Lean Start Up

Hello, listeners, members, and subscribers! Our fifteenth Moonshots Master episode is here and we are leaping into Entrepreneurship and Lean Start-Up, one of the most valuable methodologies we have ever used!

Kicking off with the team from Productivity Game, we hear a breakdown of Eric Ries’ experience at imvu and how there is so much value in learning what customers actually want. We also get inspired from the folks at Development That Pays, who tell us about the very best MVPs of all time.

As we look to understand more about Lean we go to the master himself, Eric Ries, who teaches us how to utilise a Lean methodology when building your product. Dan Martell then talks about his ‘problem, pain, passion’ framework that he uses to validate business ideas, and how we should never build a business backwards.

Now we’re ready to learn about adopting the habits and framework, we revisit Productivity Game who guides us with the steps to building an MVP. Closing out the Master series episode we have Eric Ries again, who reassures us that many startups have ‘pivoted’ their strategy, and then gone on to become thriving companies.

Our recommended reading list will help you go even deeper into the topic and our shows on Lean Start Up:

What key lesson are you taking from the Master Series shows? Get in touch and let us know! Thanks for listening. That’s a wrap.

TRANSCRIPT

Hello and welcome to the moonshots master series. It's episode 15. I'm your cohost Mike Parsons. And as always, I'm joined by Mark Pearson Freeland. Good morning, mark. Hey, good morning, Mike. I am so excited and I know you are too to dive into this brand new topic that we're bringing on for our members on apple podcast, Patreon and Spotify today in the master series.

I am so ready, mark. This is one big framework, one big idea that has had so much effect on how I work. It is informed so much of the good stuff that I've been part of for the last decade. So I'm dying to dig in.

I tell you what, Mike, it might have the word lean in the title, but there's nothing slim about this.

It's very, very meaty. In fact, today listeners and subscribers, we are diving into the idea of entrepreneurship specifically around lean startup, which I think is pretty well documented around Eric Reese, Mike, but it's just got so much to give us and to teach us this idea of Lean's business models, right?

It really does, because I remember when I was first introduced to it and this whole idea that you can build something in a sort of a lightweight manner. You can test and learn really early and take all of the risk and fear and trepidation out of launching a new product. You can literally shift from this idea of being.

Oh, my gosh. I'm so scared of launching this. I have no idea if it's gonna work, you can shift from that mindset to, I can't wait to share this product or service with our customers because it's gonna help them. It's gonna help them get things done in their life. It's gonna solve some problems.

Like you can really shift towards excitement and away from fear because let's be honest, launching a brand new product. It is super hard. One intent at best attempts is gonna work. It's full of all sorts of problems, unforeseen issues. You've also perhaps most fundamentally, we've all got our own biases about what we think is gonna work and lean startup helps us get over all of those things and actually build something that users want.

They want to keep it. They want to use it. They're thankful for it. And if you're really lucky, they might even pay for it too. Wow.

Mike, if we were ever trying to convince anybody, whether it's our members, our listeners, or anybody in the general public about following Lean's startup, I think you've just made the case right then and there, who doesn't want to go out and create?

I think we all, like you say to build on what you were just saying. We wanna go out and create these products and these businesses that, yeah, maybe they make us money, but also we get a lot of satisfaction from creating work that matters to people that inspires them to maybe be the best version of themselves.

Maybe it's creating a product that helps them track their fitness or just live a nice productive life, whatever it might be, but to make something that customers really want. That's the key thing, isn't it? Yeah. Making a product that matters to people is not only gonna be reward rewarding and solving that real problem, but it's also just a little bit of

fun.

It certainly is like discovering what people need and, finding their problem and then finding the solution to it and get that market that product market fit. It's all huge. And the crazy thing is Mark, that this has all been pulled together. This idea of lean was set up by Eric Reese and he did everything prior to writing the book.

He did everything. He shouldn't. In fact, he worked on a starter that raised and spent 40 million over five years on a product that nobody wanted. Is that not any creator's worst nightmare? that you spend years of your life, millions of dollars. You get it out there and you have this. Oh, nobody wants this.

oh, has that, is that not like the worst feeling mark from that comes lean startup. So what a gift it was indeed, right?

Yeah, that's right. And actually my, I think you and I, we've made the case already, and we've started to reveal a little bit about the history of lean startup and the framework and methodology that came through with Eric Reese.

So why don't we give our listeners and members what they really came here for and that's to get inspired. So this first clip that we've got is from a moonshot favorite productivity game. Who's gonna help us understand Eric Reese's experience and how it led towards him being able to validate a business idea with MVP tests.

In 2004, Eric crease was a chief technology officer of a Silicon valley startup called IMVU IM V's vision was to create a new online product that would allow users to build 3d avatars and interact with friends using their existing instant messaging networks. Their product would combine two popular trends at the time, 3d gaming and instant messaging with complete confidence in their new business product.

They got to work putting in crazy hours to bring their idea to life. After six months, Eric and his team had incorporated all the major instant messaging services like AOL and MSN messenger into the product. And it was finally ready to be released on launch day. They eagerly waited. The thousands of people they thought would download their product, but there was one problem.

No one was willing to download it in an active desperation. They invited target customers into their office. And asked them questions as they interacted with the product. It became obvious after a few interviews that their base assumptions about what the customers actually wanted were completely wrong.

It turns out that people didn't want to use existing instant messaging networks to invite their friends because they didn't know if the product was cool or not. However, people were willing to install a new instant messaging service that would allow them to talk with strangers using their 3d avatar.

