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We share proven marketplace development strategies based on real world case studies. Browse actionable insights on minimum viable products, product/market fit, user experience, revenue models, payment systems, platform architecture, and more.

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Six months after launching the new AAF platform, spend per customer increased by more than 65%.

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Product pages now indicate if an artwork is part of campaigns (e.g. curated collections or art fairs). Promotes buyer acquisition and retention.

We lowered shipping costs (a conversion factor) by grouping similar format products into one package (e.g. one tube for unframed prints).

Landlord dashboard promotes transparency by tracking 3rd-party platform bookings and property performance, e.g. income and occupancy rates.

We built an online art fair manager to help AAF replicate their highly successful physical art fair model online due to Covid-19.

30x increase in revenue per user due to improved marketing and customer service enabled by onboarding automation and platform optimisation.

How much does it cost to build an online marketplace in the UK?

<p>One of the greatest causes of marketplace startup failure is insufficient budget planning. This is often the result of conflating the initial setup costs with a full product development road map that is geared towards product/market fit. Many startups fail to make provision for dynamic and recurring items that are key to their platform’s successful operation and optimisation.</p>



<p>We have previously written about <a href="https://www.cobbleweb.co.uk/how-much-does-it-cost-to-build-an-online-marketplace-in-the-uk/">marketplace development costs</a>. That mostly covered the initial design and implementation of technology. However, this basic cost should not be seen as a static or final amount. </p>



<p>Marketplace success, especially product/market fit, is dependent on ongoing iteration and experimentation. Startups should therefore also include the cost of these processes in their marketplace development budget.&nbsp;</p>



<p><strong>CobbleWeb</strong> has created a budget calculator to make it easier to estimate the various costs for custom marketplace development that will ensure a higher chance of success.</p>



<figure class="wp-block-image size-large"><a href="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/03/Budget-Calculator-1.png"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/03/Budget-Calculator-1.png" alt="Budget calculator for marketplace development" class="wp-image-5375"/></a><figcaption>Budget calculator for marketplace development</figcaption></figure>



<h2>The basic cost to build your marketplace platform</h2>



<p>As we mentioned in our <a href="https://www.cobbleweb.co.uk/how-much-does-it-cost-to-build-an-online-marketplace-in-the-uk/">previous post</a>, custom marketplace development can cost anywhere from £10,000 to £100,000 plus. This includes the following once-off services:</p>



<h3>Discovery</h3>



<p>This stage is used to gain a deep understanding of your business and the market that it operates in. This includes mapping out the unique selling points, user journeys, user personas, and transaction flow.&nbsp;</p>



<p>We also investigate the suitability of technologies to be used. The goal is to design a marketplace solution that will inspire high levels of confidence in the end product. The discovery stage is a good example of the powerful extra value that custom development provides.</p>



<h3>Development&nbsp;</h3>



<p>This is the technical implementation of the user stories as defined in a storyboard created during the discovery phase. User stories are the building blocks of any development road map and are grouped under top-level categories (epics) that cover the main user flows of your marketplace. e.g. user management, product management, navigation, buying funnel and shipping.</p>



<p>Knowing when to prioritise which user stories is an important part of your budget calculation. As can be seen from the storyboard example below there are a number of variables that can affect the initial development cost.&nbsp;</p>



<p>Priority one items are those user stories that will be included in the first release of your platform. Changing the priority will update the total development cost in the calculator.&nbsp;</p>



<p>The number of advanced and standard days will also affect the development cost. Advanced days comprise the estimated workload for senior developers with seven plus years experience, while standard days are the workload for junior developers with three to seven years experience. The more complex the user story or feature, the more advanced days will be required.</p>



<figure class="wp-block-image size-large"><a href="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/03/User-storyboard-1.png"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/03/User-storyboard-1-1024x395.png" alt="Segment of user storyboard with variables such as priority status" class="wp-image-5374"/></a><figcaption>Segment of user storyboard with variables such as priority status</figcaption></figure>



<h3>UX/UI design</h3>



<p>During this phase the required user interfaces, page layouts and graphic elements are designed for testing during the development stage. Designs are then iterated based on user feedback till sufficient results are achieved.</p>



