Warning Label

by Joshua Chuang

Hypothesis-driven, lean entrepreneurship can be the difference between a successful venture and a failed one. This strategy requires one to propose a hypothesis, develop a test around the hypothesis, test it, and learn from it. At its core, hypothesis-driven, entrepreneurship strives to reduce the biggest risk startups face: building a product that no one wants. A powerful tool for entrepreneurs, but potentially dangerous for those who don’t fully understand it or who overlook certain dangers.

The following serves as my warning label to the entrepreneurs out there following the lean startup methodology:

1. BEWARE of AssumptionsPeople tend to presume they understand how things work, when in fact they often don’t. For example, with Cake Financial, the founder and CEO, Steve Carpenter, assumed that the user-interface wasn’t what people cared about and focused his attention on the back-end. He also assumed that Yodlee would be a bad business partner, based on his prior experience. Both are completely valid and, seemingly, reasonable points. However, other plays (like Mint) were able to capitalize on Yodlee’s abilities to create a strong product. Don’t make assumptions/presumptions! Whenever possible, test your assumptions.

2. BEWARE of false positives and negativesConsider the following scenario. You’re friends with many people in the VC and tech industries. You make an assumption that people in this world want a product that automatically folds your laundry (I hate folding clothes, one of you should really make this product). Your friends all love it, and you’re receiving some good press from some famous blogs. All signs point towards making the product, right? WRONG! This is a false positive! While it could be true, it’s not a definitive positive (and you should never read it as one). One might begin building an expensive prototype when, in fact, there was no real demand. So what should you do? When designing your test, create a checklist of potential outcomes and their associated implications. Could I be receiving good press simply because I’m connected to the right VC firm or right advisory board? Are my friends supportive because they believe in me or because they believe in the product? Next time you hypothesis test something, make a checklist first.

3. BEWARE of the “Customer knows best” mentalityPart of the lean startup methodology requires creating minimal viable products, testing them, and improving them based on feedback. Learn as much as you can as quickly as you can. However, what happens when people start asking for numerous improvements/features? What happens when users fundamentally dislike one of your key features? I wish there were a simple rule as to when you listen to the customers and when you stick to your beliefs. Like many things in life, the answer is “it depends”.
In short, my advice is to take your “belief” and test the crap out of it. If the feedback says make changes, but you still wholeheartedly believe you’re right, then try and figure out why they’re wrong. Ask those you trust whether your reasoning makes sense. As I’ve already established, every entrepreneur likes to believe they know best. What I’m telling you is to never trust your gut alone. Prove it if you can. And if all else fails, then make a choice and pray it works out.

Good luck entrepreneurs. You’ve been warned!