That meant Eric's work, trying to integrate existing messaging services into the platform was a complete waste of time. Eric was frustrated having wasted nearly six months of work, building something nobody wanted, but he was thankful for having learned what his customers actually wanted before the company ran out of money.

However, Eric couldn't help, but wonder, did he really have to waste months of work to learn what his customers actually wanted? He quickly realized the answer was no, of course not. Eric could have simply integrated one instant messaging add-on service and shown it to a handful of customers and learned that no one wanted to use it.

Eric took a step back and saw that his approach to building an innovative product was fundamentally wrong. His focus shouldn't have been on executing the perfect plan. His focus should have been learning, which of his efforts were valuable to the end user in the least amount of time. Instead of relying on past experience, intuition or focus groups to determine if what he was doing was valuable, he should have been deploying minimum viable products, a minimum viable product or MVP for.

Is a product made with a minimal amount of effort that is used to test specific assumptions regarding the value of an idea. The story of how Zappos the online shoe company got started is a great example of how to conduct an MVP test. Before Zappos became a billion dollar online shoe company, founder, Nick swim, tested the assumption that customers were willing to buy shoes online.

Instead of building a website and collecting a large inventory of shoes, swinmurn worn approached local shoe stores, took pictures of their inventory, and posted the pictures on a simple website. And then when a customer clicked on the buy button under the image of a shoe, he'd go back to the store, purchase the shoes at full price, then go to the post office and ship the shoes to the customer.

Eventually swinmurn was unable to keep up with the number of online shoe orders. And at that point he knew his online shoe company was a good idea. Once he validated his idea. He could be confident spending time and money, hiring a team and collecting an inventory of shoes.

Oh, Omar, in just a few interviews, Eric Reese and his team realized that their base assumptions, their primary principles for building this product or in fact totally wrong.

Oh, that is everything we wanna avoid. But this is something that the good news is Mike. We do not have to make the same mistake. Isn't it crazy to think that just by a very small amount of user interviews, they were like, We've built the wrong thing. , our assumptions are wrong. And this to me, mark, if we can capture this moment together for you and me and our listeners, I think the big unlock for the rest of the show is here.

And that is you don't have to go and deploy millions of dollars of capital to discover if you've got a good product or not. You can actually do all these early stage tests. It can be as simple as waiting for it, actually focusing on a conversation with the target user, the target customer, and determining if they have a problem.

And do we have a potential solution here? And the thing is that for some reason, we're so quick to launch into, building an army of people to build a thing, but why aren't we talking. The customer to me, this is at the very beginning of it. You can build something very small, like a questionnaire.

You can build like a mock up and you can sketch something on paper that can be the start of the conversation with users. And if you embrace this, you can build, measure, learn, get in this continuous cycle and fundamentally change how you deploy your resources. So you don't go heavy. First you learn, and then you release a little bit of your time, energy, budget, resources, and then you learn some more and then you deploy a little bit more and you can do it incrementally over time.

As you are confident, as you are, rather than guessing what people want. You actually know. And if you chip away at a product like this iteratively continuously over time with validated learning this scientific method is so powerful because at a certain point, you're like, Hey, we got something.

Now we can ramp up at a certain point. You're like, I'm delighted to know that every night when I go to sleep, I know I'm building something that our users actually want. Mark, what did you think of this idea of just coming back to the fundamentals and actually testing your idea up front? I think the revealing part for me is when we hear about Eric Reese and his team working on IMVU and combining two concepts or two ideas that were fundamental successes with customers, the idea of instant messaging avatars, and trying to combine them into one on paper.

It sounds great. I'm sure Eric and all of his team investors, probably family members, all thought he was gonna be a slam dunk, win of an idea. And I love the revealing insight that they went out, launched it and then realized straight away nobody wanted it. But like you say, just a few interviews. Was enough.

In fact, I think the productivity game called out, they had the audacious idea. I think it was about going out and talking to customers. It just shows how unusual it was and how unusual it perhaps still is in a lot of businesses to just get in front of customers. Exactly. Like you've just said in very simple ways of putting an MVP or a simple product in front of somebody and saying, Hey, is this worthwhile?

Is this it? It can relieve six months of wasted time. It can remove that. Like you were just saying fear when you're going to bed, what's keeping you up at night. is gonna give you absolute confidence that what you are creating is valuable to your customers and maybe to your members.

And you mentioned getting things in front of customers.

And I tell you what we love to get things in front of our members. In fact, this entire show is designed, built and exclusively for our members who we are so grateful for their support. So mark, it would only be fitting that we do a tip of the hat to our members, a tip of the hat, a blow on the moonshot trumpet.

And please welcome in Bob Niles, John Terry Marlin, Ken DMA, and Marja Connell, Rodrigo, Yasmin and Liz SI. Mr. Bonura, Maria, Paul Berg and Kelman David Joe, crystal Evo, Christian, hurricane brains, Sam Kelly, Barbara and Bob, Andrea Matthew, Eric and Abby, Jose and Joshua, Chris and Kobe Damien and Deborah Lasse and Steve Craig and Lauren Javier Daniel, Andrew and Rav Yvette.

Karen and Raul, please. Thank you very much. Accept our love and appreciation for being part of the moonshots family. Day in, day out.

Yeah, big thanks. To Raul and Karen for joining and I wanna tip my hat to some of our members who've been with us for over a year now. Dimar can Mario lion, Terry John Nielsen, Bob have all been with us for more than a year.

It is like an anniversary right now. We're super grateful for all of your support because you, our members, you are the driving force behind this whole program. This moonshot train has left. The station is. Really imperative for us that we create something that you value because it is your contribution that helps us pay all the bills, take care of all the different licenses and subscriptions hosting that it all takes to produce such a big show like this.

