Do You Feel Lucky?

It’s time to face the brutal facts. Do you have a scalable and profitable business model? If you do, you’ll enter the customer creation phase where spending and risk will ramp up rapidly.

So, do you feel lucky?

Actually, luck should have very little to do with your decision. You have hard facts that you have worked diligently to acquire through the previous phases. Now is the time to pull all of that data back out and make a go or no go decision for your fledgling enterprise.

This is the 14th installment of our Lean Innovation Seriesand the final step in the Lean Innovation process.

There are 3 steps to answering the critical and final pivot or proceed question:

  1. Assemble the Data – At this point you and your team have gathered a massive amount of data. Now is the time to pull it back out, verify and analyze it. The best way to analyze all of this data is visually. You need to build a “war room” where you can post the most relevant data on the wall. Use one wall for all the versions of your business model hypothesis; another wall for supporting documentation and leave space to write out your questions and conclusions on a large white board. Pull out your Business Model Checklist and make sure you have the answers to all of the questions. Are you willing to bet your company that you got these questions right?
  2. Validate Business & Financial Model – The business model review should answer the same questions posed in Phase 4 of Customer Discovery, but you should now have quantifiable and indisputable proof of the answers. The review of the financial model answers one key question: Do all the tests point to a scalable, sizable business and can you make it happen before the business runs out of cash? If the results are not convincing enough, it’s time to make changes or pivot and test to find out if the new approach improves results.
  3. Review Metrics that Matter – In this step you use your business model canvas to organize your financial model. This is a radically different approach compared to the 5-year income statements, balance sheets and cash flow statements that are standard in your typical business plan.

In the physical channel the following numbers will tell all the story that your investors or managers need to know: value proposition, customer relationships, market type, cost structure, channel, revenue streams and burn rate. For the digital channel the numbers are value proposition, customer relationships, market type, cost structure, channel, revenue streams and burn rate. Use these key numbers to create simplified cash flow statements for the time frames that make the most sense for your startup and fully tell your financial story.

You and your team have now reviewed all the information you need to make the pivot or proceed decision. This is the moment of truth when the founders and investors will make the final decision to start spending large sums of money to execute the business model or pivot the business. The need to pivot at this stage is not unusual and not a cause for concern. Many companies need to make some final tweaks before the team can enthusiastically vote to proceed.

One final suggestion – don’t confuse pride and passion with facts. Focus on what you know (the facts), not what you think you know to make the best decision.

As always, I’ve done my best to summarize the main principles in this blog but pick up a copy of “The Startup Owner’s Manual” by Steve Blank and Bob Dorf to dive deeper.

Thank you for being a part of our values driven community!

Image courtesy of https://www.flickr.com/photos/darknetportal/1021204446/

By: