Riskiest Assumption Assessment

What MVP Should you be Building?

In last week’s post, I described the one thing your MVP should do – check it out for good and bad examples of MVPs.

To recap…

An MVP tests your riskiest assumption, with the least effort. Click To Tweet

Based on the above, a couple things about MVPs become clear:

  1. To know what MVP to build, you must know your riskiest assumption.
  2. As your riskiest assumption changes, your MVP will change.

In other words, creating your MVP(s) is a journey – one that starts by validating your riskiest assumption.

Once you validate that riskiest assumption, a new assumption will become the “riskiest.” That means you’ll create a new MVP, or modify your current one, to validate it. You’ll continue this process until you acheive Product-Market Fit.

Of course to start the journey, you have to know what your current riskiest assumption is…

What’s your Riskiest Assumption?

Determining your Riskiest Assumption can feel like black magic. With so many assumptions to choose from…

  • You can build a product that makes customers happy.
  • You can find customers who will buy it.
  • The customers will pay enough for it.
  • Etc.

How do figure out which one is “riskiest?” How do you even evaluate the “risk” of an assumption?

After helping thousands of startups at accelerators and 1-on-1 validate their business models, I’ve seen a clear pattern of “riskiness” has emerged. A pattern so clear that I’ve been able to create a simple tool that quickly tells founders:

  1. What your Riskiest Assumption is.
  2. What MVP should you build to test it.
  3. Where you are on your path to Product-Market Fit.

Just answer the questions in the Riskiest Assumption Assessment and then take a look at the 5 Phases of Product Market Fit below to understand exactly what your next step should be.

If you want a hand taking that step, the Assessment will also tell you the most helpful exercise for you in my upcoming workbook series, “FOCUS Framework: How to Find Product-Market Fit” (launching May 3rd).

What MVP should you be building? Let's find out... Click To Tweet

The 5 Phases of Product-Market Fit

On your path to Product-Market Fit, there are five phases of assumption validation you’ll progress through. In order of “riskiness”, those phases are…

  1. Finding Early Adopters for your product
  2. Offer Testing: You can reach your Early Adopters
  3. Currency Testing: Your Early Adopters will pay you
  4. Utility Testing: You can satisfy your Early Adopters
  5. Scaling to Fit: You can achieve Product-Market Fit

Based on the results of your Riskiest Assumption Assessment above, identify which phase you’re in now to learn more about the MVP you should build, and see what’s ahead of you on your path to Product-Market Fit.

1. Finding Early Adopters for your Product

The riskiest assumption, for every startup, is that there are people actively trying to solve the problem your product will solve for them – these are the people we refer to as your Early Adopters.

In particular, your goal during this phase of testing is to validate:

  1. There are people already trying to solve the problem (Early Adopters)
  2. You know how they describe the problem
  3. You know the emotions they experience associated with the problem
  4. You know where/how to reach them
  5. The deficiencies of their current solution

Experiment to Run: The best technique for validating these assumptions is the customer discovery interview.

Interviews will answer any questions you have regarding the assumptions above, and set you up for success in validating the rest of your assumptions.

Metric to Measure: What percentage of customers you interview report taking steps to solve the same problem w/n the last 6 months? Once 60% of your last 10 interviewees report actively trying to solve the same problem, in my book, you’ll have found your Early Adopters.

2. Offer Testing: You can Reach your Early Adopters

During your interviews, customers will tell you where and how to reach other Early Adopters. Your goal in this phase is to validate what they told you.

In other words, you’re testing that you can find more Early Adopters, you know what to say to them when you find them, and that they’re eager enough for a solution to the problem that they ask you for more information.

MVP to Build: To validate this assumption, you’re going to test a combination of marketing channels and marketing messages based on the results of your interviews.

Potential MVPs:

  • Ad campaigns
  • Cold email outreach
  • Cold calling campaigns
  • Becoming member of forums/communities
  • Social media outreach
  • Attending conferences, meetups, etc.

