Monday, May 19, 2014

Why the Lean Startup Model is Good AND Bad

tumblr_lzmap6av2c1qjvjiuo1_500I’m a big fan of capitalism, and I subscribe to the notion that “greed” (i.e. working for self-interest) is generally a good thing.

If you aren’t aware of what lean startup movement is, it’s basically “find the customer first and build second”.

… startups can shorten their product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and what he calls “validated learning”.

.. if startups invest their time into iteratively building products or services to meet the needs of early customers, they can reduce the market risks and sidestep the need for large amounts of initial project funding and expensive product launches and failures

It’s a way to prevent lots of wasted time and money on building stuff no one wants by first figuring out if people will actually pay you for it.

Yes, I totally agree. Most of entrepreneurs fall into the habit of falling in love with their product or idea, building some crazy expensive prototype with all the whistles and bells…. only to get a rude awakening upon their launch that no one gives a shit. Or worse, zero sales.

This story is all too common among many (if not most) entrepreneurs who give their best with ZERO market feedback. They get disappointed in their “failure”, lick their wounds, and go back to what they used to do.

Yes, it sucks. It’s horrible. I would never wish that upon anyone, but it happens. That’s why I’m all FOR the lean startup model. Find the customer FIRST, then get them to pay (or at least give you a deposit), and build the product.

Here’s a REAL problem with this kind of thinking.

It’s great for the entrepreneur, but not so great for the humanity.

It’s based on the notion that there is someone out there willing to pay you for this. In another words, people are aware of the pain and are willing to pay you for the solution.

But the real BIG problems in life don’t have awareness… let alone a name for this problem.

  • Think about Google. Before they existed, if you asked anyone on the net if they thought there was a huge internet search problem, i’m certain 99% of the people would have said “umm.. maybe?”

  • Think about Facebook. Before they existsed, if you asked anyone if they thought there was a huge need for social network where you can upload pictures of their friend’s ugly babies (yes if you do this, trust me.. your baby is not THAT cute.. people click on “like” out of boredom or social obligation) and funny cats, they would ask you if you’re high on crack.

  • Think about Tesla. Before they existsed, if you asked any car buyer if they thought there was a huge need for us to have sustainable energy consumption so that we can achieve foreign oil independence, they would just look at you like a deer in headlights.

In another words, big LONG term solutions to big problems (that really benefit the mankind for generations to come) cannot be solved with the lean startup model.

And that’s where the VCs and real visionaries come into play.

They can handle longer sustinable periods of negative cashflow until the critical market acceptance makes the business model. But unfortunately, most VCs are just like these “lean startup” thinkers… their ultimate and most likely only goal: returns.

Remember that guy Elon Musk?

He started selling solar panels even when the solar market wasn’t that hot in US. He went against the grain. He started making electric cars when every person on earth thought electric cars as a business was a dumb idea. He started shooting rockets into space as a private company and of course, people said that was a stupid idea.

Often times, big, life changing, truly disruptive stuff happens when no one is really thinking about them.

Take a look at PAR program for example. If you look at all the email services, you might ask yourself, do you REALLY need another email marketing platform? If you look at it that way, no. But the difference between them and us? Our email marketing actually turns profits for our customers because we do the hard work.

In another words, if we did the lean startup “get your customers first” thing and used that as the only metric to determine if we should push forward, we would not be where we are today.

If you have a couple millions in the bank (or even hundreds of millions) in the bank to sustain the negative cashflow until you come to a point where you can “WOW” people with your product, you’re going to have to resort to investors to pay for your every day needs. (You can read my experience on raising money from investors here and here).

So if you’re RICH, give these enterpreneurs with long term big vision goal guys a chance.

Change the world for once, not just your bank accounts.

Source: ShoeMOney

Why the Lean Startup Model is Good AND Bad

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