Despite contemporary advice, learning from your mistakes is not a path to success unless you validate the lessons failure is teaching you. You can do all the right things in writing a killer business plan, securing investors, hiring the best team, launching a great product and selling like crazy – and yet fail. And that’s not surprising; the odds are against start-ups with up to 75% of them failing globally.
Is there a different way of doing things to give your business a better chance of succeeding? A methodology called the ‘lean start-up’ is gaining popularity as a less risky way of starting up a company, and is based around Validated Learning.
Rather than the traditional method of planning well ahead, utilising big design, incorporating market experience and going with business intuition, it favours experimenting with products and services, using customer feedback to pivot and iterative product design.
Validated learning is a cycle that helps to quickly validate or reject business ideas. It removes some of the risk of ‘gut instinct’ by encouraging you to build a ‘minimum viable product’, get it into the hands of customers and then validate the results – you then learn whether your next move is to pivot or persevere.
Ditch the business plan
So how to do you do it? First, you dispense with the traditional business plan. Creating a five-year plan is a waste of time. The boxer Mike Tyson once said “Everybody has a plan until they get hit. Then, like a rat, they stop in fear and freeze. If you’re good and your plan is working, somewhere … you're going to get … the bad end of the stick. Let’s see how you deal with it. Normally people don’t deal with it that well.”
The traditional business plan is a research document that assumes far too many unknowns, which can account for the high failure rate of start-ups. There’s often too much time, effort and money ploughed into traditional start-up methods and not enough customer input.
Usually it’s too late to change direction when businesses realise their customers do not need or want what is being offered. Kind of like in the cartoons when they run off a cliff but don’t fall until it’s too late and they realise they’ve run out of road.
Customer-led business planning
Second, test your ideas on real customers. Ask potential customers for feedback on all elements of your business from the pricing, to the features and the customer experience. Use that information to revise and refine. Validated learning encourages a ‘temporary’ business with a massive reset button built it.
The method is to keep failing, keep trying new things, all the while adapting, improving and learning from customers until you hit on a scalable business model. It’s like baby weaning but with the potential for financial rewards and cleaner clothes.
Why do I need validated learning?
Knowledge only gives you power if you apply it. Validated learning is useful because the development process of your business can be significantly shortened and you can avoid wasting time and money on developing unwanted features. Ultimately, this can bring down the cost of production and lead to a better product with built-in flexibility to adapt to a changing environment.
The validated learning approach will help your business to innovate rapidly so it can not only survive as a start-up but continue to thrive as environments shift. Netflix is an example of adapting to changing environments. It started with mail-order movies, moved into streaming people’s favourite shows and now is even making them, as one of the biggest investors in film and TV in the world.
Validated learning will help you be more like Netflix and less like Blockbuster.