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- Now let's talk about Lean Startup

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and hypothesis validation.

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Steve Blank, a Silicon valley entrepreneur

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and a professor at Stanford, UC Berkeley

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and Columbia university,
published a famous article

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entitled "Why the Lean
Startup Changes Everything".

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In his article he stated,

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"launching a new enterprise,
whether it's a tech startup,

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a small business or an initiative
within a large corporation

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has always been a hit
or miss proposition".

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According to the old formula,
you write a business plan,

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pitch it to investors, assemble a team,

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introduce a product and start
selling as hard as you can.

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And somewhere in the sequence of events

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you'll probably suffer a fatal setback.

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The odds are not with you.

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As new research by
Harvard business school's

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Shikhar Ghosh shows, 75%
of all startups fail.

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Imagine, there is a way to predict

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which product initiative or undertaking

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is going to be successful,

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actually before building it,

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rather than after it's
delivered to customers.

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How can we learn from the customers?

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What they need before we
deliver anything to them?

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The worst ways to ask
customers what they need.

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Of course, they would tell
you they want a faster horse.

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According to the famous quote
attributed to Henry Ford,

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"no one could think of a car,

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they just wanted to move faster

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within the confines of what
they were familiar with".

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Whether he was asked whether
he listened to his customers,

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Henry Ford presumably said

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that if he asked what customers needed

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they would have said that
they needed a faster horse.

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The lean startup approach

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relies on the concept
of validated learning.

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This principle describes
learning generated by prototyping

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or implemented an initial idea,

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and then measuring this
against customer feedback

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and this way validated effect.

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Typical steps in validated learning

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include the following.

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Specify the goal.

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Specify the metrics.

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Act to achieve the goal

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and analyze the metric,

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whether it's progress
in achieving the goal

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or improve it and try again.

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As Eric Ries stated in
his book, "Lean Startup",

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build, measure, learn.

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Each test is a product hypothesis.

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And once the test is completed,

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the validating learning tells us

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whether to pivot or try something else,

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or persevere as Eric Ries attributed.

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In order to organize and
structure validation experiments,

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companies use a simple template,

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which is sometimes referred to as the

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"lean validation canvas".

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Look at the template on your screen.

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It allows to make assumptions,

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put the most probable hypothesis first,

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look at the measures related
to validating this hypothesis

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and then record pivot
or persevere decision.

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Step by step,

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the validation canvas is
used to record each customer,

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their problem to solve,
the riskiest assumption,

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the experiment and the results.

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There are multiple types of
lean startup experiments.

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For example, if we believe that customers

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are liking opportunity to
take a small business loan,

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if their credit history is at
risk, we can do several ways.

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We can offer them such a loan

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and see whether the risk is worth taken.

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We can at least let
them apply for the loan

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and see which loans can be
underwritten, which cannot.

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Either way we will know,
are customers interested?

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Are they ready?

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Is it really a risky proposition?

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So that's the exploration.

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Interaction with the customer
that focuses on their problem.

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The other type of lean startup experiment

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is called GAMBA, observing the customer.

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The third one is the pitch,

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which is interaction with the customer,

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with the attempt for the customer

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to buy or subscribe to your service.

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Another and very interesting example

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is called concierge experiment.

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A company called seamless,
which is similar to grub hub,

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it delivers food from multiple
restaurants upon order.

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First, when the concept
came up about 10 years ago,

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there was a lot of concerns
whether the model would survive

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because you can go to
a specific restaurant

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and other food from there.

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If you like Chinese food,
you will go to Chinese place.

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If you want American food

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you will go to a diner and so forth.

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However, without even having
any contracts with restaurants

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seamless decided to offer this service

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in a specific area of San Francisco,

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and what they did once
they received an order

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through the web form?

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They would just go, buy food
and deliver it themselves,

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even at a loss.

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Within one month, they knew
that the model is viable

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and that allowed them to build a very

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strong and profitable business around it.

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And as you know,

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it has been confirmed
now a few years later.

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So that that's about lean startup

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and how can you use it
to validate product need.

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Now, let us talk about
modern product practices,

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how they take this
concept to the next level.