Don’t Bet on Your First Business Model — Validate It Early!

This week, Brady Kalb and I are delivering our workshop at the Lean Startup Conference 2018 in Las Vegas. This is based on the methods that we use in the Microsoft Garage to grow new businesses internally and Brady’s experience as an entrepreneur. Brady is the CEO of Skyepack, and he shares his stories from the trenches iterating to a business model that works. And I share my experiences working with Intrapreneurs from across Microsoft.

Materials

Our slides in PDF | Our handouts in PDF

Stay tuned to this page for more materials that we develop from our audience’s input.

Startups Vs. Enterprises — Different Laws of Physics

While working together, we kept marveling at the differences between operating as a startup as a new business within an enterprise. They operate under two different laws of physics. So, some of the most interesting discussions we had centered around how these laws of physics impact the types of experiments you can do, and the approaches needed for both startups and enterprise to validate new business models. Here are some tactics and strategies for approaching it, comparing and contrasting with each other.

Customer Discovery

Startups: Value rejection as critical to learning

Brady: As a startup, you don’t have access to a ready supply of customers. You have to go find them. You will hear “no” a lot. Seek to understand the reasons for “no” and value that rejection as a key part of learning.​

Enterprises: Earn gatekeeper’s trust, find new customers

Ed: While enterprises often have existing customers, work with the account managers who nurture those relationships. And don’t be afraid to find new customers.​

Finance

Startups: Squeeze value from every penny

Brady: There is a short-term end to the runway. You have to find creative ways to squeeze value from every penny.​

Enterprises: Collaborate with Finance, be rigorous

Ed: In enterprises, Finance departments use metrics that are suitable for big businesses. Work with them to establish new metrics for your incubation effort and be rigorous to earn their trust.​

Channels

Startups: Try many, double-down on what works

Brady: You are building channels from scratch. Try different options, then double down when you figure out what works.​

​Enterprises: Leverage existing and develop new channels

Ed: Leverage the enterprise’s existing channels, and don’t be timid about developing new ones. They could be your most powerful.​

Experimental Strategy

Startups: Reduce cycle times, act with 80% of info

Brady: There isn’t time to get all the data you’d like to have. Learn to be comfortable acting with 80% of the info to help reduce cycle times. ​

Enterprises: Use stealth mode, operate fast

Ed: To avoid the experimental skews of being a known company, operate in stealth mode. And go faster than the pace of the rest of the company — I love to work with Hackathon teams, for which a weekly experimental pace feels luxurious.​

R&D

Startups: Move fast and break things

Brady: Things breaking is inevitable. Embrace it and break them early to find out what customers truly care about.​

Enterprises: Limit scope

Ed: It’s always tempting in an enterprise to think big, but it’s crucial to limit the scope of your initial market and what you do in each iteration.​

Risk

Startups: Accept risk, but limit and mitigate

Brady: Entrepreneurs get mis-categorized as risk-seekers. Most of us hate risk, but we accept it, and strategically mitigate it. ​

Enterprises: Decrease liability, woo policy owners

Ed: In an enterprise, the risk is to the whole company, so keep liability low, and use this mindset to woo the policy owners you’ll need exceptions from. They’re trying to protect the company, and like to see that you share their perspective.​

PR

Startups: Creatively get any press you can…cheaply

Brady: Press is golden for startups, but very difficult/expensive to get. Be creative and bold with your vision to get earned media.​

Enterprises: Avoid leaks, create experimental brand

Ed: For enterprises, PR can actually be too easy. One Garage team created a simple lockscreen app, limited to the India market. It leaked on a Sunday night and had 71 pieces of tier 1 press by morning. So, we strive hard to avoid leaks until we’re ready to use the attention. And we created an experimental brand that gives us customer forgiveness and permission to experiment, distinct from the rest of the company.​

Conclusion

We hope you find this useful. Does this resonate with you? If you have any some thoughts or criticism, we’d love to hear them! Leave a comment.

Thanks and Best,

Brady and Ed