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The Best Lean Startup Tool In My Experience

There’s a specific agile tool which I think every early-stage product team should use, regardless of whether they’re following the Lean Startup methodology. Lean Startup drew its roots from agile software development. Eric Reis added Steve Blank’s idea of customer development to agile. Assuming we aren’t talking about re-reading Eric Reis’ book for the 17th time, the¬†best Lean Startup tool is the dogeared post-it.

That’s it.

What? Why not some kind of fancy-shmancy online tool that defines, builds, and releases your product? In your sleep. There’s lots of those around. < grin >
lean startup tool
Post-Its are placeholders for team discussions. Invented by accident at 3M, having slips of paper with adhesive turned out to be a fantastic tool for organizing ideas.

This harks back to the old Class-Responsibility-Collaboration (CRC) approach introduced in the early days of object oriented software design. Post-its and index cards helped create the internal design of a larger software program. If you don’t understand the problem domain well enough, then it’s hard to design good, clean software. Post-its allowed developers to note that they need to discuss something in detail at a later date. Once developers were ready, they huddled around a problem. They dissected the problem into sub-components. They formulated a solid hypothesis about the best way to solve a technical problem.

Over the years, software teams have attempted to create software versions of the same experience. There are lots of tools which approximate this effect. Of the ones which I think are probably as close as you can get with software: Jira and PivotalTracker.

Unfortunately, as soon as you get a team in front of computer screens you lose a lot of information. This holds true regardless of whether they are in the same room or in different time zones.

Here’s a handful of ways you can use Post-Its for your product development:

  1. General Brainstorming: A great way to pull out the gems from introverts in a group setting, you can write up Post Its individually, vote on them, and discuss them. In fact, this is a format we use at the London Lean Coffee sessions I help run.
  2. Marketing Copy: When speaking to customers, you hear the words which customers use to describe their problem. By tapping into the conversation already going on in their heads, you increase your own ability to convince them. Just because you know your solution will address their problem, doesn’t mean they do. Since you describe the problem exactly how they see it, you draw in their attention and fascinate them. When you have prospect language on postits, it’s easy to group post-its into similar themes. You can reorganize them based on whatever criteria you want.
  3. Developing An Unfair Advantage: Getting a team to think about their strengths is hard to do. But when you talk about your team’s strength, document them on post its. Have your discovered strengths hanging on a wall. Help everyone with day-to-day decision-making criteria, by focusing everyone on adding to those strengths. By building on your strengths, you are much more likely to succeed. You rapidly develop an unfair advantage, by reinvesting into your strengths.
  4. Verbalizing Your Unique Selling Proposition: Why should a prospect buy from you specifically? Immediately after they decide to buy your type of solution, this is the next question you must answer. It’s simple. It’s critical for your business. It’s also easy to forget about. Post-Its are a good way to organize your thoughts. You can add information about your competitors and alternatives. This will distill the one sound bite which will convince you and your prospects that your offering the best one possible.
  5. Identify Unmet Market Needs: Sometimes you may be struggling with identifying a problem worth solving. To build a successful product, you need to be addressing a difficult problem for your prospects. A good example of using post-its for this process is in the book Blue Ocean Strategy. You can map out the offerings of an entire industry against how customers “scratch their itch”. This identifies unmet needs in the customer’s process of solving their problem.
  6. Feature requests or bug reports: Post-Its are already the bread and butter tool of any decent development team. What about yours? Working from Post-Its, it’s much easier to deliver prototypes or new features faster. Post-Its capture nuggets of wisdom gleaned from direct access to customers or the product owner can be. Post-Its help gather together the relevant considerations for a new product. If everyone is looking at the same wall of post-its, it’s much easier to deliver.
  7. Long Term Planning and Vision: While there is often a strong focus on increasing certainty and clarity with tools like product roadmaps, you risk destroying value by pre-committing to things which don’t need to be committed to. A good example is the default setting of task dependencies within Microsoft Project. In contrast, if you continuously articulate your vision with post-its, you can adapt your vision as you learn. Even though Agile tends to be tactical and focussed on the short term, you can also track long term visions with post-its.
  8. Hypothesis Test Backlog: Post-Its help keep track of assumptions and hypotheses you still haven’t proven. This is the valuable “grunt work” which Lean Startup prescribes. A great way to keep track of what you still need to learn about your market, your product, or your business model, Post-Its allow you to adapt Lean Startup to your situation. Launch that product successfully!
  9. Map Features To Business Goals: Quite often product teams get lost in tons of feature ideas and “things to do”. It’s easy to feel overwhelmed. The most creative way I’ve applied post-its? Gojko Adzic’ Impact Mapping tool. Impact mapping helps you identify high level business goals. Then you organize your development around reaching those goals. It’s a powerful and subtle process. You can find out more in my ebook Clear Strategy Now.

More Visibility + Less Structure = More Learning

If your goal with Lean Startup is to de-risk a product idea as soon as possible, you need to identify where you are going. To do that quickly, you need “signal”. Signal will help you achieve that faster.

A smattering of post-its on a physical wall are a true “information radiator”. Anyone and everyone can jump in, comment, or move the post-its around. This means you engage everyone’s head.

Post-Its are a thinking tool. They help your team think clearly about

  • your problem
  • your product
  • your role in delivering a solution to that problem.

With Post-Its, it’s not really about using post-its themselves. Using PostIts means that you interact more effectively: in-person, on-location, face-to-face.

As you can see, the lack of structure which post its give you, help you to discover and learn about your problem much faster. By using a software tool, you are hard-wiring in assumptions which may not be true for you or your product.

Extreme Product Launches

Crickets.

Imagine that’s what you hear as you jump up and down on the biggest physical or virtual stage you can afford on Launch Day.

