The Lean Startup - Eric Ries [23]
Zappos began with a tiny, simple product. It was designed to answer one question above all: is there already sufficient demand for a superior online shopping experience for shoes? However, a well-designed startup experiment like the one Zappos began with does more than test a single aspect of a business plan. In the course of testing this first assumption, many other assumptions were tested as well. To sell the shoes, Zappos had to interact with customers: taking payment, handling returns, and dealing with customer support. This is decidedly different from market research. If Zappos had relied on existing market research or conducted a survey, it could have asked what customers thought they wanted. By building a product instead, albeit a simple one, the company learned much more:
1. It had more accurate data about customer demand because it was observing real customer behavior, not asking hypothetical questions.
2. It put itself in a position to interact with real customers and learn about their needs. For example, the business plan might call for discounted pricing, but how are customer perceptions of the product affected by the discounting strategy?
3. It allowed itself to be surprised when customers behaved in unexpected ways, revealing information Zappos might not have known to ask about. For example, what if customers returned the shoes?
Zappos’ initial experiment provided a clear, quantifiable outcome: either a sufficient number of customers would buy the shoes or they would not. It also put the company in a position to observe, interact with, and learn from real customers and partners. This qualitative learning is a necessary companion to quantitative testing. Although the early efforts were decidedly small-scale, that did not prevent the huge Zappos vision from being realized. In fact, in 2009 Zappos was acquired by the e-commerce giant Amazon.com for a reported $1.2 billion.2
For Long-Term Change, Experiment Immediately
Caroline Barlerin is a director in the global social innovation division at Hewlett-Packard (HP), a multinational company with more than three hundred thousand employees and more than $100 billion in annual sales. Caroline, who leads global community involvement, is a social entrepreneur working to get more of HP’s employees to take advantage of the company’s policy on volunteering.
Corporate guidelines encourage every employee to spend up to four hours a month of company time volunteering in his or her community; that volunteer work could take the form of any philanthropic effort: painting fences, building houses, or even using pro bono or work-based skills outside the company. Encouraging the latter type of volunteering was Caroline’s priority. Because of its talent and values, HP’s combined workforce has the potential to have a monumental positive impact. A designer could help a nonprofit with a new website design. A team of engineers could wire a school for Internet access.
Caroline’s project is just beginning, and most employees do not know that this volunteering policy exists, and only a tiny fraction take advantage of it. Most of the volunteering has been of the low-impact variety, involving manual labor, even when the volunteers were highly trained experts. Barlerin’s vision is to take the hundreds of thousands of employees in the company and transform them into a force for social good.
This is the kind of corporate initiative undertaken every day at companies around the world. It doesn’t look like a startup by the conventional definition or what we see in the movies. On the surface it seems to be suited to traditional management and planning. However, I hope the discussion in Chapter 2 has prompted you to be a little suspicious. Here’s how we might analyze this project using the Lean Startup framework.
Caroline’s project faces extreme uncertainty: