Business Model Validation
Scurri will ship anything, not just parcels and pallets at low cost, we match transporters to the customers’ needs at an affordable price. Our service was built with some adoption of Eric Ries’ popular Lean Startup approach although we had nevertheless mirrored Steven Blank’s Customer Development Model to achieve business model validation so we were, largely, addressing the needs of the customer when building the service and features thereof.
Our business model is two sided; we have transporters with whom we work to provide a service to our paying customers. Sometime after our initial soft launch, but still prior to scale, we reacted to transporter feedback and made some significant changes in the core model upon which Scurri works. What we didn’t do was validate qualitatively, in a meaningful way, whether this pivot was something worth doing and that made sense to the customer. We had built a service that served the needs of the customer with the initial launch but pivoted later after discussing this model with our transporters. We exacerbated this by falling into the optimisation trap – our focus after this pivot was on tweaking the product with bug fixes and minor improvements. And, consequently, something got lost in translation.
We found that whilst Scurri was still effective in ensuring we can ship anything, things that other providers with a standardised service wouldn’t cater for, we observed a marked reduction in the sale of the normally well-defined parcel and pallet services.
As you may have read in Rory’s post about Innovative Accounting we had, at this point, began to make a conscious effort to adopt the mind-set of a lean startup and structure our development process accordingly supported with tools such as Kanban.
We found that we needed to go back and validate qualitatively the problem and solution fit and the problem/market fit. In effect we were retrospectively applying Lean Startup to our existing business model, we needed to look back before we could move forward.
In Lean Startup the lifecycle of a start-up is geared towards ensuring business model validation, that we have a finely tuned business with the focus on learning and positioning the business for accelerated growth through scale. This achieved through building the Minimal Viable Product and validating the direction of the business through pivot experiments (bold experiments that confirm the business is going in the right direction or steer the business in the right way).
Eric recommends that one validates the first 2 stages with validated learning, the qualitative validation occurring before, and during, building the product or service. In the first stage one attempts to answer “Do I have a problem worth solving?” and the second stage addresses “Have I built something people want?”
Retrospectively applying this approach or more specifically, attempting to validate the problem/solution in lieu of the service change before moving forward with the problem/market fit, seems very logical and structured in application but people are complex and the practical application of this in the real world can be challenging to get right!
In part 2 I’ll write about the challenges we faced in doing this and the lessons we learned along the way!