Previously in "Lean Startup Adventure", Yann laid out the product vision into a canvas to explore the business model. This clarifies most of the assumptions on which we intend to build the product. But some of these assumptions, if they turn to be wrong, can make the business fail miserably. These are the risks.
In this post, I'll explain how we determined and prioritized these risks.
A lot of things could go wrong with our business plan. We could solve a problem that doesn't exist, we could fail to build a path to our customers, or we could make a great product but fail to make a business out of it because of bad pricing. There are risks of course - otherwise there wouldn't be an opportunity.
In Running Lean, Ash Maurya encourages entrepreneurs to rank business models against product risks, customer risks, and market risks. Naturally, quantifying a risk is just a matter of multiplying the probabilities of a specific outcome by the associated loss.
At this stage, we feel no need to go deep into statistical modeling of our risks. We already have a pretty good intuition about those risks and their ranking.
All it takes to determine the risks for the first Admin-as-a-Service Business Model is a series of discussions with a few advisors. Advisors are people external to the project who are not in the target, but whose experience is valuable. In our case, we look advisors in the marmelab staff, and in our own network of startup entrepreneurs. After meeting with about 5 people, here is what we get as a result:
Note: When shaping that risk, we don't notice that we're too "online-oriented". Other customer channels, like referrals or word-of-mouth, are dismissed as not compatible with the early phases of our product. That's a mistake. We also overestimate the reach risk at that point. There is still time to find a better reach strategy, but we will only find out later.
Phew, that's a lot of possible reasons to fail! After listing all these risks, our first reaction is to stop there. There are just too many possible causes of failure to even try. But we're still almost convinced that we're addressing a problem worth solving. Motivation is key in a risky business. So let's continue, and check if we're right or wrong about that business idea.
Why is it important to prioritize risks? Because in a Lean Startup business, we're not looking to build a product, but to learn - or, as Eric Ries puts it, to acquire Validated Learning. We will learn the most from the most uncertain assumptions with the worst possible outcome, the ones that can simply kill a business.
To put it otherwise, if one of the risks we've listed proves to be true, we'd better find out very soon and pivot to another business model, before we spend too much in the wrong direction. In any case, we will learn something, be it that no business is possible with that model. And that's already a competitive advantage over other companies who would go all waterfall with their product.
So we will have to tackle all these risks, one by one. How can we lift them? By building an experiment to check whether we're right or wrong. Each experiment will bring us validated learning, and allow us to tackle less risky assumptions.
So the list of prioritized risks determines an ordered list of experiments. This is our roadmaps for the early stages of the product. By working on risks, we've just found a way to do product planning efficiently, and to determine where to start.
There is a cheap way to get insights about our business model: by discussing our vision of the problem with possible customers. In the next blog post, we'll explain how we designed Problem Interviews.
Thumbnail picture: Circles, by Susanne Nilsson