This week’s blog is going to be focused on the second part of the Lean Dashboard model where we will be explaining the main principles of validating your business model through a series of experiments. If you would like to read up on the implication and importance of Milestones in the model, feel free to read last week’s blog on this topic here.
So, why do we bother to set up experiments in regards to our business model? The main issue at stake here is that the business plan that we set up via our Lean Canvas previously (see this article for more information), is purely based on ideas which we think MIGHT work. The role that we need to take now is to actively challenge all key parts of our business plan through a series of experiments to see which parts actually stick. So how does this process work?
The key objective revolves around the next step you would like to validate and a deadline by which this should be done. For example, you may be in the Product /Market fit phase and decide that you would like to test whether or not a particular segment is interested in your product (such as working professionals) and you would like to know if a particular channel (such as social media) actually allows you to reach that market effectively. You, therefore, need to choose an appropriate metric to test this, which in this case may be a metric such as conversion ratio or price per conversion.
Once you have established a key objective, you can start gathering ideas for experiments around this theme. In the case that we have chosen where we are testing for a specific interest for a segment, we may start to setup experiments such as: « Will using more videos in our social media post lead to increased exposure? » « Will increased exposure lead to an increase in our conversion ratio? » « Will using limited time promotions lead to a sustainable client base ? ». It is up to you to choose appropriate experiments for your key objective.
Once you have brainstormed a number of experiments, it is now time to start launching them, this process is done in three different steps: build, measure, and learn.
In the first phase, build, we are looking at gathering all the necessary resources to set up our experiment. Let’s say that we are looking at boosting our social media exposure with increased video content. This means that we will need to find a way to create video content that is appropriate and on brand and effectively publish it on our social media page. Once all of this is planned out you will realize that some experiments are too complex to be built with the means of the company, this means it needs to be taken out of the queue and rethought on a smaller scale in most cases.
In the second phase, measure, we choose an appropriate metric and measure the effect of our efforts (Increased video content) against our objective (To increase our social media exposure). In this case, an obvious metric would be the number of impressions per week. However, we cannot end there since we also need to know what increased exposure means for our sales. We may thus choose to measure the number of visits to our website per week and the number of sales carried out from our website in this timeframe. This is data that will then be used to determine whether or not the experiment was a success and whether or not video content should be used on our social media platform and what this means for our business model.
In the last phase of the experiment, learn, we reflect upon the results and make a judgment as to whether or not the experiment was successful. If we can see that an increase in the video content on our social media page has increased the number of impressions per week and thus increased the number of site visits and a number of purchases of our product. We can make the link that increasing the quantity of video content on our social media page has led to an increase traffic on our website and an increased our sales and is thus an effective strategy in regards to our advertising channels.
Here we store all of the completed experiments in order to remain aware of the key aspects that have been successfully validated and aspects which we successfully disproved. This allows you to maintain a broad perspective of your business’ operations and can help you figure out what experiments to work on next.
So now you know how to use the Lean Dashboard for your business and should be able to understand the main principles behind this tool and the main process behind validating your business plan through a series of experiments.
Thank you for taking the time to read this blog. As always, if you are a startup looking to launch your business and are looking for a place to work, be sure to check out our website at www.bettercoworking.ch and pay us a visit if you are around the Place de la Riponne!