The past year I have been diving into Lean Startup and its key principles. I truly believe in Lean Startup as a method for radical innovation, but what you usually get are the examples of Uber, Dropbox, Google, Yammer, Zappos, Buffer, AirBnb etcetera. What all these companies have in common? Right, they are all services/ software driven and internet based.
However, I am a consultant and am usually dealing with midsized companies that more often have tangible products and also quite often operate in a B2B market. So I was wondering how to apply the Lean Startup principles in a B2B context. Is Lean Startup in B2B a mission impossible or opportunity?
So here are my initial findings- I would love to hear your comments and most importantly: successful examples of Lean Startup in a B2B setting, they are difficult to find because this type of companies is generally less open about their tactics.
Critical differences between B2B and B2C markets
Before even talking about Lean Startup, we first have to acknowledge that the B2B market is different in nature from a B2C market. According to Etienne Garbugli the most important differences are:
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Types of solutions that matter: return on investment
If you want to sell in a B2B market, the buyer in general is looking for the following
- Will this increase our revenues?
- Will this decrease our costs?
- Will this increase customer satisfaction?
2. Client relationship
- Number of customers is limited
- Relationship based
- Trust and stability are essential factors
3. Decision Making process
- Several stakeholders: each stakeholder has a different role and different needs
- Long sales cycles
Different Build-Measure-Learn Cycle
The AIM institute argues that for B2B the Build-Measure-Learn loop should be expanded into the Learn-Build-Measure-Learn loop. I agree. As a B2B business it is too expensive, risky and time consuming to start with minimal versions. A B2B customer is more knowledgeable in your domain and probably knows better what he wants or what he does not need. This is also very consistent with the view of Ash Maurya in Running Lean: you first need to assess what the problem really is that you are trying to solve.
Validation in B2B markets
Garbugli developed the B2B startup pyramid which I think is quite helpful.
Etienne argues that validation takes place in the sequence of the pyramid. This means that you
- Need to define your vision: Why do you want to do this in the first place? What is your vision behind the initial idea? Once you have that clear, kick off with the Lean Canvas of Ash Maurya. You will have to define a customer group. Start with the role or person that feels the pain, the problem the most.
- What markets could be affected by this vision?
- Jury: This is the decision making unit, in which every member has a different role. Who are these stakeholders? Try to create buyer personas. A buyer persona is a description of a real life person that might be interested in your product or service. It is all about behaviour, motivation etcetera. You will discover you need to adjust your message to the persona in order to have a chance to win them over.
- Problem: the pain you wish to solve. Try to relate the problems per stakeholder to one or more of the objectives they are trying to achieve.
- Solution: how are you going to solve the pain of a stakeholder?
So, after you have written down your assumptions regarding a level, you are going to find a way to validate whether this assumption is true. However, given the personal nature of the relationship and the limited number of customers, you cannot risk the chance of burning your customers.
Discovery and preference interviews
In B2B the key instrument is discovery interviews. The benefit of discovery interviews is that they will also help you to engage with customers which might eventually lead to sales.. The AIM institute then suggests a series of quantitative preference interviews. In this last interview two questions are asked:
- How important is it to …
- How satisfied are you currently with ..
The only relevant problems are the important and unsatisfied ones. The result of this quantitative research is the Market Satisfaction Gap. The calculation is illustrated in the next example.
According to AIM, the project is only worth pursuing if you have a score of 30% or more, unless you can offer at a substantially lower price.
Common misunderstandings for B2B Lean Startup
@TriKro (Kenny Nguyen) states that the following misunderstandings are common:
- Lean Startup is about tactics
Many lean startup examples come from consumer products and focus on tactics such
as a landing page. These tactics are inappropriate for a B2B sale. However, lean startup is a mindset, not a set of tactics. The tactics must be modified to fit the situation. So, start with learning and employ discovery and preference interviews.
- Lean startup does not apply if the product is complex
Lean startup does not mean everything can be built in one day. It is not about doing everything fast, but it is about going faster. That means if it takes one year to build a B2B product, lean startup tries to break this into 11 months, then 9 months, then 6 months and so forth. It is also about doing the right things. And about killing your darlings if they do not solve a problem worth pursuing.
What about the examples?
- General Electric: the example is B2C, but GE has adopted Lean Startup principles throughout the company nowadays, in the video B2B examples
https://hbr.org/2014/04/how-ge-applies-lean-startup-practices/
https://www.youtube.com/watch?v=nhmQNW1mkSk
- As I said, quite difficult to find. I would love to hear your examples!
Mission impossible or opportunity?
My conclusion is that Lean Startup really provides an opportunity for B2B companies. As long as we consider that Lean Startup is not a tactic but a mindset, and we take initiatives and experiment in the light of the mindset, the potential gains are massive.