April 24, 2012
The second year of the Chicago Lean Startup Challenge is fast approaching, with $75,000 in cash and prizes on the line.
The 14-week program features lean startup classes and mentorship, including a dedicated health track. After 10 weeks, judges select 4 finalists to pitch their startup ideas in the final competition, with pitch coaching from Excelerate Labs CEO Troy Henikoff. Last year’s winner was SoapBox.
In exchange for a shot at the prize, startups have to write weekly blog posts and create a video about their experiences up to week 9. Applications cost $100 (refunded if you’re not selected), and you can apply here.
Below, co-organizer Bernhard Kappe, founder and CEO of Pathfinder and head of the Chicago Lean Startup Circle, explains why not all startups are as lean as they think.
Tech Cocktail: Lots of startups call themselves “lean” these days. How important is it to teach the lean startup methodology?
Bernhard Kappe: I think there’s a lot of confusion as to what lean means. It’s certainly a lot more well known as an approach than it was before; we [used to] get things from people that were like, “Oh yeah, I’m lean, I started it in my mom’s garage,” or stuff like that. And that’s changing somewhat – lean doesn’t necessarily mean cheap….
The lean startup approach is one where, at its base, there are two really big parts of it. One is figure out a business model first – so learn first and then scale later – so you have to do a whole bunch of experimentation and hypothesis testing.
And the other part is … the types of experiments you need to do are ones that involve getting close to your customers and go to the source, get out of the building. Talk to customers and understand their problems and their needs first, and target solutions and get feedback on that second. So that’s in a nutshell what we mean when we talk lean startup. But there’s a whole bunch of techniques and there’s a lot of traps that people fall into. And everyone needs advisers and mentors.
Tech Cocktail: Can you give an example of traps that people fall into?
Kappe: First of all, people fall into the trap of, “We’re going to get information from our potential customers. Let’s send out a survey.” Mistake #1. Horrible idea. There’s a time and place for surveys, but really at the beginning you want to understand your customers; the most you would want to use a survey for is to qualify that this is the target group that you want to talk to.
For example, if you were running a survey and just said, “We think these are the top 3 or 4 problems that people like you have. Is that true, do you have these problems, how would you rank these problems?” … Maybe if you ask, “Are there any other problems?” you might get something – but then asking them to rerank those problems after they’ve elicited new ones, going through the process of figuring out how they solve those problems now – you can’t take that conversation to where it needs to go; you can’t take the next step of exploring and getting a deeper understanding. That’s what you have to do first. And that’s why you do things like problem interviews that are face to face (or you could do via telephone or Skype, etc., as well) but not surveys, because surveys are just going to reinforce what you have and not facilitate your actually learning new things.
Another thing people do is they don’t talk about the problems, they just talk about their solutions and try to sell the solutions. They may talk to potential customers, but instead of understanding whether they’re solving a problem or tackling a problem that’s worth solving – a top 3 problem for this particular user – they say, “I have this great solution for this problem” and then they try to sell them on the solution. That doesn’t help you learn at all. So you have to separate problem interviews from solution interviews, and solution interviews have to be not about selling but learning whether you’re on the right track – so which of the features you have can you take away.
People misunderstand what minimum viable product is. It’s the next learning step, and so when you do solution interviews you’re trying to say, “Okay, if we get rid of this feature, would you still buy it? Would you still use it?” You’re trying to really get something down to the core, the essence, beyond which someone isn’t interested anymore – rather than keeping a whole bunch of features in it. But that’s the other thing people do – they build too much and you don’t know which of those features are the right ones.
They don’t ask about pricing – how much someone is willing to pay for something – early enough. That’s like the second conversation you have with someone … ask how much they’re willing to pay for it. Not like that – you name a price and gauge their reaction and [when] you do that with enough people, you can get a sense of what pricing they need to be on something. So there’s lots of little pitfalls and tricks along the way.
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