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Case Study One

Page history last edited by Sean Murphy 14 years, 8 months ago

See also CS1-KeyTechniques

Note: this case study was submitted to Lean Startup Circle Group from an anonymous entrepreneur see original LSC thread


My partner and I had an idea for a web app.  The app is a B2C platform that we are selling as SaaS to organizations for use with their constituents.  


We decided from the get-go, that while we clearly saw the benefits and necessity of our concept, we would remain fiercely skeptical of our own ideas and implement the customer development process to vet the idea, market, customers etc etc before writing a single line of code. My partner was especially adamant about this as he had spent the last 6 months in a cave writing a monster, feature-rich web app for the financial sector that a potential client had promised to buy, but backed out at the last second.  They then tried to shop the app around, and found no takers.


Thousands of lines of code, all for naught -- as is usually the case w/o a customer development process.


We made a few pencil drawings of what the app would look like which we then gave to a graphic designer.  The graphic designer created a PS file. We had him create what we called our "screenshots" (which suggests that an app actually existed at the time) and had him wrap them in one of these freely available PS Browser Templates (http://piksels.com/photoshop-browser-templates/).


Now armed, with 4 "screenshots" and a story we approached our target market. Some of which were through warm introductions, some, very literally, were through simple cold-calling.


Once we secured a meeting, we told our potential customers that we were actively developing our web app (implying that code was being written) and wanted to get potential user input into the development process early on. Looking at paper print-outs of our "screenshots", no one could tell that this was simply a printout of a PSD, and not a live app sitting on some server somewhere.


We walked them through what we thought would be the major application of our product.  Most people were quite receptive and encouraging.  What proved to be very interesting was that we quickly observed a bimodal distribution with regards to understanding the problem we are solving and our proposed solution. People either became very excited and started telling us what we should do, what features it needed and how to run with this OR they didn't think there was a problem, much less, a needed solution.


We ruminated on this for a while.   The vehemence of those that didn't get it surprised us.  Perhaps we had a super-duper-hyper-ultra-cool idea---but not enough customers existed to make it worth the effort. We visited each potential customer a minimum of twice, if not usually, three times.  Each time we would come back with a few more "screenshots" and tell them that development was progressing nicely and ask them for more input.


We also solicited information as how they were currently solving the problem and how much they paid for their solution. On the third visit, we pressed those who saw merit in the idea to sign a legally non-binding Letter of Intent.  Namely, that they agree to use it for free, if we deliver it to them and it is capable of X, Y and Z.  And not only do they use it, but that they intend to purchase if by Y date at X price, if it meets their needs.


[BTW this LOI was not written in legalese.  3/4 page of simple everyday English.  In fact, we customer dev-ed the LOI itself.  The first time, we asked them to sign it before we had written it.  When they agreed to sign it, we quickly whipped it up while sitting in a coffee shop and emailed it off to them.]


This would help us separate the wheat from the chaff when it came to determining interest and commercial viability.  Once we had two LOIs signed and in-hand, we actually began to write code. We also implicitly used the LOIs for price structure and price discovery - which we are still working on.  We backed into prices from all sorts of angles, estimating the time-cost of equivalent functionality,  competitive offerings, other tools we were potentially displacing -- but in the end, we

lobbed a few numbers at them and waited to see if they flinched: Customer X got X price, Customer Y got X + Y price, and so on.  


So far, our customers have never mentioned price as an objection, which suggests to me that at this point we are very much underpriced.


The LOI was also useful as we leveraged it by approaching the competitor of one of those who signed by simply letting them know that their competitor will be using our app.  They returned our cold intro email within 8 mins. We have two customers that have balked at signing LOIs, but want to use our product.  This has been somewhat of a quandary for us.  When we decided to go the LOI route, we thought that we would not bend and only service customers who would sign the LOI.  In the end, we decided that these two were large enough to help us with exposure, provide good usage data and worth the risk of them wasting our time.


We'll see.


Right now, the app itself is pretty ugly, a bit buggy and slow.  And doesn't even do a lot.  It is borderline embarrassing.  Don't get me wrong, it does the few necessary things.  BUT it definitely does NOT have the super-duper-hyper-ultra-cool Web 2.0 spit and polish about it because we haven't been able to find a good, dependable designer who works at reasonable rates.  We have found plenty of designers who are happy to ignore our direction and put in 25 hours w/o our permission and go off on a design tangent and then ask for reimbursement for work we didn't need or didn't authorize.  But I digress....


Interestingly enough, our ratio of positive comments to negative comments from actual users is about 10 to 1.  One of our first customers had a disastrous launch with it, yet, has signed on to try it again. (Granted, they did get it for free and we did offer it for free for this next time.) But they didn't hesitate to try it again.  I thought we would have to plead, beg and beseech.  But for them, it was  a no-brainer.  So, we have to be doing something right.


Our feature set is very limited and being developed almost strictly from user input.  While I personally have all sorts of super-duper-hyper-ultra-cool Web 2.0 ideas --- we are holding ourselves back, and forcing ourselves to wait for multiple, explicit and overlapping user requests.  We have seen our competitors whose feature sets are very rich to say the least, but we think, in some cases, as overwhelming as they are feature-rich.


Only time and the market will tell if they are innovative and we are slow, lazy pigs or they have gotten ahead of the themselves/market and our minimalistic solution will be better received. Would love any and all thoughts on our experiences.

Comments (2)

Marco said

at 1:41 am on May 10, 2010

I too would be interested in a status update! Great start, but how did things develop?

Sanjay said

at 7:40 am on Apr 24, 2010

Very interesting, would like to know current state as this was posted almost 8 months before.

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