The Lean Startup Playbook: Launch Ugly, Learn Fast | 018

Charles (: 00:22

to the Unsexy Entrepreneurship Podcast. I am your co-host, Charles Harris, and as always, I am joined by Seth Jensen. How are you today, Seth?

Seth Jenson (: 00:30

doing okay. I've been sick for like a million years and I'm almost not sick yet so I count it a blessing.

Charles (: 00:36

Almost only counts in horseshoes and hand grenades though, I don't know.

Seth Jenson (: 00:39

It's true. It's probably good this is a remote podcast, otherwise we lose our MVP. You'd be down for sickness and then this whole thing would unravel.

Charles (: 00:40

you

⁓ it's definitely the season to get sick. and we've had our fair share in our house as well. ⁓

Seth Jenson (: 00:54

Yeah, I'm

sure your adorable children bring home all kinds of goodies and microbes from, let's see, kindergarten and preschool or daycare, yeah.

Charles (: 01:00

Yep.

Daycare. Yeah,

yeah, between the two of them, we get everything that passes through. Yeah, right after COVID was the worst, when they all just went back for the first time, oof.

Seth Jenson (: 01:14

yeah, I believe it. Everyone's immune systems are weak from isolation. Yeah, that must have been a crazy...

Charles (: 01:17

Yeah

It was a terrible time. But we're not talking about colds and sicknesses because neither of us are doctors. Well, actually you're a doctor, but not of medicine. Today we get to talk about a really, really fun topic. MVP or the lean startup approach to running a business. Where do you want to start with this, Seth?

Seth Jenson (: 01:24

You

Not the kind you want operating on you.

want to start with something that is going to crush all of our creative entrepreneur souls right out the gate. I just want you to start miserable and come to reality some hard talk. And you know, we were joking about this beforehand and you said that this statement crushed your soul, but it's true. The reality is building is fun, but it's not entrepreneurship.

Charles (: 02:03

It hurts so much. Building is the most fun thing ever. Like that's why I like being an entrepreneur.

Seth Jenson (: 02:08

I know, but really if all you do is build, then you're more of an artist at the end of the day because building a business, building a thriving engine of revenue and profit, it does not mean just staying obsessed with your product all day and making it better, adding features, tweaking it.

That's eventually when you get to scale that will be someone's job. You'll have a head of product and their job is to perfect the product. But at the end of the day, you as an entrepreneur have responsibilities that extend far beyond just having a great service or a product. And that includes.

making sure that what you're building is not just an art project, but one that your customers are hungry for and are going to break down your door trying to get it. if you're just heads down focused on the product and you forget about focusing on meeting a specific need and a demand, you're going to build a statue to your pride as opposed to the next big thing that's going to be a huge market.

Charles (: 03:05

So it's really interesting you bring this up because I I think I've mentioned before but I have a group of accountants that we all started our firms around the same time Maybe a year and a half ago now we all randomly connected on social media. I don't even know how it happened really It's totally weird and bizarre But it is interesting Sometimes some of us will iterate and get stuck on

If I don't have this perfectly automated process of the client comes in, it pings a notification to me, it sends them an email and then this happens and then, you know, because we don't want to be involved in the nitty gritty work. I think most entrepreneurs are the same way, but we want to create this automated, beautiful workflow and...

Seth Jenson (: 03:44

Yeah.

Charles (: 03:47

Honestly, my business still doesn't work that way and I probably need to automate it more. But the ones that are hung up on that, having gotten clients and the ones that are just saying, sort of works, I'm just gonna push it. We're just gonna start going and see what happens. Or the ones that are, they have their own firms now.