So a big thank you to you. We really are grateful for your contribution. We hope you're really enjoying Lean's startup and to celebrate our enjoyment of Lean's startup. Why don't we listen to someone new on the channel? It's a YouTube channel called development at that pace, and we're gonna hear about three awesome minimum viable products before diving in.

Let's establish some rules for a proper MVP. It's gotta be minimal. It's gotta be viable and it's gotta be a. Actually, no, it doesn't have to be a product. I'll be showing you a great example of a non-product in a minute or two, it has been argued that the word product in MVP is unhelpful. Steve Cohen has made a strong case for using the word experiment instead.

And I have to say, I agree, but for now let's stick with the P and temporarily redefine it to premeditated, meaning that the MVP must be a deliberate attempt to learn about the market. This rules out cases that look like MVPs in retrospect, but were really full products that just happened to everyone's surprise, developing into something big.

Let's get going, starting at number three, it's a buffer. Buffer's an application that makes it easy to share content on social media, way back in the beginning, they put these two pages on their website. It's a test, certainly, but at this point, not quite an MVP, the next version was better. They slotted this page in between the other two pages.

Now visitors, the website is not just saying, this is interesting. They're saying I want to buy this. In fact, there was no way for anyone to input credit card details or payment details of any kind, but anyone who got this far was at least prepared to think about parting with their money as co-founder Joel gask said, after this result, I didn't hesitate to start building the first minimal version of the real functioning product.

Minimal. Yep. Viable. Yep. Premeditated. Yes, definitely. This was definitely an experiment, but has gone on from this MVP to do really quite well. Its current valuation is something close to 400 million. Moving on to number two, it's Dropbox drop boxes. I'm sure you know it is a file synchronization service, edit a file on your desktop and seconds later it's updated on all of your other devices.

Rewind to the very early days of Dropbox, the team entirely composed of techy types had the basic synchronization working that was easy. The hard bit was gonna be to achieve the same trick on every platform, Mac, Windows, Android, iPhone, et cetera, et cetera, given that the team was all technical types.

You'd have put your money on them. Diving straight in drew Houston, the CEO did something surprising. He made a video, the video just three minutes long demonstrated the same process end to end, but it was more than just a simple demo. It was full of techy and jokes designed to appeal to earlier

where you'll see that not only are the changes from my Mac already here, but if I make, and it worked like a charm in Drew's words, it drove hundreds of thousands of people to the website or beat a waiting list, went from 5,000 people to 75,000 people.

Literally overnight. It totally blew us away. Mineral. Yes. Viable. There wasn't a product that could be used, but there certainly was a product that could be demonstrated premeditated. Yep. Definitely. An experiment. Dropbox also went on to do quite well. Its current valuation stands somewhere between five and 10 billion.

It's time for my number one pick, it's Zappos. It's 1999. Co-founder Nick Swinmurn. I hope I'm pronouncing that right. Wanted to build an online store for shoes, but would people use it? Here's how he went about finding out. He popped down to his local shoe stores. He went into each of the stores and he and I shook, he photographed pairs of shoes.

The photographs were uploaded to a super simple website. If someone clicked on a button to buy a pair, Nick would pop down to the store where he took the photo and buy the shoes. What I love about this one is that behind the scenes, there's pretty well. Zero infrastructure, almost zero inventory. And yet from the customer's point of view, everything appears to be perfectly in place.

Minimal, definitely viable. While this time it's not even up for discussion, definitely viable, real customers, real money, changing hands, real shoes being shipped premeditated. Yes, of course. Zappos went on to do quite well. They were acquired by Amazon in 2009 for a cool 1.2 billion buffer, Dropbox and Zappos.

Three of my favorite MVPs.

I think Mike, what's really interesting when we hear Gary from development pays break down those favorite minimum viable products or as he says premeditation or minimum viable experiments is that there's a real focus from all three businesses, Buffer Dropbox and Zappos.

Obviously we heard a little bit from the productivity game in the first clip of today as well. Is this focus on creating something that's minimal and putting it out? Obviously those three examples are quite digital orientated. They were online. So they could maybe add in an extra screen or design or a bit of communication and messaging perhaps to optimize the experience for customers, but all three of them have this reality.

And I think it speaks back to what you were saying earlier. It's really focused on being minimal and small and agile or lean, and then just putting it out in front of customers and saying, okay what do you reckon? Let's see how customers and people interact with it.

Yeah. The interesting thing about Lean's startup if you get into the real practice of it, is that in building your, your first iteration, your prototype or your MVP, the idea mark it's.

To write as little code as humanly possible. So basically what is the bare minimum prototype or experiment that you could do? So in Dropbox's case, they literally made a video of what it would look like if it was working, it wasn't working, it didn't exist. It was a concept video. It's a future looking video.

This is what it would look like. And because the response to the video was so overwhelming. They're like, okay, we got something. Same thing with the buffer guys or alternatively with the Zappos guys, what they did is they're like, okay, let's do an experiment and we're gonna hold zero inventory. So this is such a great story.

So they would go to the shoe shop and they'd take photos of, put them on the website. Now you might be thinking to yourself, if you are just going to a shoe store, And taking photos of their shoes and putting that online. Then they're already selling it with a retail markup. So when you sell your shoes, you are basically not gonna make any money, but that wasn't the point of the experiment.

What happened in the history of Zappos is once they saw that people, cuz you gotta remember back in the nineties, it wasn't even a clear case that people would actually be prepared to buy a shoe through a browser because in those days you would go into the store and get fitted. So they just had to actually test the hypothesis.

