Lean Business Scorecard: Feasibility
#3 Can you scale your business idea?
This is Part 3 of the 4-part guide where we focus on Feasibility.
- Overview
- Part 1 — How Desirable is your idea?
- Part 2 — How Viable is your idea?
- Part 3 — How Feasible is your idea?
- Part 4 — How Responsible is your idea?
- Download the Lean Business Scorecard (download link)
The Case for Feasibility
When I speak to people about Feasibility, especially more technical folk who like the “delivering solutions” part of creating business ideas, I find that they often focus on the feasibility of building the solution itself.
By that I mean, they tend to obsess about all the features they could build to help their customers and how feasible each one of those features is to build.
They obsess over the question of “Can we build it?”
But this is not the right question when building a business.
In my experience, anything can be built.
The right question to assess if a business is feasible is “Can we scale this?”
To illustrate this, I want to share a quick story about Lightbulb moments.
Who created the first electric light?
If you ask the question “who created the first electric light?” most people will tell you it was Thomas Edison.
The truth is that Thomas Edison was probably the 9th to build on an electrically powered light, something that was originally “invented” 79 years earlier by Alessandro Volta, which itself was inspired by the work of others.
Volta published a scientific paper in 1800 about his Voltaic Pile Battery, the first electrical system made of two stacks of metal discs — pairs of Silver and Zinc discs to be exact — which when connected in a series that created a flow of electrical current.
This current of invisible electrons was visually demonstrated by passing electricity through a wire until it heated up and glowed, creating light.
In the 75 years following the publishing of Volta’s paper, various other folk tried to create a light bulb for public usage. Warren de la Rue invented arguably the first electric lightbulb in 1840 and over the following years more scientists created increasingly sophisticated lightbulbs, but none caught on.
Thomas Edison began his famous series of failed attempts to create a lightbulb in 1878 (he apparently said “I haven’t failed, I’ve just found 10,000 ways that don’t work”) and set up the Edison Electric Light Company in New York to pursue his dream, backed by bankers like J. P. Morgan.
After eventually finding a solution to creating a lightbulb that would work reliably and could be put into mass production, he had a problem, or rather, his customers had a problem.
In New York, most people lacked access to electricity.
There was no way to power a lightbulb.
This is when Edison arguably had his true lightbulb moment.
He created an electricity generation system and an electricity distribution network that would allow his customers to use their lightbulbs and allow him to disrupt the business of the Gas companies and Gas distribution networks that were prevalent at the time.
Thomas Edison understood that to scale his business idea that the key was to understand what the essential capabilities were that he needed to unlock the value of his solution.
He knew what it took to scale and distribute his Lightbulb’s value.
Let’s take a look at the Feasibility section of the Scorecard with this in mind.
As you can see, the Feasibility section focuses on the business operations and capabilities needed to run and grow a business idea, not just the feasibility of the solution at the core of the idea.
In Edison’s case, he needed an electricity generation and distribution set of capabilities to enable his customers to use his innovative solution, the lightbulb. No doubt he also needed to market his lightbulb and reach agreements to run electrical wires into homes for the operation to function.
The bias is always to keep this set of operations and capabilities as lean and focused as possible, which you can only truly validate if you have tested a number of approaches and gathered data to show which approaches produce the most effective results with the least cost.
Unless money and time is no object to you — Always keep it lean and mean!
Lean Operations & Optimised Channels
The key questions I look to answer when assessing Feasibility are…
“Can we scale the leanest possible operations?” — Do we know what the leanest set of capabilities and activities are to deliver our solution and realise the most value for our customers and the business?
“Can we experiment our way to growth? — Do we have the experimental mindset to constantly identify opportunities for improvement in how we go about acquiring, activating, converting and retaining customers? All in a way that helps us stand out from the competition?
Let’s look first at the first of these questions around Lean Operations.
Getting Lean
This is what the scorecard looks like for the assessment of Lean Operations.
If you have taken the necessary steps to focus first on validating the Desirability and Viability of a business, you should have a clear understanding of what your killer feature is and you should know why it’s so valuable for your customers.
The value of this insight cannot be understated as it will allow you to create a much leaner business operation than if you were dealing with several potential killer features that may offer different types of value to different types of customers, all of whom would need to be attracted, acquired and converted into paying customers in potentially different ways.
Multiple features are also likely to require many more supporting capabilities for their operation, something that may add little customer value, but end up incurring large costs and extra time to get to market.
Knowing what the “true” value you create for your customers is will make it easier to establish…
Your Key Partners — the people and organisations who are essential to providing your business with the leanest set of capabilities to run your business and drive growth. If you’re thinking of flying solo on a business venture, consider again your limited time and what you choose to do with it. You will need to make decisions and trade-offs on what to buy, borrow or build to operate your business and it may not always make sense to have all your capabilities in-house from day one, or ever.