Metric to Measure: Once your Early Adopters’ response rate to your “Solution Offer” (i.e. click on your ads, respond to your emails, etc.) is high enough that you can clearly see a path to Product-Market Fit, you’re ready to test the next assumption.

3. Currency Testing: Your Early Adopters will Pay you

Once you’ve validated you can reach your Early Adopters, you need to test if they’ll “pay” you sufficiently to solve the problem.

In this case “payment” can be in the form of actual cash, or it can be something else that leads directly to your Product-Market Fit (e.g. usage of your product, personal data, etc.) depending on your business model.

MVP to Build: To validate this assumption you’re going to actually ask for “payment.” While you won’t usually take the payment (because your product hasn’t been built yet), you’re going to ask for it and measure how many Early Adopters try to pay you.

Examples include:

  • Landing page with pre-order functionality
  • Requesting a Letter of Intent after a solution interview
  • A mobile app w/ just enough functionality to measure the number of downloads and opens

Metric to Measure: Once your Early Adopters “payment” conversion rate is high enough that you can clearly see a path to Product-Market Fit, you’re ready to test whether you can start solving the problem!

4. Utility Testing: You can Satisfy your Early Adopters

Now it’s time to test whether you can actually solve your Early Adopters’ problems. While it can be tempting to automate your first couple attempts at a solution, there’s usually a more efficient way to to test this assumption.

MVP to Build: manual solutions are the best way to test whether you can solve an Early Adopter’s problem.

While they make take more of your time to solve a customer’s problem, manual solutions are much faster to build, and even faster to iterate on, than automated (i.e. software) solutions.

Examples include:

Metric to Measure: Once you’re solving the problem sufficiently well that your Customer Lifetime Value and your Viral Co-Efficient are high enough that you’re tracking towards Product-Market Fit, you’re ready to start scaling your solution!

5. Scaling to Fit: You can achieve Product-Market Fit

Once you’ve validated that Early Adopters exist, you can reach them, they’ll pay you, and you can solve their problems sufficiently, the only assumption left is that you can scale until you achieve Product-Market Fit.

MVP to Build: now is the time you get to automate your solution, scale to multiple marketing channels, and branch out to your second and third customer segments.

Examples include:

  • Beta version of your software
  • Software-based pilot for a large customer
  • Running outreach campaigns in multiple channels simultaneously
  • Multiple, simultaneous, landing page test targeting different customers

Metric to Measure: At this point you’re measuring that all your previous metrics (e.g. response rate, conversion rate, Lifetime Value and Viral Co-Efficient) are all still tracking towards you achieving Product-Market Fit.

Want Help?

I know that’s a lot to digest, but you now have an overview of the entire path to Product-Market Fit.

If you’d like more detail on any of the phases above, including:

  • How to define your Product-Market Fit metric (i.e. how do you know if you’re on track to achieving Product-Market Fit?)
  • How to conduct your customer interviews
  • How to do marketing channel and messaging testing
  • How to do payment testing (without losing/upsetting your customers)
  • How to manually test your solution
  • How to scale your solution

I’ve spent the last 18 months developing and testing that upcoming workbook series I mentioned – the FOCUS Framework. It includes 40+ experiments, exercises and tools, all inspired by my experiences teaching Lean Startup and Customer development at accelerators, and to founders 1-on-1, around the world.

FOCUS officially launches May 3rd, and if you’re interested, you can get a $20 off launch-day coupon here: http://focus.customerdevlabs.com.

Recap

Based on the “Your MVP Should do 1 Thing” post, you know that:

An MVP tests your riskiest assumption, with the least effort. Click To Tweet

In this post you learned:

  1. Your Riskiest Assumption
  2. What MVP you should use to test it
  3. Where you are on your path toward Product-Market Fit
  4. What phases of Product-Market Fit validation are ahead of you

What’s Next?

In the following weeks I’ll be continuing this MVP series:

  1. What is an MVP?
  2. (This one) What Kind of MVP Should you Build?
  3. My 8 Favorite Tools for Building MVPs
  4. I’ll Fix your MVP: Send me your MVP and I’ll tell you what, if anything, to tweak to make it perfect.