Will people actually buy a shoe online that they haven't tried on in real life? And once they got that experiment validated, they then went to wholesale distributors and were buying shoes at wholesale and started making. The point here is that a lot of people pre lean startup, would've gone and spent thousands of dollars on shoe inventory and set up the store and basically thought to themselves, I hope someone will buy these, but if you use lean startup, you're like you don't have to do that.

It's like drop shipping. You don't have to make thousands of products in a warehouse. You can produce them after they are purchased. So they were really trying to test the idea using Leann's startup. The guys at Zappos were like, okay, let's see if we can actually convince people to buy in a new channel.

And once they proved that, then they could move into subsequent steps. But here's the thing. Unlike Eric Reese, and here's original startup, they validated the underlying fundamental ideas behind the product before incurring any major costs. And this is something we can all do. Do we build MVPs? It doesn't matter if it's a product.

Is it a service? Is it digital? Is it analog? You can prototype experiences. You can create lightweight versions. You can even use an invitation such as a poster or a landing page as a way into a prospective product or service. And you can look at the demand and reaction to the invite, whether it's a, a really nice looking landing page, or maybe you have printed up a big, three poster and said, Hey, here's a product where we're working on.

What do you think? And if people are like I dunno. Or maybe they're like, huh? That could be really handy if he could do that. If he could give me that benefit, that would be amazing in that feedback. Just there you learn everything you need to know. You're like, oh my gosh, okay. That's the bar we have to do.

And okay. We have to meet that and exceed that expectation. Okay. But now we have that clarity. The point is don't wait until you spend millions of dollars and hours. Get these insights right up front. Mark. We've seen it so many times working together on projects. When you get these aha moments up early, it totally changes the trajectory of a project.

Doesn't it? Yeah.

That's exactly right. Rather than being wedded to an idea from the get go. And again, I think my, I would even build from what we are learning today in the master series around lean startup, entrepreneurship and building a product or a business. It actually hacks back, I think, to the idea of growth mindset, rather than being wedded to your idea rather than saying, this is the idea it's gonna work.

I know best what I've done in my career. I know what I'm doing, and I know how to go out and build a team, build a product, build a business, launch it, and be successful rather than going in with that. Let's call it blind optimism, having the mindset. That you can go out and actually talk to customers in a minimal way and learn from them and perhaps be surprised that shows that you are willing to, I think, learn about your customers.

You're willing to be agile, especially this idea of being lean. It's a lot of fun when you can do it. And like you say, you and I we've done a lot of these in our career where we've tested maybe an idea, a product in a very small minimum way. And it's pretty revealing when you do hear back from a customer that the idea is either a spot on and you've cracked it or B maybe it stinks.

maybe you need to go back to the drawing board and change it up again.

Yeah. It's just wonderful. Just embrace that learning and, I. This continuous learning characteristic really defines that entrepreneurial success. And even though Eric Reese may have missed five years and 40 million, the fact that experience sparked him to write the book, the lean startup was truly amazing.

So let's return to the author himself now and listen to his thoughts on the methodology for building an MVP. Let me

say a word about minimum viable product. I know, people will have heard of this phrase at least a little bit. The idea here is we want most startups to be torn between these two different approaches to building a product well, in which I call maximizing the chance of success says, look, we've only got one shot at this, so let's get it.

That's what I talked about. Startup, number one, we're gonna ship it when it's right. And that actually is perfectly rational. If you only have one shot and you wanna take the best shot, you can build the most perfect product you can. The issue is of course, you can spend, I don't know, say five years of stealth, R and D building a product you think customers want and then discover to your shame that they don't.

So the other possible extreme approach is to say let's just do an early release. Often people have heard that phrase, and this just says, look, we'll just throw whatever crap we have out there. And then we'll hear what customers say and we'll do whatever they say. But the issue there is, if you show a product of three customers, you get 30 opinions.

And now what do you do? So the minimum viable product is a synthesis of those two possible extremes. We wanna figure out what's the minimum set of features necessary to engage with those early evangelists to start the learning feedback loop. . And so sometimes I get to ask the question how do you know if you found the minimum viable product and from a theoretical point of view, this is quite challenging.

You could make a really interesting argument that any given feature is absolutely, a hundred percent necessary to learn. But the good news is there's no reason to deal with this theoretical issue because if you're like me and every entrepreneur, I know what you think the minimum viable product is way too big, probably two orders of magnitude, too many features I'm not exaggerating.

So the easy formula for finding out what the minimum viable product is to take what you think it is right now. And cut it in half and do that two more times and ship that. And I know customers are gonna absolutely hate that thing. That's only one eighth, as big as you thought it should be. And that's fine. If you ship that and customers say you moron, how could you have shipped without having features X, Y, and Z? The things that were all gonna be on your roadmap. Anyway, you can say, good idea, good point. And then go build features X, Y, and Z, but you may be surprised. Of course not you, but maybe, a friend.

Who would be surprised to ship a product as I did. And nobody cares. They don't say you are an idiot. It should have features X, Y, and Z, the worst fate of any shipping, any product, this just, nobody cares. You don't get any feedback at all. That's what most features on most products do. They're just dead weight.

So what we wanna do is try to eliminate those and ship without them. Of course that's because visionary customers can fill in the gaps, right? Early adopters can be very forgiving of mentioning features. They see the vision and you can be in dialogue with them going through that learning feedback loop.

Here are the reasons why people don't do the minimum viable product. I'll just try to address them really quickly. First the fear of the false negative. So I ship my minimum viable product. If it had just had that one extra feature customers would've loved it, but because it didn't, of course they hated it.

Duh, why would I bother shipping something? I know customers will hate and there's nothing wrong with that reasoning. All I want you to do is ship anyway. So maybe customers will love it, even though it doesn't have cut feature X and then you can go on and be very successful. And if you're wrong and a really unique feature X, then you can just build feature X.

If you wanna do minimum viable product, you have to be prepared to iterate. And so you have to have the courage to say, yeah, we'll ship something, get negative feedback and respond.

My, this is great. Now we're moving into the part of the show where we're really starting to understand and digest the idea and the fundamentals of lean startup.

And how great is it that we can actually hear from Eric Reese himself, right? Talking about how to release a product, a minimum viable product, but also B how to identify what a minimum viable product of your product actually is.

The thing that he is like calling us out for is, how we just want to Polish and Polish something before we put it in front of someone. He's like tearing off the bandaid, cutting it back, cutting it again, getting as little as possible.

Because what I loved is the argument he made there. So let's say you, you cut too much and you give too little product in your MVP. And the customer says you're missing all these things. Then great. Then, you need them, yeah. Better to have that conviction that you need to build them rather than building just one line too much is time wasted is effort.

That is it. You don't know if you should build them. I love the fact that he's what is there to lose? There is no risk here. If they all hate the first version, because it's too small or it doesn't do enough. That's learning. Good. It's almost, lean startup becomes an expression of a growth mindset, don't you think?

Yeah, I exactly love what you've just said. Which is obviously building on Eric Reese. The fact that there is no risk, if you've got the other features and you are afraid as Eric's calling out a fear of false negatives, that's okay. Insert the feature that you missed out in the first version.

That's all right. Eliminate that deadweight like Eric Reese is calling out. And I think that actually goes against what a lot of us are brought up with. And I think this is why entrepreneurs want to push out the final version as when they feel comfortable because we're oriented around working hard, putting forward our best version of something.

Maybe this is through education and school, and therefore we're not used to creating something that is kinda half baked or not our best work. And I think that when this idea, this framework, this methodology came out, it does feel so. I don't know, Mike I feel like it's the penny drop moment.

You think, of course, why don't we do this? And the reason why I think we don't is because it goes against the natural behavior that we have, which is to only put out stuff when we are ready. And I think that's the way that business has already always been orientated around and what a revolutionary idea that Eric agrees comes up with and he proves.

Through the failure of IMVU and obviously he's making the case for us here in that last clip, but I think it really does go against maybe the fundamentals that a lot of us have when we're trying to release our product or our business, that we are really, yeah. Excited and proud of.

In fact, what we're gonna hear now is from Dan Martel, who speaks to just this he's Hey guys and girls don't build your product or your business backwards.

So let's have a listen to the man.

Number one is how do you come up with the best idea? Because you might have no idea, which is totally cool. A lot of entrepreneurs run into that, or you have a number of ideas. You can't figure out the right one to do it. Here's a quick three P framework for thinking this through.

Number one is you need to know that you have the problem. Like I would never start a company if I didn't have the problem myself, because at the end of the day, you need to understand the mindset of the customer and where they're struggling with. And here's the reality. If it doesn't work out, at least you'll be a customer for the product.

So number one, you have the problem. Two is the pain. Make sure it's not a vitamin. Make sure it's a painkiller. Make sure it's a must have. Not nice to have. All right. So that's the distinction of a great idea. Is this something people really want and are gonna beat down a path to your door?

Or is this just something maybe they would like it to make their life better, which are usually typically hard to monetize and make money from. The third area is passion. At the end of the day. If you're not passionate about your idea, then you gotta make sure that you find one that you are because the problem is what's gonna get you excited, not the solution, finding a customer that you would love to serve and be passionate about that.

That's key. So the first part of the strategy is to make sure that you focus on the right idea. Number two is get feedback from the right customer. So when you have an idea, most of you, you get excited, you talk to your friends, they all go. That would be awesome. Yes, totally. You should pursue that.

What I do that's totally different is I find customers that were comp or use my competitor's product. So if you wanna build innovation, that's cool, but you're probably in a market and you can find customers that currently pay. For that solution and ask them about your specific approach to solving that problem.

Because those people actually have put their money where their mouth is. Whereas if you just go to a general market and you ask people for their advice on your idea, they're gonna be kind. I'm from Canada. Canadians are super polite. They will never tell you that your idea is a bad idea. Do you realize that?

Do you know how much risk you incur by asking people? Hey, what do you think of my idea? No. You wanna talk to customers that have the problem and get their advice. That is the second one. Getting feedback from paid customers. Third is prototyping and not building a product. The problem I have with the word MVP or minimum viable product is it's got the word product in there.

What I would suggest is building a clickable prototype, something that you could sit down and design three core features of the idea, not the future vision. Look in five years. The truth is the world's gonna change. Innovation's gonna take hold. You don't know what that's gonna look like. Just sit down and say, okay, what could we build in a six week product sprint?

What are the three core features that'll deliver value for our customers? And you sit down and you build a prototype. You can use tools like balsamiq or UX pin, or even envision, but you wanna build a clickable prototype. I've seen people use Keynote and PowerPoint. So super simple, build the prototype.

Then here's the key is you wanna run a pilot program. You go back to those customers that you've talked to. You go back to people that you think are interested and you get them to pre-buy the product people ask. What should I charge? My suggestion is 50% off of the first year. Cost that you're eventually when you launch it and here's the deal.

If you put that clickable prototype in front of the customer, you've nailed their pain point in the market. You're excited and passionate about the problem, and it's something that you wanna solve yourself. They're gonna resonate with that and they can join that pilot program. You only have a limited amount of seats, cuz really all you're looking for is feedback as you co-create it with them, you do that two cycles and eventually you launch your public, your product public.

Whoa, this is great. Mike, hearing so much from Dan Martel helping us understand this, I think passion for the product, but also the problem is a great takeaway for me, but also, I mean he's touching upon the magic word. Isn't he prototyping?

He? He is indeed. And that it's continuous that it's co-created with your customers.

So you should, basically you should know your customers intimately. By the time you launch it all begins with solving the problem and not just solving it a little bit, solving it so much that it is a must have product. That bar is, having done so many products, the difference between having a good versus a great product, the chasm mark is so enormous.

If you say we only launch products that are must. What that means is after using your prototype, the customer said this was so compelling. I wanna keep using it. I don't wanna stop. No. Don't stop the MVP yeah. The truth really is few products reach that level because we accept mediocracy or we don't do the work or we don't do enough testing.

We don't do enough iterations. I think what we are starting to learn here is, if you are not prepared to work through that problem and know that problem really well, then you're gonna find yourself putting out into the world. Eh, it's okay. Would you pay for it? Not really a product?

Yep. Yep.

It's very true. Isn't it? I wanna briefly build on Mike, this he references Dan, my references, the idea of using products like envision even PowerPoint and keynote to pull together a very low fidelity prototype. That's something that you and I have even done and it is amazing when you are able to create something, maybe it's a website, maybe it's a very low fidelity application or feature and quickly wrestle it up.

Maybe anywhere between maybe five or 10 minutes you can go so fast. Can't you? And it's so easy to then put it in front of a customer and get just a little bit of feedback. Yeah. And then come back later and say, okay, you told us this is it. This that iteration, as you've just referenced is such a key Coolhouse isn't

it?

Yeah. Do it several times in a day, several days in a week, several weeks in the months in the year, this is the path to learning using this sort of methodology of lean start. You build it, you measure it, you learn, build, you measure it, you learn and just keep going and stick with it. Like any good diet or workout routine, stick with it.

Go for 1% better every day. And before you know it, you will have something that is. Really special and distinct, and market's not unlike when you go to Patreon and comment on a show you'll find so many goodies there. You can actually do some pretty fine, special, meaningful things there where all our members hang out together, where you can share ideas, comment on the shows, or even tell us what shows you'd like us to do next.

Yeah,

That's right. You are members and subscribers as part of our family. Many of you have been with us for over a year. I can't believe that Mike , it really is amazing. and thank you so much for the support, but we want to hear from you. Yeah. Let us know what you like us to cover. Not only in the master series, which obviously you are all listening to right now, the topics, the themes, the ideas that maybe you want us to dig in a little bit deeper into, but you can even reference and call out the weekly show that we put out.

And whether there's an individual or a book that you are really interested in learning a little bit more, but maybe you haven't had the time to dig in deep. Let us know. Log on to patron.com/moonshots or navigate to it via moonshots.io. You can even send us a little email, hello, moonshots.io, and just let us know what you are thinking, because exactly as we're hearing today in lean startup, it's all about you, the customers, the family.

We want to hear what makes, what matters to you. What makes a difference and how can we create a product that's perfect for you?

Said, Mark and we are now rattling through the home stretch of this master series, episode 15 on the lean startup by Eric Reese. What a big concept it is. We could go for hours on this, but we won't.

We will save you dear listeners. But what we will do now is hear from the productivity game on how we can build the habit and the practice of creating a MVP.

If you have an innovative business idea, or you've been asked to work on an innovative project at work, here are the steps that you can take to validate your idea without wasting a bunch of time and effort building something that nobody wants first, write out your vision for the user experience you wish to create after your business product or work project is complete.

Let's say you have an idea for an innovative new board game that combines two popular board games, monopoly, and risk. This game allows you to go around a board and collect properties while at the same time, building up an army to take out your opponents. The first step in developing this product would be coming up with a brief step by step description of how the game is played from the initial setup to the end of a single game.

After coming up with a high level plan for your product, you need to step back, look at your plan and identify any assumptions. You've made that if wrong would result in a large amount of wasted time and effort. So let's say that you've told your friends about your board game idea and they absolutely love it.

They tell you that they'll definitely buy your board game when you complete it. At this point, you may be tempted to just go ahead and spend hundreds of hours making the board game. You're confident about your idea, but there is still one fundamental assumption that you haven't tested. My target customers will actually buy the product.

It's critical to remember that validation comes from measuring the behavior of your target audience, not gathering opinions of the general public. People can tell you that they will buy your product all day long, but that story often changes when it comes time for them to bring out their wallets. The third step is determining how you can build an early version of your product to validate a critical assumption.

The two most common ways to do this is build a concierge MVP or a smoke screen. MVP. The concierge MVP is what Zappos did instead of trying to bring the vision of an online shoe company to life. By buying a warehouse and automating a system of delivery. Zappo's founder, Nick swim Warren started with a manual and labor intensive process that was quick and cheap to set up.

It was just enough to test his assumption and validate his business idea. The smokescreen MVP is about creating a front, an illusion that you have a great product without actually building out the product. It's marketing your product and collecting pre-orders. Before you have a finished product for your board game, this could involve making a two minute animated video that walks people through how your board game works and why they should buy it.

It's like creating a Kickstarter campaign that crowd funds your idea before you spend major time and money building your idea. This is infinitely more effective than sending out surveys and gathering opinions, or simply trusting your gut and going off experience. In the fourth step it's time to show your MVP to a small segment of target customers and then measure their behavior.

