Delivering Customer Value Through Lean Startup Methodology

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A common challenge for large companies, startups and entrepreneurs is if a product will be adopted by consumers. The lack of consumer interest disregards factors such as investment size, usability and brand, causing products from companies recognized for their innovations to be discontinued due to lack of users. According to Steve Blank, founder / co-founder of 8 Silicon Valley startups and innovation teacher, startups do not fail for lack of technology, but for lack of customers.

We at Venturus also suffer from the same problem and are also looking for ways to meet this challenge, which goes far beyond thinking and developing cool technologies, but how technologies can meet our customers’ known (or yet unknown) demands, their pains. and expectations.

As a company that serves diverse segments and types of customers, the search to know them and meet their needs also needs to be diversified, so we use various tools and frameworks that help us understand the specific demands of each of our customers.

In this article we will address a customer experience using Lean Startupi, which is a methodology designed by Eric Ries and published in a book of the same name, which consists of a quick trial process that helps answer the unsettling question: Should a product be built? Partnering with Lean Startup is transforming the way we develop software for this client.

 

Understanding Lean Startup

This methodology, although focused on startups, can be applied to the context of large companies, based on business hypotheses, such as ideas for new products, features or services. Next is Customer Discovery, which aims to understand the customer, his or her context of operation, identify their Tasks, Pains and Gains to be met, as well as the benefits provided by the proposal. At the end of this process, it is possible to conclude whether there is a fit between customer needs and the proposed solution. This process is interactive and if there is no fit, you can modify the initial proposal and validate it again with the customer information.

After some interactions, if there is no fit between the proposal and the customer demands, we have a clear signal that the proposal should not be implemented. Once the fit is observed, there is more confidence that there are customers who recognize the value of the proposed solution and thus the problem raised by Steve Blank is minimized. Then move on to building the business plan, which must also be validated with potential customers. For startups, this phase is important for structuring and confirming that the new business is sustainable and scalable.

It is important to note that so far, several decisions have been made about the viability of the proposal, but there is no product or service development yet. This should happen only after confirmation that the business plan is indeed viable.

As stated above, Lean Startup is a rapid experimentation method, so agile development methodologies aimed at rapid experimentation and constant increments are critical to the success of the solution.

 

 

Applying Lean Startup

Unlike startups, in large and already established companies, it is natural to distance themselves from the Research / Development team and end customer, because in these companies there are specific teams for each purpose: customer service, marketing, product, research / development, etc.

In our specific case, combining Lean Startup concepts with the use of analytics tools (tools that collect application and service usage information) required broadening our research horizons to understand why a cool feature in our eyes was so little used by users. In parallel with this, we were discussing the development of a new feature and a new question arose: does this new feature meet the demands of end customers?

 

It was certainly an opportunity to use Lean Startup concepts.

 

Still according to Steve Blank, large companies may have hypotheses about fit products and customers, but they need to be confirmed leaving the offices and going to talk with customersii. As a result, we focused our efforts on the Customer Discovery phase as we wanted to understand the causes of our feature’s failure to fit as well as learn about our application usage patterns. Getting out of the office and talking to clients is not natural for engineers, more comfortable with algorithms and exacting questions, yet we take the challenge and follow Steve Blank’s advice.

The strategy used to get out of the office and talk to customers was Value Proposition, which is to identify the set of benefits perceived by the customer using the solution, which is why they would choose to pay for the solution. We will detail this shortly, but it is important to note that these benefits are completely different from features and technologies.

To identify these benefits, we use interviews with people who could be potential customers of the proposed solution, where we seek to identify Tasks, Pains and Gains related to the scenario of the proposal. Despite the name “interview”, there is no questionnaire with ready questions. The interviewer should prepare in advance a script of the information he wants to address and keep it in mind, but this information should be naturally approached in a conversation in which the interviewee is listened with empathy.

During the conversation we identify their tasks related to our context and seek to delve into this theme, to know why that task, as this will be key to identifying the benefits. In this way, we identified pains and gains related to the theme discussed. It is interesting to note that the identified pains and gains go beyond material and concrete issues such as financial return, often the pains and gains are emotional or social, for example a gain would be social status.

