Customer Development in risk averse organizations, such as non-profits

Lean start-up principles are very effective, if, well, you’re a start-up!  But how do these methodologies apply if you’re an established brand, wanting to improve your share or introduce a new product?

I recently worked with a global non-profit using many lean start-up frameworks to help them find a product-market fit on a technology they had developed.  I was very excited to use these principles where the focus wasn’t on TAM (Total Addressable Market) but instead on the impact to making the world a better place.  What a breath of fresh air!

I’ve worked with large companies before using customer development frameworks, and while I’ve had to make some modifications to fit into the corporate culture, working with a non-profit forced the issue and highlighted the key difference to me.  It can be summed up in one word – risk.

When you’re a young start-up, you’re effectively nothing and have nowhere to go but up.  However, for risk averse organizations, especially a non-profit, where your brand is based on integrity, moral principle, and constituent perception of impact – boy, does that throw a monkey wrench into things.  I quickly found my cavalier attitude towards interviews and pilots in an attempt to “Get out of the building” and create an MVP (Minimum Viable Product) was met with strong, sometimes emotionally charged, resistance.

Why?  Because many of these people have spent their career building relationships of trust that allow them to be in a privileged position in a complex relationship.  Talking to the wrong person, even if innocently brainstorming, can set expectations or raise questions about intent.  Even worse, deploying a product that is supposed to be a vehicle of that trust could at a minimum erode a relationship if it doesn’t work, or even worse destroy the brand if a bug or loophole is found that causes misrepresentation.

None of this means that customer development methodologies can’t be used in a risk averse organization, but it does mean that they need to be adapted and special attention needs to be paid to certain points.

If you’re interested in using lean start-up methodologies but are part of a large, risk averse organization and find it difficult to proceed, here are a few modifications that might help make it more palatable to your decision makers:

  • Embrace the risk: Make the downside part of the plan from the beginning.  While the most interesting opportunity might be the highest risk, your path is likely to follow the lowest risk opportunity first.  So structure the roadmap as one that connects the dots between the low risk opportunities and the end-game.  One thing we did was break down the value proposition into three different progressive levels.  While we all agreed the third level was the most valuable, it also assumed the most risk so was not going to be part of our initial pilots, but showed a path.
  • Pick the “right” Value Proposition: Start-ups have few resources, limited capability, but can build both quickly to pivot and seize opportunity.  Large companies cannot, they are entrenched in servicing their current customers (this is one of the premises of Christensen’s Innovators Dilemma).  So it is important to filter the list of potential value propositions with the ones your company is best suited to do (even if that isn’t the one that adds the most value to the market).  While this may mean a heavy partner strategy to get to the whole product for the user, or constrain the segments you serve, it will give you the best chance to succeed with minimum risk.
  • Be selective on your Customer Segments: In order to protect the brand, we decided to target customers which were established relationships with the same downside risk so that they would partner with us to pilot the product.  This partnership would mean a mutual understanding that this is a pilot, we’re all learning together, and the output would be to build confidence in the model, not the value proposition itself.  We looked for business models that were similar in goal to our technology, and focused on pilots where this could be a parallel solution to a manual process that is already trusted.
  • Give extra attention to the Customer Advisory Board: I think this is a great idea that doesn’t get enough focus in lean start-up discussions.  It formalizes the feedback process as well as creates a commitment bias for them to stick with you through challenges.  In the consideration of risk averse customer discovery, it provides the added bonus of acceptance and understanding when things might go wrong.

If you’ve been interested in applying these frameworks, but you know you’re limited on your customer access and ability to pilot (you only get “one bite at the apple”, so to speak), hopefully these points will help!  They did for us!

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