One of the best books on the market for any aspiring entrepreneur is “The Lean Startup” by Eric Ries. In his legendary writings, he explains the concept of a “feedback loop” which he applies to any product or business idea to turn a profit in as little time as possible and as inexpensively as possible. This feedback loop can be applied not only to products and businesses but also to achieving our goals.
The feedback loop is a basic three-component loop; build-measure-learn. It is the framework for establishing, and continuously improving, new ideas (such as products and services) as quickly and cost-effectively as possible. The steps are explained below:
Build – In this first step of the loop, the goal is to create a Minimum Viable Product (MVP) – the most basic working prototype that allows you to test your hypothesis. For a new video streaming service, for example, it could be a basic website with just one movie.
Whatever MVP you choose, it needs to show just enough core features to attract the interest of early adopters – the people who’ll likely want to buy your product as soon as it launches. We don’t want to waste time creating the ultimate product that we think our customers would want, only for them to not want it.
Instead, we want to spend as little time and money as possible to get the bare minimum working model into the hands of those who will eventually become paying customers. The purpose of this is to learn as much as possible as quickly as possible (i.e. we get the maximum knowledge output for the minimum effort input).
Your priority, as a startup, should be to prove the demand for your proposed product and not to waste resources building a fully functioning model that’s full of advanced features that no users will end up paying for.
Measure – You can only analyze information that you have measured. Quality decisions depend on quality data. How does the result compare with your hypothesis? Is there sufficient interest in your idea to continue developing it? Does the data show that you’ll be able to build a sustainable business around your product or service?
Learn – And here is the most important step. There are two main conclusions from the loop; either your hypothesis was correct, and you persevere with the idea and continuously improve, or your hypothesis fails.
Fortunately, because you measured the information in the previous part of the loop, you should have gained valuable knowledge about what doesn’t work, which enables you to pivot your idea towards a more customer-oriented one. You now have more useful information about the market you are trying to enter.
This could be considered a failure, as you now have to change your product, but in reality, it is a huge win, because you learned more accurately about the needs and wants of your consumers. You are much closer to creating a valuable business than before you started.
And because you built your MVP, you avoided wasting time and money developing a more elaborate idea that was not important to the customer. By failing fast and efficiently you prevent a larger, more damaging failure later on. That is what success looks like to me.
Build-Measure-Learn often generates “bad” news, particularly during early cycles. You may need to pivot repeatedly before you can persevere. Pivoting can be damaging to your morale, but remember that it’s a critical part of the Build-Measure-Learn process.
Although the failure loop was written with the intent of business efficiency, it also applies to the challenges we face in our everyday lives. If we missed a sales target, we should ensure we use any measured information to learn any lessons and improve for next time. The only time we fail is when we fail to learn.
We need to shift our view of what success and failure truly look like in the practical world. In your mind, success would be your hypothesis working flawlessly. But this is your ego talking. Practically, success would be any result that provides you with information in which you can pivot or readjust towards meeting your goal.
For example, an entrepreneur may wish to open the best bakery in town, and he plans to beat his competition by offering the largest assortment of baked dishes from across the world (his hypothesis).
But the local clientele only purchases two or three familiar products (the result). Instead of continuing to encourage his customers to buy unfamiliar products, he would be better off removing the worst-selling products and promoting the best selling.
The baker has to accept that the failure of his hypothesis was not an absolute failure, but an opportunity to pivot toward greater success. He has to see the lesson learned as the success, and not the result of his hypothesis.
Related Article: History’s 3 most successful failures.