Disruption and Lean Startup – improving the Lean Canvas

One of the more interesting tools I’ve discovered lately was the Business Model Canvas. This was created by Alex Osterwald with a huge group of people. I thought it was incredibly useful for putting issues that companies have into a specific context. However, I did feel that something was missing. Something important. The picture linked above is extremely useful for an existing company that wants to put everyone on the same page, but I felt that it would fall a little flat in helping a new company start. There are simply too many unknowns to answer a lot of the questions that are in the frame work.

This is where the book Running Lean comes in. The author decided to adapt the business model canvas into something that a lot of entrepreneurs could use the Lean Canvas. In entrepreneur circles today, the most important thing to focus on is the problem trying to be solved. If you don’t have a clear articulation of the problem you’re trying to solve you’re going to fail. As such, there is more of a focus on the problem, the metrics associated with the problem and less focus on the planned solution. Secondly, Ash Maurya, argues that the best way to use the Lean Canvas is to look at both the problem and customer segment concurrently. Ignoring any potential solution, but looking at the problem you’re trying to solve and the people you’re trying to solve it for. This helps keep in perspective the real goal with your product, solving a problem for a customer that they’d be willing to pay you to solve.

However, I believe that this solution is still missing something which is something of an analysis of the existing competition and the planned solution. While Maurya does highly recommend including existing solutions under the problem, there is no effort to really use them – other than to make sure your product is different than their product. With the Lean Canvas the goal is to interview customers to identify if your existing solution is worth pursing more through rapid continual feedback – leveraging the MVP that I discussed in my last article. There are a few questions that can be asked to help shape the direction of the solution before talking to any customers.These questions come from the Theory of Disruption which argues that there will be less competition over time for the customers you’re pursuing because incumbent firms truly don’t want them as customers.

Does this product compete with Non-consumption? If you can answer yes to this, then you are expecting to undercut an existing incumbent that does not serve an existing market segment. In the case of Radios this mean extremely low quality devices that most people wouldn’t buy. In the case of video games now, you could argue that consoles are competing against non-consumption, this argument makes even more sense in terms of games on a smart phone. If the answer is No, then you need to ask the next two questions.

Does this product represent a sustaining technology? If you introduce this product to the market does it go after the same customers that the existing firms are already attempting to serve? Furthermore, does it go after the highest most valuable customers in those customers segments? If you answer yes to this, you will face extremely stiff competition from incumbent firms. They want those customers and will fight you tooth and nail for them. You will lose against those businesses and should look for a different solution to the problem you’re trying to address. If the answer to this is no, then you need to ask yourself the next question.

Does this product represent a disruptive technology? If you introduce this product would only the least valuable customers decide to purchase it? These would be customers that are being over served by existing solutions. For example, Pandora and Google Play Music both represent solutions for people that are over served by Apple’s iTunes. For customers that find iTunes to be part of their iDevice there’s little reason for them to look outside Apple’s Ecosystem especially since there are solutions for Apple users in that ecosystem. However, for non-iDevice users, iTunes represents a product that has many features that are undesirable. So Pandora and Google Play Music represent a smaller music collection where you never own the actual music you’re listening to even if you pay a premium for the updated services. This is disruptive to iTunes for that very reason.

Including these three questions at the minimum, with a clear understanding as to what they each mean, will help shape the solution to the problem you are trying to solve. Additionally, it will help you understand what customer segments you should pursue from the very beginning. As you are successful in capturing the lower tier customers you will continually improve your product and begin to move farther and farther up market. Which allows you to then truly disrupt the market.

Combining these theories into the Lean Starup approach will help understand the best route to pursue. Furthermore, you might not be able to answer these questions honestly. You will likely need to get customer feedback pertaining to these questions. Don’t as straight forwardly if the customer thinks it’s sustaining or disruptive, they won’t understand what that means. You will need to ask them if a competitor is already offering this service and if they aren’t using it why. If they are using a similar service make sure you try to differentiate between the competing product and high light the differences. Try to understand if your competitor would release this and if their customers would use the service.

That’s where the Lean Startup Build Measure Learn cycle comes back into the fore, you ask questions, learn build again, learn, and continue the cycle.

Innovation and Lean

I’ve been doing a lot of reading around Disruption Theory, Lean product develop, and Lean Startup theory including the application of all three. One of the more interesting aspects of Disruption theory is that people hire products to do specific jobs. This is fairly similar to the questions that Lean Startup and product development ask, what problem are you trying to solve. This hired to solve a job approach seems to instill some limitations if these jobs aren’t continually re-evaluated. For example, in the Innovator’s Solution they talk about RIM and their Blackberry device, now this book was written in the early 2000s, which means that there was an actual debate if they should include cellular service or not. They argue that the job RIM is hired to do is to provide short periods of distraction to business people.

The risk of not re-evaluating these jobs on an extremely frequent basis, such as quarterly or annually, would likely lead to missing out on something like the iPhone. What I found interesting in this section of the book is that they argue against cramming every type of feature into a single device. I think that, at the time, this was sound advice due to the limitations of the technology, the costs of doing that, and immaturity of the markets still.

I believe this is where the Lean Startup approach really would help. Innovator’s Solution basically argues for the minimum viable product for a given job. Afterwards, through collecting data on how the users actively use the product the team can learn in which direction the product should mature. Through engaging continually with the customers it’s possible to understand and, with the right questions, determine if and when the job the product is hired to do is starting to change over time.

For example, iTunes was originally designed to be a light weight music playing piece of software. The job was to play music. Over time, because of the goal to move up market and capture other markets, Apple added new features, changing the jobs that iTunes was capable to fulfill. In some cases this lead to clear overserving customers and has since been accused of becoming bloatware. Using the correct metrics Apple would know if they were losing market share or if their market share was being artificially maintained because of the iPhone/iPad. This means that the music playing space is clearly ripe for disruption. The most popular product is over serving most of the market and causes excess performance drain on systems using the software. This is clearly why, despite iTunes popularity, services like Last.fm, Pandora, and Google Music are so popular. They are meeting the market where the market is and moving.

Over the next few weeks I plan to explore these theories and techniques in more detail. I plan to work towards something of a unifying theory and then attempt to deploy them in a startup of my own and write a book about the process. I have no idea what startup I plan to start but that’ll be half the fun! As a writer for KBMOD, I plan to work with the leaders of that team and deploy these theories with them. Hopefully seeing positive results for those guys.