This post is written by one of Thinktomi’s thought leaders, Joan Wrabetz who is an experienced engineer, entrepreneur, and venture capitalist. You can read more about her in her introduction post and read her full series here.
In a previous blog entry, I talked about pivoting and the important value to a startup in being able to pivot and change a business model when the current business model is not achieving success in the marketplace.
For Startups, Cash is King
But, in startups the bigger problem seems to be that there isn't enough cash to survive the pivot process. In startups, we have a saying: "cash is king". This is because the business can only survive as long as the cash lasts when the startup isn't making any profits.
So, the fundamental problem is how to pivot faster.
Remember that I defined pivoting as the process of identifying the problem with your current business plan and then adjusting the business plan to eliminate the problem.
The Lean Startup Approach
So, how does one pivot faster? Enter the "Lean Startup". To quote Wikipedia,
"Lean startup is a method for developing businesses and products first proposed in 2011 by Eric Ries.
Based on his previous experience working in several U.S. startups, Ries claims that startups can shorten their product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and what he calls "validated learning". Ries' overall claim is that if startups invest their time into iteratively building products or services to meet the needs of early customers, they can reduce the market risks and sidestep the need for large amounts of initial project funding and expensive product launches and failures.”
The basic process centers around the build - measure - learn process. The goal of the lean startup is to execute the loop and to do it as quickly as possible.
How to Pivot Faster
If we break this down, how could we go through this loop faster? We could shorten the time to build, the time to measure, or the time to learning. Let's focus on build time.
The word "lean" is used as part of the title because lean principles are recommended as the way to shorten the build time. One key concept that has been introduced by the lean startup methodology is the concept of "Minimum Viable Product".
This concept suggests that development efforts should focus on building only the bare minimum of features required for a customer to be able to use the product and provide initial feedback. Once the feedback process starts, the company can start the process of measuring and learning.
Approaches to Shortening Build Time
Some approaches for shortening the build time include (some of these are specific to software, but should illustrate the point):
Design from the user interface backwards and build prototypes so that customers can see the product and react to it at very early stages.
Use agile programming methodologies to generate prototypes on a regular basis (in 2-4 week cycles)
Take advantage of open source components
Use cloud computing resources for rapid development and test
Implement continuous integration so that the entire system is built and tested every day
You may note that as you shorten the build time, you will be going around this loop many times instead of just once. This means that you may iterate your product design multiple times in the same time period that today we might spend going through the cycle once. In other words, you can start to pivot much faster.
Decide How to Measure
What about the "measuring" process? In my experience with startups, the biggest problem they have with measuring is just figuring out how to do it. They are not comfortable or experienced with finding prospects who are able to give them early feedback or with interacting with prospective customers on a regular basis.
For companies developing web technologies and/or consumer mobile software, getting products into the hands of users is easier and can be done at low cost. For other companies, cost is a major factor in their ability to get their products into customers' hands.
The bottom line in identifying customers is that startups need to have a clearly defined initial target market. Preferably that initial target market will be small (see my post -- "small target markets"). In that case, you just need to go out and contact customers who are in your initial target market. In today's world, there are many ways to contact your prospective customers -- email, surveys, Linkedin, Google, Facebook, Twitter, etc.
There are also early adopters in every market who are more likely to try early products and provide feedback. Your goal needs to be to find these people in your target market.
A second important element of the measuring process is to measure all of the business plan, not just the product features. Is your pricing correct? Is your delivery model going to work? Is your marketing message right?
Try out as much of the business model as possible on customers, including having come of your channel partners (if they exist) evaluate your minimum viable product. Often there are features required by the distribution channel so that they can take the product to customers.
Be Open to Learning
Finally, how can we speed up the learning part of the loop? In general, startups tend to be pretty good at the learning process once they have data to use for the process. However, founders tend to be pretty stubborn. If they weren't stubborn, they probably wouldn't have survived through the initial funding process. But, this stubbornness can be counter-productive to learning fast.
Founders need to be self-aware enough to recognize that they are in a learning process and be open to the critical feedback that they are getting from prospective customers. In my experience working with many startups over the years (including my own mistakes), founder and founding team behavior is the biggest factor in the speed of learning.
Further Reading on the “Lean” Approach
Now that you are ready to go forth and Pivot, here are some great references for the Lean Startup methodology as a way to get started on the path toward the faster Pivot.
 Ries, Eric (2011). The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Crown Publishing. p. 103. ISBN 978-0-307-88791-7.
 Roush, Wade. Eric Ries, the Face of the Lean Startup Movement, on How a Once-Insane Idea Went Mainstream. Xconomy. July 6, 2011.
 The Lean Startup TESS Search. United States Patent and Trademark Office. September 6, 2011.
 Penenberg, Adam. Eric Ries Is A Lean Startup Machine.Fast Company. September 8, 2011.
 Adler, Carlye. Ideas Are Overrated: Startup Guru Eric Ries' Radical New Theory. Wired. August 30, 2011.
 Bury, Erin. How Eric Ries Changed the Framework for Startup Success. Financial Post. December 7, 2011.