Growing an early stage Consumer Startup with Experiments [Part 1] - Navigating the early stages

vaidy

March 23, 2016

You’ve got an idea for a consumer product. And you’re raring to go build it.

But you’ve also heard about the Lean Startup and that it’s better to “ build what you can sell, rather than sell what you can build”. And you’re sold on that idea already. You definitely want to avoid building something that nobody wants.

Where do you go from here? That’s what this series is about. It’s a 3 part post, that’ll take you from where you have an idea to giving you specific next steps to help you navigate your startup for the next 6 months or so.“Hold on..who said I was sold on the Lean Startup?”

One of the things that most first-time entrepreneurs struggle with is thinking about their “ business as their product”.

Here are 9 things you need to think about straight off the bat, if you’re serious about building a sustainable business with your product idea:

Most of us have a tendency of focusing only on the “solution” block above and forgetting about the remaining 8 blocks. That is a recipe for failure and will almost certainly crater your business even before it gets off the ground.

If you’re skeptical about those statements, please do yourself a favor and read the Lean Startup. If that still doesn’t change your mind, the rest of this post series will do you no good either.

But if you’ve bought into the idea that your primary measure of progress as an early stage startup is learning about your market, read on.

The “steps” you need to climb

Navigating the whole process of systematically de-risking your business model is a big and hairy task. To tackle something like that head on, you want to be using the best tools and techniques that are currently available.

The first thing to realize is that every startup has the following stages of growth:

Lean Startup stages

Source :Slideshare on Understanding lean Analytics by Ben Yoskovitz

Which stage am I in?

If you’re asking this question, you’re probably at one of the earlier stages :). Which is either Empathy or Stickiness. Beyond that is product-market fit, at which time, your startup is growing by leaps and bounds. And you wouldn’t have time to read this post :).

But how do you know if you’re yet to cross empathy ( pre-empathy) or have crossed empathy but are yet to cross stickiness ( pre-stickiness)?

Pre-Empathy Do you have a very good connection with your customers or users? Are you able to predict with confidence as to what their biggest concerns here? What makes them feel great? Why do they do what they do? If the answer to those questions is no, you’re at Pre-Empathy. The idea is to be able to feel what they feel strongly, before you start investing significantly in the product.

The tricky thing with this stage is that we all have some level of empathy with our users. This is what allows us to have a nice conversation with them, perhaps give them a solution to their personal problem, say during a face to face conversation.

But this is not usually sufficient when we’re trying to interact with them through our product. If the user has to engage with our product, we need to know beforehand what state of mind they might be in before using the product and how they would react after interacting with our product.

And for us to be able to correctly predict that, we need to know a lot more about our users.

Pre-Stickiness Do you have active users in your product? Are they using it at least twice a day (“ Toothbrush Test”)? Is your product changing the behaviour of your users? If the answer to those questions is “no”, you’re at Pre-Stickiness.

The key goal at this stage, is to reduce “ churn”: That is to plug the “leaks” in your product, to ensure that once you get a new user to try out your product, they go from the intent of “casually checking it out” to to becoming your “permanent” users (by passing the “Toothbrush Test”).

Taking it one step at a time

Step 1 - Idea You start with having a great idea for a product.

Step 2 - Cross Pre-Empathy Since you’ve just got the idea, chances are that you’re yet to figure out who your target users are and whether they have problems that can be solved by your product. So, your first key task is to get cross the Pre-Empathy stage.

Step 3 - Cross Pre-Stickiness This is the juicy bit, where you get wonderful feature ideas, build them and test how well those features resonate with your users. When you’re able to consistently and accurately “predict” how your users are going to respond to changes in your product, you’re ready to move on and increase the rate of adding users to your product.

How do I measure my growth?

We need a consistent way to be able to measure how our users react to changes in our product. This is where metrics come in.

The problem with metrics is that ‘ not all metrics are created equal’

When we’re building a product, there’s usually multiple things we could measure. For example, let’s say you’re driving a car. You can measure everything from your speed, to the heat of the engine, to the oil and fuel levels.

But here’s the thing: If what you’re doing is backing up your car, the only thing that matters at that time is the distance of the wall behind you.