Seth Jenson (: 04:04

Yeah, exactly. And it's such a simple thing, but everyone's, again, because the fun part is, you know.

building cool things and perfecting the model and the recipe. What tends to happen is entrepreneurs will just operate in stealth mode, just building their dream product only to find out that they're their only customer. And they're the only one that actually wants what they built because they just satisfied all of their hopes and dreams and not the paying customer base that they're hoping to invite. And so the lean startup and kind of this concept of a minimum viable product.

was kind of created as a countervailing force against that tendency of entrepreneurs to build, build, build, build, build, build your perfect dream product, build a higher bunch of people, have this slick logo and company, and then launch to the world and see if it works. That's the, that's what we don't want. And so the lead startup says, Hey, instead of doing those shenanigans, let's start really lean. Let's build something small, have it face reality as soon as possible so that we can collect feedback, change it, have it

face reality, change it, face reality, and have this kind of iterative process so that you're building alongside your customer base, tailoring to your needs, reaching what we call product market fit as soon as possible, and de-risking this whole process a thousand times over because you're learning those lessons, making small bets instead of building a dream company, dream product, and then just, you know, rolling the dice to find out whether it worked or not.

So again, I think it's a really powerful concept. And if people want to go to the source material, Eric Ries and Steve Blank are considered the fathers of this kind of lean startup movement. been around for over a decade now. I actually have been in the room with Steve Blank a few different times. He's still going around teaching this philosophy and it's still kind of the dominant paradigm in this space. But it all kind of

If I could summarize it in just one provocative phrase, I'd say, don't just build your dream right out the gate, build a janky, ugly product that gets the job done. And then just iteratively improve it from customer feedback. Like that is summarizing the whole thing in one provocative statement.

Charles (: 06:10

So I'm going to talk about a software that I absolutely love. is, well it was janky, it's getting better, which naturally happens to these type of products. It is a very niche software. It's called Uncat, U-N-C-A-T, for uncategorized transactions. This is the bane of accountants existence. When we get a new client, it's always there or ask your accountant account.

Those are the two accounts that we see all the time that you're just like, what does this mean? Like we have no idea. So there's this software called Uncat and it is fantastic. And this is what I think of when you say janky product, ⁓ not that it's janky, it works very, very well for what it does, but it's just.

Seth Jenson (: 06:35

Haha.

Ha!

And see, hold up,

that's the key, right? It can be janky in a hundred ways, but if it's really good at the one thing you need, then it's a great minimum viable product, right? And that's, you're ready to pay for it, right? Even though they didn't hire 20 developers to make it slick and whatever, it does the thing you need. That's the key.

Charles (: 07:04

yeah.

Well, and it's

such a simple software. Like this is the thing, right? All it does is it takes transactions from QuickBooks that are uncategorized or in that account, and then it sends an email to your client and allows them in a space to reply to that email saying what, where, when, and why, right?

So I say, have no idea what this Amazon purchase is. I don't have access to your Amazon account. I'm going to put this in on cat. It automatically sends you an email one to three times a week saying, what is this? Why was it purchased? just so that I make sure to categorize it correctly. And then once that's done, it notifies me and then I can categorize it and finish everything on my end. So really, really simple software and it's got a great logo of a cat riding.

a bowl or something with a little lasso, it's great. But this is what I think about, right? Like not a sponsor. I would love Uncat to sponsor us, but yeah, it's just one of those like simple programs that's really easy. I pay $9 a month per client that I use it with. I don't use it for all my clients, but a lot of them I do. I probably pay them, I don't know, at least 90 bucks a month and it is well worth it.

Seth Jenson (: 07:52

You

Not a sponsor.

Yeah, yeah,

right. And that's a great example because again, what we're saying here...

Charles (: 08:19

And it's just kind of interesting how it worked.

