This is the third post of a series. It will try to show how Lean Startup can be useful at the discovery phase of an organisation’s life. The previous post dealt with the ideation or concept stage of a start-up which precedes the discovery phase.
The inspiration for this series comes from my own experiences, as well as those of entrepreneurs and intrapreneurs I have worked with throughout my career. Too much time is wasted on projects that never reach the market or never achieve profitability.
What is the discovery phase?
The discovery phase comes after you put serious thought and work on your business model. During the ideation stage, you asked yourself:
- Who will my customers be?
- What value will my project bring them?
- Who will enable my business?
- How will I connect with my customers?
- How will I make money and what are the costs involved?
All of these questions you answered yourself (or with your partner-s). This means that your answers are not facts but assumptions. These assumptions may be based on secondary data or past experiences but they remain assumptions as they aren’t the direct answers of your stakeholders. Hence, until your potential stakeholders answer these questions the answers you put down on your business model canvas will remain assumptions. Any future ideas you have for your business that significantly impacts any part of your business model should also be treated as assumptions.
You will need to verify all of the key assumptions in your business model to minimise your various business risks. Key means that if the assumption you are making isn’t verified your entire business could:
- Not take off
- Have much lower returns
- Take longer to take off (increasing the risk of running out of runway) or
- Suffer significant impacts (like serving a different clientele or being based in a different city)
This means you will have dozens of assumptions to test during the discovery phase and hundreds, if not thousands, over the lifecycle of your organisation. The two most important meta-assumptions (as they are composed of many assumptions) aka leap-of-faith assumptions, are the value hypothesis (which will lead to product/market fit) and the growth hypothesis (that will enable you to scale your business).
Risk reduction and other benefits of Lean Startup
All these tests on your assumptions are the cost to reducing your commercialisation start-up risk (as well as the product and financial risks by ricochet). Other benefits to using a Lean Startup approach are lowering marketing costs due to having a product/service that will meet the needs of your target markets more closely. You can also expect a better work environment as well as significantly higher levels of customer satisfaction and innovation in your company once it’s up and running.
So how does one go on to test an assumption to see whether it’s true or not? You do what any good scientist would do; you convert your assumption into a hypothesis, then design and conduct an experiment to validate it.
Our next post will show you how Lean Startup experiments are done during the discovery phase.