The Startup Theory: Define, De-risk, Experiment | Tapptitude

12 Min Read • Jul 5, 2016

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Sinziana Chitea

Content Marketer

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The second stop of The Startup Theory will focus on the first steps of articulating a proper business model for your startup. In our previous chapter, we closely defined what it takes to master the lean canvas. So today, we’re going to show you a more ample view of a well-thought-out business plan, suitable for any startup out there. The tactics we are going to present are the ones we consider valuable, tactics that we ourselves have put to the test over the years. As a mobile app development company, we’ve worked with countless startups on a myriad of products and strategies, so we’ve managed to gather quite the experience.

Keep in mind that having a good product is not enough. You need the means to present it to the world and to convince people that this product will bring value to their everyday lives. How is one supposed to do this? By investing time, money, thought and creativity. How is one supposed to make the right investments? By carefully and strategically planning every move. By developing a business model well suited to a startup, that underlines the main characteristics and objectives of the venture, the main risk areas and the main efforts that have to go into working it all out.

Curious of what strategically planning a business look like? Read on to find out what a comprehensive and efficient business model entails.

The lean canvas is a startup’s best friend

When discussing business strategies and what the next big step could be, you should definitely use your imagination. And you shouldn’t even think about making such big decisions without Ash Maurya’s lean canvas on hand. Not only will it aid you in seeing the bigger picture – and significant details as well – but it’s one of the best strategic management tools out there.

Fill the canvas out with all the necessary details. You’ll start by establishing your Problem-to-be-solved and the Customer Segment you’re looking to solve the problem for. Beforehand, make sure the problem you’re looking to solve is really worth solving for the specific customer segment you want to reach.

Then you’ll move on to defining your UVP. Try to settle on a clear and compelling message that encapsulates what you’re all about. Make it clear to the early adopter you’re trying to sway, what benefits they’ll get out of buying into what you’re selling. Further on, suppress the desire of fully filling out the solution box. For starters, document how your prototypical customer solves the given problem at the moment and assess the capabilities you need to present in order to make good on the promise made in the UVP. You’ll also be settling on the key metrics to measure your solution’s success rate soon enough. They should enable you to fully perform, while not interfering with your cost structure.

Your communication tactics should be centred around your customer segment and their behaviour, in order for your message to reach them properly. Also, don’t shy away from putting a price tag on the value your MVP brings to its users. An MVP might only cover the basics of a business idea, but it’s the basics that make or break the entire plan. The right price will set the right expectations for your customers and the right positioning of your brand.

The final note in your lean canvas will probably be the Unfair Advantage box. You need to undergo an in-depth research of your MVP and your preferred customer base, in order to grasp what makes you stand out in the crowd. That is what the lean canvas is for. By the end of filling it out, you’ll be able to answer this question: What can you bring to the table that your competitors won’t?

Learn more about how to master the lean canvas in the first chapter of our Startup Theory series

tapptitude's start-up theory chapter 2 define, derisk, experiment

The basics of a killer Unique Value Proposition

There’s a reason why you’ll find the UVP (unique value proposition) box right in the middle of the lean canvas. You could call it the heart of your planning – which is why you have to make sure you get it right. As you did with the lean canvas, you can use the UVP canvas to your advantage, by taking a closer look at your customer base and assessing how you can address their wants and needs (and pains).

The UVP canvas consists of two sections, enabling you to better visualize the fit between what you offer and what your customers want.

To your right, you’ll find the Customer Segment section, consisting of the customer characteristics you can observe and use to lay down your hypotheses. The Customer Jobs box describes what your prototypical customer is trying to get done, be it tasks or problems they’re trying to work out or needs they’re trying to satisfy. Having these in mind, look at the remaining two boxes: the customer’s pains and gains. They’re a closer look at the experience the customer has while performing said tasks or resolving said problems or needs. What is bugging your customer? Any negative emotions, undesired costs or situations or unwanted risks your customer might stumble upon, you have to consider solving via your product and/or service. On the other hand, what are the benefits your customer wishes for or would be pleasantly surprised by? Again, this is something you need to be well aware of. You know how the saying goes: there’s no need in creating a product nobody wants.

To your left, you’ll be closely reviewing your offer. What does your offer consist of? How do your products and/or services help the customer get a functional, social or emotional job done? How do they help satisfy his or her needs? You need to know what role you want your product to play and the one you want your customer to perform in regards to your offer. Will they be a buyer, a co-creator or a transferrer? Make up your mind about it and act accordingly. Remember that your offer should be evaluated as a benefit by your customer segment: you should either relieve one or some of their pains or you should create gains that they can appreciate. Carefully fill in the remaining two boxes with info about how you plan to make your customer happy.

What you’ll end up with after correctly filling out the UVP canvas is an accurate map of the two very important pillars of your business plan. There are two things you are looking to achieve here: the problem-solution fit and the product-market fit. This would mean that, for one, the features of your UVP perfectly match the characteristics of your customer, and second, the market validates this match and real customers adhere to your business. 