To make the execution of Value Propositioniii systematic, Alexander Osterwalder created the Value Proposition Canvas, as part of the Business Model Canvas also created by him, both owned by his Strategyzer companyiv. With the Value Proposition Canvas, Alexander Osterwalder made it possible to visually map the Tasks, Pains, and Gains identified in the interviews with what the solution promises to deliver. If there are problems with this mapping, the solution is probably not appropriate or needs adjustment.

The Value Proposition Canvas created by Alexander Osterwalder runs through the diagram below. On the right side (round) we find Jobs, Pains and Gains identified through user interviews. On the left side (square) we have proposed Products and Services, as well as Gain Creators and Pain Releivers.

 

(Fonte: https://designabetterbusiness.com/2017/10/12/how-to-really-understand-your-customer-with-the-value-proposition-canvas/)

 

At the top of the image we have the Business Model Canvas thumbnail where we see that the Customer Segment is the right part of the Value Proposition Canvas, and the Value Proposition is the central part. For Alexander Osterwalder, the business model needs to be prototyped as well as products and services, which is why it proposes Value Proposition as part of the Business Model.

In the video https://vimeo.com/152440705, Alexander Osterwalder himself fulfills the Value Proposition Canvas of Tesla cars. The image below shows this Value Proposition Canvas:

 

(Fonte: https://designabetterbusiness.com/2017/10/12/how-to-really-understand-your-customer-with-the-value-proposition-canvas/)

 

It is important to note that Tesla has a customer hypothesis: upper middle class men with salaries over $ 100k. From this hypothesis they identified the tasks, pains and gains  of these potential customers and then the product is designed to meet these demands.

Considering the end result, we see that the demands of the hypothetical customers identified in the Customer Segment section have been met, resulting in a car that caters to the audience that was originally intended and became the object of desire in the market.

In Alexander Osterwalder’s video, cars like BMW and Mercedes are listed as expected earnings, showing that design, performance and social recognition are important to these customers. To meet these expectations, Tesla cars deliver good performance, focus on design, style and technology. In the area of pain battery problems are major and in response to this, Tesla provides fast charging and battery charging points network. In addition, the internal space is not compromised with large batteries.

All the benefits that Tesla cars provide their customers seem like good choices, but they are in fact good as there is a direct mapping to their customers’ Tasks, Pains and Earnings.

 

Solving

Getting back to our original problem, getting out of the office and talking to people allowed us to define user profiles for our features, identify their pains and expected earnings, that is, we performed the Value Proposition Canvas Customer Segment and checked to see if we had fit with the solutions. of our app. This allowed us to answer the questions:

 

1 – Why the low adhesion of our feature already in production? 

The construction of the Value Proposition Canvas has allowed us to conclude that we have identified the right pains and gains. However, when designing painkillers for pain, we failed to add restrictions that make it difficult for end users to adopt the feature. This will require us to rethink these conditions so that the user’s pains are actually resolved.

Another finding of this process is that the feature had a feature code defect that required a quick fix and update of the production system. This scenario shows why agile development methodologies are critical in this process enabling rapid problem detection as well as quick fixes and solutions.

It is important to note how customer focus has allowed us to identify our shortcomings in both requirements and execution.  Certainly, these are lessons learned for future projects.

 

2 – Does the new feature meet the demands of our customers? 

Again the Value Proposition Canvas has led us to the conclusion that there is indeed a significant customer profile that will benefit from our feature and that we have identified their pains and expected earnings.

For this new feature, we implemented a prototype and experimented with some users for ten days, which led us to the conclusion again that pain relievers needed improvements and so a new cycle was started.

Beyond answering these two questions, the use of Lean Startup and Value Proposition Canvas concepts is changing the way we develop products and services, taking the focus off technologies and features for delivering value to our usersv.

 

 

_________________________________________

References:

i The Lean Startup: How Constant Innovation Creates Radically Successful Businesses. Ries, E. https://books.google.com/books?id=19forYX7NLQC

ii Product Fit, Steve Blanks – https://www.youtube.com/watch?v=HIfzzDXPZqA

iii Value Proposition Design: How to Create Products and Services Customers Want. Osterwalder, A. and Pigneur, Y. and Bernarda, G. and Smith, A. and Papadakos, T. https://books.google.com.br/books?id=jgu5BAAAQBAJ

iv strategyzer.com

v https://www.forbes.com/sites/eilenezimmerman/2015/04/20/steve-blank-on-why-most-startups-fail-and-itsgot-nothing-to-do-with-technology/#1a3f2abd20cc

 

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