By now you should have taken your business
model as far as you can
or should on paper.
Yes, I know you can continue brainstorming possibilities. But endlessly brainstorming possibilities grounded in uncertainty is a recipe for failure.
It's time to get outside the building and gather empirical evidence from people other than yourself.
The first conversations I recommend you have aren't with customers. That will come shortly. But with trusted advisors.
These don't have to be "professional" advisors. They can be a prototypical customer, a potential investor, or another fellow entrepreneur with specific expertise, domain knowledge, or experiential knowledge that applies to you.
The goal for these conversations is identifying your riskiest assumptions.
Remember your business model is "the product" you are building. When building a complicated product under a deadline, you wouldn't start with what's easiest, but what's riskiest.
The same principle applies here. Incorrect prioritization of risk is one of the top contributors of waste.
But before you can correctly prioritize risks, you have to first understand the difference between risk and uncertainty.
Things on your canvas have varying levels of uncertainty. But high uncertainty does not necessarily mean high risk.
Yes, I know you can continue brainstorming possibilities. But endlessly brainstorming possibilities grounded in uncertainty is a recipe for failure.
It's time to get outside the building and gather empirical evidence from people other than yourself.
The first conversations I recommend you have aren't with customers. That will come shortly. But with trusted advisors.
These don't have to be "professional" advisors. They can be a prototypical customer, a potential investor, or another fellow entrepreneur with specific expertise, domain knowledge, or experiential knowledge that applies to you.
The goal for these conversations is identifying your riskiest assumptions.
Remember your business model is "the product" you are building. When building a complicated product under a deadline, you wouldn't start with what's easiest, but what's riskiest.
The same principle applies here. Incorrect prioritization of risk is one of the top contributors of waste.
But before you can correctly prioritize risks, you have to first understand the difference between risk and uncertainty.
Things on your canvas have varying levels of uncertainty. But high uncertainty does not necessarily mean high risk.
II. WATCH THIS VIDEO - This video
will:
* start with a definition of risk,
* show you how to prioritize risk, and then
* walk you through techniques for honing in on what's riskiest in your model.
* start with a definition of risk,
* show you how to prioritize risk, and then
* walk you through techniques for honing in on what's riskiest in your model.
A key
message is recognizing your business model, not your product, as the true
product of your startup.
Thinking
this way is quite empowering as it allows you to apply similar techniques for
building and testing your business model as you would to any product.One of these is tackling the riskiest parts of your business model first.
Building a successful startup is fundamentally about risk mitigation or in marketing speak: “removing all objections”.
How to
Prioritize Risk
A critical
first step is prioritizing what’s riskiest on your business model right now.
Otherwise, it’s easy to fall into the trap of making marginal progress only to get stuck later.
Incorrect
prioritization of risk is one of the top contributors of waste.Otherwise, it’s easy to fall into the trap of making marginal progress only to get stuck later.
For instance, I used to advocate jumping right into customer interviews after “Documenting your Plan A” (Generating the Business Model) but customers don’t always have all the answers and/or getting these answers can take too long. Not to mention, you might be targeting too broad a customer segment, too small a customer segment, or the wrong customer segment all together.
Instead, I recommend spending a little more time upfront prioritizing risks and brainstorming alternative models with people other than customers – aka advisors. Advisors help you identify risks on the “total plan”, while customers mostly care about their problems only.
Note: These
advisors may be potential customers but they tend to fall into the “visionary
customer” camp. For example, they might be startup founders themselves.
While what
is riskiest on your model will vary by the type of product you’re building,
I’ve found some risks to be universal. Whenever I’m evaluating a new product
idea or advising another startup, I always start by evaluating their business
model against these three risks:
1.
Problem
Top on the list is the risk of building something nobody wants. You not only have to be able to clearly articulate the top problems from a customer viewpoint, but you also need to have a clear definition of who the early adopters are and how they solve these problems today (existing alternatives).
Top on the list is the risk of building something nobody wants. You not only have to be able to clearly articulate the top problems from a customer viewpoint, but you also need to have a clear definition of who the early adopters are and how they solve these problems today (existing alternatives).
2.
Channels
Failing to build a significant path to customers is what kills most products. The more specific your early adopter definition, the easier it is to define channels to reach those customers. I usually find startups in the opposite camp – too broad a segment and no clear way to reach them.
Failing to build a significant path to customers is what kills most products. The more specific your early adopter definition, the easier it is to define channels to reach those customers. I usually find startups in the opposite camp – too broad a segment and no clear way to reach them.
3.
Revenue Streams
And finally a business model without revenue is not a business. Even though you may choose to defer charging out of the gate, you need to be able to articulate how you intend to build a business over time. Whatever your revenue model, you HAVE to know how you will sustain your product development effort until then – through customer revenues, savings, external funding, etc.
And finally a business model without revenue is not a business. Even though you may choose to defer charging out of the gate, you need to be able to articulate how you intend to build a business over time. Whatever your revenue model, you HAVE to know how you will sustain your product development effort until then – through customer revenues, savings, external funding, etc.
What
About Solution Risk?
Unless you are trying to solve a particularly hard technical problem (like finding a cure for cancer, or building the next big search algorithm), you will be able to build your product given enough time, money, and effort. The bigger risk is building something nobody wants. I focus on “finding problems worth solving” before worrying too much over feasibility.
Unless you are trying to solve a particularly hard technical problem (like finding a cure for cancer, or building the next big search algorithm), you will be able to build your product given enough time, money, and effort. The bigger risk is building something nobody wants. I focus on “finding problems worth solving” before worrying too much over feasibility.
How to
Tackle Risk
Because the terrain before Product/Market Fit is riddled with qualitative learning, you may be able to mitigate but never completely eliminate any of these risks through a single experiment alone. Instead you need to consciously string together a series of experiments (into an iteration) and systematically eliminate these risks over time.
Because the terrain before Product/Market Fit is riddled with qualitative learning, you may be able to mitigate but never completely eliminate any of these risks through a single experiment alone. Instead you need to consciously string together a series of experiments (into an iteration) and systematically eliminate these risks over time.
