Recently I finally figured out what I’m doing in my startup.
Not how to succeed — growing very large is still ahead of me — but how to know what to do next. Here’s what I learned.
I have two theories to test, a value hypothesis and a growth hypothesis.
Value hypothesis: if I present this to you, in this format, you will exchange with me something that I find valuable. Perhaps money. Perhaps your time.
Growth hypothesis: if I do these things, I will be able to present my value proposition to X number of new people.
One of these is called sales, the other marketing. But do not be concerned with business-sounding words. You don’t have to start reading tons of business blogs or building imaginary worlds with spreadsheets. In fact, that can be very dangerous, as it causes you to emotionally bake-in ideas that most likely are completely fallacious. Just look at it like all you have is these two very tenuous theories.
Your job is to make very precise and defined hypotheses — if I do X, Y will happen — then run a test on them to see if they hold up. You are a scientist studying a completely unknown field of study. Come up with two hypotheses, one value, one growth, then test them. If they fail, change the hypotheses until they pass. A failure is a good thing! But it means you need to decide whether to give up or pivot. Most new people to startups build some huge product — one hypothesis — and never really test it. Good startups build dozens of testable hypotheses and test rapidly. Bad startups take forever to get to a test. Or they run out of money long before they ever get around to it.
Here’s the critical thing: The goal is the passing test, nothing else.
Value hypothesis: if I show a bunch of people a bushel of apples while they are at the flea market, 5% of people will buy one for one dollar.
Growth hypothesis: if I give you half-off an apple in return for your wearing an “I bought the best apples ever at Joe’s Booth!” badge, you will bring by two other people who will also buy apples.
By creating and continuing to define these hypotheses, you build a self-sustaining system of creating value, or a business. One way to break down your two theories into finer hypotheses is like this:
But there are others. As you make your hypotheses more and more detailed, you start creating a very defined structure to the test. This structure is your business model. A business cannot succeed — or fail — without creating and testing hypotheses. If you’re not testing hypotheses, you have an expensive hobby, not a business.
Want practical value? Create a Kanban board around the hypotheses you are testing, color-code your tasks to match up to what you are testing (Trello is really nice for this). Then you’ll know that every thing you do each day is for a reason. You’ll also be able to prioritize your time and energy better.
Write these down. Put them in a public, visible place for you. Everything you do — go to seminars, learn how to sell, read a book on startups, watch a video on programming, life, the universe, and everything else for a startup — everything fits into this model.
Use it.If you've read this far and you're interested in Agile, you should take my No-frills Agile Tune-up Email Course, and follow me on Twitter.