<h3>Infrastructure set up</h3>



<p>This is a once-off cost that covers the setting up of platform infrastructure through scalable cloud-based platforms such as Amazon Web Services. Basic infrastructure usually comprises data storage (Amazon S3), database engines (Amazon RDS), and virtual servers (Amazon EC2).</p>



<h3>Hosting</h3>



<p>This is a recurring cost and will depend on platform traffic. In general it’s best to use a scalable service like AWS to ensure continuity and minimal service disruptions.</p>



<h2>Additional resources</h2>



<p>The following additional services promote product-market fit and maximise opportunities for business success. These are usually estimated costs that will be refined during the discovery phase and before the launch.&nbsp;</p>



<h3>Contingency</h3>



<p>Contingency costs cover those elements that were omitted during the initial storyboarding stage. They are then added as additional user stories during development.&nbsp;&nbsp;</p>



<p>Example: Our client wanted recommended sellers to be highlighted in search results. During development they realised their business model required the manual tagging of recommended sellers. Thus, a new story had to be created on a contingency basis.&nbsp;</p>



<h3>Optimisation</h3>



<p>Optimisation costs are incurred with the implementation of refinements that drive further marketplace growth. These refinements are based on opportunities identified during the tracking of user behaviour after platform launch.</p>



<h3>Preventive &amp; corrective maintenance</h3>



<p>Preventive support focuses on monitoring the technical health of the platform. It includes the exploration of data to pre-empt issues that may crop up in future. Corrective support involves tracking and fixing platform errors.</p>



<h3>Business intelligence</h3>



<p>This is the cost for implementing and managing technology that measures user behaviour. <a href="https://www.cobbleweb.co.uk/aarrr-pirate-metrics-improve-marketplace-performance/">Tracking the right metrics</a> can increase chances for success and identify new opportunities such as additional revenue streams.&nbsp;</p>



<hr class="wp-block-separator"/>



<p>Creating a detailed development budget for your marketplace startup not only gives you a better idea of the total costs involved, it helps you clarify your business case and development priorities. A software development agency that specialises in custom marketplaces can help you make sense of this critical step.&nbsp;</p>



<p class="has-very-light-gray-background-color has-background">Get in touch with CobbleWeb to discuss your custom marketplace budget.</p>



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Marketplace development: budget vs cost (they're not the same)

7 growth strategies to scale your online marketplace post product-market fit

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<p><span style="font-weight: 400;">Part of the cultural identity of tech startups is the drive to scale a business fast. The best tech has as many users as possible, which means that there has to be business infrastructure in place to serve all of those customers. People aren’t interested in just building a good product, they want to know how to scale a business and how to do it fast. They want to make the most amount of money in the least amount of time with the least amount of long-term effort, and scaling is the best way to do that. </span></p>



<p><span style="font-weight: 400;">That is the wrong idea and will lead your business to failure. And not the good kind that startup gurus promote in their books.</span></p>



<p><span style="font-weight: 400;"><strong>Scaling your business is important, but only if you are focused on the right things</strong>. While developing your business should always be customer centric, your strategy should not be premised on increasing the numbers of customers you have. At least not at first. Your mission should be to improve your customer’s opinion of you and build your reputation. If you do those things, everything else will follow.</span></p>



<h2><b>Altering Your Perception: Why Your Assumptions are Wrong</b></h2>



<div class="wp-block-image"><figure class="alignleft"><img src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/04/wrong-assumptions-300x285.png" alt="" class="wp-image-2100"/></figure></div>



<p><span style="font-weight: 400;">This idea of not worrying about scaling your business might seem counterintuitive at first. The goal is to get more customers, because more customers mean more revenue. What is worse is that “customer opinion” is really hard to measure, and startups are all about measurement. Early customer growth is easy to measure, whether it is by units sold or website hits. Plus, many people make the argument that if a lot of people are buying what you are selling than they obviously like what you are doing. </span></p>



<p><span style="font-weight: 400;">Ultimately, some would say, customer acquisition and sales are the ultimate metric to measure overall customer satisfaction.&nbsp;</span><span style="font-weight: 400;">If that were the case, MySpace would still be competing with Facebook and RadioShack would be fending off Amazon.</span></p>



