Back in April 2012, I wondered the following:
Any social enterprises/ for-profit social purpose businesses out there reading and/or applying #leanstartup principles?
— Bonnie Foley-Wong (@BonnieOWong) April 10, 2012
I had first heard of “lean startup” in 2010. I met Sal Virani at the SHINE unconference for social entrepreneurs in London, UK and he had just come from running the inaugural Leancamp. It was at that same conference that I first learned about the Business Model Canvas. I was an independent consultant at the time, advising social entrepreneurs on their business models and financial strategy, so I started using the Business Model Canvas tool with my clients.
When I relocated to Vancouver to join a credit union as a lender to social enterprises and social purpose businesses, I used it to evaluate the business models of my borrowers. When considering the impact a business was having in the world, I referred to the components of the Business Model Canvas and evaluated whether the business was making an impact through its value proposition, by the customer segments it was serving, by its choice of key partners, or through the relationships and activities it had with its customers and partners.
In December 2011, I began a new journey to develop my own venture. My friend Sal and I crossed paths again and he happened to be running the second Leancamp in London in January 2012. It was serendipitous timing because I was going to be in London visiting family, so I immediately signed up. At Leancamp I learned about the Seven Domains Model and heard Eric Ries speak. I started reading Impact Investing by Bugg-Levine & Emerson AND The Lean Startup books at the same time, all the while putting the tools to practice on my own venture. Six months and as many iterations later, I stumbled across these tweets on Twitter:
I replied emphatically:
— Bonnie Foley-Wong (@BonnieOWong) June 21, 2012
It’s not the first time I’ve heard social entrepreneurs or non-traditional tech entrepreneurs question the applicability of Lean Startup methods to their own fledgling ventures. In my opinion, the Lean Startup concept, is applicable to any startup. It is not about being frugal or cheap. Lean refers to the process of developing a product or service with the minimum essential features and testing it with customers to get feedback quickly. The aim is a lean process of building, testing, refining, and iterating rather than a perfect product. My venture, for example, is a non-tech, service-based business in the investment services sector. Whether you’re building a sophisticated venture or a more straight-forward consumer app, there is likely a Lean Startup approach for you. The challenge for you is to figure out what the Minimum Viable Product is that you need to take to your customers. The important thing to remember is that the Minimum Viable Product has to get you in front of your customer. For non-tech ventures, this may require some creativity, however it may not even require having the whole product or service complete. By letting go of any ideas about a perfect product or service, your first contact with customers will be an opportunity to get valuable and important feedback.
Pique Ventures started off as an idea to start a business to make it easier to move capital to start-up social ventures. Given my skills, experience, and the things I was passionate about, I made the decision to do something in the investment sector. The first idea was to create a venture where social entrepreneurs performed due diligence on each other, thereby reducing transaction costs for investors. I tested this out by simply describing the model to people I met at networking events. I met with people that could be potential customers, suppliers, or partners of the business and each time took in their feedback. Did the model resonate with them? Who could they imagine using such a service? Did I need to research something they said in greater detail? When I saw the need to get closer to customers or to be more attractive to them, I made a change to the business model. Each month I told the people I met what I was doing, shared my business model, got feedback, tweaked the model, and repeated. I kept thinking about the components of the Business Model Canvas, especially what I was offering, who my customers are, what they would be willing to pay for, whether and how I would be able to deliver the offering to them. All these things were moving pieces that I kept inching closer to each other, experimenting towards a business model that worked and was in keeping with my overall vision.
Over six months the business model kept changing. I drew diagrams and maps to sort out the complexity of the thing. I now have a clearer picture of my theory of change and the business model for Pique Ventures (it is an investor network – connecting investors to investment services, entrepreneurs, and each other). Even just last week, I received yet more feedback that tested me on whether the business model was in keeping with my vision and values. I’m letting the comments sit with me for a while, as I digest what it means to my business model – what component(s) of the model might it change, do I feel energized by that, who are my customers if the business model changes slightly?
My initial minimum viable product consisted of little more than me describing the model. More recently, the MVP included a financial model and a pitch deck which I could refer to when describing to prospective members how the investor network would work. Initially, I met with people simply to ask them what issues they noticed that affected investors and entrepreneurs, before I even realized that they were potential customers. In the early months, many people suggested my MVP was an event with investors and entrepreneurs in attendance, with me moderating a discussion or hosting a dialogue between an investor and entrepreneur. I had been reluctant to do this because I wasn’t confident that the people I wanted in the room would actually show up. My instinct was right. Whilst potential customers have been willing to meet with me over tea or coffee, following an introduction from a mutual connection, they haven’t had the time or interest to turn up at an event of unknown outcome. But this hasn’t ruled out holding an event in the future. It just wasn’t the MVP that would attract my early adopters.
So my suggestions for someone entertaining using Lean Startup methods to develop a social enterprise or social purpose business:
- Gather a bunch of trusted friends or advisors together and create a number of Business Model Canvases for your enterprise ideas. Try out several Business Model ideas without getting too attached to any one model. As Steve Blank said: “No business plan survives first contact with customers”.
- Also create a Seven Domains Model for your venture. (If you want to understand how the Business Model Canvas and Seven Domains Model relate to each other and the more traditional business plan, take a look at this.)
- Develop a Minimum Viable Product – keep it simple! Your MVP could be as simple as describing it to your potential customers. It could be an event, a weekly newsletter or even a spreadsheet!
- Test your hypotheses on people who might be your customers. Get real customer feedback early on. This is vital!
- Keep iterating until you can see clearly what your offering is, who your customers are, how they are going to pay, and how you’re going to deliver it.
- You’ll still be in feedback territory until someone pays for your product or service – even then, you won’t know if it is a one-time thing, whether you can replicate it, or whether it is sustainable.
- Sell your product or service to many other customers – now you have a marketable product or service. Build, grow, keep learning!
- The Lean Startup by Eric Ries
- Impact Investing by Antony Bugg-Levine and Jed Emerson (provides an overview of the impact investing landscape from an investor perspective)
- The Ecology of Commerce by Paul Hawken
- Business Model Generation by Alexander Osterwalder and Yves Pigneur
- Four Steps to Epiphany by Steve Blank (I haven’t read this personally, but I am a fan of Steve Blank’s blog and Customer Development Model)
- Getting to Plan B by John Mullins and Randy Komisar (I haven’t read this yet, but heard John Mullins speak about the Seven Domains Model at Leancamp)