Seth Jenson (: 08:24

is a janky product that gets the job done, right? Like that's your goal in those initial stages. We're talking about the zero to one here. And when you're sitting there at zero, the next thing you need to build is your minimum viable product, which is gonna be janky, it's not gonna be perfect. And if you wait till it's perfect, you've waited way too long, you've wasted too many resources, right? You're trying to build...

the thing that's gonna make your customers delighted, like Charles is delighted with, you know, this very simple Uncat software. You're trying to make the simplest thing that's gonna delight your customers and nothing else. And then you deploy that. Once you've built it, you deploy it so that you can actually get it in the hands of customers and they can tell you, yes, this is what I need, take my money, or actually this is 80 % there, but really for me to wanna pay more for this, it's gonna need this feature. And then you learn from

that and you adjust it and you repeat the process. So we kind of, they talk about this triangle build, measure, learn. For software people, you're gonna, this is very, it's like agile building. It's been around for decades. This is kind of that same agile framework applied to entrepreneurship, but you build that minimum viable product, that thing that is the least cool, but gets the job done.

You get it to customers with a process to get feedback and make sure you learn what those lessons they're trying to teach you.

you learn them, you apply it to your new ⁓ V2, V3, and you build that and kind of repeat the process. And this is all iterating kind of up towards the mountaintop of product market fit. And finally, one day you're going to deploy it and they're like, yes, take all of our money. We love this so much. And you're going to get that kind of flywheel effect that we think about as product market fit. And so...

Really simple. Again, this is not a complicated thing. It's kind of common sense, but it goes against their instinct as builders because we just want to build the perfect company and the perfect product right out the gate. We want to go maximalist instead of instead of minimalist.

Charles (: 10:17

Well, we're gonna be scared

that someone's not gonna wanna pay for it or they're mad because it looks funky or whatever it might be.

And something that I've seen recently that's really cool too, I'd be curious on your thoughts. And I think I've mentioned it before, but like a lovable or a replate where you can just have AI build the software for you. Obviously it's not great. It's going to be janky, but I think that's a great starting point, especially for those of us that aren't necessarily technologically inclined.

Seth Jenson (: 10:47

Yeah, and that V1, that very first minimum viable product that you put out, it can be even jankier than AI code, right? when people are looking to build a...

software product, for example, I encourage them like, is there a way you can do this analog, like through like Google Forms or like a workflow where it's like you're the software in the backend, just making it happen for your potential client, but they're just interfacing with like Google Forms and like what PDFs you send them. But can you test the value of your product in kind of that analog way to get feedback before you've, because again, a lot of people are like, oh, I've got this app I need to build. I need to hire, you know, $60,000 worth of software.

software engineering, hire dev team, get that out and that's my minimum viable product. I'm like, no, no, no, you could be so much leaner than that in most cases to the point of like, have them fill out a paper form and like mail it to you. it's, you know, start small for those first 10 customers and make sure you can already be measuring and learning before you're even hiring developers. If you do have that talent of using AI and building something, which is becoming increasingly

available, then yeah, you can spend a Saturday and have a janky MVP. And that's great, but not everyone's willing to take that, that, that leap. You should be, honestly, it's really, we're kind of moving that day and age that it's, should take that risk, but. ⁓

Charles (: 12:08

Yeah, it's really a cheap,

well worth it time. I tried just doing for free, just doing random things and I was shocked at how much I could do. And I have, I don't know, maybe one semester of college programming experience, like literally nothing.

Seth Jenson (: 12:22

Right, right.

And the beauty is do whatever medium is gonna get you the information you need, right? And so if a Google forum is gonna get you the answers you need from your customers, like, and again, I say Google forum, I'm not saying survey your customers, I'm saying build, you know, if you're a financial planning app, build a Google forum that collects their questions and then, you know, send them a PDF answer as if it was the workflow of the software, right?

If that gets you the answers you need, then do that. Do the cheapest, simplest thing possible. And the less bells and whistles, the better because you don't want your customer distracted by refinement. You want them to only focus on whether you're delivering the value of your core product or not. if, if, so choose the simplest, ugliest way to get that job done. so that you're getting really good data about whether that job's getting done properly. So if that's building an app, if that's software or whatever, if it's doing it just in person, like

Whatever, do it so that you're gonna get the right answers and the right data. And that's kind of that measure and learn phase of the Lean Startup methodology.

Charles (: 13:26

So I mean, we're talking about the Lean Startup, and I think it lends itself really, really well to software programming, that type of business. How do you get it to work for something that's easier, like more, how do you, how would a plumber do this, right? Because a plumber gets a call from a customer and they go out and they fix the part and.

Seth Jenson (: 13:41

Yeah, awesome, great question.

Charles (: 13:46

I mean, either it works or it doesn't. don't know how to tell if this is going to be what the customers are excited about.

Seth Jenson (: 13:49

Yeah.

Yeah, great question. So again, if you're like, I'm going to be the biggest plumber in DFW and then you might be, you know.

The non-lean startup way to do it would be, all right, I'm gonna need a truck. I'm gonna need to register my business. I'm gonna need to hire some technicians. I'm gonna go buy, you know, $5,000 worth of tools. I'm gonna go get trained in all these different things. That would be how to not do the lean startup is going and dumping tens of thousands of dollars into equipment, trucks, personnel, logos, all of that branding and buying a bunch of ads and just like seeing what happens. Alternatively.

You can go hire, make a relationship with someone that's already certified and is a contractor as a plumber and say, hey, we're gonna start small. Is it okay if I give you some work now and again? Until we kind of figure things out. And then you can get a billboard. You can decide what marketing you want to do. And again, it's tricky. Plumbing tends to be, hey, we want as many customers from as many different things as possible. If you're niche, then you need to focus on your niche. Maybe it's...

plumbing for water softeners or whatever. Maybe you're niching down or generally you're gonna have different strategies. But you know, again, hiring a...

Part-time contractor and just starting small is a much better way to test the water and make sure this is the business you want to be in and who your customers you want to work with and not work with what they want from the experience, right? Is it about having someone dressed a certain way that comes into their home that makes them feel comfortable versus is it flexibility in the schedule? Like you're going to find out what people are looking for from a plumbing service by just having that hiring person and experimenting with that part-time person rather than going and buying again all this equipment.

and trucks. And maybe your margins are less because now you're having to pay this guy more and he's using his own equipment and things and so you're not making very much in those early days, but you're learning the lessons and starting small. And if all of a sudden you are figuring out what customers need and you need to hire two contractors and then three, and then at three maybe you're like, all right, I'm just gonna hire a full-time person now because one person can do what these three, you just grow and iterate. But again, the key is the whole

time you're doing this not because not only to de-risk what you're doing but to also build up your expertise about this right. Learn those lessons on the cheap as opposed to in the most expensive way possible.

Charles (: 16:08

Yeah, let me share a story from my own business because I think it's very applicable. So when I started, I had an idea of what people wanted and I figured it was mostly just in communication with their accountant because that's usually the complaint that I had heard is that they couldn't get in touch with their accountant. So they, you know, they just didn't know what was going on.

And so as time went on, I realized kind of what was impactful and what wasn't in that communication. And we talked about this previously, the videos versus non videos. I still think that's pretty important for most of my clients, not all of them, but most of them. But what I also realized is they really like knowing their tax bill ahead of time. This is a common thing.

And I can't tell them their tax bill ahead of time. No one really can. There are some we can guess and I, I usually can get about five to 10 % off. Um, but that's, know, that can be pretty different if you're going to $10,000, right? That's going to be pretty significant difference. So what I found though, is that people really appreciate nice looking reports.

Seth Jenson (: 16:54

Right.

Charles (: 17:18

They appreciate the communication and making it look and feel like I put effort into it. Right? And so even if honestly, there's not a huge difference between the two. so anyway, I, I've been doing tax prep or, ⁓ tax planning for awhile, and this is a very convoluted story. But what I found is from my financial reporting side, they really appreciated these reports that are giving them.

That was what they always would mention and comment on, not even necessarily the videos. And so as I've been doing tax planning, I realized I needed to up my reporting game for tax planning and not just say, I think it's gonna be about this. Because if I just tell them what I think it's gonna be, they don't like it. They wanna see something tangible. They wanna report. They want something that they can refer back to because they're not gonna remember anything.