<div class="wp-block-image"><figure class="alignright"><img src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/04/Business-competition-1-300x200.jpg" alt="" class="wp-image-2104"/></figure></div>



<p><span style="font-weight: 400;">In the current environment, no one can differentiate the quality of their product for long. If someone develops something to sell to an underserved market, a competitor in the form of another startup or an established company looking to expand their customer base will develop something similar. &nbsp;If you focus on developing something that you can easily replicate so you can sell to more customers as they arrive at your brand, then it will be easy for your competitors to build something comparable that they can easily scale as well. As a result, competition in your “scale industry” will be based on price and advertising because that will be the only source of differentiation.</span></p>



<p><span style="font-weight: 400;"><strong>Competing purely based on price and accessibility to product will invariably lead to declining profit margins and increasing marketing budgets.</strong> The result is that even if you do succeed in holding onto some of your customers, you still lose in terms of your income statement.</span></p>



<h2><b>Origins of The Heresy: When We First Learned to Do Things That Don’t Scale</b></h2>



<h3><b><figure><img class="aligncenter wp-image-2115 " src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2018/04/paul-graham-scale-business-1.jpg" alt="" width="526" height="329"></figure></b></h3>



<p><span style="font-weight: 400;">Until July 2013, it was common knowledge that a successful startup was one that could be scaled quickly and efficiently. That changed when Paul Graham published an <a href="http://paulgraham.com/ds.html" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">essay on why it was important for early startup to do things that don’t scale</a>. While the title of his essay was eye catching and a little bit scandalous for the tech world, what Graham was preaching was less about scaling businesses and more about a shift in perspective for early stage startups from developing technical capability to expanding personal capacity.</span></p>



<p><span style="font-weight: 400;">Many startups focus on the technical components of their product, expanding its technical capability. Does it work right? Can people navigate it? Does it satisfy the customers’ needs? All of these are important questions. But while these qualities are necessary for a startup to succeed, none of them are sufficient to guarantee entrepreneurial success.</span></p>



<p><span style="font-weight: 400;"><strong>Success in business comes from doing things that competitors either can’t or are unwilling to do</strong>. Graham believed that founders were unwilling to put in the time to develop their personal capacity; to understand their customers as well as they understood their technology. Graham suggested a series of steps for entrepreneurs to take that “did not scale,” but at that list’s heart was the need to learn more about the customer. </span></p>



<div class="wp-block-image"><figure class="aligncenter"><img src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/02/get-out-of-the-building-e1518529383222.jpg" alt="Illustration about learning from the customers" class="wp-image-1842"/></figure></div>



<p><span style="font-weight: 400;">Graham suggests in his article that early stage companies must aggressively attempt to reach customers by getting into the same room with them and engaging them in conversation. By conversation, he doesn’t mean the founder trying to sell the customer a product, but the founder listening to the customer’s use cases and explaining how the product can fulfil the customer’s specific needs.</span></p>



<p><span style="font-weight: 400;">What we see in the essay is that the “thing” that will separate successful startups from the also-rans is patience. The patience to engage with a customer face to face and instead of trying to do quick bulk sales online. The patience to develop awareness of the challenges your target market faces and adjusting your product to meet those challenges. &nbsp;The patience to ensure that your customers aren’t just satisfied with their purchase, but delighted by the experience. That all takes significant time and the actions necessary to do those things can’t be scaled.</span></p>



<h2><b><figure><img class="wp-image-2127  aligncenter" src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2018/04/scaling-customer-base-1.jpg" alt="This illustrates converting user into customers" width="639" height="434"></figure>The Backlash: Why Scaling is Still Important</b></h2>



<p><span style="font-weight: 400;">There is a good reason that patience is something not a lot of startups can afford. Obtaining investment in a business is dependent on a company’s ability to demonstrate traction, and traction is a function of customer retention and growth. <a href="https://www.forbes.com/sites/stellafayman/2013/08/01/why-do-things-that-dont-scale-doesnt-always-work/#e90ff03208cf" target="_blank" rel="noopener noreferrer">Critics point out that Graham ran the YCombinator</a></span><span style="font-weight: 400;">, which meant that everyone who he was advising already had funding for their product development. This meant that these entrepreneurs could literally afford to take their time and do things that can’t scale. Scores of other entrepreneurs don’t have that option because they need to gain funding fast in order to keep their business running and survive, and that means knowing how to scale a business quickly.</span></p>