Subscribe to get all of these posts in your inbox.

Like last week, if you leave a comment below with a link to your landing page MVP and if it provides a good lesson for others to learn from, I’ll post a (public) video review of what you’re doing well, and what you might consider changing.

Thanks to those who submitted their last week. I’ll be compiling everything for the final post in this MVP series!

I’d also love feedback on the new Riskiest Assessment Tool. Let me know what you like, and what you don’t, in the comments below.

Bounce screenshot

Your MVP Should only do 1 Thing

Minimum Viable Products (MVPs) are tricky:

  • How “minimal” should yours be?
  • What does “viable” mean?
  • How do you keep it simple, without ruining your reputation?

MVPs only need to only do one thing. To understand that one thing, you want to understand the definition of MVP.

MVP is the new Beta?

Remember when “betas” were a thing – as in, “we’re working on our beta version”, “we just launched our private beta”, etc.?

In the last few years, that term has been replaced with “MVP” – “we’re working on our MVP”, “we just launched our MVP”, etc.

This is where the confusion around MVPs stems from…

MVP is *not* the new beta Click To Tweet

The original definition of MVP from Frank Robinson is:

A version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.

In other words, your MVP is the version of your product with the highest ROI when you optimize for “validated learning.”

So how do you optimize for validated learning?

Test your “Riskiest Assumption”

For your business model to be successful, there are a number of assumptions that need to be true:

  • Customers know they have a problem
  • They want your help solving it
  • They will pay you to solve it
  • You can solve it
  • etc.

All of your assumptions can be prioritized in terms of “riskiness” where the assumptions that are most critical to the success of your startup, and/or are least likely to be true, are considered more “risky” than the other assumptions.

For example, “you can solve your customers’ problems” is critical to your startup’s success, but it’s very likely to be true (humans are natural problem solvers and since you’re a human, I’m confident you can solve your customers’ problems). On the other hand, “customers will pay you to solve the problem” is not only critical to your success, it’s also (unfortunately) less likely to be true – so you would consider that assumption more “risky” than the former.

Once you order your assumptions by their “riskiness”, to build an MVP, you build the simplest version of your product, that tests your riskiest assumption.

In other words, an MVP is:

A version of a product that allows a team to collect a maximum amount of validated learning of customers test their riskiest assumption with the least effort.

Notice how this definition changes the focus of an MVP from building a product, to running an experiment. That’s critical to understanding what an MVP is – remember that.

MVP or Not an MVP?

Use the examples to test whether you understand what an MVP is…

Example 1: Explainer video

Dropbox famously gauged demand for their product via a demo video that, thanks to some video editing, demonstrated functionality they hadn’t built yet.

What do you think? MVP or not an MVP?

Let’s look at the definition again:

A version of a product that allows a team to test their riskiest assumption with the least effort.

Does a demo video of functionality that doesn’t exist represent a:

  1. Version of a product that
  2. Tests the team’s riskiest assumption with the
  3. Least effort?

If Dropbox’s riskiest assumption was “people want a new service to sync/share files” and if it took less effort to edit video than it did to write code for the functionality that didn’t exist, then yes, this is an MVP!

As long as the riskiest assumption is being tested with the least effort, it’s an MVP.

If instead they’d built a simple version of their product (i.e. a pilot, a beta, etc.) and measured how many people used it everyday, the wouldn’t have been testing their riskiest assumption, and they wouldn’t have done it with the least amount of effort.

Example 2 – PowerPoint Demo

PowerPoint Slides

Let’s say you are going into a pitch meeting with a customer using a slide deck with mockups of your software. You’re not going to demo any functionality at all, you’re just going to talk about the problems you’ll solve while showing them some pictures, what do you think, MVP or not an MVP?

Recall the definition of MVP:

A version of a product that allows a team to test their riskiest assumption with the least effort.

As long as you’re testing the riskiest assumption during that meeting (e.g. “customers will pay us to solve this problem”) with the least effort (a slide deck is less effort than even making a video), it’s an MVP.

