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Lean methodology: Building a product company with the lessons of Steve Blank & Eric Ries

LeanMethodology

We started Modify Watches in 2010, after graduating from UC Berkeley’s Haas School of Business. During school, I had worked on a sustainability business, Refill Revolution, which is now part of True2O.com. I was fortunate to take a course from Steve Blank and Eric Ries titled “Customer Development in High-Tech Enterprises.” I’m still not sure what the title means. What I do know is that combining their core theories made me realize that we built Refill Revolution completely wrong.

The core lessons I took from that class are “build a minimum viable product [MVP]” and “get out of the building” (there’s so much more nuance to what Blank and Ries write, and every entrepreneur and intrapreneur should read their work). With Refill Revolution, our team thought about the business for a while. Then we – again, just the team – committed to investing in Facebook. Then we built a Facebook app for over $10,000 and saw what happened. Needless to say, while we built something cool, we didn’t, as Paul Graham would say, “build something people want.” We were extremely lucky to find an acquirer who was able to take advantage of our platform; as a stand-alone business, we were dead on arrival.

My second startup, Modify Industries Inc., started from a completely different premise. Before investing any time or money on an e-commerce site that would provide an awesome experience, we focused on one core hypothesis: people would buy interchangeable products. The value of interchangeable products is that if you have one watch, and you can pay a little bit more for an interchangeable watch strap, then you have two looks – effectively two watches – for about 70 percent the price of what two “full” watches would cost.

The MVP 

The easiest way to test this was to see if, given the choice of mix-and-match watch pieces, customers would buy one watch (i.e., one face and one strap) or buy into the Modify system, where buying more faces and straps lowers the effective price per watch. The fastest path to test our hypothesis? Sell other people’s products.

Before we invested in a proprietary design – before we even spent more than $50 on a website – we went to eBay and purchased interchangeable watches. We then went on Weebly.com and built a static website that had jokes, watch imagery, and “Buy Now” buttons. These watches were a true MVP – a lot of them broke within 2 months! That’s the point: to test our hypothesis, we simply needed to see how people buy. Test completed; we refunded our early customers.

Getting out of the building

Steve Blank’s mantra is to “get out of the building.” The premise is that while you might think you know what’s right or what your customer wants, you’re 100 percent wrong. You don’t know. Your team doesn’t know. And no amount of brainstorming or white-boarding is going to make a difference. The only way to learn what your customers want is to talk with them!

Blank’s Customer Development methodology has driven significant changes in our business. We talk to customers daily through feedback mechanisms on our site, Facebook, and Twitter. We include business cards with our phone numbers in every order, an indication to customers that we want to hear from them. We survey our fans at least quarterly. And finally, our entire team has calls with different customers every week. These efforts are driven to gather as many insights as possible.

We have made substantial changes from customer feedback:

  • Business model change. We have created a business customizing products for brands. We learned about a market for this when a buyer from Google contacted us and said, “Can you make a Chrome watch”? We said yes, and custom watches accounted for 40 percent of our revenue in 2012.
  • The right product improvements. We asked our fans what features they wanted to see in the second version of our timepiece. We assumed they would want water resistance, a stopwatch, and a backlight. Surveying fans made it clear that we were right about water-resistance: 95 percent wanted that feature. The other two? Less than 10 percent wanted a stopwatch, and even fewer wanted a backlight!
  • Adding brand-name licensing. Our fans asked early and often for licensed properties like Domo, Major League Baseball Players, deadmau5, Cal, and more. We took this feedback, and have been rewarded with significant distribution (Best Buy) and watches that hit passions.
  • Design decisions. We love the design/t-shirt company Threadless. They’re the epitome of crowdsourcing, as far as we’re concerned. We’ve tried to learn from them, and added some of the Steve Blank methodology to every design decision. Before we launch a new limited-edition timepiece, we always ask our fans to vote on the winner. Eventually, we hope to get to a point where we do not produce anything without knowing that there is demand to sell out of that design.

We have kept this ethos while building Modify over the past three years as we took the lessons of Blank and Ries to heart, and still repeat the mantra “We don’t know what we don’t know.” Our company is all the better for this, and we believe that all entrepreneurs should carry a humble attitude. Think a lot and build a great plan. But test as quickly and cheaply as possible. After all, you’re definitely wrong, so why not figure that out quickly?

Aaron Schwartz is the cofounder and CEO of Modify Industries, Inc. The company’s first product, Modify Watches, can be mix-and-matched to allow individuals to customize their look. Modify has been featured by the Today Show (3x), the New York Times, Men’s Health, Self, and many more publications. The products are in Best Buy, Amazon, and a few dozen small retailers.

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