Lean Model Framework (Part 2): Lean Resources, Business Models, Customer Truth
The lean startup was first coined by Eric Rises in 2008 and published three years later in his book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. The lean startup is designed to reduce cost and time and help you minimize risks. The principles of the Lean startup are construction, measurement, and learning.
In the old models, it began with the lengthy process of writing a complete business plan. After that, the entrepreneurs were looking for an investor, and by attracting capital, they started to mass-produce the product. The problem with the old method is that new markets change very quickly, and your product may become obsolete before it hits the market. On the other hand, how do you know that customers will accept your product at the end of this long process?
A better approach is to use the lean model framework which is based on lean startup and has been coined by Bernard Schroeder, director of the San Diego Entrepreneurship Center. This approach is based on getting feedback from customers and says if you want to sell a product, just make it! If you want to provide a service, just provide it!
The lean model framework has four elements:
- Rapid prototyping
- Lean resources
- Business models
- Customer truth
In the previous article, we discussed the first element, Rapid Prototyping. This article will look at the next three elements: Lean resources, business models, and customer truth.
“Genius is one percent inspiration and 99 percent perspiration,” said Thomas Edison.
One of the essential principles for becoming an entrepreneur is to learn how to conserve your resources as you move forward. You have to use everything but in a smart way. Your goal is to maximize the opportunities for learning while spending the least amount of money.
The key to becoming an entrepreneur is understanding how you can use other people’s resources to build your product or service.
Having a small budget does not mean that you can not do your job. All you have to do is find a way to intelligently penetrate the resources of others. The mindset of Lean sources is something like this:
“Move fast and break things. Unless you are breaking stuff, you are not moving fast enough.” Mark Zuckerberg, founder of Facebook
The exciting thing is that today’s business world enables entrepreneurs to do many things without having a lot of resources themselves. Lean resources are everywhere, and learning how to use them is very important. Resources to look for are:
These people are a collection of skills you need. Many people build their company based on their expertise and try to make money from what they are good at. Look at the people around you and see if there is a potential startup idea that you can use to launch with their help.You can also find a skilled person to help you in your startup.
Local and Global Talents:
Today, you can use Upward.com or freelancer.com to select your startup employees among the talents who work part-time. You can also use incubator resources, small business centres, startup weekends and more. In addition, some large companies have provided a shared workspace option for entrepreneurs.
You will probably find that there are more resources available out there that you were not aware of.
If you want to sell a physical product, local farmers’ markets or local independent shops are good places to sell. You may find potential guides or even city facilities that you can take advantage of.
You may find that there are many financial resources that you can access. In addition to putting a little pressure on yourself and investing personally, you can also get help from friends, family or other local investors. Just make sure you tempt them and then spend their money in an entirely professional way.
Nowadays, online technology tools are a precious resource. You can use online marketing tools to drive sales on your website or influential sites like Amazon.com to sell your product or service.
Furthermore, you can use technology to reduce startup costs in a variety of ways. For example, use sales platforms like Shopify. You need to be vigilant and use all available tools.
Production and Distribution:
you can access global supply chains using websites like alibaba.com or globalsources.com. Many local manufacturers will help you build the prototype, or even you can use a 3D printer to make it. The fact is that today’s business infrastructure welcomes entrepreneurs. Whereas the previous generation had to build their own factories to be able to produce something, today, there are many ways to manufacture products on a small-scale.
The 3D printing industry is estimated to have grown from $ 450 million in 2013 to $ 5-7 billion in 2017. This is really fast-growing. My prediction is that 3D printing can provide real opportunities for entrepreneurship. You need to learn about 3D printing and observe it as a service or opportunity.
As an entrepreneur, you need to accept that the speed of the market has changed. Being fast means seeing and using opportunities that no one else has seen yet. Because after a while, these opportunities are everywhere.
“The way to get started is to quit talking and begin doing.” Walt Disney
In today’s world of startups, you can not spend many months writing a complex business plan because it gets old before your idea enters the market. It is best to bring the minimum viable product that meets your customers’ needs to the market and modify it once you realize what is attractive and what is not. If your product or service is not successful, you have not lost much, and you are preparing to win the next idea.
“life is like riding a bicycle. … You have to keep moving to keep your balance” Albert Einstein
Creative ideas are great, but it is the business models that govern. The purpose of using a prototype is to build a good business model that can stand on its own two feet. To be successful, you must create a genuine business model.
A business model is a blueprint for successful business performance in the long run. It includes revenue sources, customer base, products and services, financial details and the way to profit the business. Achieving a suitable business model is the most important strategic decision an entrepreneur can make.
