The application of lean start-up principles, since its articulation by Eric Ries in 2008, has caused something of a revolution in how we think and act in regard to new venture creation. It is difficult to find a published new business creation methodology since then that doesn’t make fairly heavy use of these principles. Although Ries’ original methodology was focussed on high tech start-ups, the basic principles have been found to be universal.
At its core is the concept of Validated Learning. Very simply, a core driver of an entrepreneur is the conviction that their intended target market will willingly part with their hard earned cash for the product or service they have dreamt up. However, they can never be certain, no matter how comprehensive the business plan until it actually hits the market and the orders either pour in, or (which is the more regular case) don’t. In many cases it’s already too late for the entrepreneur to recover, as by this time months of planning and enormous amounts of capital have been wasted on development and distribution of a product that no one actually wants.
Lean start-up methodology suggests a process of learning by exposing the public to a series of cheap, quick experiments, or iterations, that are something like the solution you eventually want to introduce. From the reaction of the public to these experiments, learning is gathered: Is the problem my solution is intending to solve a compelling problem for this group? If so, does my solution actually solve it? If so, do they want it badly enough to pay for it?
By listing and validating or invalidating assumptions through the gathering of real information the chances of creating a successful business and not wasting years of effort and money are greatly increased.
The Allan Gray Orbis Foundation IVC process
Using these principles as a foundation, IVC (Ideation, Validation & Creation) is intended to help Fellows as they prepare to refine, validate, and build their new venture ideas. The process, which has been developed and implemented in conjunction with Cactus Advisors, is designed to help Fellows evaluate ideas, stress-test them, and then create MVPs (minimum viable products) and prototypes in order to conduct the experiments necessary to validate their assumptions and prove that a viable market for their solution exists.
The intended outcome is that by the end of the IVC process the participant is confident that their product or service has a viable market and is paired with a sustainable business model for bringing it to market.
IVC is broken into three separate areas, each one consisting of a facilitated introduction to the tools, followed by a period of intense self driven application for the participants before presenting their findings at the next session. The process is fluid – a participant may move backwards and forwards through the stages as an idea changes and evolves, and there is no set timeframe for completion:
- Ideation: Articulating the value proposition of the idea/concept
- Key Objectives: Identify an idea or concept with a clear value proposition, a problem that needs solving, specific pains and gains, and simple (one line) revenue calculations.
- Format: Using various tools including value proposition canvas, lean canvas and customer interviews, participants will be guided through the methodology of eliminating assumptions and validating their concept.
- Validation: Validating the value proposition and demonstrating commercial viability of the concept
- Key Objectives: Slay the assumptions in the model through customer interviews and testing. Emphasis is placed on the business model to ensure that there are conservative estimates on revenues, expenses, timelines, value proposition, product-market fit, etc.
- Format: Using various tools including Javelin experiment boards and business model canvas, participants will be guided through the methodology of further eliminating assumptions and validating their concept. There is a heavy focus on the data they have gathered in the prior month from their customer interviews and testing.
- Creation: Start building a Prototype / Minimum Viable Product
- Key Objectives: Teach Fellows how to identify the core features that need to be in their product/service and how to build user flows and mock-ups to continue validating their key value proposition with customers.
- Format: Using various Tools including prototyping, mock-up apps and survey tools, participants will be guided through the methodology of developing low-fidelity, low cost versions of their products. They continue using customer interviews and interactions to validate the value proposition and slay assumptions.
When they feel they are ready, each team pitches to a panel using a simple slide deck as a guide, and if all are convinced that the market for the idea is valid, they are offered an initial seed capital investment and a place on a full time accelerator program to formally launch the idea into market.
The IVC thus far has been a great success story. From 27 starting participants, the first six months from April to September 2016 saw the creation of 9 new fellow businesses. Each of these received an initial investment from our funding partner E2, and they are all current participants in the Foundation’s inaugural full time Accelerator programme.