Keep in mind that a slide deck is just like a video – minus fancy transitions. If a video meets your team’s criteria for an MVP, a slide deck might too – especially in B2B scenarios.

If on the other hand you went into that meeting hoping the customer would create an account on your platform and try it during the meeting – you’d be testing the wrong assumption, and you’d have done so with far more effort than a simple slide deck. A working prototype wouldn’t be an MVP.

Example 3 – Landing Page

Landing Page

If you imagine a landing page is just like a PowerPoint deck that you scroll through instead of click through, then you can already tell, a landing page can be an MVP as well.

Again, you want to use the least amount of effort to test your riskiest assumption – as long as you’re doing that, you’re building an MVP.

Anything more than that, and you’re getting closer to a “beta” product, than an experiment.

Example 4 – Facebook Advertisement

Facebook Ad

If you capture the essence of a landing page in a FB ad, with a title, image, description etc., then…what do you think: MVP or not an MVP?

What was that definition again?

A version of a product that allows a team to test their riskiest assumption with the least effort.

So really, as long as you’re testing the riskiest assumption with the least amount of effort…you get the picture.

If we go back to the Dropbox example we can even see that depending on their riskiest assumption, they too could have used a Facebook ad to test this out.

If their riskiest assumption was, say, “people have problems syncing/sharing files” the Dropbox team may have been able to test that with a Facebook ad!

Example 5 – Simple App

Bounce screenshotA friend and I gave ourselves 24 hours to build a proof-of-concept app that would help people get to their appointments on time. It had basic GPS, traffic and calendar integration, rudimentary UI, and we only built it for Android.

It got written-up Forbes and as a result, we were able to collect the email addresses of 3,000 people who wanted the iPhone version.

What do you think? MVP or not an MVP?

To know the answer, we have to look where we always look…our riskiest assumption.

If our riskiest assumption was genuinely, “We can build the app”, then it would have been an MVP. The truth is though, our riskiest assumption was, “People will pay for this app” and there was no way for us to test that with this app.

So, no, despite the app being simple, newsworthy, and popular…it wasn’t an MVP.

If it doesn't test the riskiest assumption call it a beta/pilot/POC - just don't call it an MVP Click To Tweet

What’s your Riskiest Assumption?

Now that you know what your MVP needs to do, you just need to figure out your riskiest assumption so you can build one.

Good news! My post next week will tell you your riskiest assumption and the best MVP is to test it! Subscribe to get it in your inbox.

To Recap

  • MVP is not the new beta
  • Definition of MVP = (Say it with me…) The simplest version of a product that tests your riskiest assumption.
  • Before you build an MVP, you have to know your riskiest assumption.

Want More MVP Help?

This is the first of a four part-series on MVPs:

  1. (This one) What is an MVP?
  2. What Kind of MVP Should you Build?
  3. My 8 Favorite Tools for Building MVPs
  4. I’ll Fix your MVP: Send me your MVP and I’ll tell you what, if anything, to tweak to make it perfect.

Stay tuned for those.

Bonus: Want me to Review your MVP?

Leave a comment below with a link to your landing page MVP and if it provides a good lesson for others to learn from, I’ll post a video review of what you’re doing well, and what you might consider changing.

The videos will be public so you and the rest of the Customer Development Labs community will learn from them which this is an ideal opportunity for startups who are:

  1. Confident in their landing page MVPs and want other startups to see it or
  2. Not confident in their landing page MVPs and want help fixing it.

The Sales Pitch is Dead. Long Live Solution Interviews!

You know the #1 Rule of Validating the Problem is…to not talk about your solution.

If that’s the case, how and when, do you pitch your solution? Watch this video for a quick walk-through on how to sell, without pitching (i.e. how to nail a solution interview).

When do you Pitch your Product?

The answer, for me, is easy:

The perfect time to pitch your solution is…never. Tweet this

Solving a customer’s problems, especially in the early stages, is a collaborative effort.

You need feedback on your solution. You need to know when it’s going to fail. You need to know who will use it, and who won’t. You need to know how much they’re willing to “pay” for it. That information won’t be found “pitching” a solution.

