Developing a great idea into a successful business is often attributed to great timing and a lot of luck. We caught up with GLP Module Director Frank Rimalovski to dispel this myth by taking a deeper dive into the Business Model Canvas. Frank explains how essential it is to test assumptions, get out of the building and invest in Talking to Humans.
Frank Rimalovski is an early-stage investor and entrepreneurship educator with 25+ years of experience in start-ups. He is the founding executive director of New York University’s Entrepreneurial Institute and manage director of the NYU Innovation Venture Fund.
In one sentence what is a Business Model Canvas?
The BMC is a simple yet powerful tool that (when used properly) helps entrepreneurs articulate the most critical assumptions of their business, and can then be used as a scorecard as those hypotheses are tested with customers.
What is the principle function of the BMC?
The BMC’s principle functions are two-fold: 1) it helps entrepreneurs through thinking through and articulate the most critical implicit and explicit assumptions of their business to enable them to identify their riskiest assumptions worth testing, and 2) as they test them via customer discovery and experiments they can use it to keep track of what they learn as they validate and invalidate those assumptions.
Why is the BMC an essential tool for any aspiring startup?
Most startups fail, and the number one reason they fail is that they build something that the market didn’t want or need. So, implicit in that is that testing your assumptions with your customers BEFORE you actually build and launch is essential to not end up in the fail bucket with all the others. It is also quicker, cheaper and easier than investing the time, money and resources to build something only to find out you got some or most of it wrong, which inevitably most entrepreneurs will do. In fact, on average, studies show that 60% of the initial hypotheses at the outset of a venture are wrong, which suggests that it is more than likely something in that 60% will cause you to fail or struggle. So, it makes a ton of sense to validate, invalidate and pivot your way to decreasing your risk, so you can execute on facts rather than assumptions.
In your experience, what is the biggest challenge that most startups face?
Startups face a lot of challenges, but as above the biggest one is making sure that they are building something that they know customers want, and want badly. Vision is important, but lacking execution based on facts, it is a dream or hallucination.
Talking to humans is one of your key messages. How important is customer discovery to any new startup?
Talking to humans is hugely important. Arguably the most important thing you will do in the early stages. Businesses are built to serve customers. Serve them well and delight them and they will reward you with loyalty and money to enable you to sustain your business and achieve your impact and vision. That’s essential even for non-for-profits. So, getting out of the building to talk to humans is a must. Otherwise, how do you know who has the problem you’re trying to solve, whether they are actively seeking a solution, and what is the best way to solve it.
What are your top five tips for startups?
- Articulate your assumptions using a tool like the BMC, or similar.
- Focus, focus, focus: Define your customer as an individual human (not a company or organization) and focus on those who you believe will be your early adopters.
- Identify your riskiest, unknown assumptions and focus on those.
- Get out of the building and test by speaking in real time with your target customers to test your riskiest assumptions and develop depth of understanding on the problems they face, their preferences and priorities. Go for volume. Talk with at least 20-30 to test each set of assumptions (you won’t be able to test every assumption in each interview).
- Do not sell prematurely. Don’t ask customers if they want/like/need your product or service. Focus on validating the problem and who has it most acutely and is actively seeking a solution. That is the bedrock that your startup will be built on.
Read Talking to Humans (see http://talkingtohumans.com) for more!