<div class="wp-block-image"><figure class="aligncenter"><img src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/04/scaling-Vs-learning-300x247.png" alt="" class="wp-image-2108"/></figure></div>



<p><span style="font-weight: 400;"><strong>The challenge is to reconcile the need to develop background on customer needs versus the demand to gain traction by creating customer growth</strong>.</span></p>



<h2><b>Reconciling the Controversy: It’s All About The Timing</b></h2>



<div class="wp-block-image"><figure class="alignleft"><img src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/04/scaling-learning-both-300x165.png" alt="" class="wp-image-2110"/></figure></div>



<p><span style="font-weight: 400;">The answer is you need to do both. First you need to understand your target market, deeply and completely. Once you have gained that understanding, you need to turn your attention to scaling your startup. &nbsp;In the past we have discussed the importance the Lean Startup Method for any new business. Lean Startup preaches <a href="https://www.cobbleweb.co.uk/iterating-mvp/">rapid, cheap iteration of prototypes and efforts to discover the best strategies for your business.</a> These principles do not just apply to the technical components of your business, but your customer outreach efforts as well. Many low-fidelity MVPs are actually things you can’t scale and are meant to help familiarise founders with their customers.</span></p>



<p><span style="font-weight: 400;">If you <a href="https://www.cobbleweb.co.uk/choose-right-mvp-type/">use these low-fidelity MVPs</a> in the context of Lean Startup Principles, you will be able to quickly determine what your customers want and then be able to <a href="https://www.cobbleweb.co.uk/high-fidelity-mvp-transition/">transition to high-fidelity MVPs</a> meant to help you scale your business. You get the best of both worlds.</span></p>



<p><span style="font-weight: 400;">Do the things that don’t scale, and do them early. Do them long enough for you to learn your customers and build a culture of providing incredible experiences. Then quickly transition to activities that will help you scale, because if your reputation is sound you are going to need to be able to meet the incredible demand your business is going to generate.</span></p>

Startup Scaling - Do's & Don'ts of Expanding Your Business

<h2>Stay Lean, Stay Agile, Stay Hungry: Iterating Your MVP</h2>



<p><span style="font-weight: 400;">We have talked a lot about what an MVP is and <a rel="noreferrer noopener" aria-label=" (opens in a new tab)" href="https://www.cobbleweb.co.uk/choose-right-mvp-type/" target="_blank">what it looks like</a>. We have even <a href="https://www.cobbleweb.co.uk/iterating-mvp/">talked about “iterating”</a>, or building better MVPs as you get new information through testing. What we haven’t discussed in detail is how to do the actual iterating. &nbsp;The key to success in entrepreneurship is the same to surviving in the wild; if you are lean and agile, you thrive. If you aren’t both, you are prey.</span></p>



<div class="wp-block-image"><figure class="aligncenter"><img src="https://media.giphy.com/media/weKozimGUbPMI/giphy.gif" alt=""/></figure></div>



<p><span style="font-weight: 400;">“<a href="http://theleanstartup.com/" target="_blank" rel="noopener noreferrer">Lean startup</a>” and “<a href="https://www.scrum.org/" target="_blank" rel="noopener noreferrer">agile development</a>” are phrases that have been used so excessively and haphazardly that they have almost lost all meaning. The terms have even been used interchangeably, which is incorrect. While the two processes are often used in tandem, it is still two separate and distinct processes.</span></p>



<p><span style="font-weight: 400;">This post will answer the question of HOW to iterate your MVP to find your best possible product through lean startup practices and agile development, and how they can work together. Pay attention, because after this post will come the only test that matters; whether you can iterate your way to success.</span></p>



<h2>Lean Startup Is A Process</h2>



<p><span style="font-weight: 400;">Lean Startup is about building your business and understanding your customers through a repeating, scientific process. When we talk about about learning what your customers want, whether your product will address that problem, and whether your customers will pay for that product, we are talking about the lean startup process.</span></p>



