The number #1 reason why startups fail is because there is no market need for the product or service they are building. By now, this startup maxim is engrained in the brain of whomever claims to know anything on building scalable businesses from scratch.
So how to prevent this from happening to your startup or corporate venture?
Typically, the answer given in the countless blogposts, vlogs and lectures on the topic can be summarized in any of the following one-liners:
After working with +200 Chinese startups, scale-ups and corporations to build new ventures from scratch; after seeing many of them fail and some of them struggle their way towards success, my personal experience certainly confirms that indeed, the #1 reason startup fail is because there is no market need for the product or service they are building.
However, my biggest frustration working in the field of innovation, particularly in China, is that one-liner such as ‘speak to customers’ will not help any startup or corporate venture to actually make meaningful progress.
Innovation is hard enough. To properly help young founders, they deserve to be taughtHOW to speak to customers.
Startup founders need actionable tactics that they can apply in real-life: Details matter.
So because the details matter, here is my answer to one of the most pivotal questions for startup and corporate venture founders:
How should you properly apply the lean startup methodology? Or phrased differently, how does the customer validation process actually works in practice?
To properly answer this question, let’s first define what customer validation actually means:
To minimize the risk of building a product nobody wants, startups and startup founders should be going through a rigorous process of customer validation. In essence, customer validation is a scientific approach to test hypotheses and either confirm or falsify your belief system in relation to your business.
The first step to this process consists of a proper self-assessment to determine where you are in the innovation funnel. Have you sold your product? Are customers using your product on a prolonged basis? Are those customers satisfied? In our experience it makes sense to distinguish between three validation phases:
The first step to applying the lean startup methodology properly therefore is, to determine the validation phase you are in.
Once you have completed your self-assessment, as a next step you can start crafting your validation roadmap. Like any roadmap, your validation roadmap should be time-bound, actionable and measurable. A simple but effective canvas we use to craft a validation roadmap for and with our clients looks like this*:
In essence, a validation roadmap is a collection of well-crafted verifiable hypotheses. So, to break things down one step further, this is a good template for such a hypothesis:
“I believe [hypothesis] to verify that I will test [Test] and measure [metric] I am right if [criteria]”
Ideally, you’d like to formulate only a handful of core hypotheses you wish to test. In the early-phase of your business, those hypotheses will necessarily be related to your customer and your value proposition since without customers and without providing value to those customers, you have no business.
After constructing your core hypotheses, it’s time to prioritize. After all, as a startup founder you do not have time to test everything at once. To properly determine what to test first, we recommend to ask yourself two core questions:
Essentially, by asking yourself these two questions, you are assessing early-stage business risk and execution speed.
Finally, and importantly, you should consider how to test your hypotheses. Contrary to popular belief (e.g. ‘just speak to customers’), there are many different ways to test hypotheses. In fact, at XNode Innovation Program we help entrepreneurs get acquainted with up to 18 different validation tools including validation interviews, focus groups, questionnaires, split tests, rapid prototyping and many, many more.
In a next post, I will share all the specifics on the 18 validation tools we use and how to apply them in practice. Why?
Because details matter.