Car backing up

Source :Daily Remarks

We call that the “One Metric That Matters” or OMTM for short. This is a concept from the Lean Analytics book.

What’s my OMTM?

The idea is that once we know the stage of your startup and the type of product you’re building, we can come up with that “one” metric that you should be measuring.

The Lean Analytics book has a nice matrix of which metrics to measure in what situations. From what I know, this is based on significant research and experience. So, if I were you, I would go with what is suggested there - at least for starters. It’s better than any gut feels or guesses that you or I could make.

Lean Analytics Stages

Source : Lean Analytics Workshop on Udemy - Alistair Croll and Ben Yoskovitz

After a couple of weeks of using the metric while also performing experiments at the same time [described in the next section], you will be able to start seeing some patterns. If there’s a more important metric other than the one you’re measuring currently, it’ll start showing up in your radar and you can them switch focus to that metric. In essence, you will just “know”.

But once again, your problem now is to find a good metric to “start” with. And the grid above is very useful for that.

“Learn” Using

Experiments

The next question is how do you use the above concepts of OMTM and startup growth stages on a daily basis to move your startup forward.

Your goal is to learn about your market. In the first two stages of a startup, there’s a significant gap between what the market (or your users and customers) wants and what you may be intending to build.

The goal is to lower that gap. And you achieve that by performing “experiments”. The “experiments” are best seen as a routine or process - that you keep repeating everyday.

It takes some discipline to do these well, but after a month or two of practice, you should be well on your way to learning (about your market) at a good pace.

Diving into the world of Experiments

The process is as follows:

Step 1: Setup the experiment
Step 2: Build
Step 3: Review results
Step 4: Iterate

Step 1: Setup the experiment:

What is your OMTM?
What is the current value of the OMTM?
What is your target value for your OMTM?
What is your experiment hypothesis (or “idea”) to help you move forward toward the OMTM goal? [What’s a hypothesis? They’re simply assumptions that you write down about the market’s perspective of your idea. The only significant difference here is that you also have an explicit intention to test and confirm whether your assumption is true or false (validated or invalidated).]
How will the idea help you to learn more about your customer? This question will help you stay grounded during the ideation process. A high level of excitement while coming up with product features is a common scenario. While the excitement is great in that you will feel more energized, it’s quite risky in that you may end up forgetting that these are your ideas and that your users would still need to buy into them, for your investment of time and money to make business sense.
How will you measure whether your idea is working?
What is the reporting structure for the above information?

Step 2: Build:

Implement the “idea”
Is your measuring process easy?

Step 3: Review results:

What is the OMTM value, after the experiment?
Update the Report with the new OMTM value
How well did your “idea” work? Which hypotheses were validated and which were invalidated?
Is the customer’s behavior more predictable to you after the experiment?
Was there something else (perhaps unexpected) that you discovered during the experiment? If you had an insight during the experiment, that’s fantastic. These are the gems you’re looking for.
Are there any new hypotheses that you want to test? Any hypotheses that need updating?

Step 4: Iterate:

Ready to start the whole thing again? :)”

Overwhelmed? Here’s a perspective that could help

The above seems a bit overwhelming at first, but after the first couple of experiments, your focus will automatically shift from the process to the goal at hand - which is to learn more about your users. You’ll start to think more and more like them.

You could think of the process and steps like your camera equipment - the camera body, your lens, tripod etc. Your goal is to focus on your subject and capture them (that is “learn about them) in your photo. You could think of each experiment as adjusting the lens to increase your understanding of your users. With each new experiment, the clarity of your “picture” will improve.

And over a period of time, you will be able to think how your users think - in a predictable, consistent manner.

Experiments for “Consumer Startups”

The concept of experiments is useful to grow any kind of startup - enterprise or consumer. But when you dive in deeper into the techniques for performing the experiments (especially at the Pre-Stickiness stage), you’ll observe significant differences.

And this post series is focused specifically on “Consumer Startups”.

Further, experiments also look quite different in the Empathy and Stickiness stages.

Get Going Already!

It's now time to roll up your sleeves and get to work on the experiments. Check out the remaining parts of this series to get started: