Lean Startup: Doing The Wrong Thing Better?

Eric Reis has created a movement with the publication of his book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.  Based on his experience with consumer software, he encourages entrepreneurs to launch “minimally viable products,” run as many “experiments” with these minimally viable products as is possible to accelerate learning about what customers want, and thereby “pivot” to a value proposition that customers want. It sounds quite compelling until you realize that this entire approach is based on one of the great myths about innovation: that customers have latent unarticulated needs, needs that they cannot tell us.

Theodore Levitt was famous for telling his students that “People don’t want to buy a ¼ inch drill. They want a ¼ inch hole!” Levitt made it clear that a customer’s need – making the ¼ inch hole – is distinctly different from the solution – the ¼” drill.  The need is what customers are trying to accomplish or experience and the solution is whatever they use to do it.

One of the important implications of Levitt’s insight is that, with the help of a skilled interviewer, customers can tell us what they want to accomplish and/or experience. The conventional wisdom that “customers have latent unarticulated needs, needs that they cannot articulate,” is simply wrong when we are talking about what people want to accomplish rather than about product specifications.  Customers can tell us what they want to accomplish and/or experience, such as make a ¼” hole, cut the grass, clean the floor, etc.

What customers often cannot do, and we should not ask them to do, is come up with the next great solution. That’s not their responsibility; that’s the supplier’s responsibility.  Just as a doctor is responsible for conducting a diagnosis on the patient before prescribing treatment and then creating the treatment plan based on his/her medical expertise, so should suppliers take responsibility for determining what their customers are trying to accomplish and where they’re struggling, and then use their expertise to develop the best solution. To create superior offerings for customers, we must first gain a superior understanding about their needs: what they are trying to accomplish and where they struggle. Only after we understand this are we ready to invent new solutions.

If innovation is the process of understanding customers’ needs and inventing solutions that address them, then companies can execute the innovation process in one of two ways: needs-first (clarify what the customer is trying to accomplish and where they are struggling) or ideas-first (generate ideas and then attempt to validate them in the market).  All of the competing theories of innovation fall into one of these two camps.

The critical task for entrepreneurs and corporate innovation teams is to determine how their circumstances dictate which approach to innovation is appropriate for them. The only circumstance in which the lean startup, ideas-first approach, makes sense is when a company has a new technology or offering that is “looking for a market.” That is, if you have developed a unique capability but you’re not sure who cares or who might benefit from it, then launching a minimal viable product can help clarify what value it has and for whom.  It’s a fishing expedition, but that’s all you can do until you know who your customer is and what they want to accomplish.

In virtually every other circumstance, it pays to invest upfront to clarify who your customer is and what you’re going to help them accomplish before attempting to invent or improve a solution. This investment upfront saves many times its cost by eliminating the need for product iterations and failures. Knowing what customers want to get done upfront provides you with clarity about where to focus and what to do before generating solutions.

Nonetheless, the Lean Startup approach can make sense when:

• The risk of failing to address your customer’s most important unmet needs is low
• The cost of experimenting with different product offerings is low

While these circumstances may exist in consumer software, Reis’s background, they certainly don’t exist for many companies. Can you imagine what a disaster the lean startup approach would be for a heavy equipment manufacturer? Covey taught us that keeping the end in mind is one of the 7 habits of highly effective people. Isn’t it also one of the practices of highly successful companies? If you’re going to create value for your customer, you must first identify and then keep in mind their end so that you can help them accomplish it better than your competition.

Overall, the best approach is to determine who your target customer is, what they are trying to accomplish, and where they struggle before attempting to invent or improve a solution. This is all doable today without great expense. This increases your chances of success tremendously because you’ll know where to focus and what to do to create a winning offering.