<p><span style="font-weight: 400;">It is very simple. You begin by arriving at a few key hypotheses. Be sure to limit the number of hypotheses you are testing because if you do too many you will never be able to craft a series of tests to address all of them. When you identify your issues, devise a series of experiments that test your hypotheses. Be sure to identify clear and measurable metrics that will clearly express the results of each test. Then you build a version of your product that can be put through the tests you identify. After you conduct the tests, you review the results and either change your hypotheses accordingly if the tests show you were incorrect or find a new batch of hypotheses to test.</span></p>



<p><span style="font-weight: 400;">This process should seem familiar to you because we have alluded to it in the past. The low fidelity MVP is your first set of hypotheses in a lean startup process, <a href="https://www.cobbleweb.co.uk/high-fidelity-mvp-transition/">the high fidelity MVP</a> your next set. The lean startup method is how your MVPs make sense and how you devise them in the first place.</span></p>



<h2>Agile Development is A Practice</h2>



<p><span style="font-weight: 400;">Agile Development is about building your product, especially when that product is software or a website. Traditionally, products were developed according to the waterfall process. You had to develop the entire prototype, with all of its features, all at once. This process could take months, cost massive amounts of funds, and represent a significant emotional investment. If and when the product is released and fails, the results could be devastating for your business.</span></p>



<p><span style="font-weight: 400;">Agile Development was devised to mitigate that risk through a series of incremental development. By focusing on individual features through development, and then testing those features for bugs and usability you can avoid overinvestment in faulty or misaligned products. By running a series of “sprints” you still get to the completed product around the same time you would have completed the product through the waterfall process, but with agile development you can be confident that the product is error free with high usability.</span></p>



<p><span style="font-weight: 400;">Again, this should sound familiar to you, as we have been advocating this sort of process before. We have spoken in prior posts about focusing on single issues and developing them one at a time. Agile development is how you do that. </span></p>



<h2>When You Are Lean and Agile, Speed Thrills</h2>



<p><span style="font-weight: 400;">So you can be lean. You can be agile. But if you want to be successful you need to be both, because only by being both can you achieve an entrepreneur’s true power; speed. Speed is what makes or break a business because it lets you out maneuver your larger, slower competitors. The large volume, incremental releases demanded by the agile method directly supports the crucial lean goal of customer development. With each small iteration of your MVP you release under the agile method allows you gain the lessons, the assumption validation, and the mitigation of risk that the lean process absolutely requires.</span></p>



<p><span style="font-weight: 400;">So while the agile and lean methods are distinct, different processes, the goals and methods of the two have a symbiotic relationship. Using these two processes properly together is the only way to find your product’s market fit. </span></p>



<p><span style="font-weight: 400;">Rise to the top of your industry’s food chain by being lean and agile - don’t be anyone’s prey.</span></p>

Lean Startup and Scrum - How to combine them for the best results

<p>The term <span style="font-weight: 400;"><em>pivoting</em>  has become something of a business banality. Any time any sort of problem arises for an entrepreneur, a “wise” mentor will sagely shake his or her head and utter <em>pivot</em>, as if it was some mystic cure-all. As a result, people take a variety of actions claiming that it is a <em>pivot</em> which will lead to a stronger business. More often than not, those actions lead to dead ends.</span></p>



<div class="wp-block-image"><figure class="alignright size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2022/02/pivot-definition-300x300-1.jpg" alt="" class="wp-image-7911"/></figure></div>



<p><span style="font-weight: 400;">This is a shame, because a pivot is powerful if put into play the right way. Pivots are a natural extension of the lean business model, which requires you to incrementally experiment to discover how to build a better startup. Many times, experimentation reveals that assumptions you held about your business are wrong and you need to make a change. Pivots are about making the right type of change. Think about the physical process necessary to pivot. You must plant one foot on solid ground and move around that point. Similarly in business, when you pivot you have to plant yourself in what you know from your experimentation and move around that point. </span></p>



<p><span style="font-weight: 400;">Before you ask if and when you need to shift your business, you need to ground yourself in the right frame of mind so you can best act on the trends you discovered from your application of lean business model principles. This post will provide the information on which you can rely on while pivoting your way to a better company.</span></p>