Pitching is inherently a one-sided affair – it’s a monologue, not a dialogue. We want a solution dialog.

Instead of pitching, try solution interviewing.

The Sales Pitch is Dead

In the B2B scenario, I replace traditional pitching with Solution Interviews.

Problem interviews validate problems. Solution interviews validate… Tweet this

Solution interviews provide insight on:

  • Will the solution work?
  • Where are the solution’s weaknesses?
  • Is your marketing copy right?
  • Is the price right?
  • Is she ready to buy?

The solution interview is where you move from “do my customers have a problem they’re trying to solve” to “can I build a business solving this problem?”

Pitching is dead. Long live the Solution Interview! Tweet this

The 3 P‘s of Solution Interviews

Note: watch the video for a full description of these phases.

  1. Problem Reflection – This is a chance to recap the points from your Problem Interview and allow the customer to refocus on the problems that they need fixed. The problems reflected should of course be carefully selected from all the problems you discussed in the Problem Interview. They should be the problems that you know you have a solution for!
  2. Proposing a solution  – Your aim here is a discussion, a consultative approach as opposed to a one way, one-woman show! You are starting a conversation based on the common ground established in the Problem Interview and honestly asking for feedback on the potential solution/s you have come up with.
  3. Progress – Once you have the problems recapped and you’ve discussed the potential solution, it’s time to agree on the next steps. This will be your common “To Do” list featuring all the key moves to get you and your customer to A Problem Solved!

You will want to run the Solution Interview at a different time, post the Problem Interview. This will allow you the time to reflect on issues raised and identify the problems you can solve. The time to come up with the optimum solutions for the customer and put together a viable action plan. This type of approach will ensure you NEVER have to pitch again and as a result, eliminate the uncertainty of will they/won’t they get back to me.

Monologue : Dialogue :: Sales Pitches : Solution Interviews Tweet this

With a dialogue, you can identify any “glitches in the Matrix” there and then. It allows for more flexibility and also a more personal approach. You have already had contact and obtained agreement for future contact with the Problem Interview so the Solution Interview is all about trust and an honest delivery of an end to the customer’s problems! Prepare to be the one who Saves the Day!

Customer Development Made Easy…

Summary

The Solution Interview is about building trust, to solve a problem. Tweet this

Watch this video for a walk-through on selling without pitching and how to nail your solution interview. Solution Interviews are the ideal way to open up communication, offer potential solutions and gain the trust, and business, of your customers. Because you have taken the time to establish their problems, expressed in their own words, they now know you’re not just proposing something “off the shelf”, something for everyone.

Forget all about the art of Pitching, you want the art of Dialogue. Tweet this

How to Interview B2B Customers

If you’re doing B2B Problem Interviews, I’ve got some tweaks to our traditional interview script that I’ve been using to great effect in the enterprise space. I wanted to pass them along.

Step 1: Define the Role

I now start off my B2B interviews with, “How do you describe your role?” I dig this question for 2 reasons:

  1. It gives you both a common foundation to build on during the interview.
  2. It gets the customer describing her world, using her words.

If you already know your customer’s role (e.g. job responsibilities) is, asking them to describe it gives you an easy way into the conversation while providing a shared context to work from for the rest of your interview.

If you don’t fully understand your customer’s role, asking her to use “her own words” gives you clearance to ask what might otherwise be an intimidating question.

“Oh, I’m not asking because I don’t know. I just want to hear you describe it.”

It’s her words you’ll use throughout the interview to establish an relationship. It’s her words you’ll use to demonstrate trust when asking for interviews with other B2B customers. And it’s her words you’ll use when it’s time to start pitching her a solution.

In cust interviews, words matters. Reflect them back for killer rapport (and marketing copy). Tweet this

Step 2: Define Success

You’ve just asked about her role, now you want to know how to help her kill it in that role, so you ask, “What does success look like for you?”

You’re on the lookout for metrics used to evaluate her performance – both the measures her manager uses, and she uses. The success criteria she calls out is what we’re going to help her achieve!

