part 6 in the Product Management Frameworks Series
Startup Frameworks have been pioneered by the tech startup scene since the 2000s. They model the methods of successful startups for repeatable success.
Startup Frameworks gained popularity with approaches like Eric Ries’ Lean Methodology and Steve Blank’s Customer Development. These startup frameworks were the first to recognize that startups were not smaller versions of larger companies, but rather something more unique.
Why Startup Frameworks?
To understand why we have startup frameworks, think about what was happening from 2008 to 2012 when these ideas took hold. The tech industry had been through two major setbacks: The Internet Bubble of 2000 and the Great Recession of 2008.
People were questioning the startup model.
Sequoia had posted its great presentation declaring RIP Goodtimes for Startups as the financial markets were crumbling in 2008. Investors were stepping back and asking for more reliable approaches to entrepreneurship. Still, we had Google, Facebook, SalesForce, and many other great examples of value creation from the startup world.
Investors and entrepreneurs were asking: How could we make these successes less accidental? How could reduce all this startup waste?
Steve Blank, a serial entrepreneur and adjunct professor Stanford, and his student, Eric Ries, believed they had found some answers.
Steve Blank originated customer development in 2005. It is considered the first startup framework and the cornerstone of the lean startup method.
Blank was a serial entrepreneur in the 1980s and 1990s, starting and selling some of the most successful startups today’s generation has never heard of. His last company, E.piphany, a CRM company, started in 1996 and sold six years later for 3.2 Billion. You heard that. 3.2 Billion in 2002. This was after the Internet Bubble of 2000, and in the middle of the recession of 2001-2004. Blank had proven to the market that he knew the fundamentals of startups.
Blank retired in 1999. He started teaching at Stanford and published a book, The Four Steps to the Epiphany, in 2005. (Get it, Epiphany, E.piphany? Ok, moving on…). In his book, Blank made a simple argument that changed everything:
- Leave your office, go to the market. No inside-out thinking for product design. Get out of the conference room and into the market to talk to customers.
- If you build it, they won’t come. Find your customers, then build a minimum viable product to validate you can solve their problems.
- Build fast. Test fast. Fail fast. Learn fast. Validate your business model and product in the market.
- Startups are different. Startup metrics, job functions, and success criteria are different from big companies.
- Chaos and uncertainty are part of the plan. No well-laid plan survives contact with the market. Startups must adapt quickly to market feedback and be comfortable with change.
The Customer Development Process
- Customer Discovery. Develop the founder’s vision into a hypothesis you can test in the market.
- Customer Validation. Go out into the market and test the hypothesis. If the tests fail, go back to square one.
- Customer Creation. Build demand for your product and drive it through your sales channels. Refine the sales model based on market feedback.
- Customer Building. Product market fit is validated, and the company scales from startup to established enterprise.
In the mid-2000s, Steve Blank invested in a company and made the founder, Eric Ries take his class.
Eric Ries was a fellow entrepreneur who also saw the need for a startup frameworks. He looked to Japanese lean manufacturing models as an example for how to approach the problem.
What did we have to learn from the Japanese, Toyota, and all those Lean Manufacturing methods? Ries saw valuable principles in the lean method:
- Identify the Value. Product managers are expected to focus ruthlessly on the market value of their features. No feature is added to the product that does deliver value to the customer. Product teams use practices like asking five whys to get to the root cause of customer problems.
- Map the Value Stream. Product managers need to map a path to market that minimizes bottlenecks and waste, while focusing strictly on value.
- Build Efficient Flow. Product managers work with engineering to ensure smooth, continuous delivery of value.
- Market Pull vs. Push. Product managers focus on Market Pull over Inside-out Push. This means focusing only on features the market has validated.
- Drive to Perfection. Take a data-driven approach. Measure your results and repeat, relentlessly until you get it right.
Lean STARTUP Principles
Ries applied lean thinking to the world of startups and developed these principles:
- Entrepreneurs are everywhere. You don’t have to work in a garage to be in a startup.
- Entrepreneurship is management. A startup is an institution, not just a product, so it requires management, a new kind of management specifically geared to its context.
- Validated Learning. Startups exist not to make stuff, make money, or serve customers. They exist to learn how to build a sustainable business. This learning can be validated scientifically, by running experiments that allow us to test each element of our vision.
