At Cow-Shed Startup we love the Lean Startup methodology. A great example of a startup that successfully used the Lean Startup methodology is Zappos.
Zappos is known as one of the most successful customer friendly ecommerce businesses in the world but it did not start that way. Zappo’s founder Nick Swinmurn vision was of a central online site with a great selection of shoes with a new and superior retail experience. If he had followed a standard methodology, it would have taken him a long time to realise his vision - testing his complete vision with warehouses, distribution partners, and the promise of significant sales. Instead, he started by running an experiment.
His hypothesis was that customers were ready and willing to buy shoes online. To test it, he asked local shoe shops if he could take pictures of their inventory. In exchange for permission to take the pictures, he posted the pictures online and promised to come back and buy the shoes at full price if customers bought them online.
Zappos began with a tiny, simple product. It was designed to answer one question : is there already sufficiant demand for a superior online shopping experience for shoes? A well-designed startup experiement like the one Zappos began with tests more than a single aspect of a business plan, many other assumptions were tested as well.
To sell the shoes, Zappos had to interact with customers : taking payment, handling returns and dealing with customer support. This is decidedly different from market research. If Zappos had relied on existing market research or conducted a survey, it could have asked what customers thought they wanted. By building a product instead, even just a simple one, the company learned much more :
a) It had more accurate data about customer demand because it was observing real customer behaviour, not asking hypothetical questions.
b) It put itself in a position to interact with real customers and learn about their needs. For example, the business plan might call for discounted pricing, but how are customer perceptions of the product affected by the discounting strategy
c) It allowed itself to be surprised when customers behaved in unexpected ways, revealing information Zappos might not have known to ask about. For example, what if customers returned the shoes.
Zappos’ initial experiment provided a clear, quantifiable outcome: either a sufficient number of customers would buy the shoes or they would not. It also put the company in a position to observe, interact with, and learn from real customers and parners. Although the early efforst were very small scale, the huge Zappos vision was realised in just 10 years. In 2009 Zappos was bought by Amazon for a reported $1.2billion.