Tristan Kromer on Testing Customer and Value Hypotheses

These are excerpts from  Episode 9 of Outlier on Air: Tristan Kromer, A Lean Approach to Business.  They are in the same sequence the took place in the interview but a number of stories and asides have been omitted to focus on what I felt were some extremely valuable insights from Tristan Kromer on clarifying and testing customer and value hypotheses.

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Melinda Yeamen (@melindayeaman): Today, we are going to talk about having a lean approach to your business. We’ve got Tristan Kromer. He is a freelance lean and Innovation coach, and he runs the Lean Startup Circle. This is a grass roots community based around lean startup principles, with Meet-Up groups worldwide. This is actually a follow-up interview to a written interview that “Outlier Magazine” did, Tristan, you are joining us from Silicon Valley, is that right?

Tristan Kromer (@TriKro  | blog):  That’s right. I’m sitting here in the SOMA area of San Francisco right now, and I have my offices in this area.

Tristan Kromer Started Like Everyone Else, Failing Repeatedly

Melinda: Before we go into Lean principles, I want to get to know more about you personally: what brought you up to Lean Startup coaching and what drives you to do it.

Tristan: How I got to Lean Startup is relatively straightforward. It’s the same way that most people get into it, which is that you try something new, whether that’s in a large company or a small startup of your own.

You start out with this wonderfully egotistical idea that you know what you’re doing, and that you alone can provide that vision, and tell the customers what they need, and then you fail repeatedly to deliver on that promise.

Then, after banging your head against the wall enough times you start to think, “Maybe I’m not so visionary. Maybe I’m not Steve Jobs 2.0, and it’s time to try something new.” Most of us who have become real Lean evangelists in the past few years have struggled desperately with our own projects and suddenly realized that there was perhaps a better way. A way that is more grounded in reality.

• Test out those ideas on a small scale and seeing what sticks and what doesn’t. I’ve worked with larger companies in the past. I worked in the IT security industry for five years in Germany and Taiwan and Vietnam and Switzerland. I worked in the music industry in the US before that for 10 years.
• Identify the critical assumptions in your business–whether that business is a band, a restaurant, an IT company, or a high-tech company.
• Test them, validate them, and then move on. Just that methodology has just proven more successful than the “Field of Dreams” — the “build it and they will come” approach.

That’s really how I got there –by failing repeatedly and–by trying to recognize the things that worked when I did succeed and the things that inevitably wound up bringing me to failure.

A Day In The Life Of A Lean Startup Coach

Melinda: Tell me a little bit what your life is like. What does your life look like as a Lean Startup coach?

Tristan: This morning I woke up at 6:00 AM to talk with a team at company I’m working with in Switzerland. They want to implement Lean Startup practices but in a large company they also have to worry brand, and political fallout from other teams. I am helping them do small-scale innovation in a large company environment?

Since then, I’ve been working a lot of the day on Lean Camp,  an unconference the weekend right before the Lean Startup conference. An unconference offers an open space format like BarCamp, this one will gather a lot of Lean Startup practitioners to discuss Lean methodologies, tactics, and tips and lessons learned. I’ve been spending all day with our massive volunteer team trying to get that organized.

Melinda: I ask you because our audience is specifically entrepreneurs and startups. We all have these major aspirations, and once we take that leap from the corporate world–or from college or wherever we’re from–we have to bust it. There is no longer a paycheck that’s coming no matter what. We have to earn every cent. We’re all doing it for a larger dream, too. I wanted to pull that out, plus I’m really interested in how you operate.

Tristan: I think that’s common for a lot of us. It’s no different from when you or I worked in a larger organization. We probably did the same thing. We were busting our asses at two in the morning. Eventually it becomes, “Why am I doing this for somebody else?”

Instead of dealing with the nitty-gritty of some mechanical policy that’s not allowing me to innovate, why don’t I do that for myself, and really try and solve other people’s problems in a more direct fashion?

We Have This Drive To Create

Melinda: I love that you use the word innovate, because I think a lot of entrepreneurship, of course, we have our own “why” as to why we’re doing it, but one big commonality that we all have is we’re innovating. That is what we want to be doing all the time. We have this drive to create, and that’s what we have in common there.

Tristan: There are a lot of people out there who I would consider entrepreneurs, who consider themselves entrepreneurs, who are innovating on a small scale.

I know a lot of people in Silicon Valley who look down on people who are just creating yet another brick and mortar business, or yet another restaurant, or even an e-commerce site or a blog. Personally, I think these are all levels of innovation.

People have a lot of different reasons why they go into entrepreneurship: I think they are all valid. Being an entrepreneur is not a question of scale but the drive and self-imposed desire to solve problems. That’s what I think really qualifies it.

Melinda: What is the bottom line for you personally? What really drives you to do all of this?

Tristan: I’m rather introverted; given no agenda for the day I would most likely curl up into a little ball with a television. I get a lot of satisfaction seeing the end result of my labor and seeing people actually make progress against their goals. It’s like listening to a good song.

When I played in a band and worked with other bands as a producer, those jobs offered immediate satisfaction. When there is too much distance from the impact of what you are building, which can happen in a large company, even if you’re working for a phenomenal company.

If you don’t actually get to interact with those customers, and see the satisfaction on their faces when they buy or use your product, I think that can become very demotivating. For me, the satisfaction of genuinely helping somebody is the end-all be-all. If you don’t have that, I don’t know what you’re doing.

Whether you want to call it business model innovation, or Lean Startup, or Lean Canvas, or Business Model Canvas, or any of those individual methodologies doesn’t really make a difference. The question is: are you actually helping people enable their own creativity and problem solving?

What is Waste?

Melinda: Can we talk about Lean Startup principles? Many in our audience have read the book; I found it to be excellent. Many, many things hit home for me. One was that failure is a good thing: we need to fail fast and pick ourselves up, eliminating waste and not repeating the same failures so you can efficiently move along.

I want to get your perspective on failure: how do you accept yourself and love yourself through the failure, but eliminate waste and not fail any more than you have to.

Tristan: Eliminating waste is the original lean: what Taiichi Ohno and the crew at Toyota first created as “just in time manufacturing” and later  became known as lean manufacturing.

The idea was to eliminate waste in terms of resources being used to create one physical product. I think it gets confusing, because a lot of people have a different sense of waste. The definition of what waste is and what the product is that you are trying to build changes the way you approach things.

If you are trying to build the product, even an insubstantial product, there are a lot of things that could be waste. There’s code and automated testing that might be considered waste even though it helps you maintain quality. Ultimately, the thing that Lean Startup identified is if you don’t know what product to build in the first place, then, it is all waste.

Failure of a Hypothesis is Not Failure of Your Startup

If you don’t know what the product is that the market wants, then everything you build is waste. The only thing that you can focus on is producing a business model that capture the knowledge and know-how in your company of what the customer wants and how to deliver that. Waste is really anything that you do that is not directly focused on learning about your business.

You might run a test and you put up a landing page and you put up a value proposition and nobody bought it. Some people might say that is failure, but it is not. You have to look at it in terms of, “Did we produce any units of knowledge? Did we learn anything?” A failed test teaches you something if you invalidated a hypothesis. For example, you have successfully discovered that nobody wanted that value proposition; therefore you don’t have to build that product. Failure of a hypothesis is not failure of your startup.

Melinda: A lot of us have things that we want to build, some are tech related and some are not. When you should actually start building that product? Should you always be explicit about your concept sand prove the desire for it in the market first? What is your strategy on that?

Tristan: Focus on what is the riskiest thing about your business model. Sometimes it may be a technical risk–can we make this piece work–and sometimes it may be an aspect of market risk–will people pay for this?

A Lean Startup Starts With You Admitting Your Ignorance

Melinda:  So when we want to create a product, evaluating just how obvious the problem is in the market is the first step. How much do we really need to test? What are the fundamental steps Lean Startup recommends?

Tristan: A Lean Startup for me is first and foremost the willingness to admit your ignorance. It’s recognizing that we don’t  know all of the answers. That’s step number one.

If you think that you know everything, that you have a perfect product, that you have a crystal ball that lets you make a spreadsheet for  how much revenue you’ll have five years into the future, Lean Startup is irrelevant for you.

But for those of us who are willing to start with that premise that “I don’t know,” then our first step is identifying the blanks and asking, “How do I go about learning more?”

Other Perspectives Are Critical to Uncovering Your Ignorance

The second step for me is getting perspective. We can identify some of the gaps in our knowledge but we may still have blind spots, where we don’t know that we don’t know. What Rumsfeld called the “unknown unknowns.”  It’s at this point that you should really take the advantage of other  perspectives on your problem:

• From colleagues: Ask them for their opinion on your business model. Ask them to question you, to challenge you,  to force you to validate key assumptions for them.
• From potential customers: Do they really have the problem that you think they have?

Getting other perspectives is a critical part of Lean Startup. It’s not talked about as much in the canon, but nobody can identify all of their own assumptions: it’s like trying to stare at your own eyeball without a mirror.

You need a second pari of eyes. Then, and only then, can you really do what Eric Ries talks about in his book, which is that “Build, measure, learn” loop. Until you’ve identified those assumptions, you can’t go about building something, measuring it and learning from that, because you don’t know what you’re trying to learn.

You Can Adjust Your Product Or Your Market Focus

Melinda: What I’m hearing is that it’s important to approach your business in a humble way and say, “Even if I know exactly what I want to create, I need to listen to colleagues and potential customers–and later on actual customers–so that I understand my customer base and adjust my product as I’m building it.”

Tristan: Absolutely. Or adjust your market focus. What you’re striving for is product-market fit. Not only can you adjust your product all you want, you can also adjust your market focus.

I personally prefer to stick with the market because I am normally motivated by empathy for a certain group or niche and I want to solve their problem. So I will continue to adjust the product. But I know other entrepreneurs who start with an invention, who have discovered a technology and are searching somebody who wants it and will pay for it.. It’s not my preferred approach, but entrepreneurs often do it.

It’s All a Matter of Opinion Until You Run the Experiment

Melinda: That’s interesting that some of us are motivated more by the market we’re talking to and others are more motivated to find a use for something they have invented. In my experience working at companies of different sizes and in my own startups I often see teams make decisions on opinions or what we like personally. This applies to feature selection, marketing decisions, all the way on down. Sometimes it can be hard to move forward when there are several conflicting opinions. How do you move past that?  When is it OK to use opinion and when do you absolutely say, “Look, the market has to tell this, not our opinions?”

Tristan: There’s no great rule of thumb, to be honest. It’s all a matter of opinion until you run the experiment. Whether it should be red button or green button, there’s no intellectual argument you can have that says what design will be more aesthetically pleasing and result in better click-throughs.

You might have some previous case studies or some analogs that you’re familiar with, but ultimately the market is the only one who can tell you for certain which one is best. But it only makes sense to test those things that you have a strong feeling will actually have an impact.

If you’re working on a brand-new product, testing the color of the button is probably not the first thing you should do. You should probably test that tag line you were talking about before. Can you explain the value proposition to somebody? Even before you determine whether or not anybody wants the value proposition, are you explaining it correctly? Can anybody understand what you’re talking about?

If your product is guaranteed to cure plantar fasciitis–which is a serious problem–and your tag line is “Cures plantar fasciitis instantly,”  that would be an extremely valuable proposition. But do many of your prospects know what plantar fasciitis is? Perhaps the better phrasing: “Do you have foot pain?” “Do you have a pain in your heel when you get up in the morning?”

The value proposition is far more important than what color is the button. It does take a certain amount of judgment to figure out what is the most important thing to test, right now. Is it going to be the line spacing or the font you’ve chosen or is it going to be the actual functionality of your product? It really depends on your target market and how severe the pain is. If it’s a very severe pain, the design is probably not an issue.

But if it’s only a weak pain point, something makes your prospect’s life just a tiny bit easier, than design is a huge factor:  the user experience has to be very fluid and friction-less.

Don’t Get “Stuck in Solution Land”

Melinda: When a client approaches you with a problem what techniques do you use? The Lean Startup book highlights “5 Whys” is that one that you use a lot? How do you kind of drill down to find a solution?

Tristan: Ignorance is my best technique. I never know about the person’s product. In fact, 90 percent of the time, I don’t want to know about the person’s product. It won’t help me and is likely to get me  “stuck in solution land” as my colleague Kate Rutter would say.

If I don’t know anything I  can adopt an outside perspective

• I don’t know anything about the customers.
• I don’t know anything about the value proposition.
• I have the benefit of perspective and ignorance in that I don’t have any of the assumptions that the entrepreneur has.

The “5 Whys” vs. “5 Whos”

I can ask really stupid questions like, “OK, I understand your value proposition is to solve my plantar fasciitis, how many people are affected?”

You mentioned the “5 Whys” and I will use that for root cause analysis.  But normally I start with the basic: “who is your customer?” That’s the question that I usually wind up asking five times:

• Who is your customer? Oh, it’s everyone.
• Really, is it for my grandmother? Would my grandmother buy this product? Sure, she’d buy this product. She doesn’t have a computer. OK, maybe she won’t buy this product.
• Would my six-year-old buy this product? No, probably not. Also not a big computer-user. Now we’re starting to narrow down the customer segment.

I ask “Who is your customer?” and “What is your value proposition?” repeatedly. It can help the team identify key assumptions that they didn’t realize that they were making and a better map of what they don’t know.  Both of these then need to be explored and tested.

Testing, Testing,…

Melinda:  What are some simple ways you can run a test? I think a lot of people just don’t do tests, because they think it has to be super scientific.

Tristan: I think that’s a common opinion but it’s actually a misunderstanding of what a truly scientific test is. To be scientific you need a theory–or a hypothesis–that can be disproved. You can substantiate it, but you never prove it, only disprove it with new data or observations.  So to keep it simple you look for ways to disprove your key hypotheses which are the your riskiest assumptions in your business model.

Melinda: Really, work on disproving rather than proving?

Tristan: Yeah. All tests should be designed so that you can actually fail them. Most people design tests and they’re looking for that 95 percent confidence rate: they haven’t set any fail condition. So that means that there is no condition under which they would stop doing what they’re doing.

For example, “I can get people to click on my adwords” vs.  “for my business to work I need to get at least a 20% click through rate.” The latter is a better test because it’s easier to disprove. With the former as long as someone clicks at least once at some point then you feel encouraged to continue.

My Product is For Everyone (That I Know)

The most common theory of a first time entrepreneur is that everybody wants the product.

Melinda: Does it worry you when you hear someone say, “My product is for everyone.”

Tristan: Yes, but if you actually ask, “Tell me more about your customer” they actually refine it quite rapidly. Most people don’t actually even believe that it’s for everyone because they haven’t even thought about that, yet. Sometimes when they say everyone they mean “everyone in Silicon Valley” because that’s what has shaped their worldview. But it can happen anytime the members of a  startup team are very similar and only hang out with people like themselves. Getting a little diversity in your worldview is a quick cure for that.

How to Advise Entrepreneurs About Their Business Idea

Melinda: Do you have some simple tips for how our audience can become better at advising colleagues?

Tristan:  Yes, here are four  key things anyone can do to help:

1. Don’t focus on someone’s idea for a solution.  You may find it absurd or very reasonable but either way you will have a bias.
2. Ask: “What is the customer segment?” Is it well refined? Is it focused?
3. Ask: “What is the value proposition? Is the proposition is comprehensible? Will the customer segment understand it?
4. Ask: “How are you testing it?”  Can the test fail? If not, get them to reframe it to one that can.

Summary; Three Key Steps to Get Started

Melinda:  What do you want our audience to take away?

Tristan:  Whatever business idea you’re focused on right now, no matter how much you think you know something, say out loud, “I don’t know. I don’t know and I’m going to test this.” Then get somebody else’s perspective. Ask a fellow entrepreneur, “Please spend the next 20 minutes and challenge me on everything I’m saying. Don’t argue against me but just ask me questions.”

If you can have a conversation with somebody for 20 minutes, where they only ask you questions and you don’t defend your value proposition just explain it, you’re going to find that you have a lot of unanswered questions. That’s what you need to test. Just start with, “I don’t know.” Get a second set of eyes on whatever you’re doing. That will take you 90 percent of the way.

After that join a Lean Startup Circle group near you. There are groups all over the world. It’s just a group of fellow entrepreneurs who, just like you, are  there to learn and to challenge each other constructively.

Melinda: I want to thank you so much for spending this time and lending your expertise to us. Thank you so much, Tristan. I sure appreciate it.

Tristan: No, no. Thank you very much and I hope you all have a great day. Good luck to you and your businesses.

Melinda: Thank you. To learn more about the Outlier movement, visit OutlierMagazine.co.

Related Blog Posts

• SKMurphy Newsletter Archive
• A Conversation With Tristan Kromer on B2B vs. B2C Customer Acquisition Challenges
• Tristan Kromer: You Can Tell a Good Advisor By Their Questions 
• Tristan Kromer on Business Models
• Minimum Viable Product: Enthusiastically Proceed Skeptically
• Be Mindful of People’s Time

A Note on the Transcript

These excerpts represent about 50% of the raw transcript. They are in the same sequence the took place in the interview but a number of stories and asides have been omitted to focus on what I felt were some extremely valuable insights from Tristan Kromer. I have added subtitles and hyperlinks for easier scanning and context. I used CastingWords.com and supplied a copy of the raw transcript (which ran about 7300 words) to Melinda Yeaman of Outlier for their use.