A great idea fails with a weak business model, and a robust business model can be one of your best strategic tools. To build a startup that shines in the future, you need to create a great business model.
The philosophy of the business model is to combine six elements to achieve a unique and valuable proposition:
Partners (both strategic and tactical):
These can include your manufacturers, distributors, suppliers, and those who help build and sell your product.
Key Startup Activities:
All you need to do to generate a prototype and deliver it to your customer for feedback.
Startup Key Resources:
Everything you need to present your product. These can include the financial resources available and the people to whom you can outsource.
Outstanding companies deliver their product to the customer in the best way. As a result, the customer feels emotionally dependent when using the product or service. Make your customers happy to have strong relationships with them.
How do you want to market your product or service? This usually involves a combination of direct sales, wholesale sales, or online sales. You need to understand how you can cost-effectively reach your customers.
This includes the specific customers you want to reach first. Successful startups focus on particular customers, attract their attention by using influential people and then move on to more significant market segments.
Once you have these six elements in place, you can develop your own value proposition.
Most novice entrepreneurs think they have to market something entirely revolutionary to succeed. Still, the reality is that most innovations are in duplicate products or services as well as improvements to current or previous products or services. What matters is how well you can solve the problem, not how revolutionary your idea is.
“By listening to the market and doing a better job in your own unique way, you can create a valuable company.” Bernard Scherove
business Model Development
The basis of developing a business model is that you study the market carefully to learn about a specific customer problem.
You then develop your solution based on a unique value proposition. By building a prototype of your solution, presenting it to real customers, and enabling product testing, you validate your unique value proposition. If customers respond positively, you will continue to improve the solution and try it again with customers.
Once you have an acceptable product entering the market, start optimizing the production process and increasing profitability. You can do this in the following ways:
Identify all the optimal revenues that your product or service can generate. There are usually more things than you initially thought, including licensing, retail, marketing or co-investment, online sales, and more.
You are looking for ways to keep your costs to a minimum, and shoul do this by outsourcing, getting a discount for high volume purchases, etc. You do not need a great business plan for your startup to be successful. Instead, you need to build a robust business model and improve it so that it can be used in the real world. This is where the real magic happens.
“We like business plans that present a lot of information in as few words as possible. The following business plan format, within 15–20 slides, is all that’s needed.” Sequoia Capital
Customer feedback can and should be a lifeline for your business. If you can have satisfied and loyal customers and profit from them, you have succeeded in starting a business. Customers are usually correct. So, listen carefully and repeat, transform or change your activities accordingly.
Getting customers to tell you what they think is the most important thing in the Lean model. As an entrepreneur, your customers are your most important ally. If you connect with your customers and stay faithful to the promises you make about your products and services, they will help you understand how to market what you want to sell.
“True or false, customers are always right.” Marshall Field
Customer feedback should be at the centre of your efforts to fail quickly or gain great success. To accept and use the truth of customers, you must pay attention to the following points.
Understand Your Customers:
Get out of your company and put yourself in their shoes. Find out all about the challenges they face daily and what upsets them. When interacting with your brand and other brands, be there for them and examine the quality and shortcomings of the overall customer experience.
Do Not Presuppose Anything:
instead, immerse yourself in what customers are saying and experiencing. Always meet with customers to understand their decisions and preferences. Do not pretend to know them, but go out from behind your desk and experience for yourself what they do.
Predict What Customers Will Need in the Future:
Although customers may not always know what they want, they are never wrong. Predict your customer’s future needs based on your first-hand knowledge of the customer environment, not speculation. Customers usually do not tell you what they do not want, but they help you give them what they want.
Always Segment the Market:
Find a niche for the first customers to come to your product and expand your product from there. Target innovators first, then the eager customers, then general customers, and so on. This way, you can sell your product through Word-of-mouth marketing (WOM marketing). Never try to target the market as a whole; it is impossible.
Build a Great Brand:
Do this with the help of the experience you get from customers. Brands are in customers’ hands. So, if you continue to make customers happy, your brand will be solid and refreshing.
Do this by talking directly to your customers. Listen to their concerns and respond appropriately. This way, they will guide you in the right direction. Every contact they have with your company is a moment when the customers tell the naked truth. Listen to them and react.
Once you know the truth about customers – what customers say about you – you can decide whether to repeat, make a change, or abandon your product or service altogether. You need to decide on these issues based on the feedback you have received from customers.
If you listen carefully, this collective feedback will be valuable because you can improve your product or service. Remember, customers are not always right, but they are never wrong. Believe that you can achieve a great victory.
“The only thing worse than starting something and failing is not starting something.” Seth Godin