At this point in the board game example, you might buy a few ads on Facebook and target a small group of avid board game players. The ad would include the name of your game, a catchy subtitle, and a link to your animated video with the option to pre-order your board game. After releasing your ad, you could measure the amount of clicks your ad gets versus a typical Facebook ad or the average time people are watching your video and the number of pre-orders you receive after allowing some time to observe these behaviors, you go into the last step deciding to pivot or persevere.

If your ad gets a lot of clicks and most people are watching your entire video, but you don't get a lot of pre-orders. It might be worthwhile to spend a bit more time tweaking the design of your board game. However, if after a few iterations in a few tweaks, you still don't get more than two or three pre-orders for every a hundred clicks.

It might be worthwhile to pivot to another board game strategy or an entirely different business idea. Eric Reese says the sign of a successful pivot is that these engine tuning activities, these tweaks are more productive after the pivot. Then before

Mike, we've learned so much in just that last clip, we're really into our production and habit forming part of the show today.

And we're gonna hear maybe I'm not gonna spoil who the last clip might be from, but we're gonna, I wonder who , we're gonna focus a little bit on pivot in a minute. So instead what I'd quite like is just to remind ourselves. As we've just heard from a productivity game, you still need to start with a great vision.

You need to have a vision for that finished product vision can change. And it probably will along the way, but it's great to hear that a lot of us as we're building are business plans or products and these ideas in our heads prior to actually going out to validate with the target audience.

And we'll talk about that in a minute. Actually, having that vision figured out is still important. It isn't something that we just move on from or forget. I think that's quite key. Isn't it?

Yeah, it reminds me a lot of Jeff Bezos who says, be stubborn on vision, but flexible on how you get there.

Great. Which is classic lean thinking. Cuz what you say is let's say I want to build a service that helps people work out and be fit and healthy. Okay. That's my vision. I really wanna help people be fit and healthy. How do you do that? That really depends on where the customer and the user is at.

That's really dependent on what you learn through interviews, testing lightweight prototypes and the interesting emphasis that Jeff Bezos does is says, hold onto the vision behind your product, but be super bowl adaptive and flexible. He said differently. Change it as you learn. And how do you go out and learn?

You build these MVPs. We talked about these different approaches from Dropbox and Zappos, whatever approach is appropriate to the product or service that you wish to launch. Get these lightweight early versions out there to test interest demand. Is it a must have, is this really solving a problem? Is this an essential thing that your customer needs?

And if you do that regardless of the shape or form, you can fulfill your vision, but do so by meeting the needs of the user. To me, mark. I could just bang on about this all day long. It is like obsessing about your customers and the problems they have. And frankly, you'll find you'll stumble your way to success because the news and the reality is that most companies are not customer obsessed.

They become, particularly as they grow, they become a little bit more obsessed about themselves. The internal dynamics, the stakeholders, the power players that are going on and the forgotten stakeholder is the customer. And that's why disruption is always happening to incumbents because they take their eye off the ball.

So if you want to remain on top of your game, and if you want to create value, whatever your mission is, product service, business, community, project, whatever impact you wish to have. Use Lean's startup as a means to become customer obsessed, find their problems and solve them in a convincing way. It is all about this journey, a journey of which you can hold onto that vision, but you can be super flexible on how you get there.

What do you think?

Oh, again, my you've made the case, haven't you? I think you're totally right already throughout the show. We've learned of the value of starting with that good vision with validating via a number of different methodologies and means such as concierge MVP, like Zappo or smoke screen MVP.

And you are exactly right. If you follow these steps, you're bound. Stumble upon perhaps that validated idea, going back to the same audience checking. Okay. Is this it? No. Okay. That's okay. What about this one and releasing your perhaps obsession with getting it right on the first go, which I think a lot of us probably want.

Yeah. And that, that flexibility, that idea of being agile is much more beneficial because you can actually create a product and business. That's gonna make a difference in the world.

With that thought, mark, I wanna give you the opportunity to introduce our last and final thought to bring this lean startup story.

We can't talk about the lean startup story without going back to the author, the man who penned himself, the guy who unfortunately had to go through some of the tough heartbreak in order to uncover this beautiful insight. And that is Mr. Eric Reese. So let's hear from Eric Reese one more time and how he thinks it's all about being able to pivot your strategy.

I was groping around for a way to describe a phenomenon that I kept seeing in the startups I was working with. So I wrote a blog post. The blog posts. It wasn't like coining the term pivot. It just said, pivot, don't jump to a new vision. Now I'm good at encapsulating it crisply. A pivot is a change in strategy without a change in vision.

I show my slides now a cartoon I saw, I kid you not in the New Yorker magazine. There's a man and a woman sitting in an outdoor cafe. And the caption below says, I'm not leaving you. I'm pivoting to another man. So the word pivot is probably my most notorious contribution to the startup vernacular.

Here's the critical thing you gotta understand about the pivot. It's really very simple. You get in your car, you don't boot up your GP. To say, GPS, where do I want to go? It doesn't know it's just a robot. It helps you get where you want to go. So the vision is the destination you have in mind, but if you run into an obstacle, you don't just drive your car into the obstacle over and over again in the hopes that it will be fine.

You, with the help of your GPS, find a way around. Okay. Very simple startups that succeed, all do that really well. They start out with an idea that sounds good, but turns out to be terrible. YouTube started out as dating. And they only, after people were starting to upload all kinds of video, did they make the pivot to a video site?

Flicker was an online video game. One of the things you could do in the online game was upload photos. And since that's the only thing players actually did, they said, Hey man, don't we make it. We call it a zoom in pivot where you take one part of the product and you make the whole product, you shrink it down to just that one thing you make the world's best photo uploading service, even though you meant to make an online game.