Seth Jenson (: 18:00

Yeah.

Charles (: 18:04

And so that was an investment I did recently. It wasn't anything crazy. but I purchased a tax planning software to up that game so that I can send them a report. And then suddenly I get a lot of compliments on, this, this is fantastic. Why don't all accountants do this? Your communication is great. Right? So my initial thinking of communication is important. I think that's true. I've been experimenting on how that communication happens over time.

I find one avenue that works really well that I think people latch onto. And so then I try it in another aspect of the business as well. And I've had just great success with it. It's the same, same concept, I think.

Seth Jenson (: 18:39

Yep, build, measure, learn. That's a great example. And again, you can...

If you'd gotten full ham on your initial assumptions and just trusted your gut and built out a firm with that and branded according to that version instead of this, wouldn't have, you know, would have invested a lot of time and effort and things that weren't as true as the insights that you've discovered by staying small and moving towards their interest. But there is a caveat here because there's a flaw baked into the lean startup that most people don't want to talk about, but kind of the bleeding edge of

like the academic literature and everything is starting to kind of come to grips with this, where what the Lean Startup does really well when executed exactly as kind of proposed, is it builds exactly what the customers want. And that's a good thing 85 % of the time.

but everyone saw the customer is not right and they don't know what they actually want. Right. And so the one kind of cautionary tale I'll put like you should definitely be implementing the lean startup and the kind of like lean and iterative process and be learning the whole time.

But what you don't want to do is become a slave to your customer and assume that every little request they make is the gospel truth. This is a classic Henry Ford quote, right? If I'd asked what my customers wanted, they'd say a faster horse. You do need to let your expertise and your uniqueness and creativity and vision for your company be baked into what you're doing. And your example is actually good about this because you had kind of from your own expertise, this idea about communication being paramount.

in the accountant customer relationship. And so you brought that lens and that perspective to what you're doing and your customers weren't necessarily asking the get go for that. But it was a combination of customer feedback, plus your expertise that got you to that sweet spot and had that kind of perfect feature to your flow. And so that's a good example of not being a slave to the customer and only doing exactly what they want, but letting your unique perspective and expertise actually, you know, pleasantly surprise them, go above and be

beyond what the customers expect from their products. Because we need visionary companies. Visionary companies are the ones that actually unlock value and it's not being visionary if you're just trying to do what the customers are already expecting, essentially, right? Because they learn that from your competitors. It's not gonna give you a leg up. So that's my just kind of my asterisk next to the build, measure, learn model.

there should almost be a fourth step of innovating, be creative, apply your own expertise in that building and measuring and learning process, not just taking everything so black and white from customer feedback.

Charles (: 21:16

Yeah, it makes a lot of sense. Do you have a good example of a company that started the Lean Method approach and got bogged down by customers?

Seth Jenson (: 21:25

⁓ yeah, I mean, you can just spend a lot of time just chasing. So I guess, I guess the one other way to put this is like, it's an learning from customer feedback as an art. because first of all, there's going to be a variety, right? You're going to get a lot of different opinions and it's going to teach you about.

the different customer profiles that you're working with because they're all going to have different needs. And so just remember that your customer isn't one mass body, they're actually subsections and you're going to want to focus on some and not others. So that's kind of a whole different conversation.

Charles (: 21:52

So, okay, so we could go back to Airbnb,

which we've referenced a million times, right? They thought their target audience was just people willing to let people stay in their homes. What they realized is New York had a special need for this and they were more likely to use it. They also realized, I think now they've realized that high-end experiences are part of the draw to Airbnb.

Seth Jenson (: 21:57

Mm-hmm.

Charles (: 22:16

And so that's like a subset of their group that they didn't realize at the beginning. but if they had listened to customers slash investors originally, I don't think they would have ever taken off because everyone was saying this is scary.

Seth Jenson (: 22:26

Yeah, so it's actually...

Exactly.

