Lean Startups

Aspiring entrepreneur Ranga Yarlagadda had a rare  opportunity to attend a "Lean Startup" event this past weekend in LA. He tells us that it was a mind-blowing experience that really altered his perspective in several ways.

He put together a quick note (see below) sharing his thoughts and insights. We felt that this would be of great utility to anyone about to start-up and hence, here it is:


What was the event about?

Ø According to the website "Lean Startup Machine is a three-day workshop where attendees use Customer Development and Lean Startup principles to validate an idea for a new product or service"

Ø The goal is to build a Minimum Viable Product - the minimum amount of effort you have to do to complete exactly one turn of the Build-Measure-Learn feedback loop.

Ø The winner of the event is defined as "The team that shows, through evidence, the most customer validation for a new product or service."



What did I learn?

Ø SO, YOU HAVE AN IDEA? An idea in itself is worth NOTHING. Ideas are dime a dozen these days, lots of people have lots of ideas, and everything you ever possibly thought of, someone has for sure thought about it. ACT on your idea, let it take a life of its own a.k.a let it out and see what is possible!

Ø YOU THINK YOU KNOW THE CUSTOMER? Trying to really really understand the customer is imperative. If you can get a customer to really explain to you what the problem is, what he thinks should be done about it, that is GOLD. We all think we know how to do market research (at least I did), by fielding surveys and questionnaires, but go talk to REAL people on the street and they will almost always have some interesting insights. Folks in the lean community call it, "Get Out of The Building" or GOOBing. Cliched but rarely ever taken care of before building something.


Ø DON'T SPEND YOUR LIFE ON SOMETHING NO ONE WANTS! Do NOT persevere if what you're solving/building is not painful enough. People love telling stories about how they ate frozen food, slept on friends couches, roughed it out when it was tough and went on to strike GOLD. These make for amazing media stories that people love to read, but the real trick is to know when to walk away and when to persevere.

Ø BE A PIRATE! Do whatever it takes to make it, because the only time anyone cares is when you make it, otherwise no one gives a damn! Just to give you an example, we created fake landing pages among other things that were endorsed by reputed brands and names, did they sue us? Of course not! Do they know? I doubt! Did it drive traffic? Maybe! Like my friend said, I am not promising you that I will take you to the moon, but as long as it's in the "possible" realm, DO IT!

Ø TOO MANY COOKS SPOIL THE BROTH! We were a team of five, all smart and insightful in our own unique way, but it is a nightmare to quickly agree on something and execute! Agreed, there wasn't enough time to gel, but I think it's best to have lots of advisors (it's free and you don't have to take them seriously if you think otherwise) initially and 2-3 people at the most involved in building a company. 

Ø YOU CAN BUILD A COMPANY OVER THE WEEKEND! Yes, that is right, you heard me, if I did it over the weekend, anyone can. It really is that simple. What a lot of people (with fulltime jobs) struggle with is this notion that they are busy in their "real" jobs and that they need to quit to start something substantial. Complete BS! So stop giving yourself (and the rest of the world) excuses and commit to doing something. I'm not saying it's easy, but a little commitment goes a long way you know!

Ø YOU CAN GET CUSTOMERS TO PAY WITHOUT HAVING DONE ANYTHING! Say what? That is correct! Don't spend six months building the "latest and greatest" version. Stick to the basics and always ask yourself, what is the least I can do to satisfy/acquire a customer? And then, always exceed their expectations, get their feedback, and iterate.



What do I plan to do?

Ø TAKE ACTION! Easier said than done, but this is at the heart of LEAN. It is a call to action to quickly run "business experiments" to test your hypothesis. And this can be done without a team!

Ø INVALIDATE MY ASSUMPTIONS! This one is hard to swallow, but you have to learn to quickly know if your assumptions are right or wrong. And if they are wrong, just move on to your next big idea. Trust me the world will be a better place!

Ø NETWORK! NETWORK! Go out and actively seek the people you aspire to become one day. The community thrives on this! No matter how busy their lives are, they always WANT to everyone around them to succeed. It is incredible how much you can learn over a cup of coffee from a few folks.

