We talked with Torstein about experiment with business models and lessons from start-ups.
- Torstein, tell us more about the start-up business models and how well established firms can learn from these? “The digitalisation of the economy has exploded since the introduction of connected devices in the middle of the last decade. The last few years, barriers have been pushed using new methods for delivering products and services. It is not digitalisation itself that drives this – but the use of digital technology as an enabler that has moved the barriers of how we consume, buy and otherwise interact with the world around us. New start-up companies are constantly challenging established businesses through innovative and lean methods for developing new products and services. One of these principals, the lean start-up, is inspired from the lean framework and has been adopted and praised by entrepreneurs throughout the world.”
- Can you elaborate on the ‘lean startup’ and why firms should pay attention to it? “Established companies have a lot to learn when it comes to adopting methodologies like the lean start-up. Currently, most companies undertake a waterfall approach when developing new products or services. This implies that both the cost of failure and the risk of failure is far greater than it needs to be. Short-term financial gains, brand protection and a “we know best” attitude is still the uniform view for how products and services are developed. This means that firms initially invest a lot of money to create a product they THINK the customer wants, develop it in ISOLATION and measure success solely based on FINANCIAL indicators from day 1. The lean start-up framework has an alternate approach. Products and services are developed in interaction and testing with the customer, always measuring performance and results of market tests. The core concept is that you do not need a finished product to test how the customer responds to your idea. This can be done using what is called an MVP (Minimum Viable Product), which allows us to test how the customer responds to what we think the product will look like in the future. This means that we can easily, quickly and cheaply test if the product or service idea is as good as we hypothesis.”
- Are you currently working with clients through the lean startup leans? And what do they think about this mindset? “We are currently assisting a company in building the capability to grow and develop new business with a “lean startup” mindset, as well as assisting them in developing their first product using this methodology. This process can be challenging for our customers, because it feels uncomfortable to let customers see products that do not function 100% initially, but at the same time, allows them to partially depart from the way they have always done business and learn that the best way to understand the customer is to interact with them.”