Most people have heard of and are familiar with the principles of the “lean start-up.” Like many concepts in business, it really boils down to common sense. Rather than bet the farm on a brilliant new idea, risking capital, human resources and opportunity cost, take that idea and test it.
Testing – or experimentation - is a strategy that allows investments to be deployed for one or over large numbers of smaller bets that will either bear fruit or fail fast. Whereas established products and businesses rely on established metrics – like sales volume, market share and the like – experiments are designed to learn. It is far more valuable to fail and understand why than to succeed and not know what caused your success. Why? Because you can leverage the learning. You can’t replicate success if you don’t understand what caused it.
The concept here is to figure out the most critical assumptions that must be validated in order to gain the confidence to proceed. These typically fall into one of three categories:
· Does anybody want it?
· Can we do it?
· Can we make money at it?
And, importantly, in that order. Remember – see it through your customer’s eyes. If nobody wants it, it’s not going to matter whether you can do it or whether it is profitable at trivial levels of uptake.
Once you have identified the two or three most important things you need to believe in order to feel confident enough to launch, then your task is to figure out the fastest, cheapest way to test your assumptions, learn, pivot and test again.
We’ll talk about how to design a good test in another post. But for now, here’s an example: human powered flight.
In 1959 British industrialist Henry Kremer put up what in today’s world might be considered the X prize: $50,000 pounds ($1.2 million today) to someone who could power an airplane using only their body and fly a figure eight around two posts a half mile apart. (We’ve come a long way!)
Ten years went by. Nobody could do it. Then Paul MacCready came along. He considered what had been done and re-framed the problem.
MacCready’s insight was that everyone who was working on this problem spent upwards of a year building an airplane on conjecture and theory without a base of knowledge based on empirical tests. Triumphantly, they would complete their plane and wheel it out for a test flight. Minutes later, a year’s worth of work would smash to the ground.
MacCready came up with a new problem that he set out to solve: how can you build a plane that could be rebuilt in hours, not months? And he did. He built a plane with Mylar, aluminum tubing and wire. Sometimes he would fly three or four different planes in a single day. And six months later, he won the prize.
In today’s world, 3-D printing is enabling prototyping that lets manufacturers, designers and others quickly and cheaply learn whether something works.
But even in business model innovation, the same principles apply. Figure out the minimum viable product you need in order to validate your most critical assumptions. Learn. Abandon or pivot. Odds are you won’t get it right the first time. But allow the experimentation. Insist on fast and cheap learning, and hoard what you get as a result.