Business Model Innovation - Lean Startup Social Enterprise Launch
Project Example | Nonprofit Business Model Innovation
Lean Startup social enterprise launch
Context
My client had designed a social enterprise concept that was well-supported by research and analysis. Now, it faced the task of translating concept into reality.
Key Question
How can we take our social enterprise from design on paper to successful launch?
Solution
I advised my client that the only way to confidently invest in a new venture launch is to pursue a lean (i.e., frugal), iterative process of assumption testing based on real customer feedback. I led the client through a Lean Startup-inspired process, going from the initial business model design to prototype, proof of concept, minimum viable product (MVP) build, and operational market test. Activities included:
- Prototype and proof of concept: Early on, we prototyped key elements of the product experience to validate customer interest and refine product design. We conducted 40+ potential customer meetings to confirm we were targeting a major problem and that our refined solution would address the problem.
- Minimum viable product (MVP) build and operational market test: To validate that customers would actually be willing to pay for our solution, we built an MVP and tested our ability to sell and deliver the product. This also allowed us to validate our unit economics (e.g., how much it cost to acquire a customer) and build a convincing model of expected social enterprise financials.
There were several keys to success in this process:
- Structured hypothesis articulation and testing. We explicitly stated the hypotheses underlying business model design—for example, "we can acquire a paying customer for under $300." Then, we explicitly tested hypotheses—for example, by running digital advertising and calculating the average cost to acquire a customer.
- Working in new and sometimes uncomfortable ways. During this process, we operated in startup mode, at a much faster pace than was usual in my client's organization. In addition, my client had to become comfortable with the notion that expertise, research and analysis would not yield the full answer to business success; rather, the answer had to be discovered through customer interaction and real market experience.
- Avoiding the natural organizational forces that squash new models. It is a well-researched fact that most organizations fail to succeed with new ventures that have different business models than the parent organization due to the natural organizational forces that determine resource allocation. I coached my client to anticipate and defend against these natural forces to create the right conditions for new venture success.
Results
The client is currently concluding a successful operational market test and is expecting to receive funding for a full social enterprise launch in 2020. Along the way, this lean process carefully managed financial risk by avoiding commitment of the full funding up front; rather, incremental funding was released only as we demonstrated ever increasing confidence in the viability of the business opportunity.
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