You can reach out to Ranga at https://www.facebook.com/ranga.yarlagadda

Ode to an entrepreneur

Starting your own business is a risky thing

We wonder what ideas we can bring 

To ensure that the venture is a success 

And not one where your head is buried in your chest

The entrepreneur actually learns on the job

Over time, the right crowd and he hobnob,

Discuss ways how the business can grow

And how to shut down operations if they are slow.

He takes decisions that are termed as rash

The sceptic thinks that he is full of trash

However, there are a few who believe

And will raise money and make others see

That the project was indeed not a waste

In time, the sceptic will improve his taste

The project will boom for a while 

And the proprietor will travel many a mile

And then one day, when it will arrive

The entrepreneur will have a different drive

The profit made from project one 

Will be used for project two (but he won't be done)

And once again the cycle will go on

And will never stop, but don't think of it as a spawn

It's of course the life of an entrepreneur, you see

Because for him, a life without risk will never be


Addendum by Mukesh, from his experiences: 
You need to go there, and you need to drive.
To drive is all what you should always thrive.
Its not just about to live, but to feel alive. 



Addendum by Sasikanth, from his experiences: 
And like a kid, do not wail
When your first ventures, they all fail
Many such ghosts you have to flay
To make your mark and have a say

Common Sense #Fail

In my previous post I mentioned about writing on 'common sense' later, so here it is.

Entrepreneurship is a lot of learning. A big portion of it is breaking of some of common-sensical myths. It would be a huge help to learn about them beforehand for entrepreneurs (Especially if he/she is getting into business without much of a background of it.)

We observe lot of patterns and rules in life, and after some time we start calling those as common sense (Usually, based on what we think is common. Anyway that's a different point). 

Some examples:

• If you fill a bottle with water it will fill up
• If you drink it, it will get empty and your stomach will fill up
• If you throw a ball up, it would come back

Ok, I'll stop here lest I be labelled silly again.

There are similar ones that a first timer business person would imagine to be just common sense and expect them to be true, but learns the hard way usually:

• If there is an extra work, there will be an extra pay too 
• If you deliver what client wanted and he approves it, you will get paid. 
• When someone says, "We are looking to have a long term association with you", he means it.  (After some initial days we started having a good laugh when someone uttered this line, while bargaining)
• Finance guys will only take as many leave as others. (This one is my favorite. People involved in payment collection would know how many times have they heard "Our finance guy is on leave today")
• People will take email as proof of communication. (Oh yes, this is wrong too)
• Someone who wanted a thing very very urgently, gets it delivered in time, will also make payment in the same very very urgent fashion. 
• You will be paid and valued for things which require mental work   (I was once told work required in conceptualisation and graphic designing in brochure printing was like chutney along with Idli and should be free)

And then I came across this classical quote:

Just because you are vegetarian, it doesn't mean a lion will not eat you.

And it cleared up a lot of things. A lot of things which were not making sense to me earlier, started making sense. And now all of those learnings I mentioned above are just -- common sense :)

Intention is not to dissuade a budding entrepreneur. It is just meant to make him/her aware of what is to come, and reducing the surprises. These are usual issues that all businesses face (Especially in India. More about that later though), and most of them get through. So get yourself prepared, and just go get it.

-----------

My points have been mostly on payments, as it is all about business and business is a lot about money. There are other points too, but these were on top of my head. Will add more when I remember them.

Meanwhile if you have been an entrepreneur, or are currently now, please feel free to add your "common sense items" in comments.

The Big Daddy: Funding

Now, this is one thing that every entrepreneur talks about. Obviously, it is the most crucial of things. Who does not try reaching out to Angels and VCs?

But, just like 80% of Engineers passing-out of college each year are not job worthy, the reality is that 95% of entrepreneurs are not fund worthy.

And the good news is that, it is 100% in the entrepreneur's hands to identify that s/he is in the 'not fund worthy' bracket and work towards over coming it. You would be surprised at how easy this is, once you have gauged yourself and realized where you stand!

So, how do we know if we have scaled the wall and entered the worthy 5%? Where do we stand now and how do we improve? Is there a framework to follow? Can there be one at all?

