Categories: archive |books

Book: Running Lean

  • Read: November 2012
  • Rating: 9.5/10

Running Lean by Ash Maurya is a fantastic book. Basically, Ash takes Osterwalder’s Business Model Generation (pretty much the best business book ever), throws in a bit of Ries’ Lean Startup (which isn’t bad either), then turns it all into an applied exercise that the reader can actually do for their business. It’s a book that you’re going to want to read twice. Or thrice. After you read Business Model Generation (which is a two-hour read), you should read this book.

While the book is amazing, it’s not without a couple of flaws. First, the book has a high slant towards tech. Doing customer research and getting feedback and pivoting with tech products is easy (easier than with a physical product that you have to manufacture). That being said, everyone should be doing some form of customer research before diving into their business (and spending a lot of money- their own or others’). My second complaint is that it’s still just a book. I think it would be pretty awesome if Ash took his book and converted it into an online “checklist” of sorts for startups. But that may just be me.

The book is broken up into 3 parts:

Roadmap

  • Chapter 1 - Meta-Principles
  • Chapter 2 - Running Lean Illustrated

Document Your Plan A

  • Chapter 3 - Create Your Lean Canvas

Identify the Riskiest Parts of Your Plan

  • Chapter 4 - Prioritize Where to Start
  • Chapter 5 - Get Ready to Experiment

Systematically Test Your Plan

Stage One: Understand Problem

  • Chapter 6 - Get Ready to Interview Customers
  • Chapter 7 - The Problem Interview

Stage Two: Define Solution

  • Chapter 8 - The Solution Interview
  • Chapter 9 - Get to Release 1.0

Stage Three: Validate Qualitatively

  • Chapter 10 - Get Ready to Measure
  • Chapter 11 - The MVP Interview
  • Chapter 12 - Validate Customer Lifecycle

Stage Four: Verify Quantitatively

  • Chapter 13 - Don’t Be a Feature Pusher
  • Chapter 14 - Measure Product/Market Fit
  • Chapter 15 - Conclusion

My Notes

Running Lean is a systematic process for iterating from Plan A to a plan that works, before running out of resources

Roadmap

Optimize utilization of time (our true scarcest resource)

Three steps of Running Lean:

  1. Document your plan A
  2. Identify the riskiest parts of your plan
  3. Systematically test your plan

“Customers don’t care about your solution. They care about their problems.” - Dave McClure

The biggest risk for most startups is building something nobody wants

Three stages of a startup:

  1. Problem/Solution Fit
  2. Product/Market Fit
  3. Scale

Document Your Plan A

Brainstorming list of possible customers for your product:

  • Distinguish betweer customers and users
  • Split broad customer segments into smaller ones
  • Put everyone on the same canvas at first
  • Sketch a Lean Canvas for each customer segment

I’m not going to get into the details of the Lean Canvas, but you can find all about it pretty easily by Googling “Lean Canvas” or “Business Model Canvas”… that said, here’s a quick breakdown:

  1. Problem - Top 3 problems
  2. Customer Segments - Target customers
  3. Unique Value Proposition - Single, clear, compelling message that states why you are different and worth buying
  4. Solution - Top 3 features
  5. Unfair Advantage - Can’t be easily copied or bought
  6. Revenue Streams - Revenue Model, Lifetime Value, Revenue, Gross Margin
  7. Cost Structure - Customer Acquisition Costs, Distributing Costs, Hosting, People, etc
  8. Key Metrics - Key activities you measure
  9. Channels - Path to customers

Your objective is to define an early adopter, not a mainstream customer

The first battle isn’t selling; it’s getting a prospect’s attention

Bind a solution to your problem as late as possible

Initial goal of a startup is to learn, not to scale

MVP (Minimum Viable Product) is not synonymous with a half-baked or buggy product

Charge for your product from day one:

  • Price is part of the product
  • Price defines your customers
  • Getting paid is the first form of validation

Identify the Riskiest Parts of Your Plan

Incorrect prioritization of risk is one of the top contributors of waste

Business Model Objective: to find a model with a big enough market you can reach with customers who need your product that you can build a business around

Prioritize your Lean Canvas (Ash’s recommended priority order):

  1. Customer pain level (Problem)
  2. Ease of reach (Channels)
  3. Price/Gross Margin (Revenue Streams/Cost Structure)
  4. Market Size (Customer Segments)
  5. Technical Feasibility (Solution)

Validating hypotheses takes time

When validating your Business Model, ask specific questions:

  • What do you consider the riskiest aspect of this plan?
  • Have you overcome similar risks? How?
  • How do you go about testing these risks?

