Over the last three years, our Lean LaunchPad / NSF Innovation Corps classes have been teaching hundreds of entrepreneurial teams a year how to build their startups by getting out of the building and testing their hypotheses behind their business model.
While our teams have mentors, socialize a lot, and give great demos, the goal of our class final presentations are “Lessons Learned” about product/market fit, pricing, acquisition/activation costs, pricing, partners, etc. We think teaching teams a formal methodology around the Lean Framework (business model design, customer development, and agile engineering) is a natural evolution of how successful incubators/accelerators will build startups that add value past their “demo day” slide decks.
Here’s the story of one such team: Jonathan Wylie, Lakshmi Shivalingaiah, and the Evoke team.
Imagine if, in the course of ten rollercoaster weeks, your customer segment changed from executives on corporate campuses to moms on playgrounds, that a tool that was just part of your product turned into the killer product, and that the value of the problem you were solving went from number 47 to customers trying to give you money when you demoed. Here’s how that happened.
We came to the Lean LaunchPad class wanting to build a mobile/web research management system aimed at helping qualitative researchers better manage the media they captured in the field. We were ready to learn, but we were pretty confident we would end the journey in the same market space in which we started. We had a killer team and all the right skill sets. I was a consultant and ethnographer, another teammate was a market researcher, and two others had the software engineering skills to build what the market needed. And what the market needed would, of course, be exactly what we had envisioned. After all, there must be a huge number of researchers struggling with the exact same problems we had, right? Not quite.
Out of the building
In the first four weeks, our team got out of the building and spoke with employees at 42 different companies. We spoke with people at all levels, from front-line user experience researchers at large tech firms to the CMO of a Fortune 500 consumer goods company. From the first 10 interviews, we learned that video is a big problem for researchers who use that medium. It takes an average of four hours to mine every hour of video for the relevant 10 seconds of insight that matters. Thus, we focused our early minimum viable product on helping researchers save money and time in finding insight in market research videos.
We built wireframes as a Minimum Viable Product to elicit feedback and began showing them to customers during our interviews. At this point, things got real — and a bit ugly. Given something tangible, customers were able to start gauging their willingness to use and pay. Turns out, researchers were “just not that into us.” We heard consistently that the product looked good and solved a problem, but it was not an important problem. It was number 47 on their list, and there was no way they could justify paying to solve that problem.
As disappointing as this was, we dug deeper with our questioning. To our surprise, customers started offering ideas on where there might be a true need, one of which was the legal market, specifically the deposition process. We thought this would be perfect for our product. There is a lot of video being recorded, and attorneys need to be able to pull out the insights quickly. After a solid week of speaking with lawyers and attending webinars on real-time deposition software, we had mapped both the technology and the buying relationships. What we learned was that we would just be an incremental feature to the incumbents and would need to integrate our solution with theirs. This combined with regulation from the courts, a two-year sales cycle, and the realization that e-discovery groups are not early adopters, made this an unattractive market.
Technology in search of a market
By this point, we were a technology in search of a market, not a good place to be. The next customer segment we tried was startup founders. After all, they are just like us, researching their markets and needing a way to share insights and keep their teams connected to customers. However, we found that most just assume that what they are building will have a market. The few who did get it felt uncomfortable using video during the interview process.
While at times we felt like we wanted to give up, we began to hear a positive signal in the noise of all the customer rejections. At first it was faint. While customers in all three markets were lukewarm for use at work, they got visibly excited telling us that it would definitely solve a problem at home. Say what?? They told us, “Too bad you’re not making a consumer product so I could document my kids… I would pay a lot of money for that product.” Woah…were customers telling us we are a consumer product rather than B2B?
We settled on a small-scale experiment to test the consumer market. We decided to speak with 10 parents over the course of a week. If five had a similar problem, we would dive deeper. What we got was a landslide of interest. All 10 parents had the problem. Even more amazing to us, nine of them liked our solution!
We learned that parents capture moments with their families to:
- remember and relive later
- share with those closest to them
- pass along a memoir to their kids
To our surprise, it turns out that none of these are being accomplished well with existing products, and parents are stressed because they feel like they are failing in an important responsibility.
Since that initial experiment in class, we’ve validated these findings (and many others) during over 200 hour-long interviews.
We even partnered with the university on a 112-person design workshop to learn more about how photos and videos fit into people’s lives. It’s always an incredible experience to be invited into someone’s home to learn about how they capture their most precious family moments. Sometimes, the learning is immediate and conclusive. Other times, we have to do multiple rounds before we arrive at an answer to an important question.
The result of all this effort is that we have found a large and underserved market in hidden in plain sight, right in the middle of an area that gets a lot of attention: photos and videos!
There’s no way we would have learned any of this unless we were out of the building and in the trenches with parents over an extended period.
Knowing our customers and their problems first hand has given us a huge head start and a competitive advantage. Most entrepreneurs seem to just make this stuff up for a pitch deck or to please stakeholders, but the validated learning that we gained through these interviews and other methods of business model experimentation, is not something that can be easily replicated.
As for our current status, we are building the product, continuing customer development, exploring and validating other aspects of our business model, and yes, hitting the pavement to raise our first round of funding! If you want to talk to us about that, or if you know parents that we should be speaking to, please feel free to reach out.
For all the parents out there, relief (and much more) is on its way.
Serial entrepreneur Steve Blank is the author of Four Steps to the Epiphany. This story originally appeared on his blog.
This story originally appeared on Steve Blank.