When the lean concept hits an innocent student and leads to significant lessons
4 months ago, I started an exciting web project with two of my friends. On paper it sounded like a great idea. So we wanted to give it a try!
A few months before, I had attended to the online - and astounding - conference organized by lean startup guru Eric Ries (actually I wrote a post about it here and even experienced my first “social broadcast” with Twitter). At the end of the keynotes, I had learned so many things from disruptive product development methodology to metrics-based marketing to cheap go-to-market that I kept thinking again and again:
“I just need to get started, apply the lean style and here we are I.P.O. (ie Internet Paranoid Obsession)! But first I have to get started!!!”
As a matter of fact, this web project was our pretext to start applying the “lean style”. In parallel in September, we all started a computer sciences/ entrepreneurship master program in French engineering school Centrale Paris and we wanted to get our hands on a dirty web project before starting our “big thing”.
It turned out this web project has become our “big project” to me and another cofounder. Our other friend gave us more than a hand to launch the application but he has now left to another direction.
4 months since the beginning and I wanted to share the multiple lessons learned on our journey to the lean path. In this blogpost, I’ll try to be wide open. The first part describes our project and all decisions we’ve made with regard to the lean startup principles. I turned it into a small knowledge test to make things a little funnier. In the second step, I dwell upon lessons we've learned. Lastly I evoke our next steps as well as the usual traps we won’t fall in. I’ll try to be more than transparent so dear readers feel free to comment and give feedback. I’m every day learning and willing to learn more from you.
Now let’s start your lean check-up!
The Extreme Lean Startup Test applied to Peernuts
Preliminary: what is Peernuts?
Peernuts is a sharing platform for cultural goods. You just have to log in, list your library, connect with your friends and get access to the hundreds of films, books, video games, comics they want to share with you.
Right now, Peernuts is in beta mode, available in French and just for DVDs. We use Facebook social plugins to help you reach your friends. Check it out: www.peernuts.com if you’re interested.
Test #1: Blogging before coding
Have you started blogging before coding? If yes, congratulations! Go to Test #2. If not go wordpress, tumblr, posterous or any other blogging platform and start sharing your project!
A blog is a way to present your product to future customers (especially if it’s a B2C product), gather feedback, learn and improve the original draft. It’s quick and cheap. It has only advantages.
At Peernuts, we started with a short blogpost and a 10-question poll we massively advertised on Facebook. In a week, we had about seventy answers. We were in the middle of August so it wasn’t so bad! And with all the positive feedback we got, we were definitely on track to accomplish more!
Test #2: Market shrinking
Is your market really big and totally bullish? If yes, you’re missing the point. If it’s big that’s too big. Start shrinking your market!
In other terms, segment your market, find a niche and focus on it. There is extensive material on this concept so I won’t talk too much about it.
At Peernuts, we wanted to manage all cultural goods. There was no point using an app for books, one for movies, another for video games…etc. But that was indeed too big for us. So we decided to take a shot with movies. A lot of people disagree with us and say it’s not optimal but we pretty think we’re right. We’ll see!
Test #3: Feature Burner
The Feature Burner is for startups what for females the Fat Burner is. Ask yourself if you have more than 3 features. If yes, you’re too fat. Go back to the Feature Burner! If no, congratulations! Go to Test #4!
At Peernuts, we had put all our ideas on a whiteboard. I remember there were about 10 to 20 ideas each one accounting for a different feature in the product. First we asked: “What is our core value proposition? Why will our users go to our website”. Answer: “to see what movies they gonna lend or borrow”. Then we asked: “What is absolutely necessary for that?” We came up with 3 features: a movie listing powered by an external movie database, a loan dashboard, a friend system coupled with Facebook connect and a basic mail invitation. That was it!
No rating system, no wish list, no recommendation, no notification, no privacy setting…etc. All of that is useless. If people do not use the basic features, do you really think they will with additional features? That’s pretty hypothetical.
Test #4: We don’t have a designer Syndrom
Are you trying to get a designer on board? If it’s a friend already interested in the project, ok fine. If not, you can absolutely do without!
