Recently my good friend and former classmate,Ikenna Uzuegbunam, asked me to deliver a short presentation to the undergrads at the Coal City University Enugu. The topic was to be one of my choosing within the field of entrepreneurship. I chose to speak on bringing new products to market (or new product development as the more learned folks in the academia call it)
New product development (NPD) covers the complete process of bringing a new product to market, renewing an existing product or introducing a product in a new market. New product development is described broadly as the transformation of a market opportunity into a product available for sale
— A dictionary of business and management
From the definition above, I think it should be clear why I chose this topic for my 30 minute talk. New product development is an important topic to all businesses but especially so for startups because in the case of a startup, the new product IS the business. Meaning that if you do not get it right, your startup will likely fail. The risks are higher in emerging economies (like Nigeria) where entrepreneurs have to contend not only with the standard challenges of the startup life but also with the environmental challenges that come with the regions where they operate.
Given the audience , the immense breadth of the topic and that the context of the conversation was around tech enabled startups, I decided to focus specifically on one method of building products that I always advocate for startups in Nigeria: the Lean Startup Methodology. This article is a rehash of my presentation with some new bits added in. Please see it as a primer aimed at inspiring the would-be entrepreneurs to do more research on the topic.
Before we talk about the Lean Startup Methodology for new product development, let us first look at the traditional way of launching a new business or product.
To do this let us use a semi imaginary business idea called booknaijahotels.com.
Imagine that the year is 2011 and you wanted to start this business.
The idea is simple, a hotel booking website for people who want to book hotel accommodation in Nigeria. Some context for those not familiar with the Nigerian tech space in 2011 , while there was mobile internet available in Nigeria in 2011, it was only available to about 13% of the population and it was virtually impossible to watch a youtube video on any device without considerable buffering (assuming you were wealthy enough to consider streaming a video on your device). 16% of the population leveraged formal banking services and way less than that number used ATM cards. A lot has changed since then.
If you are following the conventional business methodology , you will usually start with creating a detailed business plan and in that business plan you lay out a lot of things that include your strategy , your operations and of course your multiyear year financial projections. The idea is that you use this business plan to secure funding and then start executing.
So let’s assume that you have written an amazing business plan and you are able to use it to convince some investors that may include family and friends to give you money.
The next thing is that you start building the product or the service . You invest a lot of energy doing this and if you are a software developer , this is the point where you immediately dive into designing and coding your product. You build the product, which in this case is the hotel booking website (Some folks even skip the business plan and jump straight to this step). So you build a beautiful website and then you plan for a big launch. The plan is simple, you will launch the product, market it , interested hotels will register with you, you will vet them after which interested people will be able to book accommodation in those hotels. With this plan in mind, you hire staff and invest in a marketing campaign as part of your big bang launch.
But then what happens after that?
There is a popular saying by Mike Tyson that often gets quoted whenever there is a conversation about startups in general and the lean startup methodology in particular: “… Everyone has a plan until they get punched in the mouth”
9 times out of 10 you will find out that everything you had in your business plan becomes obsolete once you launch your product/service.
First of all you launch only to discover that most of the hotels in Nigeria (as at 2011) do not even have reliable internet access and even if they did, they do not understand why they should register with you because they feel that they are doing just fine as it is right now.
Not to mention that most of the people who are trying to book these hotels do not have ATM cards and for those that do, they are very skeptical about using it online. So here you are in the second month of your launch, with a beautiful website that has no hotels on it and a fast dwindling number of site visits per day and by the way not only have you have spent a huge amount of money on marketing , you have been paying salaries for the past year while the product was being built until now. Your investors are asking you “How far?” [Nigerian for “What’s going on”]
I am sure you will agree with me that this is not the way you planned it. You are feeling like you have just been punched in the mouth…by Mike Tyson.
Please do not get me wrong, there is nothing wrong with the traditional methodology I just described . I just believe it is meant for situations where the business model is clear and understood, the market is known and understood and the operating environment is relatively predictable
So what is the Lean Startup methodology saying? And why should you care?
The lean startup methodology was popularized by Steve Blank and Eric Ries, both Silicon Valley entrepreneurs.
It is basically saying that the methods that work for established businesses with established business models do not necessarily work for small high growth companies ( startups) or for businesses in fast changing and unpredictable environments where you do not have data to validate your assumptions.
Basically while traditional businesses have a business model, startups by their very nature are still searching for one. Once you have found your business model you can then look to scale.
Lean startup is an approach to building new businesses based on the belief that entrepreneurs must investigate, experiment, test and iterate as they develop products.
While the conventional methodology is saying that you should follow a relatively linear model:
Plan → build → Launch → Adapt/Scale
The Lean Startup methodology is saying that you should follow an iterative model of :
Build → Measure → Learn → Repeat
with the ultimate aim of finally determining the business model that works for you and then leveraging that to scale.
So let’s use our imaginary business to look at how things could possibly play out if you use the lean startup methodology :
So let’s assume that you want to launch the same business: Booknaijahotels.com.
First thing is you start with the idea of the product or service you want to build.
Your first mission is to find out as quickly and as CHEAPLY as possible if the idea has legs. Do you have a service or product that people would be interested in using? I am sure that the first thing that will probably come to mind is to conduct a survey to ask people if they would use your product. While that has been known to work, you need to always remember that a lot of times what people say and what they do is totally different. So even if they say they will use it, how do you know they will actually use it without taking the risk to build out the whole product first?
