Section II: STEER
Once you get past the experimental stage, this information will assist in building a sustainable business to influence or restructure your strategy. The Build-Measure-Learn feedback loop is an important component of the model.
When starting a business, you are taking a leap of faith and making assumptions. Consider the Build-Measure-Learn feedback loop an engine. The value and growth hypotheses provide information and variables to start the engine of growth. Each recurrence of a startup can be viewed as a revving of the engine to see if it will turn over. Once this engine (startup) is running and in place, the process repeats, shifting into subsequent gears.
When testing your startup, you must be ready to enter the Build phase of your model with a product or service (minimum viable product). This MVP allows the product to have a full turn on the Build-Measure portion of the loop. This also assists an entrepreneur in quickly starting the process of learning.
The ultimate goal of a startup is to measure its standing and take a hard look at what the metrics reveal, then implement experiments to shift outcomes more in line with the vision. Startups must ask the hard questions like, How are you making your product or service better? Or, Are the changes we’ve implemented made a difference?
Startups must implement new types of accounting methods to disrupt innovation. This means a baseline must be established to determine how your product or service is performing within the vision, and testing your hypotheses (tune the engine). Then, you must pivot or persevere.
You must either continue on with the product or service based on the metrics you have, or pivot and test the next assumption for growth and value. Take the time to evaluate the performance based on customer feedback and measure actionable metrics, which must be actionable, accessible, and auditable.
Pivot or Persevere
Based on the information gathered, you should be able to make a determination as to whether or not you have made adequate progress based on the original hypotheses, or whether you need to make some changes. These changes are called pivots, which test new hypotheses on strategy, product and engine of growth.
Consider a Startup’s Runway, which measures how many pivots are left in a startup. Essentially, you are measuring the number of opportunities left to make a major change in your strategy.
There are a number of pivots that test these hypotheses:
Section III: ACCELERATE
In the Small-Batch Approach, a finished product is produced every couple of seconds, but the Large-Batch Approach waits to deliver until the end. There is an advantage to working in small batches because any issues in quality can be quickly identified, and the process works faster in solidifying a sustainable business.
Startups use the engine of growth in achieving sustainability, keeping in mind the cardinal rule: New patrons come from the actions of past patrons.
There are four ways these past patrons drive sustainable growth:
These four elements power the feedback loops, or engines of growth. The sticky engine of growth occurs when companies track their attrition. The viral engine of growth occurs when awareness spreads quickly and can be quantified. The paid engine of growth is when money used to acquire customers, as in subscriptions.
A company that automatically adjusts to current conditions in processes and performance is an adaptive one. To move the engine, Lean Startups must have a process that will provide a natural feedback loop.
An adaptive process regulates the speed in operations, giving you a chance to prevent time wasters. Once those are addressed, the speed gradually increases once again.
Utilizing the five why’s technique when discovering potential issues helps identify human error. There will always be a “why” to something that is occurring. Formulating questions that assist in getting to the root of the problem is key.
Remember: The work of a startup is never done, and the mindset must always focus on pursuing disruptive innovation and operational excellence.
“When blame inevitably arises, the most senior people in the room should repeat this mantra: if a mistake happens, shame on us for making it so easy to make that mistake.”
Successful innovation teams must be structured correctly to succeed. A startup also requires less capital than a large organization, but the capital must be secure.
When leading a startup, there must be complete autonomy to develop and market products without red tape and interference from a layered management.
True entrepreneurs must have a personal stake in what they’ve started, such as equity ownership or other forms of bonus incentives. Lastly, it is important to have a platform where all changes and experiments only affect one set of variables (customers or features) at a time.
Does it Work?