What Are the Limits of Lean for an Early Stage Startup?
The early days of a technical startup are as exciting as they are frightening. You have a lot of work to do to turn your idea into a coherent product. But chances are that your team, however talented, is tiny and money is tight.
The prospect is even more daunting when you look at the percentage of startups that pivot away from their original idea to better fit the market, which may be as high as 73 percent, according to a recent study by the Swiss institute EPFL. There’s no guarantee that whatever you’re building today will be the thing that ends up making you money. You’ve got to play smart to increase your chance of success.
Much has been written on how to play smart, with a range of possible methods available. One of the most popular, the lean startup approach, has become the de-facto standard for running a modern business in its infancy. In a nutshell, the idea is to deliver often, fail fast and learn from your mistakes. But delivering, failing and learning from your mistakes still takes time, and in that time, you still have a company to sustain financially. In order to keep going until you find product-to-market fit, therefore, you should spend your money wisely.
Under this framework, you’ll likely reach the conclusion, given that you’re a technical startup, you should build as much as possible from scratch. After all, you have an awesome team who can surely deliver a specific, run-of-the-mill, feature, right? Sure they can. The real question is: At what cost?
Are You Really Saving Money?
Let me invite you to do a quick exercise. Take all the features you intend to include in your next release — be it a proof-of-concept, an iteration of your MVP or an actual software version — and divide them into two groups. The first are those that are unique to your product, and therefore differentiators. The second are those that are the same across all your competitors.
The first group is really what makes up your secret sauce. This is your key intellectual property (IP). Because this is central to your identity as a company, there’s no option but to build these features in-house.
The second group is more interesting. These items are still essential to your product, but they don’t add much in terms of IP value. Also, since they’re made up of run-of-the-mill features, it’s likely that someone else has already built them and is providing them as a service.
A good example here is Zendesk, one of the leading services for customer support management, or MailChimp, which is for email marketing. User authentication is another useful area to consider. You can either build your own authentication system, or you can rely on somebody else — Google, Apple or Facebook for instance — to authenticate the user for you.
Of course, using these services comes at a cost, but not all companies follow the same strategy when it comes to monetizing their product.
Some services, such as the user authentication ones we just talked about, are free. The cost here is that your users must identify themselves via their online presence. For instance, you can have users log in to your app or service through their Google account. Unfortunately, that requirement could stifle the adoption of your product depending on how privacy-conscious your target users are.
Other services start you off with a free account and then charge as your business grows. The bet here is that you won’t move to a new service once you can afford to pay because that would be too costly, both in terms of data migration and in terms of internal process changes and retraining your staff.
Still others will charge you from the start, and that charge may or may not be sensible for your current company stage and financial standing. The aforementioned Zendesk currently charges $49 per customer support agent per month. That’s a fair price, given the functionality on offer, but it might still be too much for a cash-strapped team to afford.
Aside from these integration costs, you also need to consider the UX impact that bringing in a third-party service will have on your product. The rule of thumb here is simple: Assuming the system you’re integrating allows for customization, the more you customize, the higher the cost your team needs to absorb.
Some services allow for some basic customization, such as displaying your company logo and using your custom colors. This type of customization is pretty easy to set up. The resulting user interface will still work as intended by the third party provider, however. The user will notice that they’ve moved away from your product and into something different.
Alternatively, they may allow heavy integration through the use of APIs (application programming interfaces). This means that the integration happens behind the scenes and the user interacts with your app through an interface that your team implements. At the same time, your software takes care of communicating with the third-party service in the background.
This approach works best to provide a seamless user experience, at the cost of developing the aforesaid interface internally. In other words, you’re offsetting some of the feature cost to the third-party provider, but not all of it.
But perhaps at your early startup stage, you can be a bit more daring and think more laterally to implement auxiliary features.
Think Outside the Box — Meaning Laterally
Let’s look at gathering user feedback and doing basic customer support as an example. In the early stages of your business, you won’t have millions of customers to interact with. What you actually need, then, is just a way for the users to send you their feedback, and a way for you to reply back.
Instead of spending money on a ready-made customer support solution or implementing something bespoke, you could rely on a simple feedback form such as the one provided by Google or Microsoft 365. This solution is especially appealing if you’re already a customer of either company.
On Google Forms, for example, the information entered by the customer ends up in a spreadsheet, and you can get an email notification whenever there’s a new submission. You can then get back to the user via email, or directly via your own app if you have already built such messaging functionality.
Expanding lateral thinking further, perhaps you can even consider doing without a support and feedback option altogether, at least initially, and employ Discord, Telegram or another instant messaging solution to interact with your user base.
These services are completely disjointed from your product, but that might not be a bad thing in terms of brand signaling. It shows that you’re embracing cutting-edge platforms while keeping the focus on your core competency within your own product. This might also have the collateral benefit of building up a tribe of followers, which is an important tool for viral marketing.
The only word of advice here is to think about the data you’re creating and collecting. For one, you won’t want your users’ personally identifiable information (PII) to be stored on third-party systems. There are legal requirements surrounding the handling of PII, and involving third parties means taking into account how they handle this data. Your legal counsel would need to review the terms and potentially require the issue of an updated terms and conditions document for your users. Legal concerns aside, you might also not be too keen on losing that data if you later decide to migrate away from the free service.
In short, don’t just take existing services at face value, especially those you’re already paying for as part of your operational expenses (e.g., Google Workspace, Microsoft 365). Can they satisfy some of your secondary requirements — maybe in a pinch — while your team focuses on the primary ones?
To conclude, being lean means releasing often, and to release often you need to implement fast. More specifically, you want to focus your team’s effort on building those things that are unique about you, the features that differentiate you from the competition.
For everything else, you can consider outsourcing to third parties. Many providers are more than willing to take on certain business functions from you at a cost, be it immediate or offset in the future, and monetary or data-related. As long as you’re clear about this cost, and the UX concerns of integrating an external system in your product, you should be good to go.
Freeing up your team from the implementation of these ancillary features would allow you to iterate faster, delivering on the lean credo.
In parting, let’s go back to the exercise we looked at earlier and expand on it a little bit with a set of questions to get you thinking about third party replacements:
4 Questions for Finding Third-Party Solutions
- What are you working on today that isn’t core functionality?
- How much of your team’s time is that work taking up?
- Can you outsource some of that without impacting your core UX too much?
- Are there any data/security concerns in doing so?
Once you’ve identified low-risk and low-UX-impact secondary features, you can investigate services you can integrate, freeing up your team for little monetary cost. If you do, you’ll find that you make your lean process work even smarter.