<h2><b>Pivots in Perspective</b></h2>



<p><span style="font-weight: 400;">Pivots can have a lot of definitions, but the one that is most appropriate in context of the lean startup method is “<a href="https://grasshopperherder.com/cheat-sheets/cheat-sheet-pivot/" target="_blank" rel="noopener noreferrer">changing one aspect of your business model while keeping other aspects constant</a>.”</span><span style="font-weight: 400;">&nbsp;Simple to say, but difficult to apply because what you change can have significant effects on the other aspects of your business.</span></p>



<div class="wp-block-image"><figure class="alignleft"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2018/02/Pivot-Pyramid-min-1.png" alt="" class="wp-image-1951"/></figure></div>



<p><span style="font-weight: 400;">Consider the Pivot Pyramid provided by Selcuk Atli</span><i><span style="font-weight: 400;">.</span></i><span style="font-weight: 400;"> Each level of the pyramid represents an aspect of a business model, where each previous level defines how the current level is constructed. For example, the customers you wish to target heavily define what problem you are going to solve. The problem you wish to solve is going to define your solution. If you pivot to a different customer base, not only is that going to influence what problem your business is going to try to solve but the answer you are going to provide. This is why it is absolutely crucial to try to find your product-market fit before you start prototyping answers and products. &nbsp;The more effort you put into the prototyping before locking down your target customer base, the greater risk you run in terms of building a product without a market.</span></p>



<h2><b>Pivot vs Optimisation</b></h2>



<div class="wp-block-image"><figure class="alignleft size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2022/02/Optmisation-vs-emperiment-min-300x300-1.jpg" alt="" class="wp-image-7913"/></figure></div>



<p><span style="font-weight: 400;">The lean startup method places a high premium on experimentation, but there are two types of experimentation you can run; optimisation and pivot experiments. Optimisation experiments are about refining parts of a business model so that it can be more profitable. Pivot experiments are about validating parts of business model to ensure that is scalable and repeatable. In other words, optimisation is about making a business model better while pivoting is about finding a business model that works.</span></p>



<p><span style="font-weight: 400;">The best pivoting business strategy is to do all pivot experiments first. You need to be methodical and test until confident in every level of the Pivot Pyramid before moving on to the next one. Establish your target customer base first, then identify your problem, and only after you have a high level of confidence in those answers move on to testing which answers and products work best. Optimisation of a business model should never occur you are confident that it is feasible and sustainable.</span></p>



<h2><b>Designing the Perfect Pivots</b></h2>



<p><span style="font-weight: 400;">Pivots are a function of experimentation, something you only do </span><i><span style="font-weight: 400;">if and only if</span></i><span style="font-weight: 400;"> an assumption you had about your business is proven to be verifiably false. Pivots should be focused on one of three classes of questions:</span></p>



<ul><li style="font-weight: 400;"><span style="font-weight: 400;">Who has the problem?</span></li></ul>



<ul><li style="font-weight: 400;"><span style="font-weight: 400;">What is the problem you are trying to solve?</span></li></ul>



<ul><li style="font-weight: 400;"><span style="font-weight: 400;">How:</span>
<p>&nbsp;</p>
<ul>
<li style="font-weight: 400;"><span style="font-weight: 400;">Do you solve the problem?</span></li>
</ul>
<p>&nbsp;</p>
<ul>
<li style="font-weight: 400;"><span style="font-weight: 400;">Big is the market?</span></li>
</ul>
<p>&nbsp;</p>
<ul>
<li style="font-weight: 400;"><span style="font-weight: 400;">Are you going to reach this customer?</span></li>
</ul>
<p>&nbsp;</p>
<ul>
<li style="font-weight: 400;"><span style="font-weight: 400;">Will you make money?</span></li>
</ul>
</li></ul>



<p><span style="font-weight: 400;">In general, you should focus on the first two questions before pivoting to the how. This corresponds to the base layers of the pivot pyramid described above. These questions provide the foundation of what your pivot experiments should be about as they form the basis for any sound business model. If you design your experiments with these concepts in mind, you will begin to find a business model that works.</span></p>