Phobia for MBA jargons

I used to have (and still have to some extent) a phobia for MBA jargonic terms.
Of course who can make out anything of "Paradigm shift in the market cap as per the prototype studies shown by the co-branded channels is going to drive incremental time-phased growth in the emerging alignment of resources." 
(More of such BS can be found at Gobbledygook generator)

Driven by the instincts, accompanied by the jargon-phobia and assumptions on how people and businesses behave, I started the business while ignoring the usual adages of doing market research, validating ideas, having some business plan etc.

It appeared that everything should be driven by common sense*. Just like you would expect volume to go high when you turn the knob, one would expect to make business on doing good work. It seemed that MBA jargons would only lead to analysis-paralysis and prevent us from taking the plunge.

That was not best of the decisions I made.

Having been there and done that, I now understand how those jargons and doctrines have been arrived at and why they are important.

There are guidelines like Don't think too much. Just do it. Those are in general suitable for people who tend to over analyse or are too cautious to take plunge. But not for people who are ready to take plunge into anything if their instincts tell them to do so.

I think a new entrepreneur should definitely look at following in the beginning:

• Do the market research and competition analysis. See what are the unmet needs and how strong are the needs.
• Don't just check if people would like the service/product you are offering. Also check whether they would be ready to pay for that, and if yes, how much. 
• Do think of how and how much money can be created this way. (Business plan) 
• Do talk to lot of people of the industry (if existing) or the relevant industries with open mind. Just let them speak about their experiences and learnings. Best if they are entrepreneurs too.
• Do listen to all these people. But then do what your instincts and mind tell you after ingesting what they shared.
• Try quick prototyping and iterative validations with your potential clients/users and focus groups.
• Do read up a lot on stories of other businesses and do not shy away from business jargons (Of course the trick lies in finding the right balance)

Have fun.

Best.

*More on how can possibly common sense fail, later

An Ideal Market Profile to Start Up in

Every start-up in gist, is an idea extrapolated into a product/service, eventually building a brand/property for the company which can generate sustainable revenues for the company.

This is a very standard and cliched line. Make sure you read behind and beyond the words and not just between them. I learnt 4 key questions to answer there

• Is the idea solving a critical problem or wish of a large enough market?
• How educated is the prospective customer group about the feasibility of your product/service and does it help them overcome the inertia?
• Is the brand or the property that you're building not-so-easily-perishable due to factors external to yourself?
• How big is the revenue pie that you're biting into and how big is your mouth?

 I didn't have answers to them when I was struggling with a small start-up and that because, I hadn't even questioned myself on these lines back then. Now since I know the questions let me try and answer them.

Answers to them lie in selecting <insert the blog post tile here>

• Chose a market which you are a part of or are striving to be part of, so that you know or even better if you have experienced the pain points. For example, a geek is usually a better technology entrepreneur than the CEO of a retail company. Similarly an aspiring author is more suitable to start a publishing services company than a technology enthusiast.
• If you think your child's education is costly, educating a market is going to cost a start-up its fortune. Make sure your prospective consumers know what you want to sell to them. Let them tell you their problems and what they think will solve them. And, Tada! you should have it delivered to them. Period.
• All entrepreneurs are intrinsically control freaks, I consider it good. Along the same lines, make sure your business model is as fool proof to as many external factors. No point bothering about everything in the world out there, but some of the things you should insure against in your business model are, dependency on other businesses, offshoring or outsourcing, expansion plans and more importantly your people resources. Also make sure that the competitive nature of your target market doesn't restrict your business. For example, if you are a vendor to amazon cloud based products then make sure, you cater to rackspace products as well as private cloud infrastructure.
• In my opinion, an ideal market profile is something of current sizing of 25X if its full potential is 100X. If you can plug in at a 25X sized market, by the time it grows to even 50X, your aspirational market share should be atleast 20%. Although this one factor is also about the persoanl comfort zone of an entrepreneur, whether he wants big piece of a small pie or a small piece of a big pie.

Disclaimer:

PV = nRT

 Being a Chemical Engineer by education, I would compare this juggernaut of Ideal Market Profile to something like the Ideal Gas Equation. Although there is nothing called an ideal gas, we all build out models and solutions trying to come tantalizingly close to it. Just like in the equation, for as many variables, there always is that eternal constant R, that in a Start-Up is you, the startupper.

Strategy: As far as the mind can see

So...what exactly is strategy? How crucial is it to start ups?