It's actually a great example, right? If they had just gone and talked to all their customers, hey, you know, what would it take you to feel like comfortable in having some stranger stay in your house? Their answer probably would have been nothing. Nothing would make me feel comfortable. Like, and that was what investors were telling them and, you know, people on the street would never, but because they'd had their own experiences with hosting people on an air mattress in their, in their apartment, they knew like that that wasn't true. They, they, they had kind of their particular, and so we've talked

as before, but for them the unlocks were familiarity, covering the host insurance-wise, and trust. And so they went and tested those principles with high quality photographs, eBay's review system, and kind of a money back guarantee type thing. they had a unique contrarian perspective that was, but they still, the answer wasn't,

Charles (: 23:14

Mm-hmm.

Seth Jenson (: 23:17

we're right about this, everyone else is wrong, so we're gonna build Airbnb. The answer was, I think we can...

unlock something different in the customer. We get a different customer response if we do X, Y, and Z. And so then they started that just in New York, just a few, two listings, I think, were their first one. People don't know that Airbnb operated for years with barely any listings and barely any customers. They did not go from zero to millions of listings. It was like years with just a handful of listings in New York.

But they were learning those lessons during those moments. They were refining the model. They were building, measuring, and learning. So yeah, that's a great example.

Charles (: 23:52

Yeah, it's always interesting to kind of view this from perspective of an entrepreneur, right? Because I can see where we start off with the MVP, right? Most Minimum Viable Product and slowly start working it up. But yeah, I just wish we could jump into the end result before we go through the painful process, if that makes sense.

Seth Jenson (: 24:08

You

Yeah,

no, it's true. Again, it goes against our instincts. But what this also, I think, lets you do that does feel good is you should be kind of a

accumulating revenue as you go, right? Like this gets you selling so much faster than you otherwise would. And luckily revenue does feel good. Building feels good, but also having a little bit of income also feels good. So keep that in mind of staying lean and deploying quicker than you would naturally also means you've got paying customers earlier in the process and you get that thrill of watching your bank account start to accumulate, right? So it's at least counterbalanced by that kind of revenue for

forward

approach because it's not validated. You don't know whether people actually like what you're building until they've paid for it. There's just no other metric that can account for that. so maybe just to kind of review, kind of because we've talked about a bunch of principles here, I think it's important to remember that building is fun, but it's not entrepreneurship, right?

Like yes, that is one of the jobs of an entrepreneur is to build great products and services. But if you're just in your attic building, building, building, building, you're not an entrepreneur. And what I always tell people is, and tell the people you got paying customers, you don't have a business, you're not an entrepreneur. So don't build your dream, build a janky, ugly product that gets the job done for your customers and makes it easy for them to give you your money. Another way you could think about this is,

When you're in the building phase, think about living off of ramen. When you've nailed that product and you've got product market fit, then feast in the growth stage. That's when you're deploying your capital, because you've got your product and then it's about growing and scaling, and that's when you want to be spending so that you get that growth and a fully validated product becomes a big trend. We talked about the build, measure, learn, flow that's built into the Lean Startup.

And we talked about the minimum viable product being the goal. And that's what you're building and deploying version one, version two, version three, trying to get the product market fit. And then lastly, just remember the customer is not always right. know, apply your expertise, steer your ship, learn from the customer, listen to the customer. But sometimes, you know, it's, you should also be visionary. You should also add things that the customer can't see yet. But.

You have to test them. have to use the lean startup to make sure that your gut is right, that your expertise is right, and you have to be willing to change when it's not. So don't be a slave to the customer feedback. Apply your own expertise. But at the end of the day, let the facts stand and build the customers that build the products that people want to buy, not the one that you want to continue to dream of. So it's a powerful framework. This stuff gets me excited because it's really revolutionary and it's just a framework to do anything big.

whether

it's your business or changing your community or even in creative pursuits, it's a really great powerful way to build cool things.

Charles (: 27:03

Awesome. Thanks so much for this Seth and thank you all for listening to the Unsexy Entrepreneurship Podcast. We'll talk to you all later.