market size. Also look at how the developed solution is solving problems for each customer group. Finally, presenting multiple versions of the plan to advisors may help in selecting the less risky course of action.
Going from product launch and “product/market fit” to scaling
Entrepreneurs should launch their product when 80% of early adopters refer their product to other potential customers and turn into to paying clients. When customer retention reaches 40%, founders should consider quitting their day job andscale.
In this hand-on book, successful entrepreneur, Ash Maury shows that “startups are risky business”. A founder’s job is to “de-risk” the startup by tackling 3 generics risks : product risks, customer risks and market risks. Ash Maurya suggest that entrepreneurs engage in clients’ interviews, target early adopters, show an MVP. Product/Market fit is reached when 80% of early adopters sign on. Founders should launch their product when 40% of early adopters turn into paying customers. Entrepreneurs should launch their product when 80% of early adopters turn into to paying clients. When customer retention reaches 40%, founders should scale their business.
Ash Maurya provides useful advice in supervising 3 generic risks but does not provide scientific approach to risk assessment and does not address talent retention, lack of cash, team building, competition…
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