Building a Service Using the Lean Startup Model

tinerstake-apple-feat-1015I recently read The Lean Startup by Eric Ries and could not help but think about how IT and AV could benefit from the processes Ries defines. I particularly found myself thinking of the AV integrators and the struggle that some of them have right now with the small margins they are receiving on equipment. As these companies continue to try and find ways to create new revenue, the Lean Startup is a process they should be familiar with. Firms from the large multi-city designers all the way to the small family-owned integrators may not think of themselves as entrepreneurs — they figure they have a defined product, customers and understand their revenue flow. But the business world is constantly changing — and you need to constantly change as well.

The basic concept of the Lean Startup is when creating a new service or product, you need to take risks, make assumptions and then test those assumptions. Additionally, and maybe most importantly, you don’t spend months building products (or services). Why? Because chances are that what you are building will not be right for your customers. At this point you are probably saying, but I asked my customers what they wanted. Perhaps your customer has even been taking part in helping you build your service. Surprisingly, you don’t need to always listen to your customers. It is likely that your customers don’t even know what service they may be interested in. If they are helping you build a product, they are likely helping you make incremental improvements on a service that already exists. This service is likely provided by many other integrators and therefore provides you very little differentiation, and therefore brings little value to the customer. Instead, you need to build what Ries calls a Minimum Viable Product. That is a product or service that does the absolute basic of what is needed. Then you take the next steps in testing, measuring and adapting.

Ries spends a lot of the book discussing the need for testing and measuring what you are building. This is a critical piece of developing new products. The problem that most companies run into during this process is that they are measuring the wrong things. For example, many firms will measure customer growth and revenue growth. However, they may be missing out on measuring indicators such as repeat customers, or the increase in customers who go from a trial service to a full fledged subscription service. Revenue growth is nice (and important) but overall, continued growth and acceptance of the product is even more important.

A quick example of a Lean Startup process would be how we developed our video conferencing service at Bates. Had we asked what people wanted and built a system around that, we would have a very expensive system that was never used. Rather, we saw a need for conferencing. Typically, these are for job interviews. We started with a webcam connected to the dedicated computer in a conference room. Feedback told us our customers wanted to be able to get more people in the image than the webcam allowed. So, we added an inexpensive PTZ camera. We were using Skype as the software, because that is what most people knew. Again, we measured and received feedback and learned that there were issues with Skype. We made a move to Zoom as the software for video conferencing. Other small changes over time also took place. When we heard issues with audio, we added some different microphones. Now we are hearing feedback that indicates people are interested in high definition cameras. Through this process we developed a system that is used several hundred times per year at a very reasonable cost.

While a book on entrepreneurship may not exactly be on your beach blanket reading list this summer, this particular book would be a great addition. It will help reshape the way you think about developing new products and services for your customers, providing them with more value and you with more business.