Well you could run an experiment. Or a series of experiments and that is basically what the Build → Measure → Learn → Repeat cycle is. It is a series of experiments, each one building upon the previous one until you have a full product/service with a business model that can be scaled.
For our example , I will start with a true story. When Mark Essien the founder of hotels.ng came up with the idea for the business, there were so many unanswered questions, the one of them was whether people were even interested in booking hotels in Nigeria online and he tested this in a very cheap way. He created a simple web page hosted at URL called hotels.ng that had only one thing on it: His mobile phone number. He ended up getting so many phone calls that his battery died and I think he even had to change the number.
Now that was real live validation that there was definitely an audience consisting of people looking to book hotels in Nigeria.
Sometimes you may not even need to even write a line of code to validate an idea. I remember back in 2014, when I was still at Google in the developer relations team, I had been toying with the idea of compiling some developer resources on DVDs and USB drives to enable developers living in bandwidth challenged regions of the world to have access to tools , documentation and videos that they would not otherwise have been able to access. But I had no way of knowing if doing that would be useful to developers in these regions or not given that my idea was inspired by the distribution method of the 90s. One day I was speaking at a developer event at the Co creation Hub in Lagos and for some weird reason that I cannot explain to this day, I mentioned in passing while talking about something else that we were planning to make available developer resources and videos on DVDs. Immediately the room burst into rapturous applause and cheers broke out. Note that at this time, there were no such plans in motion, this was just an idea that I had been privately toying with. The enthusiastic response from the audience encouraged me to invest in the first experiment and that was how the Google offline Developer kit pilot was born. Content from that initiative found its way right across the world and till today , I still come across folks who swear that it was key to them furthering their developer careers. Maybe one day I will write a full article about that pilot.
So back to our hotel example. Let’s assume you follow Mark’s method and it works. The next thing you want to know is if the hotels are willing to get on your platform and if not, what your options are. Also will people be actually willing to pay?
One way to do this is to say: I will pick a particular city and go around and get the names and address and pictures of all the hotels in that city and put them on my website and leave a phone number on the site with my account number.
When people call to request a booking in one of the hotels, I will take their hotel booking details over the phone and then ask them to pay into my bank account. Once I confirm the payment , I will go to the hotel and reserve a room for the customer with the booking details I got. Rumor has it that Mark Essien did the something similar for hotels.ng
Now what I have just described to you is what is known as a minimum viable product which is one of the key elements of the lean startup methodology that is the product of the “Build” stage..
Minimum Viable Product or MVP is a development technique in which a new product is introduced in the market with basic features, but enough to get the attention of the consumers. The final product is released in the market only after getting sufficient feedback from the product’s initial users.
So basically you are creating an end to end experience that delivers value to consumers and provides you with enough insights to take the next step.
So now that you have built and deployed your MVP, your next goal is to begin to measure and track any and all information that you need to move to the next step.
This is the learning phase.
In this example you could be measuring things like:
- Number of visits to your website
- Number of phone calls
- How many phone calls resulted in bookings
- How many bookings resulted in a financial transaction
- What hotels got the most bookings and why
- Where most of your bookings are coming from
So here we are talking about Metrics.
There are two types of metrics:
- Actionable metrics (Metrics that have an actual impact on your business)
- Vanity metrics (Metrics that make you feel good but have no actual impact on your business)
What is an actionable metric for one business could be a vanity metric for another.
Now based on these metrics you have gathered , you can now take the learnings and use that for the next iteration. For example, in the next iteration you could decide to add a payment method on your website and a web form for people to fill in their information in addition to the phone calls option. For the webform you may not even need to code it. You could use something like Google forms which is free and provides the basic functionality. And you will know the right fields to put on the form because you have been collecting the same info over the phone.
Then you measure again.
This time you could also track things like the ratio of phone call transactions to form based transactions and which ones resulted in more money and so on.
And then you rinse and repeat.
By the time you have gone through two or three iterations, you may find that you have the beginnings of a real business on your hands:
Some things to note here is that by this time :
- You have real life data and transactions that you can show at every step and this comes in handy when you are trying to raise funds for your business
- You have done all of this with the minimal resources possible.
- Your next step is usually crystal clear as you data will point you in the right direction
- You have shown the ability to execute , learn and adapt. Investors love that
So with these few points of mine, I hope that I have convinced you and not confused you that the lean startup methodology is something that you definitely want to consider as you look to build and scale your startup idea .
One question that came up when I presented this was around what I think are the biggest barriers to adopting this methodology for startups in Nigeria.
My response was that in my opinion the biggest barrier is that while this methodology is relatively well known among investors in the regions and experienced founders, a lot of first time entrepreneurs are not aware and so they miss out.
Secondly for those who get to know about it and try to implement it, they sometimes are not able to fully take advantage of this methodology due to poor implementation of metrics gathering and analysis and so miss out on the key insights that could move them to the next step
Again please see this article as just the tip of the iceberg, I would advise you to do your own research and reading on the topic to find out if it works for you.
There is a great book by the same name written by Eric Ries on this topic that you should definitely look at and tons of resources out there. One thing to note though is that while a number of startups in places like Nigeria and other similar markets have leveraged this methodology (some without knowing that they are doing so), there is limited content on the internet about this. We need more people to share their experience rolling out new products with the Lean (or similar ) methodology. That way we all learn and grow