Companies exist not to make stuff, make money, or serve customers. They exist to learn how to build a sustainable business. This learning can be validated scientifically, by running experiments that allow us to test each element of our vision. The term “validated learning” was coined by Eric Ries, author of The Lean Startup. Validated Learning is a way to determine if a project is worth pursuing. It provides a framework to your business model that is repeatable.
What is validation? To validate something is to have proven data that shows the major risks in the business has been looked at and solved by the product that currently exists. A major setback can be customer adoption of a fantastic product. What stats can you measure for success? Some include high engagement, long-term retention / lifespan, and more.
Businesses exist to get a maximum ROI. However, you need to have proven viability of the business model (called “traction” in investing terms). Being able to prove that your company has traction, especially as a start up, is important because it keeps the business grounded in reality. It also gives faith to investors that this business will thrive.
If your metrics of successes are the same, you can see true growth and snags in the project lifecycle. You’ll also be able to pivot your strategy through the project lifecycle so that way you’ll be able to avoid major pitfalls before product launch.
However, if you’re always changing your metrics of success, that’s not cool as well because the company’s focus is divided. Here’s an example from Startup Lessons Learned:
“Consider this company (as always, a fictionalized composite): they have a million dollars of revenue, and are showing growth quarter after quarter. And yet, their investors are frustrated. Every board meeting, the metrics of success change. Their product definition fluctuates wildly – one month, it’s a dessert topping, the next it’s a floor wax. Their product development team is hard at work on a next-generation product platform, which is designed to offer a new suite of products – but this effort is months behind schedule. In fact, this company hasn’t shipped any new products in months. And yet their numbers continue to grow, month after month. What’s going on?”
In situations like the one listed above, the company has a great sales force team. These salesmen / women get to know their customers and then sell them a product that does solve a problem for them. However, it takes much hand-holding for each customer in order to make the sale. Many times, the CEO needs to be directly involved, as this cannot be an easily delegated task. When a process cannot be repeated, it is non-scalable. If something is non-scalable, it’s not efficient. Startup Lessons Learned continues to explain the role of the founders and how everyone is scattered working on a product by adding more features in the form of bells and whistles that they’re not sure will even be useful to the customers:
“Worse, the founders are never around – they are too busy going out and selling! Without access to customer data, or even a clear product owner, the product development team keeps building feature after feature based on what they think might be useful. But since nobody in the company can clearly articulate what the product is, their efforts result in incoherence. Worst of all, their next-generation product is so bad they are not allowed to try it out on any customers. The team is thus completely starved of any form of external feedback.”
This is so backwards on running a company effectively. Everyone should be on the same page and have a basic understanding of the goals of the product or service based on data. That way, everyone is in alignment on the bigger picture, as tasks are broken down. And you’ll know that your product will be successful in sales—without having to hand hold people into the sale.
How have you used validated learning in your business? Share below!