Learn more about product and idea validation by downloading our handbook

tapptitude's start-up theory chapter 2 define, derisk, experiment

De-risk your business, optimize your plan

Starting a business is a risk in itself, but there are ways to ensure you don’t have the hardest time running it. There are three risk areas you need to watch out for product risk, customer risk and market risk. Don’t let these scare you off. What you need to do, however, is take a good look at your situation and assess your risks accordingly.

In the product risk area, you’re handling the part about getting your product right. The very first question you need to ask yourself is if what you’re working with is a problem actually worth solving. If the answer’s yes, you’ll move on to defining the MVP – the basic solution to said problem – and building and validating it at the smallest scale reasonable. This will enable you to validate your UVP and will prepare you for moving on to a larger scale.

The customer risk area is all about building a path to your customer segment. First of all, you need to know exactly who you’re talking to – exactly. Figure out who your early adopters are because they’ll be the ones to want your offer now, hence aiding your business to develop. Starting out with outbound channels is okay, but not growing inbound channels as soon as possible is not.

Being well aware of the given market risks is a must for building a feasible business. You need to know what and who the existing alternatives to your product are. This will enable you to set the right customer expectations and the right price. Keep on optimizing your cost structure by what your customers have to say, and most of all, by what they are doing.


Experiments and validation tactics

Vanity metrics

Vanity metrics are exactly what their name says. They’re the metrics that make us feel good about ourselves and the work we’ve put into a project or another. It might be traffic going up, it might be like and comments filling up our posts, it might be a larger number of visitors or a smaller one for the bounce rate – you name it. Vanity metrics are easiest to measure and by no means are we telling you to stop looking at them. You could, however, look for ways to turn these into Actionable Metrics to really up to your business game.

Actionable Metrics will help you make up your mind about what helps your business grow and what doesn’t. Learning how to interpret and work with these metrics will give you valuable insight into how your customers interact with your product and/or service, thus showing you how you should interact with them.

Actionable metrics 101

A/B testing is the best hypothesis testing. Be it minor copy adjustments or major product or production changes, split-tests will grant you a much better understanding of what the limits of your business are. Knowing what your customers are all about is essential to the success of your venture. Don’t shy away from split-tests that might show you a whole new side of your customer base – it’s the tests that generate the most learning you should be after.

Metrics are people too, as Eric Ries so insightfully puts it. Vanity metrics can be tricky, leading us to believe that it’s an anonymous flock of numbers we’re dealing with. It’s not. It’s people – and their characteristics, their habits, needs, and preferences. Look at the data you’re gathering on a more per-segment, or even per-customer basis. Customers are coming and going all the time and the only way to make use of this is to interpret the given data right, by looking at it in segments. Don’t just look and the incoming number of page views. Look at new and returning customers, look at the flow the new and the returning customers have on your website and watch out for new flows your customers might be undertaking. If there’s a new customer segment interacting with your business, you should be the first to know. Segmentation will enable you to target your customers right.

While we’re at it: use funnel metrics. It doesn’t even have to be some complicated and fancy process. You can just as well use index cards to lay down the conversion rates you’re looking at. What are the customer lifecycle events your users have to go through – or rather, you would want them to go through? Say it’s something as simple as them first registering on your website, registering for the free trial, using the product and then finally becoming paying customers. Create monthly or weekly funnel-like reports for all the customer cohorts you’re taking into account for your business, to see where your customer acquisition flow needs improvement. Doing this separately for the different customer segments will enable you to develop better-suited strategies.

tapptitude's start-up theory chapter 2 define, derisk, experiment

SEM and SEO are forces to be reckoned with. And very efficient tactics to work with. Use them in order to generate customer acquisition, by specifically targeting customers via relevant keywords and tracking their metrics over time. Pay close attention to the results generated by SEM and SEO tactics: you might even find a new customer segment, but generally, you’ll gather valuable info about what it is that attracts your customer segment most and where you should place it for maximum exposure.

Word of advice for all you startup-ers out there: keep it simple, at least for starters. Identifying the problems your venture might be facing when it comes to customer acquisition can be greatly simplified by looking at the right data. Detailed reports are useful to look at, once you know what the big problem is. Until then, use actionable metrics to layout simple reports, which you can and should, later on, turn into more specific and detailed guidelines. Make sure you measure what matters – keep track of the actions that lead to something useful and vital to the success of your business model flow.

Schedule a free 30-minute consultation with one of our Product Strategists and let’s talk. It’s FREE and with no strings attached.

Sinziana Chitea

Sinziana Chitea

Content Marketer

Content Marketing Specialist, teasing everyone into taking cute pictures for Instagram. Discovering the tech world bit by bit, and writing it all down on the agency's blog. Enthusiastic about everything visual. And sweets and dogs.

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