The Lean Startup Movement
In the past two years or so, Silicon Valley insiders have been studying how startups thrive in that location specifically. People like Steve Blank and Eric Ries are using iterative methods to help startups discover their best business opportunities. Keeping in mind that startup companies are searching for a viable business model, they recommend that these companies "fail fast "as the quickest way to discover the viable business.
This fail fast mentality does not mean to just wing it and try anything. There is a methodology to these experiments. Collect metrics about the business value you believe you are providing to customers. Analyze those metrics and see what has the best response from real customers. As in Agile development, this methodology encourages short feedback loops, and feedback directly from customers.
For example, suppose you have a great name for your Web travel startup. Instead of just using that name, you would test the response rate of potential customers to your name against another control name or more. Let's say the name your team likes is Travel1. So in true Lean Startup fashion, you come up with two other names, Travel2 and Travel3.
Your team buys the domain names and sets up some simple landing pages for each site. Then your team purchases some Google AdWords and links those to each domain name. Next, you validate over a time period if there is any difference in clickthroughs on either name. Once you determine whether there is any significant difference through this data, you can continue to create the actual site using some validated information on what customers perceive as good value.
Applying Lean Startup Methods to Your Organization
Lean Startups give us a model that we can bring into our existing organization to make the organization's decisions more agile in nature. Software developers can help their organizations with this decision making. Simply extend your team's Agile methods to include Lean Startup-style metrics. Since your team will be asking for metrics that directly tie back to business value, this should not be a hard sell. Still many teams encounter resistance, so let's go over ways to get your organization's support.
The principles that we will look at are Quick Customer Feedback, Measurement, and Pivoting. Quick Customer feedback is needed to test our hypothesis in a real situation. Measurement shows all involved the results, in a consistent way without emotion or guesswork being involved. Pivoting ensures that your organization can move quickly to take advantage of the opportunity shown through the Quick Customer Feedback and Measurement.
In this instance, the team is working on a feature for a consumer website. The team splits features into stories and uses a flow-based Kanban system to monitor the progress. The Product Manager has requested a feature to display merchandise the customer would be interested in when they first log in. The first story specifies that the top five sellers will display to all customers. There are other stories that specify other visual cues on different pages that the Product Manager hopes will entice the customers to purchase other products.
Lean Startup Principle 1: Quick Customer Feedback
When the Product Manager introduces these stories to the team, this is where the team can start to integrate Lean principles into the whole process. Starting with Quick Customer feedback, we can suggest to the product manager that we can get actual feedback before investing heavily in this.
To accomplish this, the team can suggest to the Product Manager that they could quickly do a controlled experiment. By placing quick links at the top of the page, they can identify whether any of the stories look to be larger wins than others. For instance, they can place a top five link at the top of the home page, and also a link to recommended products. The experiment will run for a limited amount of time.
Lean Startup Principle 2: Measurement
Now that we have established a way to get quick customer feedback, we must determine how to measure this. Since we are just utilizing links, it should be simple to measure how many are clicked. We are assuming that interest in those links will also translate to sales down the road.
If we run the experiment for a week, and we see that the top 5 link is getting 25% of the clickthrough that the recommended products are getting. When something is 3x the number of interest, that would indicate we might want to implement that first.
Lean Startup Principle 3: Pivot
With that information in hand, we can now pivot and place the recommended products story before the top 5. The product manager will place that story at the top of the Backlog queue for the team. After that story goes through she can see what kind of increase it brings in sales. That may mean baking the collection of those metrics into the story.