Lean business modeling: easiest to pursue

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I recently coached a team that went through a 3-week program to build new ideas for their brand. They both were marketing-managers of a major consumer brand with a huge following but the company they work wanted additional revenue models to be developed.

So, the first idea they came up with was complicated. It was so complicated that they really couldn’t pitch it. There were some major blanks in it which they filled up with ‘we have to check with lawyers how this works’. Weeks later, they did very solid custdev, and it turned out the first people they spoken to actually had the problem they were looking for, but were weary for the ‘lawer-solution’ they proposed. They thought of the paperwork and the costs they needed to make to get it going. So, that got them thinking. They threw away some complication in their model to clarify their minds and to get them able to communicate their idea in a way that didn’t include ‘we have to research this’. They did some more cust-dev to really get into the actual problem they were solving, and they found out that there actually was a non-legal way of solving this issue. It was actually quite simple. They tested in context, and yes: results were overwhelming. Because of the huge media-reach they were quickly to find about 60 potential customers willing to use this solution. Because this model was also more aligned with the companies’ business model (but differentiated in revenue streams nonetheless) this was a huge benefit: they now were able to do face-to-face interviews with a group of 10 customers. Interviewing these 10 first customers turned out to be a huge succes. One of the first interviewees was a friend of the business owner. She was very open towards her problem and identified the problem as existing. She also was open for the business idea and wanted to get on-board without further ado. Identifying a big problem which is very obvious but existent is a huge win: you can easily find new customers, and talk with them to help them solve their problem in a clear, consistent way. They did this for at least 4 more first customers: one of the fastest validation rounds I’ve seen to date. Corporate development is hard. And this turned out to be the case for this team. They got some feedback from their managers on the idea: was this enough to proceed with? Could this make additional revenue? Or was this just a big PR thingy? Why was this so well, simple? This got them thinking about the road they traveled: from the difficult-to-pursue idea into this very bright and simple idea which was working. Why did they validate this? Basically: because it was the easiest to pursue. Think about it: if you would develop a business model in a market you do not have knowledge in this can turn out to be a huge risk. It can be financially tricky (hire experts to guide you) but it can also make you vulnerable. The team used their existing knowledge and network to pivot this idea into a field they had a clear track-record in. This is a huge win: first of all you are able to communicate to your direct-peers, and secondly you are able to pitch your idea to anyone without any hesitation. I’ve seen product-owners-to-be struggle with this principle: operate in a market you have no knowledge in, or connection with. Uber founder Travis Kalanick didn’t had anything to do with taxi’s until he founded UBER. Brian Chesky didn’t had any knowledge over hospitality when he founded AirBNB but they opened a whole new market to a whole new audience. That’s kind of a different strategy. So, do you want to do something completely new, disrupting a existing market (taxi or hotels) or do you want to be the best in a existing market that is competitive, but you feel you have a unfair advantage over any competition? If you feel you are operating in an existing market (99% of the time you do) you should have knowledge. In poker there’s a saying which is: ,if you cannot spot the sucker on the table, you are the sucker on the table’. That’s why you need to work on simple ideas that matter to your customers.  

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