<p><span style="font-weight: 400;">Good questions are a good start, but not enough. You need to ensure that the experiments you design are structured for success. <a href="https://blog.leanstack.com/pivot-before-product-market-fit-optimize-after-91e28b631768" target="_blank" rel="noopener noreferrer">Here are four steps</a>, from Ash Maurya</span><span style="font-weight: 400;">, about how to design the perfect pivot experiment:</span></p>



<div class="wp-block-image"><figure class="alignleft size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2022/02/validated-learning-300x204-1.jpg" alt="" class="wp-image-7915"/></figure></div>



<p><span style="text-decoration: underline;"><strong>Maximise Learning</strong></span><span style="font-weight: 400;">: The whole point is to learn how to build a better business model. You should be structuring these experiments so that each is incremental, allowing you to only focus on one aspect of your business model at a time. Don’t fear failure – some say that to optimise learning you should fail approximately 50% of the time. In pivot experiments, do not be afraid to test bold changes and see how those changes affect the outcome of your business model.</span></p>



<div class="wp-block-image"><figure class="alignleft size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2022/02/Retention-300x204-1.jpg" alt="" class="wp-image-7916"/></figure></div>



<p><span style="font-weight: 400;"><span style="text-decoration: underline;"><strong>Focus on Retention</strong></span>:</span><span style="font-weight: 400;"> &nbsp;Businesses don’t survive because they make initial sales with customers, but because they provide an experience that keep customers coming back. Every experiment might require different metrics to gauge success, but the number one metric you should consider is how well the changes help your retention rates.</span></p>



<div class="wp-block-image"><figure class="alignleft size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2022/02/minimise-waste-300x300-1.jpg" alt="" class="wp-image-7917"/></figure></div>



<p><span style="text-decoration: underline;"><strong>Minimise Waste</strong></span><span style="font-weight: 400;">: Each experiment has a cost in resources and time, and as an entrepreneur you don’t have a lot of either of those things. &nbsp;You need to design your experiments so that you can get the most information you can while minimising the resources spent. For early stage experimentation to verify product-market fit, <a href="https://www.cobbleweb.co.uk/choose-right-mvp-type/">consider using low-fidelity MVPs</a></span><span style="font-weight: 400;">. These sorts of MVPs are designed to get you great information at a low price. So long as the MVP is aligned with one of the questions listed above, it will work.</span></p>



<div class="wp-block-image"><figure class="alignleft size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2022/02/Validate-qualitatively-300x300-1.jpg" alt="" class="wp-image-7918"/></figure></div>



<p><span style="font-weight: 400;"><span style="text-decoration: underline;"><strong>Validate Qualitatively, Verify Quantitatively</strong></span></span><span style="font-weight: 400;">. In early stages of developing your startup, you are not going to be able to have large groups of people to test your potential pivot on. That is ok, because a lot of the biggest, best pivots come from decisive moves that can be verified by face-to-face conversations with a small group of test customers. If your potential pivot works with a small body of potential customers, you can move forward to verifying that it works with a larger group of customers. This saves you time, money, and limits any potential harm to your reputation from a bad pivot.</span></p>



<p><span style="font-weight: 400;">Follow these steps and you should make all the right pivoting choices. But even with the best of intentions, it can be easy to stray away from the process to make pivots based on something other than experimentation and fact.</span></p>



<h3>&nbsp;</h3>



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<h2><b>Pivoting Away From Success</b></h2>



<p><span style="font-weight: 400;">The problem with pivoting as a concept is that it is misunderstood. Pivoting can appeal to certain instincts that might not be the best for a young startup. For example, there Is a real tension between when knowing when to pivot and when to persevere. &nbsp;Testing and experimentation is necessarily done with small batches of participants. This begs the question of how big of a change someone should really make when provided with information from one of these test batches; the threat of overreacting to information and making unnecessary pivots is just as big of a risk as not making a pivot when you should.</span></p>



<p><span style="font-weight: 400;">There is also confusion about what can be pivoted. For too many people, pivoting is a function of product and nothing else. Pivoting can be related to anything that is part of the business model. Many successful companies never pivoted their product, but at some point they did pivot another aspect of their business plan such as customer segments and revenue models.</span><span style="font-weight: 400;">&nbsp;Do not become so focused on <a href="https://steveblank.com/2014/01/14/whats-a-pivot/" target="_blank" rel="noopener noreferrer">whether to pivot your product</a> that you do not focus on the other important parts of your business.</span></p>