First product ship objective is to learn, learn, and learn. If you don’t have a designer who consistently asks you to delay the product ship to refine the last design details, you will never complete product ship. As long as the platform design is not critical (in the case of a luxury fashion ecommerce website, it’s critical), you can start without.
At Peernuts, that’s what we did. With no designer in the team, I was the most adapted person to do the job. I bought a book about web design, bookmarked a few articles across smashing magazine, webdesigner depot and it got me started. With a few references, you don’t become the most gifted guy in user experience but you get notions about “web-friendliness”, how to play with colors, shapes, and how to respect basic rules. Then if you’re not a master at Photoshop or Gimp (I hate Gimp I hate Gimp I hate Gimp), you can play with Keynote or Powerpoint and screenshot your compositions. That’s how I did the landing page picture ^^. Lastly, don’t depress if you don’t have a wonderful logo. It looks weird but if you don’t care, it will just be fine! Remember: you don’t need the perfect product but a working prototype.
Test #5: Danger, Procrastination
Did you postpone product ship for the 3rd time? If yes, stop messing around. Release it! If not, you've a little time to get it right but don’t procrastinate either!
When you’re building something, you always tend to think your product isn’t perfect, you should still refine it, there are a few bugs to correct, users won’t accept mistakes, … and you’re right. All of that is partially correct. Now, you need to get over it. If you keep your product in-development, you’ll lose time-to-market, miss necessary feedback. You’ll spend your time refining useless aspects of your product instead of learning with your customers. That’s one of the most important lesson I learned from the “lean movement”. Indeed, lean startups reduce their development time to the extreme.
Today, I must say it’s pretty hard to go from theory to practice. Bad habits usually come up and prevent you from doing the right thing. For example, with Peernuts, the first 3 weeks of December were a period of bad hesitation and total procrastination “Should we release it? Yes/ No? Maybe that’s not reasonable… Maybe we should correct this and this”. Eventually we decided to launch it just before going to vacation, around the 20th December. We put the site online. We knew there were bugs. We knew some were really important. But we did it anyway. I posted a blog article on the day after to inform our fans/ friends and the people that had signed up for the beta version.
To know more about the bugs we made our users experience, I can give you a few examples:
- Our Facebook connect was really unstable. The week before going live, it simply didn’t work. The error page was the fourth page the most viewed on the site. Now, it looks to work correctly because it has fallen to the ninth position…
- Our Mail system that sent invitation mails and notifications was also unstable. Sometimes I received a mail. Sometimes not. We definitely need to work on it.
- Activation mails are usually sent to the spam box of our users. That’s because we didn’t white list our server. This one pretty killed our conversion rates to zero.
Nevertheless, the past two weeks have been really interesting. We couldn’t code anything as my cofounder was in Mexico but we learned a lot of things. Way more than if we hadn’t opened the application. Now as a friend of mine told me: what’s next? So let’s talk about our alternatives and the future of Peernuts.
Lessons learned in 2010
A few figures more than a long speech
Basically, our growth is totally flat. I won’t give any precise figure but I can say something like: our viral rate is zero, our conversion rates are zero, and our number of users is almost zero. Bad results, aren’t they? Actually, we didn’t expect many people to rush to our application. We have about one hundred of fans on Facebook and we converted a significant portion of them to sign up. After that, if our mails are directly sent to people’s spam, it’s pretty hard to attract more people.
Lesson learned #1: We have a lot of technical problems to address. Being an extreme lean startup is not a goal in itself. If you have technical flaws, you must correct them.
User behavior: everything happened as expected, which means bad!
Peernuts is a peer-to-peer lending website for cultural goods. One of the barriers we identified for the service is: will users list their library? A few movies? Just one? As expected, users don’t list their full catalogue: most of them add one film during step 2 in the signup process.
Now the question is: does our current product give enough incentives or is the service in itself too tedious? Do we have a chance to correct it or no matter what we do, it won’t improve.
I pretty think all startups with disruptive (or at least new) concepts are facing this challenge. A classic example: Foursquare. It gives users the ability to share their location with friends. On one hand, it’s a pretty cool service. On the other hand, it’s clearly a waste of time. Developers probably asked the same questions as mine: What should I do to lower the barriers and raise the value? What should I do turn it into something cool you wanna share with friends, use everyday? If our users base doesn’t grow, should I persist or switch to something else? Iterate or do something different?