Key Capabilities — the capabilities you need to ideate, create, release and operate. Typically capabilities are things that allow a business to do something and can be in the form of people, processes, information or technology
Key Activities — what you do on a day-to-day basis with all your capabilities to drive growth and win your customers’ business
Let’s look at an example.
This time, we’ll be using a reproduction of Facebook’s early pitch deck.
A look through thefacebook.com’s early “media pack for investors” shows that they were really concentrating at this stage on expanding their reach across Ivy League colleges and advertisers.
The information below is what I picked out in terms of being able to understand the key elements of their operations at this stage.
Despite a reference to their expansion plans and ambitions, their strategy to achieve growth and the capabilities they would need are not spelt out.
However, there is enough information on display in the slides to infer the capabilities they would have needed to put into play to achieve the metrics they have.
Scoring for Lean Operations
Here is the scoring for the Ladder of Evidence for Feasibility.
Lean Operations / Level 1
“Lean Capabilities” are the least amount of capabilities needed to be able to attract a potential customer, activate their interest and convert them into a paying customer on a commercially sustainable basis.
Lean Operations / Level 1 / Evidence to look for
Look first to any evidence around who the target audience is and where they exist. This is important because understanding who your customer is and where you intend to look for them will give clues about how to entice them to make a purchase. After all, there is no business if you have no paying customers.
Follow the journey a customer would take all the way from the start through to the point of paying for a product and service. Look to see if there are any details provided that describe the capabilities that support each stage of that journey. Are there enough capabilities for this to be a coherent journey or are there gaps that haven’t been tested yet?
Without evidence that a business has tested the capabilities to cover one coherent end-to-end customer acqusition and conversion journey, it is hard to say that this is truly a feasible operation.
Lean Operations / Level 2
To get to the next rung of the ladder, you will need to show not only a clear understanding of the essential journeys your customer would take when interacting with your business, but also the capabilities required to support these, with a focus on the distribution/acquisition elements of the business.
Lean Operations / Level 2 / Evidence to look for
Look for evidence of testing with multiple customer segments who may have different reasons and needs for your business. Is there evidence of experimentation with several ‘funnels’ that help a business find, attract, acquire and convert users into paying customers?
A funnel can be thought of as the journey your customer takes from first seeing your product or service to the point at which they buy it. So we need to see evidence that multiple funnels have been assessed, and data captured to compare and contrast the effectiveness of the various funnels and experiments used to acquire customers.
The same logic can be applied to retaining customers. There’s no point pouring money into acquiring customers for a business if your retention is bad and they simply “leak away”, so look for evidence of capabilities that support continued engagement and interest from customers.
Lean Operations / Level 3
To get to Level 3 requires not only evidence that a business takes a scientific and data-driven approach to operating and improving their business, but that they have actually found better, faster, safer and happier ways of achieving better customer and business outcomes doing so.
Lean Operations / Level 3 / Evidence to look for
Look for evidence that multiple funnels have been tried and tested and optimised to focus on the most cost-effective channels and messaging to attract and convert potential users into paying customers.
based on this scoring approach for Feasibility, here are scores I have given for the Lean Operations for thefacebook.com example.
Based on impressive site usage scores and their clear focus on the features that are driving those stats, it’s clear that they have incredibly promising signs of having a distribution strategy and supporting capabilities that work.
What’s not clear is how well-optimised they are at this stage and how well prepared they are to drive growth nationally or internationally.
Experimenting for growth
The next set of questions to consider are around Customer Channels and your Winning Approach to drive growth
Specifically —
- What channels will we use to win over and do business with our customers
- What’s our strategy to delighting customers and standing out from the crowd?
The first question is similar to the questions behind the Lean Operations but the focus here is much more on the insights around customers (ie. where they can be found) and how best to connect to them (which generally speaking requires testing multiple approaches through different channels to find the most effective one.
Given the complexity of the underlying factors involved in this context, it takes a scientific approach to test and learn to see what works best.
For example, if you plan to target the over-80s, social media channels or channels on other technology platforms might not be the best choice. You might instead try engaging them through phone calls or community networks or television or radio advertising, but only testing will tell you what channel and what message work well together to attract and convert them.
This idea around the message and value proposition you use is then what sits at the heart of the second question.
The second question around the winning approach is probably the second most important question on the whole scorecard.
Thanks to the internet, all businesses effectively operate in a global digital market. What will make a business stand out from all the others in such a crowded space? Why would someone choose this business over another?
Answer both these questions and you have an idea of growth potential.