Launch Tomorrow

It’s probably the worst possible outcome for a product launch. You and your team have slaved away for months. You put finishing touches on the product, the marketing, and even splurging on an extra super-duper haircut for you.

Yet, you hear no response. The prospects who you thought would be clamoring…aren’t.

Once you dig into it, it turns out that they were just politely telling you what you wanted to hear. Except you’ve already spent months or years worth of your life polishing your product idea. It turned out to be a turd.

To make it worse, you could have just talked to the audience before building anything. You could have found this out at the beginning. At least you could have been building something people wanted. Something they’d be excited to buy. To pay for.

Presenting…the extreme product launch.

In software development, Extreme Programming (XP) is a style of programming. XP promotes coding with courage. Developers can make changes to large chunks of code, because they have tests to prove a change is ok. Before writing code, they write tests. Those tests make sure the code works as expected, regardless of how the code ends up looking.

It’s a special technique called test driven development. How about applying the same system building approach to building a business system?

Extreme product launches take the same idea and applying to a fledgling business. The main goal of a business is to make money. Before you start building up a technology or information business, try to sell your product first. If you prove you can generate cash flow, you have much greater certainty that your business will work. You don’t really need a product to prove that.

Even though an extreme product launch may sound like a new idea, it isn’t. There are many sites which promote selling a product before you have it. Kickstarter for products. LeanPub for books. Enroll.io for courses. Thanks to the take-down of private company funding regulations in the US, there’s even websites for funding businesses which don’t exist yet.

In order to be able to sell up front, you need to figure out:

  • Who to sell to.
  • What problems they have.
  • What they’re going to pay.
  • What objections they might have, and your plans for overcoming them.

You don’t need a product to do that.

In fact, at this early stage, you DON’T want to be writing code. If you don’t know what your prospects want, you’re just gold plating a bunch of unproven assumptions into your product. Which has a good chance of turning out to be useless. To your intended audience.

And it doesn’t take much. Just talk to them. They don’t bite.

If you want any help, schedule a call with me at https://www.sohelpful.me/agilelasagna. I don’t bite either.

What Exactly Are Financial Options Then?

In order to understand real options, you need to understand financial options. Financial options are the biggest tectonic shift in finance of the 20th century. The main concept behind financial options is simple. In non-financial terms, an option gives you the right, but not the obligation, to buy or sell something at a pre-specified price, only up until a pre-specified time.

Options give you many new opportunities to make money and customize exactly which risks you want to bear. You can:

  1. position for a large market move upwards, with a much lower level of exposure to risk.
  2. minimize your future losses if you expect the market will go south.
  3. prepare to buy something for a lower price, if you predict certain conditions will arise.
  4. lock in a cash flow stream, without being exposed to market risk.
  5. allow for a core exposure to market risk, while still dabbling in various options on the side.
  6. conserve capital via limiting risk, so that there is more cash available for future investment.

In short, options allow you to assemble the exact financial risks you want to bear while discard those you don’t. As a result, you customize your risk profile in a more powerful (and accurate) way than investors who don’t use options. This high granularity will clearly make you more profitable in a highly volatile environment.

Types of Options

When you initially buy an option, you aren’t sure what will happen. Instead, you have a hunch that it will. You are betting on a particular event happening in the future, without bearing the full risk of it happening. With financial options, this typically refers to how the price of the something in the market changes.

There are two main types of options: puts and calls. From the point of view of an option buyer, a put prevents a big loss, but costs a bit up front. It’s the option to sell something at a pre-agreed price.

A call is the opposite. It enables you to get a big gain, but it also costs a bit up front. It allows you to buy something in the future at a pre-agreed price.

In both cases, when you exercise the option, you already know what happened. You know why you want to use it-when you do.

Underlying

The asset an option gives you the right to buy or sell is called an underlying. It’s the “what” of an option. What are you betting about?

What can be an underlying?

The price of the option is actually different than that of the underlying itself. It’s independent. This is because of the unique characteristics of each option.

Time

Every option has a couple of characteristics which affect its price, not just the underlying, i.e. the pre-specified price & time at which you can buy the underlying.

For example, consider these two bets (options):
1. betting that Poland will win the world cup at the next world cup
2. betting that Poland will win the world cup at least once in the next 100 years

If Poland does win the next world cup, you would win both of these bets. They have the same underlying. Simultaneously, they have different pre-specified expiry dates. Because of this difference, each bet will have a different value, even though the underlying is the same.

If you look at a variety of options for the same underlying but expiring on different dates, you can see this pattern. As you go further out in time, typically the later option will be more expensive. It compensates or charges you for the value of time. a bank also compensates or charges you for holding your savings with them or taking out a loan for the same reason.

 Strike Price

Assuming you have the same underlying, as the strike price (the pre-specified price) is lower on a put, the cheaper it is. Everyone thinks it’s unlikely the option will ever need to be used. There is less demand for each option where the strike price is further away from the current market price of the underlying.

Conversely, as the strike price gets lower on a call, the more expensive it is. Remember that as it gives you the ability to buy the underlying at a lower price. If it’s compared to the underlying, and the strike price is much lower than the underlying price, then you can buy the option and exercise it.

How options are different than stocks

Unlike stocks, all of the money you invest into an option will disappear when the option expires; this is the worst case scenario. Stocks have no predetermined lifetime, as they represent a claim on a company that is expected to be around forever. Accountants call such a company a “going concern”. In contrast, options always have a date by which they expire. It’s a necessary part of the option. Having the option to do something by next month or by the end of next year, even if it’s the same thing, will not cost the same amount. By holding an option, you might lose everything you invest, or you stand to gain a very large amount relative to the amount invested if the foreseen scenario happens.