First version of Twitter was a thing called Odio, which was a podcasting service when they made it. Twitter only had a few hundred customers of the vanity metrics who are so low. They actually went to their investors and said, we're so embarrassed about these results. Would you like your money back and several of Silicon Valley's best investors made?

What is now a billion dollar mistake of saying yes. Thank you. If you look at PayPal, it is about like digital cyber cash on your PDA. You're like, boy, what kind of visionary is that? But they had the vision for online payments in some form. They just didn't know exactly what it was gonna look like. Let's talk about Groupon.

Because it was one of my favorites. Groupon started out as a business called the point, which was designed to help people do petitions. So imagine that you were like, okay, I wanna do approach. Test at city hall, I'm mad about something. I don't wanna be the only person who shows up. So we have a petition where off a hundred people sign up and say, we'll all go to the protest.

It tips. And we all do it. If we never get to a hundred, it doesn't give us a great idea. Right, wrong. They got no traction at all. It was a disaster and didn't work. So they're like, okay, we gotta try something new. They decide to try those social commerce things. Social commerce is about creating coupons where if we all get a discount, if we all buy at the same time, I think it was two for one pizza in the pizza restaurant, in the lobby of their building.

Okay. That was the breakthrough technology. 20 people redeemed it. Now I don't know about you. If I had been there, I would've known, oh, obviously 20 free pizzas equals the fastest company in history to get a billion dollars in sales. But most of us let's be honest. We would not have known 23 pizzas. Whatever.

The reason the group of founders understood the power of selling 20 free pizzas is that they had failed for a year to get anybody to buy anything at all that actually made them excited enough to try the next experiment and the next and the next. What a pivot is. It is redeeming failure because we learn so much about what's possible.

That's the name of the game. That's what this is about.

What a great story Groupon spent a year full of failure. And then finally the pizza offered crackers. They were off to the races. I think this just shows you how much time we need to spend solving the problem. And it is made up of pivot after pivot.

And you will finally get there. It's a numbers game. You just have to reduce all of the options. Instead tried that, I tried this approach. We tried that. We shaped it up. We changed it and we did this. And then finally got it. How good

was that? Yeah I like this story about pivots from Eric, because fundamentally, I didn't know some of that, flicker being a video game, initially Twitter orientated around audio.

These are. Reassuring to me, because I think what a lot of us might think is, ah, the biggest companies in the world, oh, they were slam dunk ideas. Somebody just knew what it was. It was intuition. The founder came up with the idea and said, you know what, I've cracked it. I went out and launched it. But similar to what you said a minute ago, about Jeff Bezos with strategy and vision and what we've heard today with Zappas with flicker, with Twitter, all of these enormous companies have been successful because they've been able to be agile, be flexible, be lean and move pivot based on how the customers are entering, interacting with the products.

And fundamentally what that does. I think Mike, is it removes that bias that a lot of us as entrepreneurs probably have when it comes to our business product. Owning and having that growth mindset, that ability to pivot and move when your product maybe receives a bit of feedback is much more important.

I think wouldn't you say?

Yeah. Eric, what Eric really did for us then was just, he laid a path that is, it's not easy and it might not be very quick, but it does increase the chances of success greatly. Doesn't it? Mark. I think what we've heard throughout the show is a whole bunch of ideas and case studies in examples that break down lean startup and demonstrate just the amount of value that it creates.

I think the big question mark is looking at all of those clips and ideas that we've discussed, which one has caught your eye.

You know what, I'm gonna call out our new friend. Mr. Dan Mattel, who talks about the idea of passion, the problem and the pain and that concept of dumb building don't build a company backwards.

I think for me, that encapsulates a lot of what we're talking about here, which is built with your customers in mind, your customer problem in mind, rather than launching straight into what you think is gonna make you a billion dollars. What about you, Mike? What's your big takeaway from today?

Listen, just celebrating the pivot.

I think sometimes it can be like, Ugh, didn't work. Ugh. We gotta try something else. But this reminded me that we should be going fantastic. We must be getting a bit closer, even if we know that definitely doesn't work. That's actually progress. I think sometimes I get a bit stuck. I'm like, Ugh, didn't work.

How are we gonna make this work now? So that for me, mark is a bit of an aha, but what an action pack

show mark. Yeah. And what's funny, it reminds me now of Yoko's willing problems. Good. If you , if your company and product doesn't, it's not a slam dunk straightaway. Good, because then you can go out, you can validate it with customers and you can make it better.

I think what a great addition into the Moonshot's master series

library, who would've thought that we could find a way to fit the growth mindset and resilience from Yoko willing into a lean startup show. Mark, this is just getting ridiculous.

we just we, I think it just proves how much all of this is connected.

Isn't it

Mike? Oh my gosh. Yes. Don't get us started on that mark. It's another hour of the show. . Mark, thank you so much to you for diving into the world of lean startup with me, and thank you to you. Our members and subscribers are here for our master series on episode 15, the lean startup. And today we learned.

That it's all about finding out what customers really want to go out and validate your ideas with MVPs. We even heard about some great case studies, three MVP, MVPs that's right. Dropbox, buffer and Zappos. And we heard from Eric Reese that it is all about the methodology of build, measure load. And as Dan said, don't go building your business backwards.

So with all of that validation, you'll also have some challenges and some learnings, but there's never enough pivots in a good lean startup journey. I hope you've enjoyed learning out loud together. I hope you've made yourself and your idea the very best it can be. Cuz that's what we're all about here on the moonshots master series.

That's a wrap.