The Lean Startup - Eric Ries [61]
Startup productivity is not about cranking out more widgets or features. It is about aligning our efforts with a business and product that are working to create value and drive growth. In other words, successful pivots put us on a path toward growing a sustainable business.
INNOVATION ACCOUNTING LEADS TO FASTER PIVOTS
To see this process in action, meet David Binetti, the CEO of Votizen. David has had a long career helping to bring the American political process into the twenty-first century. In the early 1990s, he helped build USA.gov, the first portal for the federal government. He’s also experienced some classic startup failures. When it came time to build Votizen, David was determined to avoid betting the farm on his vision.
David wanted to tackle the problem of civic participation in the political process. His first product concept was a social network of verified voters, a place where people passionate about civic causes could get together, share ideas, and recruit their friends. David built his first minimum viable product for just over $1,200 in about three months and launched it.
David wasn’t building something that nobody wanted. In fact, from its earliest days, Votizen was able to attract early adopters who loved the core concept. Like all entrepreneurs, David had to refine his product and business model. What made David’s challenge especially hard was that he had to make those pivots in the face of moderate success.
David’s initial concept involved four big leaps of faith:
1. Customers would be interested enough in the social network to sign up. (Registration)
2. Votizen would be able to verify them as registered voters. (Activation)
3. Customers who were verified voters would engage with the site’s activism tools over time. (Retention)
4. Engaged customers would tell their friends about the service and recruit them into civic causes. (Referral)
Three months and $1,200 later, David’s first MVP was in customers’ hands. In the initial cohorts, 5 percent signed up for the service and 17 percent verified their registered voter status (see the chart below). The numbers were so low that there wasn’t enough data to tell what sort of engagement or referral would occur. It was time to start iterating.
INITIAL MVP
Registration 5%
Activation 17%
Retention Too low
Referral Too low
David spent the next two months and another $5,000 split testing new product features, messaging, and improving the product’s design to make it easier to use. Those tests showed dramatic improvements, going from a 5 percent registration rate to 17 percent and from a 17 percent activation rate to over 90 percent. Such is the power of split testing. This optimization gave David a critical mass of customers with which to measure the next two leaps of faith. However, as shown in the chart below, those numbers proved to be even more discouraging: David achieved a referral rate of only 4 percent and a retention rate of 5 percent.
INITIAL MVP AFTER OPTIMIZATION
Registration 5% 17%
Activation 17% 90%
Retention Too low 5%
Referral Too low 4%
David knew he had to do more development and testing. For the next three months he continued to optimize, split test, and refine his pitch. He talked to customers, held focus groups, and did countless A/B experiments. As was explained in Chapter 7, in a split test, different versions of a product are offered to different customers at the same time. By observing the changes in behavior between the two groups, one can make inferences about the impact of the different variations. As shown in the chart below, the referral rate nudged up slightly to 6 percent and the retention rate went up to 8 percent. A disappointed David had spent eight months and $20,000 to build a product that wasn’t living up to the growth model