Lesson learned #2: It won’t be easy. First try isn’t the good try.
Our energy: people feedback
Fortunately, we have something very powerful that helps us move forward and be motivated: people feedback!
In fact, people love the concept. They find it really cool. They clearly see the value. They always ask about any business model (and we usually answer it’s not a priority). And I come to think that they really envision something that is cool, something they’ll be using, something that will bring a lot to them. We felt it when we did our poll and we feel it almost each time we talk about the project.
Lesson learned #3: There are too many people out there willing to use the service. We need to work hard but there’s definitely a chance for Peernuts to work.
What to do now? What not to do?
Right now: Peernuts doesn’t work.
But: we have a great feedback on the service we are building
Will we add features? NO
Steve Blank, the father of the customer development methodology, writes it numerous times in his book, the 4 Steps To The Epiphany:
“Don’t add features until you have exhausted the customer segments in this market.”
It’s so deeply printed in my head, adding features will really be the last thing we will do.
However, there is feature and feature: we won’t add anything new but we will definitely work on the service performance.
Will we work on the product? YES
I just told you there were bugs. That’s simply not questionable: we have to correct them. Without being a priority, design should also be enhanced.
Besides, there is a lot to do to improve the performance. I am not talking about product performance (response time, availability…) even if it’s important, but customer performance. In the next few months, we will highly focus on our metrics: conversion rate, virality rate, number of invitations, number of added movies, absolute value and per user…etc. We will regularly tweak the product and take a look at the consequences. We hope it will improve over time.
Practically, there will be a lot of work to understand user psychology: Why does he add movies to his collection? Why does he invite friends? What is the biggest interest of Peernuts? Our challenge is to design Peernuts to increase user interaction.
Will we start massive communication? NO
As long as the virality rate of a social Web product is not above 1 (which means for every user that signs up, you have more than one of his friend that signs up), it’s typically useless to do so.
If we spend time on communicating instead of letting our users do so, it’s not sustainable. If the virality rate is under 1, it means our product is not enough good to get user recommendations or user conversion following these recommendations. When we communicate to let’s say 1000 people with a virality rate of 0,5, we know we’ll only attract a finite number of people, which is:
Sum (i=1…n, 1000 x 0,5^(i)) where 1000 x 0,5^(n)>1 and 1000 x 0,5^(n+1) < 1
That’s a total of about 2000 people. And that’s it. Yet, I don’t want my user base to converge. What I desire is exponential growth! For that, we have to work on our product to add the perceived value of users and increase our virality rate. Of course, if we trigger a buzz, we attract a few recommenders/ trendsetters, it starts getting cool to use our service, it leads to raise the perceived value of users and increase our virality rate. But, as a necessary condition to create a buzz is to have a good product, we will rather focus on the latter.
Will we work on our market? YES
Right now, there are a few recurring questions that get users confused according to me. That means we don’t have the correct positioning yet. For instance, they usually ask: how to transfer my DVDs/ books/ videogames to my friends? People don’t understand they just have to hand it out once they see the person they have to lend it to. We really focus on lending within your close community or at least the people you see really often: your classmates, your colleagues, your rugby teammates, the members of your painting club…etc.
As a result, we know we have to segment more precisely our users. Right now, our landing page is really general and we suppose that maybe a tweak or two can get it right in users head.
Besides, we currently say we are a “sharing platform for cultural goods” or a “peer-to-peer lending website for cultural goods” (even if we only managed movies right now). But this one could maybe attract more users: “legal peer-to-peer sharing” or “vintage peer-to-peer sharing”. We just don’t really know what our positioning is and we certainly have to figure it out.
Conclusion
You heard our resolutions for 2011. Listen to users, focus on metrics, refine our segmentation and positioning, build something cool and we hope it will be enough. Do you think we miss something? Would you give us an additional recommendation? Is it ok to not consider any business model for the moment? Thanks for giving us your opinion on these issues and happy new year everyone!