Again pay attention to the words she uses – you’ll play these back again, verbatim, when it’s time for your solution interview.

Your customer’s success criteria, is your success criteria. Tweet this

Step 3: Define the Problems

Now that you’ve established what success looks like to your customer, we want to find out the hardest part in achieving it. These “hard parts” are the problems we’re going to solve!

This is essentially the beginning of our traditional interview script, but now that you understand her role intimately, and what she’s striving for, you’ll have a fantastic context to ask in-depth questions from throughout the interview.

The key here is to tie any problems they mention to a specific success criteria so during your solution interview, you can draw a direct line from their problem, to your solution, and that results in their success criteria.

Solution interviews = 1 part problem + 1 part solution + 1 part success criteria.  Tweet this

Summary

Using these three questions, in conjunction with the traditional interview script will provide the context, and the customer’s words, to set you up for success in your B2B solution interviews.

B2B Problem Interview Script
1. How do you describe your role?
2. What does success look like for you?
3. What’s the hardest part about achieving that success?
4. Can you tell me about the last time that happened?
5. Why was that hard?
6. What, if anything, have you done to solve that problem?
7. What don’t you love about the solutions you’ve tried?

What are solution interviews and how do you knock them out of the park? We’ll answer that in our next blog post. Subscribe here to get it! :)

Customer Development Made Easy…

When are you Done Interviewing Customers?

I love this question. I remember asking it myself, and now every time I run an interview workshop some kindred spirit asks, “How do I know when I’m done?”

 

I love this question not just because I used to ask it, and not even because I have a wicked answer. I love it because my answer has changed over time.

I used to think you interview “until you stop learning new things about your customers’ problems.” Truth is, I still believe that.

You’re done interviewing customers when you bet $100 you know what the next one will say…and win. Tweet this

Customer discovery problem interviews are hands down the best way to source your early adopters, marketing copy, marketing channels, UVPs, etc. so don’t throw away the tool before you’ve exhausted it.

But like I say, my answer has changed. While I used to just stop with the above, my thinking has evolved and I’ve got a more concrete answer for you.

The answer is 5 (and 20)

If you interview 5 customers and don’t start hearing the same things over and over, something is wrong. Tweet this

After 5 interviews, you’ll a signal will start to emerge from the noise. After 5 interviews, you’ll hear customers repeat themselves. After 5 interviews, you’ll get a sense of whether you’re on the right track.

That’s not to say after 5 you’ll have learned everything about your customers (that’ll take 15-20). If however you’re not connecting the dots after 5…you’ve probably done something wrong.

Check yo’ Segment

my segment is too big

When I’ve interviewed customers in the past and couldn’t quickly get a clear picture on their answers (i.e. interviewed more than 5 people and “everyone had different problems”) it was because I was interviewing people across customer segments.

I was interviewing “small and medium sized businesses” when I should have been interviewing, “US law firms specializing in IP law with 5 – 25 lawyers, and who are LexisNexis customers.”

I was interviewing “friends and family members of people with ADHD” when I should have been interviewing “working age people with smart phones who live within 50 miles of US urban centers and within an hour of a sibling diagnosed with ADHD.”

Those Aren’t Segments

You can see how my first set of customer segments weren’t segments at all. They were all of my potential customers…not a segment of them. These groups of people have nothing in common with one another, so when I asked about their problems, I was getting answers all over the map.

While the guy who owns 3 gas stations and the woman who owns a 500-person financial consulting firm are both SMB owners, they’re facing drastically different problems – interviewing both of them would only serve to confuse things.

Instead, if I interviewed multiple owners of “US law firms specializing in IP law with 5 – 25 lawyers, and who are LexisNexis customers” I can assure you, their answers will be almost identical.

Summary

If you’re asking “How many customer interviews do I do?” you probably haven’t niched enough. Tweet this

We’ll discuss how to niche/segment in a future post (subscribe here to get it), but for now know that you should see patterns within 5 interviews, and have all your questions answered within 20. If that’s not the case, focus your efforts on a subset of your customers and try again.

Customer Development Made Easy…