Well. It is a pity that I had to learn this the hard way. I also wonder why I did not learn or understand this at LBS. Maybe they taught it but because I was inexperienced then, I could not relate to and hence, not retain it.

Strategy is like the ring on your finger. It needs to be a perfect fit. You need to be clear about what finger you would wear it on. You need to be clearer about what finger it is not for. To be of use, it needs to have a hole!

What defines a ring is the hole. What defines your company's strategy is what you are NOT going to be. First make a list of the most important customer needs you wish to address. Not more than three, I would say. Then, ask yourself - what are the trade offs I would make in order to excel at the things that the customer needs the most. These tradeoffs are what are going to be your USPs. They will guard you against competition. If you are a start-up, never ever do the mistake of assuming that you can do everything equally well.

For instance, if you are about to set up a coffee shop, since there are already tons of them, you might want to choose 'stellar service' over 'price', 'value added services' over 'just food' and 'do what you like ambiance' over 'only the best interiors'. That distinction is important. You got to choose where you will under perform in order to perform well on parameters that really matter. If you do not, Coffee Day or the most celebrated local bakery will surely eat you alive!

This was one mistake that I consistently did at Habits and then at, Ludus. I wanted to provide a great variety and huge choice, at optimal prices and good service. I also wanted to provide stellar ambiance and an option to play into the night.  I was keen to attract corporate employees on Thursday and Friday, college students from Mon to Wed, and Families on Sat and Sun.

Too many aspects to concentrate, I would now say. It would not have been wrong if I had deputed a champion and funds to focus on each aspect individually. 

IT: You have got 'E'-mail

• How important is IT for new ventures today? 
• Can one do without it? 
• What extent of IT knowledge should the founding team possess and what can be outsourced?
• If you are not a person with IT background, is it really possible to learn it on the go and make the venture a success?  

This is very crucial for start-ups. For me, IT is not just about having a website or a face-book page. I wish people come out of this thought. IT is also about back-end systems and processes followed for smooth operations.

And do not mistake, it is one of the most important things in today's business environment. Not taking advantage of the technological advancements would be a sin! Even if you do not have the funds to have comprehensive IT systems in place on day 1, having 100% clarity about what you need and how you need to phase it is important, very important.

Even if you are not a coder, I suggest that you spend quite some time (6 months to 1 year) understanding technology, its scope, scalability and limitations yourself. It would be a blunder not knowing or doing even this. Begin with social media, the basics of digital advertising (including google ad-words), SEO and then, get into all those free tools to create and manage your websites (wordpress etc.). For the back-end systems, excel is quite an evolved tool! You do not need customized software that costs lakhs. If you search a bit on the net, you will find ample advice and quite a few free tools for almost everything you need! And if you are coder, go ahead the extra mile and dig deep.

Only after this should you consider bringing a CTO on board or hire a technology partner. If you are outsourcing or engaging a company to be your tech partner, be very very careful. I strongly believe, from my experience that amazing IT systems could be built in as much as only 50k or as high as 10lakhs! It all depends on your knowledge. If you do not put in the trouble to do the above, please be ready to be taken for a ride - no matter how much of a professional and how efficient the technology 'partner' is. You will be shelling out 12-20$ per hour and there will be no end to it.

You will have to understand the following yourself:
1. The IT systems you need - align them with your business
2. The purpose of each (revenue generation, cost saving, branding etc.) and their prioritization
3. The risk of failure
4. The scheduling and budgeting
Ask as many experts as possible for advice, search the net to the hilt, post and seek advice in all possible online forums and professional networks.

Finally, you would do well to always remember that IT is not a tangible asset. You cannot resell it. Whatever you invest into it can be recovered only from effective utilization of it to A) generate revenues or B) save costs. Hence, it is a great double edged sword. If you put in the effort to clear the fog and be able to see 2-3 years ahead, you will rock. If not, it will just be another failed investment and will demotivate you to the maximum extent.

May be a starting point would be to start 2-5 years ahead. Ask yourself 'how and what would the customer behaviour be 2 years from now, and 5 years from now? How would my competitors be behaving then? What might the industry trends be?' You would be surprised with the insights you get for yourself once you start thinking this way.