Assemble a problem team and a solution team:

  • Problem team = mostly “outside the building” activities (interviews, usability tests, etc)
  • Solution team = mostly “inside the building” activities (coding, releasing, etc)

Three must haves (for the team): development, design, and marketing

Maximize for speed, learning, and focus

Identify a single key metric or goal - decide on one and ignore the rest

The first significant milestone of a startup is achieving product/market fit, which isn’t just about building the ‘right’ product but building a scalable business model that works

Systematically Test Your Plan

Don’t do surveys or focus groups

Do customer interviews - learn what you don’t know you don’t know

Life is too short to keep building something nobody (or not enough people) want

Prepare to interview 30 to 60 people over a four to six-week period

What you need to learn during the problem interview:

  • Product risk: what are you solving? (Problem)
  • Market risk: who is the competition? (Existing Alternatives)
  • Customer risk: who has the pain? (Customer Segments)

Problem Interview Script (follow a script!)

  • Welcome
  • Collect Demographics
  • Tell a story
  • Problem ranking
  • Explore customer’s worldview
  • Wrapping up
  • Document results

Go through each problm in turn- ask interviewees how they address the problem today

Goal is to distill your product down to one “must-have” problem - one Unique Value Proposition (UVP)

What you need to learn during the solution interview:

  • Customer risk: Who has the pain? (Early Adopters)
  • Product risk: How will you solve these problems? Minimum feature set needed to launch? (Solution)
  • Market risk: What isthe pricing model? (Revenue Streams)

The demo needs to look real

“Content preceds design. Design in the absence of content is not design, it’s decoration.” - Jeffrey Zeldman

Solution Interview Script

  • Welcome
  • Collect Demographics
  • Tell a story
  • Demo
  • Test pricing
  • Wrapping up
  • Document results

Reduce scope and shorten the cycle time between requirements and release so that you get to the learning parts faster

Don’t assume that any features have to be included in your MVP

Charge on day one, but collect on day 30

Purpose of your marketing website is to sell your product

Landing page:

  • UVP
  • Supporting visual
  • Clear call to action
  • Invitation to learn more

An actionable metric is one that ties specific and repeatable actions to observed results

“Three A’s of metrics: Actionable, Accessible, and Auditable” - Eric Ries

If you can’t convert a warm prospect in a 20-minute face-to-face interview, it will be much harder to convert a visitor in less than eight seconds on your landing page

MVP Interview Script

  • Welcome
  • Show landing page
  • Show pricing page
  • Signup and activation
  • Wrapping up
  • Document results

The fastest way to learn from customers is to talk to them

Get “lost sales” prospects to talk to you

More features dilutes your UVP

Try using a Kanban board

Have the customer sell you on why you should add a feature

You have early traction when you are retaining 40% of your activated users, month after month

avoid micro-optimization experiments

Identify your key engine of growth:

  1. Sticky- high retention. Customer acquisition rate > churn rate
  2. Viral- high referral. Viral coefficient > 1 (each user brings in at least one other user)
  3. Paid- high margins. Customer lifetime value (LTV) > cost of customer acquisition

Only having passion for the solution is a problem

Create canvases for both sides of a multisided product

Getting funded is not validation

Daily flow:

  • Planned maker activities (early in the day, uninterrupted)
  • Planned manager activities (late in the day)
  • Unplanned maker/manager activities (be ready all the time)

Weekly flow:

  • Identify best days for customer development (not Mondays or Fridays)
  • Take advantage of customer downtime
  • Balance face time with customers

Five whys philosophy to get to heart of the problem

Great book- definitely worth your time.