Monday, 16 June 2014

Small but not Lean or Agile

Several years ago I was working with a start-up company (we will call them Acme) in the technology space.  Start-up companies are known for being very Agile in their approach to the market, but that wasn't exactly the case with this start-up... The company was piloting a new on-line media technology that had significant potential to do very well in the market.  Similar technologies had just started to enter the market, but none with the same feature set as Acme.  Acme's founder (we will call him Fred) had worked very hard for a number of years to develop the technology and he had written most of the code himself.  Acme obtained preliminary intellectual property protection in the US.

Acme's founder Fred had a vision for his product entering the market.  He wanted to get a deal in place with a top tier Silicon Valley company or top Hollywood entertainment company.  Fred had several meetings that he hoped would lead to that one big deal that would make the company.  Unfortunately, none of these meetings ever materialised into the Holy Grail of a deal with a top company.

In the mean time many smaller opportunities to test Acme's product in the market came and went.  Now these opportunities wouldn't necessarily be make-or-break, but they would provide real world feedback, and potentially early revenue streams.  Ultimately Fred ran out of money before he could get Acme's product into the market.  The pursuit of a big deal that never materialised ultimately was the company's undoing.

Could there have been a different outcome using Agile and Lean Startup (http://theleanstartup.com/) principles?  I think so.  To start Fred could have attempted to test a Minimum Viable Product (MVP) in the market with a limited set of users to test Acme's concept.  This may have showed the potential of the product, or showed Fred where he needed to pivot and move in another direction.  This is a part of the core Build-Measure-Learn method that is core to the Lean Start-up approach.

Fred could have also started to realise revenue much more quickly than forever waiting for the one big deal that would make the company.  This was particularly important as Fred's company was bootstrapped and therefore had very limited funding.  Fred didn't have the cash to keep waiting for the elusive big deal while not deriving any revenue from the company.  When Fred realised (I am not sure this realisation came until he ran out of money) that the big companies he was pursuing weren't going to invest, he could have pivoted to seek smaller revenue streams from multiple early adopting customers.  Fred also had other opportunities like embedding Amazon products in his media technology, which would have potentially led to a stream of referral revenue from Amazon.

Fred spent a very long time working very hard on his product.  Adopting some Lean Start-up techniques could have potentially allowed his product and company to be successful.  Using a Build-Measure-Learn approach could have helped Fred to realise much needed revenue early, and to learn what worked in the market.  Having the flexibility to pivot when he saw the go big approach wasn't working could have made his company a success (in my opinion).  Also, finding an MVP that could earn revenue in the market could have provided much needed early cash flow.  All-in-all there were allot of potential benefits Fred could have realised using a Lean Start-up approach, instead of the "go big or go home" approach that he employed.

Until next time,
John.