Looking at thefacebook.com, the evidence here is slim, but this is what I have captured from the slides. What I’ve had to infer due to lack of explicit evidence, I’ve left as a question.
Scoring for Growth Potential
We’ll be using the same scoring system again for looking at growth potential.
Growth Potential / Level 1
Knowing who your customers are is useful, but knowing the best channels to interact with and the right kind of messaging to attract their interest and engage with them is essential to driving growth.
If you’ve done your homework on Desirability and Viability, you should understand and have tested what your audience both wants and needs. It’s this kind of insight that will help you describe your product or service and stand out from the crowd.
Growth Potential / Level 1 / Evidence to look for
I’m looking here for evidence that you’ve done the least amount of work possible to get a product or service into a customer’s hands by interacting with them though a channel in way that delights them.
Look for Metrics for any channels that have been tested and evidence they have acquired at least one paying customer. Also look to see if they understand the value proposition for customers, especially if they have examples of their acquisition campaigns. There might be several at this stage.
Growth Potential / Level 2
To get to the next level, you need to demonstrate that you’ve understood the best potential places you might be able to acquire your customers from and the best potential channels to use to interact with them do achieve this.
Growth Potential / Level 2 / Evidence to look for
Look for evidence of experimenting with multiple funnels to channel customers to a business offering and the conversion rates at every step of the journey.
Look for evidence of a systematic way to evaluate different acquisition campaigns and weak points along a funnel.
Look for evidence of hypothesis-driven approaches or experiments, especially where they compare results against a set of baseline conversion rates. To progress to the next level they will need to show that they can effectively and consistently identify the most efficient ways of converting leads into sales.
Growth Potential / Level 3
You’ll reach level 3 if you’ve proven that you’ve tested multiple channels for your target audience, found the channels that convert most effectively and in the most cost-efficient manner and you’ve doubled down on what works and cut out the channels that aren’t giving you such strong return on investment.
By this stage, the differentiated value proposition for a business idea should be clear and proven by the degree that it is able to be used to convert prospects at every part of the funnel.
Growth Potential / Level 3 / Evidence to look for
Sustained experimentation resulting in predictable approaches that can be applied at a certain level of scale. Note that what worked for the first 100 customers might not work for the next 1,000 customer or the next 100,000. Experimentation and learning will always be required to understand what resonates with your potential customers.
Here are scores I have given for growth potential for thefacebook.com.
Even knowing what I know now about Facebook — from being a former user to reading and watching content and news about the company — it’s clear from looking for evidence in the slides about their channels and customer-led strategy that this wasn’t clear to whoever produced these slides at the time, otherwise it would have gone into this media pack. So despite the great usage rates, the evidence here of a coherent strategy is lacking.
Note: they obviously had an incredibly ‘sticky’ product though, so this mattered far less.
What the Feasibility scores mean
The steps you take to improve your Feasibility scores are all about making your business more sustainable to operate in the long term and more capable of adapting how you go about driving growth in sales.
In our example, no Feasibility testing has been carried out, so it’s yet to score anything on these scales.
What the scores mean for Feasibility
There are a total of 9 points you can score for the Size of the Prize section.
Viability / Score / 1–9
Recommendation for focus
Your solution is likely to be good if you’re driving sales conversiona, but the way you’re driving traffic to your business needs work. The idea of “Build it and they will come” tends to rely on guesswork and luck.
To make your own luck, try lots of ways to attract and acquire customers.
Start measuring how successful each campaign you run is and compare performance. Hypothesise what made one campaign more effective than another, then run another campaign and see if you can spot a pattern.
I always recommend using Pirate Metrics to get started with knowing where to focus your efforts in building funnels that convert.
Viability / Score / 10–12
Recommendation for focus
Your experimentation game is starting to get strong.
If you’ve introduced Pirate Metrics to your approach, consider running more automation tools into your funnels to run as many experiments as possible and use the AI capabilities some vendors have to offer to make decisions to increase or descreas traffic levels when certain conditions are met.
Use these approach to identify and shortlist the channels, value propositions and signals you can send customers that drive the highest conversion rates.
Stop the activities that don’t achieve better than average returns, double down on those that work until they stop working.
Viability / Score / 13–15
Recommendation for focus
If you’ve scored highly on Desirability and Viability and you’re in this range for Feasibility, then quite frankly, you’re very likely to be on track for growth. if you haven’t already started, it’s time to think ahead to the future on how your business idea will be a force for Responsibility
Recap
The Feasibility of a business idea extends beyond whether it is possible to build a solution to whether it is possible to build a lean business operation around that solution. This often takes the most experimentation and time to achieve true scale but taking a methodical, hypothesis-driven approach to experimenting with audience segments, value propositions and channels will yield the best results.
Next up
The next question to tackle is Responsibility.
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