The Lean Entrepreneur: How Visionaries Create Products, Innovate with New Ventures, and Disrupt Markets

Value-Stream Discovery

From the 50,000-foot view, your value stream might look something like:

Validate idea ⇒ Validate product ⇒ Validate marketing and sales ⇒ Validate growth engine

Planning and customer feedback are worked into each step. (Investment can be as well.)

Drilling down into a generic product, validating the idea typically involves testing three components: the problem you’re trying to solve, the customer segment that has the problem, and the proposed solution.

Validating the product means figuring out the specific product functionality required to minimally solve the problem.

Validating marketing and sales indicates that you know what channels to reach out to in order to find the target customers and what’s required to convert them into satisfied customers.

Validating the growth engine is determining how you convert satisfied customers into passionate customers, at a cost that will allow the business to scale.

Let’s look at a normal user acquisition and conversion funnel. We might use Dave McClure’s Pirate Metrics4 as an example for web-based businesses:

Acquisition—How users get to your website, such as Google AdWords or Facebook ads.

Activation—Customers sign up and try the product.

Retention—Customers are satisfied with the product, so they come back and use the product regularly.

Revenue—You’re paid by advertisers based on the quantity of users or customers who pay for the product.

Referral—Customers are passionate about your product such that they put new ...