Eric Ries defined a startup as follows:
“A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.” (Ries, 2011) p.37
The segmented view of sub processes
imaging incubating demonstrating promoting sustaining
expected outcome
Exciting, unique technology based idea linked to a market need
Definition of idea’s technical feasibility, commercial potential, and plan for taking it further.
Incorporating the technology value and retaining a lead in the market.
competition
Preparing a business case and plan for
commercialization, crafting the technology or product platforms, testing with lead customers
Launch of commercial version of product or process.
capturing a profitable share of market quickly
Adequate return on investments for what it cost to support.
providers of venture capital, development partners, colleagues in other functions and business partners.
First-stage or start- up financing. Government
3rd stage and other expansion-related
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All startup needs to offer a product, and the product needs to be iterated many times to reach a sustainable business. Many of the mechanics, such as A/B testing, of how to iterate one’s product has been used throughout ages under various disciplines. Eric Ries organized these method and sorted them into executable steps and proposed the Lean Startup methodology in 2008. The methodology claims that startups can decrease the chance of a final failure by shortening product development cycle by using a combination of business-hypothesis-driven experimentation to introduce many smaller tests and to use these
tests to iterate product offering. (Ries, 2011) P.72. This is coined by Ries as validated learning. Ries’ over claim is that if startups invest their time into iteratively building services to meet the needs of early customers, they can reduce the market risks and sidestep the need for large amounts of initial project funding and expensive product launches and failures
2.2.1 Definition
At the core, the methodology has the following keywords and definition:
Minimum viable product: A minimum viable product is the “version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort” (similar to a pilot experiment). (Minimum Viable Product: a guide, 2009) The goal of building an MVP is to start learning on customer behavior as fast as possible to validate business assumptions. At the starting point, the startup has a hypothesis of a product or a service which might have enough of value for customers to buy based on the founder’s believe. The team is to use ways to test and validate the assumption. The key is utilizing testing methods to increase the effectiveness of return on investment for resources put in. (manpower, or capital)
Figure 2-2 The Build-Measure-Learn cycle to validate business assumptions and to refine product offering through market testing. Source: The Lean Startup
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Continuous deployment: Continuous deployment, coined by Timothy Fitz, is a process
“whereby all code that is written for an application is immediately deployed into production.”
The method results in a much shorter product cycle time.
Split testing (A/B testing): Is a commonly used methodology to perform controlled testing for user response. By presenting different versions of a product to customers at the same time, the observer can study the differences in behavior between the two groups and measure the impact of each version on an actionable metric. (Ries, 2011) p.126
Actionable metrics: Actionable metrics can lead to informed business decisions and subsequent action. (Ries, 2011) P.130 these metrics should accurately reflect the key drivers of a business.
Actionable metrics is the opposite of the vanity metrics. Vanity metrics are numbers that make the result look good but actually serves no real value.
Pivot: A pivot is a “structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.”(Ries, 2011) P.120. Steve Blank defines a pivot as “changing (or even firing) the plan instead of the executive (the sales exec, marketing or even the CEO).” (Blank & B Dorf., The Startup Owner's Manual: A step-by-step Guide for Building a Great Company, 2012)
Innovation accounting: Innovation accounting is a concept to measure progress, to improve entrepreneurial outcomes and to hold innovators accountable by setting up milestones and to prioritize work. (Ries, 2011) p.18.
Build-measure-learn: Since all startup has an idea for a product or service, the fundamental activity is to turn that idea into actual products. If s startup runs out of resource before able to create a sustainable product, it dies. A company’s ability is determined by its ability to ideate, quickly build a minimum viable product of that idea, measure its effectiveness in the market, and learn from that testing process. The build- measure-learn loop is a learning cycle to validate business ideas. To emphasize speed as a critical ingredient to product development. This fast
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iteration method allows teams to discover a feasible path towards product/market fit, and to continue refining the service or product being offered
Pre-totyping - Make sure you are building the right it before you build it right.
Pre-totype it is a PDF created by Alberto Savoia back in the 2011. He suggested that he would very much love to write the proper book for pre-totyping but it would take months to complete and he had no indication that such a book would be worth writing. Far too many books fail in the market. Most of them fail not because they are poorly written or edited, but because there aren’t enough people interested in them. (Savoia, 2011) Reid Hoffman, founder of Linked in once said:
“if you are not embarrassed by the first version of your product, you’ve launched too late.”
The PDF is all about mechanics and toolsets to find the right it to build. Spending time and money building stuff that no one cares, or wants to spend money on, is a waste of time and energy.
Savoia suggested several definitions for pre-totyping. His favorite one is
“Make sure - as quickly and as cheaply as you can - that you are building the right it before you build it right.”(Savoia, 2011)
2.3 Summary
In this chapter, the author presented several literature that is related to product iteration and commercializing a new business idea. Literature such as the nine sub-processes from the
Commercializing New Technology were introduced at the beginning of this study to reflect on the experience of Voltset.
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3 Research design
3.1 Introduction
Author’s experience suggests finding insights is difficult without having actual experience, therefore the research is in explorative in nature. The author found this design structure to suit the need for flexibility in analyzing the target firm, and limit the subjectivity that could otherwise have been pre-imposed on the research, and can allow for new knowledge of findings to emerge.
This, however, also implies that the data results is not to a scientific significant level. Babbie support employing an explorative research design when investigating new topics or issues.
(Babbie, 1989). Before the research goes on, aligning definition could be important.