Fireside Chat with Ash Maurya – Understanding Lean Startups – Part 5


October 17, 2014

This is the fifth part the multipart series: * “Fireside Chat With Ash Maurya”*  (Read part 4 here).

Vaidy: * [With reference to what you said about working towards making an entrepreneur better and not keeping the business goal as our primary focus]* This is something that I personally battle with. We want to do the right thing for others. But, we are also doing it because at the end of that there is a business goal and we are trying to focus more on the first and leaving the second as a potential benefit. That's quite hard.

Ash: Definitely it requires a leap of faith. I see this a lot. Some of the Agile companies in the US are trying to experiment with different models.

In the past, they used to bill by the hour. So, you get a client and they ask you to build them this thing. At the back of your head you know that it is never going to work. But its still a 6 months' worth of billing. We say let's just do it and then we will be off.

But if you look at it again, you want to have the customer succeed. There are 2 ways to look at it. One is, the client comes to you with a budget and you have 6 month's time to build it and they leave. And the other is to say let's increase the life.

So, let's give the lifetime revenue of our customers for 6 months. If it fails after 6 months and they have lost the budget, they may or may not come back.

You instead build a little trust along the way, where you are aligning your interests with theirs. This is where they may come in and in 6 weeks you might do some customer discovery with them and invalidate the idea. You can tell them that it is not going to work in this fashion.

So, this is where they can now say,“We still have a budget and you just saved us 4.5 months' worth of work.”

That's the leap of faith. You can deliver transparently measurable impacts along the way. It is risky. You should put yourself in that position where you become confident and you are not just cost centred at the back.

Vaidy: I think we have, to some extent, succeeded in keeping our goal of increasing our revenue through billing hours secondary to let's say asking the customer to test the product. Where we struggle sometimes is to convince the customer to buy into it.

Like what the LinkedIn founder, Reid Hoffman says, "If you are not embarrassed by the first version of your product, you’ve released the product too late." And most customers find it really hard. Then we are left with only one choice - either you do that or we're going to stop working with you.

Ash: There's something in between, you can do some closed usability testing. This is again where there's an extreme between full loss to everyone and to roll out to deployment. This is where either they give you their customers or you say, "Hey, we are going to have some usability tests. We just want your permit.” And people will sign to do the stuff that you want to do.

You are talking about this "enterprise complex". Anytime there's a discussion about challenging the brand or challenging the revenue comes in, people are very very scared. They want to do the full thing.

And this is where you can do the usability testing anonymously. There could be some intermediate. And the idea here is to build a little trust. And I find that whenever we bring the customer's [end user's] voice in the discussion, it's very powerful.

I want to share this story because I think it's kind of related. I was in Finland working on my workshop, and we had this team coming who were working in a major bank there and they were applying Lean. I asked if they were doing a side project. They said it was a core profit to the company and most executives had visibility into this. I was really surprised. A bank was the last place to see this being applied - very high risk and they are technically very conservative.

I asked them how they pulled it off. And they told me that in Finland they have very strong labour laws and they knew they couldn't get fired. What they did is, they went out and applied running Lean process.

They said they went to their local branch offices and told the customers who were coming out that they had to interview them [they did this without the permission of their branch managers]. They started showing their wireframes and mobile apps and in Finland they showed they can do more mobile services in banking. They showed it to people and got them to commit that they would buy the app.

An interesting thing is that they recorded all these interviews and reported them. Then they went their managers and the executives and played it. So, instead of getting fired, they got the resources.

Again, its not us saying we have a great idea so give us money, but rather saying that we found a very creative way to test it. More customers, or our customers want it, so you should give us money and visibility.

Vaidy: I guess at the end of the day it depends on how badly you want do it. If you really really want to do it, you will figure out a way.