Business in Beta Colin Raney

Don’t wait for perfection—launch and learn

How do you build a business in an unproven market? How do you figure out what customers need when you’re delivering an experience they’ve never seen before? You begin where service and software companies have begun, by conducting fast, cheap experiments that help you understand your customers. You build on what you learn. In short, you prototype.

With ever-increasing competition, innovative businesses are finding that in order to stay competitive their offerings need to constantly evolve. And that to improve their offerings is to encourage consumer participation. This helps them build a competitive advantage by constantly revisiting what they deliver and how they deliver it. They know that traditional market testing will only validate their past successes. To understand the next big thing, companies have to engage with customers and react to their needs.

The Evidence — Stories from around the globe

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Platform for change

Companies like Apple and Facebook have learned to harness the energy of outside developers to create new applications. By allowing thousands of new applications to run on their platforms, they create a Darwinian environment where only the fittest survive.

Jeff, a developer, noticed that Facebook lacked reminders around birthdays, so he created Birthday Alert. Customers quickly made it one of the hottest apps on the platform. Instead of trying to guess what type of functionality users wanted, Facebook just tapped into smart developers like Jeff who built it for them.

Through this process, Facebook learned it needed a mechanism to foster developers who could improve the overall ecosystem. Now the Facebook Fund supports enterprising developers who are eager to build their ideas.

How can you engage your customers and partners to help you prototype new offerings?

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Front-of-house flexibility

The secret behind the unique feel of Whole Foods and Trader Joe’s is how employees are empowered to co-create the customer experience. Each store establishes teams to figure out the best way to serve customers, from the products they offer to the way sections are organized. Each week, employees can see the results of their experiments in the aisles.

Jesse recently joined the cheese department at Whole Foods and one of his favorite jobs is to select the cheeses that customers sample. He feels it helps set the mood of the entire store, and when he nails the selection, the store usually sells the entire stock. Giving teams the tools to constantly improve the business creates an engaging and successful environment.

What control should you give up so your team is empowered to serve customers better?

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Grassroots growth

Ayr is a former scientist with an MBA from Harvard. After several years with McKinsey, he decided to follow his dream to create a chain of fast and friendly vegetarian restaurants.

He could have hired a chef and tested his menu with focus groups, but instead he decided that it would be better to run a lot of experiments at low cost. So he launched his restaurant from a food truck parked outside the MIT campus, updating his customers about daily specials through text messages and blog posts. (cloverfoodlab.com)

After six months, the results have been phenomenal. By starting small and prototyping, Ayr is learning while he shapes his business. He’s adding additional trucks, developing permanent spaces, and has begun to cater special events. Each experiment brings him closer to his ultimate goal.

How can you intentionally limit your resources to create a more inspired offering?

Making lemonade

Like many fashion houses, Gucci and Ann Taylor were hit hard during the recent recession. The nation’s sudden shopping withdrawal left many designers with too few retail orders to manufacture their line. In similar circumstances, manufacturers will order the additional garments and offer excess inventory in outlet malls and discount retailers. This time things were different, demand was much lower so the fashion houses got creative. Taking advantage of empty retail space many designers negotiated short, temporary leases in high-traffic areas. In this short stay space they opened pop-up shops to connect with customers. The recession could have distanced these designers from their customers but quick, nimble moves created new opportunities to engage.

How can you turn your biggest challenge into an opportunity to try something new?

Real-time results

Internet companies routinely use their constant connections with customers to prototype new offerings. Companies like Google and Amazon routinely select pools of users and change the functionality in their products (e.g. you may be looking at a different Gmail interface than your friends). Depending on specific behavioral metrics, Google may change a product without ever directly asking the customer. Smart and nimble businesses know that always-on and always-accessible allows them to learn and evolve.

How can you experiment on the fly and learn without compromising experience?

Ongoing experimentation

McDonald’s has built prototyping into its organization. Since the company does not want every employee in every store deviating from service patterns, it has set up test restaurants to try new menu items, new pricing strategies, and new food preparation methods. This flexibility has paid off. McDonald’s has been able to roll out worldwide menu expansions in just a few months—quite a feat for a company that serves
47 million customers a day.

How can you build experimentation into the culture of your organization?

Name my book

Tim Ferriss loved the playful working title of his first book, Drug Dealing for Fun and Profit, but it was too racy for Walmart and other retailers. With the success of the book hinging on this decision, Tim decided to prototype. He drafted a shortlist of titles and bought Google AdWords. Each online click equaled one vote. Within a week, he had his title, and The 4-Hour Work Week was finally finished.

How much information do you need to make decisions? Can prototyping help you get there faster?

Discussion

Mike Walton

June 18, 2009

One one of my (many) long trips from Columbus to Pittsburgh, I started going off (on my poor unsuspecting passenger/fiancee) about how it is nearly impossible for a business to reinvent itself—and not just the obvious GM or Chrysler (though Chrysler makes the most godawful cars on the planet)—take Snapple—it is impossible for them to be the Snapple that they used to be, 10 years ago. There are other drinks that fill that niche and the consumer has moved on. Their product is genuinely better (have you tasted new Snapple recently!?) but it is still such an uphill battle. So many dragons (committees) to slay. So many conceptions to change. The fact that they are in expensive glass bottles w/ nearly the same print is clearly indicitive of a “NEW” product created from a committee. It’s simply not new enough, and they (the committees) simply aren’t paying attention. Crack the committee and win the game.

I think quality and luxury are the characteristics that have staying power and can be timelessly reinvented. But they are also easy to lose. Eddie Bauer used to supply jackets for expeditions to everest. Then they got cheap and mainstream, and now the clothing and layout of the store actively REPELS me (and others). And look at them. They filed for bankruptcy today.

(This stream of consciousness inspired by your guest-author publication. Keep up the good work, and now that I know about this, I’m excited to see more.)

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Matt Jones

June 20, 2009

I spend the majority of my time working with leaders of local churches.  Talk about an industry that struggles with change!!  One of the most significant ongoing “challenges” that these leaders face is the same as the Snapple illustration from earlier. They (the local churches)  experienced success with something in the past, and are having trouble adjusting to the currently reality. 
No product or service delivery method works forever.  Churches have a great deal of trouble distinguishing between these “methods” and their “work”.  The work of the church is some of the most vital in the world.  When it is being effective, suffering is being relieved, people are finding hope, and lives are being changed for the better.  It is vital that the church finds ways to be effective.

I consistently see programs and structures that were working in the 1950s,60s and 70s..  There seems to be some odd idea that the world will go back to that time, and these things will work again!

Much like the examples in this issue, there are ways to “change the menu” without compromising the core of who you are and what you believe.  One of the most important changes is letting the people who are a part of the church begin to determine the ministries that they will personally engage. In the past, it was all top-down decision making.  Now, especially in churches that are built on a small group model, there is decentralization in what type of efforts will be undertaken. 

New and very innovative ministries can emerge when there is a small group of people making decisions for themselves.  It’s related to the “apps” for facebook and iphone.  People see what is needed, and are empowered to make it happen.

This also creates a large number of prototyping opportunities for the rest of the church.  If a small group hits on something big, the organization can choose to either inform other groups or to make a larger organizational effort.

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Andrea Hildreth

March 5, 2010

YES - thank you for this push. 
I am in graduate school, but I have a great idea, but I don’t know everything, yet; and so, I wait.  After reading this - maybe I will be able to replace “I wait” with “I act”.

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Rachels Picks

June 30, 2010

Absolutely right. Don’t wait for perfection—launch and learn.

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Angie

August 11, 2010

Much like the examples in this issue, there are ways to “change the menu” without compromising the core of who you are and what you believe.  One of the most important changes is letting the people who are a part of the church begin to determine the ministries that they will personally engage. In the past, it was all top-down decision making.  Now, especially in churches that are built on a small group model, there is decentralization in what type of efforts will be undertaken.

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Rudi Lim

April 7, 2011

I work in the design industry. When we were brainstorming, I would create quick concept sketches and grab anybody around me or run to the receptionist for a round of quick and dirty user testing. It is almost free ...maybe some legwork smile

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