- Innovation Accounting. To improve entrepreneurial outcomes, and to hold entrepreneurs accountable, we need to focus on the boring stuff: how to measure progress, how to setup milestones, how to prioritize work. This requires a new kind of accounting, specific to startups.
- Build-Measure-Learn. The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere. All successful startup processes should be geared to accelerate that feedback loop.
The Lean Startup Process
Ries turned these principles into a startup framework:
- Start with a Business Model Canvas. Instead of an exhaustive business plan, start with a snapshot that captures the core hypotheses behind your business to be tested.
- Build Iteratively. Agile & customer development go hand in hand to build products with features the market wants.
- Measure. Release product often, measure results, and learn from the results. With every cycle, update your business model and your product roadmap.
Since then, there are dozens of spin-off startup frameworks and consultancies advising startups on how to build on repeatable success.
Startup Frameworks Strengths
- Recognized Startups are Different. Entrepreneurs were finally free to focus on the success factors that matter for an early stage business. Entrepreneurs discarded traditional stage gate models and business cases and adopted an agile approach. Business schools even dropped business case competitions and adopted startup pitch style business model canvas competitions.
- Added a Business Layer to Agile Approaches. Engineers and product managers who had been relying on Agile as their framework for building a company now had a more complete model to follow.
- Business Strategy Strengths. Lean is great for companies with a focus on their business model and simple product market fit for sustainable advantage. (more on this below.)
Startup Frameworks Weaknesses
Since the rise of Customer Development and the Lean Startup, those of us who have worked in startups have noticed a few problems. Many of these are problems come from people who bastardize the method or cherry pick the parts that suit them. Still, there are some common themes:
- No Long Term Investment in Sustainable Advantage. Engineers who work in Lean Startups often express frustration at the lack of investment for the long term. Rigid focus on minimal viable products and only doing what customers ask for often ignores the amazing things engineers can do if given time and independence. Lean startups succeed most often in markets where the business model and basic product feature functionality are the main criteria to success. Think Social Media, SaaS applications, gaming, and mobile apps, not the next great advancement in fuel cell technology or a big data company with years in R&D. This is okay, but it also means that Lean is not for everyone.
- Sales Debt and the Temptation to Sell Forward. Lean and Agile startups both are getting a reputation for flakiness in the business community. Engineers won’t building anything unless the customer validates it. Sales wants to close the deal. So guess what? Too many startups “sell forward”. Sales tells the customer is “ready” or “will be ready”, then does the deal. Product delivers a minimum viable product and looks to real customers to be their guinea pigs. For some customers that’s ok, but not every startup partners with their customers transparently. Some customers get stuck holding the bill. More than a few internal champions for startups winning their first deal have lost their jobs in corporate America.
- Discourages Internal Creativity. The focus on pull can often discourage good internal ideas from design and engineering. Product Managers have to focus their teams on the “How” and let the Market define the “What”. This can be frustrating for engineers and designers who have an entrepreneurial spirit too.
- Blurred Role of the Product Manager. This is an important career point. Lean philosophy holds that “A startup is an institution, not just a product.” Managing a product means being integrated with the whole process of building a startup. If you are a product manager joining a lean startup, you need to report in to the CEO. You cannot work in a silo reporting to engineering or the CTO. If you do, you’ll be working in a business analyst role capturing requirements rather than driving product growth.
Conclusion: The Significance of Startup Frameworks
Startup frameworks brought a significant development to product management. Finally, the startup community had developed a framework for tracking what worked, and what didn’t. It was a marriage of the best methods from entrepreneurship with product development techniques like agile and design thinking.
For product managers there was a sea change:
- Startups no longer saw themselves as just a product. Building a company and building a product merged into one process
- Product Managers were expected to go out into the market again. Like so many brand managers and market researchers before them, product managers once again were asked to spend time in the market rather than capture inbound requests like business analysts.
- Product Management was data driven again. Unlike pure Agile and Design thinking processes, the lean startup method emphasized using data over internal brainstorming, elevating the product role from reading the tea leaves to making expert decisions.
Half a decade in, startup frameworks are widely adopted with great success, but people are starting to see their shortcomings too. The next great trend in frameworks is just around the corner.
End of this Article Series
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