<p><span style="font-weight: 400;">Which leaves the most dangerous, and alluring pivoting mistake at all. Pivots should be done based on information and feedback from carefully designed pivot experiments. However, many businesses choose to pivot based on other sources of information such as what is cool in the moment, whether a new approach will better help them secure funding from a particular VC, or even something that was on the morning news. It is tempting to follow these sorts of trends; after all these ideas must be backed by some sort of popular support and popular support means customers. </span></p>



<p><span style="font-weight: 400;">Pivoting is not about chasing trends but making moves based on reason and logic that you understand. As an entrepreneur it is not your place to follow, but to lead. That means sticking to your process but making changes when you have information you verified. If you follow the trends and practices of others you surrender your initiative, which is the greatest advantage you have as a business owner.</span></p>



<p><span style="font-weight: 400;">Pivoting correctly and for the right reasons can be quite the challenge, but one that you can successfully navigate. If you are looking for someone to partner with on the pivot experimentation process, consider reaching out to CobbleWeb. We can keep you grounded with data but flexible and agile enough to build a better business.</span></p>

Pivoting Startup Business With Purpose

<p><strong>Startup problems are constant</strong>. Problems persist, endure, and annoy. Problems are rarely solved, just generally mitigated. Problems are consistent and a business’s best friend.&nbsp;Businesses don’t sell goods and services, they sell responses to problems. Hunger is a problem that food fixes. Thirst requires water. But here is where it gets interesting; while problems persist the solution for that problem can change.</p>



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<p>People need to travel long distances. At first the answer was walking. Then it was horse powered conveyances. Then it was trains, planes and automobiles. Tomorrow it might be hyperloops. Whatever means or solution is embraced in the future, the problem of transportation remains ever present. It’s a constant, and for an entrepreneur where there are far too many variables, constants can be comforting.</p>



<p>A skilled entrepreneur is adept at finding problems to solve. New business ideas are plentiful, knowing what problems need to be solved and can be profitable is rare. This post will help teach you not only how to find those problems, but how to study them. <strong>Problems are the constants of the business world, understanding them completely will always pay off</strong>. Problems can be the guiding principle that will inform all your decisions.</p>



<h2><strong>Startup Problem Types: People</strong></h2>



<p>The purpose of a business is to find customers; the product is merely the means to achieve that end. The problem you seek to solve is the way your startup engages and converts people into customers.</p>



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<p>The quandary is that people are very bad at describing their problems. People, like entrepreneurs, tend to express their problems as potential solutions. Instead of describing the circumstances in which they ran into difficulties, people ask for what they think they want or need to address those conditions.</p>



<p>When confronted with a problem, people will frame their response to that issue based on prior solutions that solved similar problems. People will generally not think outside of that frame to consider alternatives unless prompted or pushed.</p>



<div class="wp-block-image"><figure class="aligncenter"><img src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/02/get-out-of-the-building-e1518529383222.jpg" alt="Illustration about learning from the customers" class="wp-image-1842"/></figure></div>



<p>This realisation provides several important insights that help guide entrepreneurs to finding problems to solve.&nbsp;First, this is not something that can be done with an online form or a predetermined script. You need to engage your potential customers one-on-one so that you can follow up. The first answer they are going to give you is not going to provide the information you need. Since the majority of people do not consider the circumstances of their problem, it is going to require several iterations of probing questions to get where you want to go.</p>



<p>The second insight involves the size of the first problems your business tries to solve.</p>



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<p>As an entrepreneur building your first prototype, you do not have the resources to engage a lot of people to find a problem that will speak to large customer base. In time, you might build an answer that addresses a problem that everyone has. First, you need to find a problem that addresses a problem a much, much smaller subsection of the population has.</p>



<p>This subsection must be defined by several characteristics to narrow the field and to increase the likelihood that you find a universal problem for that group. You shouldn’t try to find a problem that plagues small business owners – that is too big a group. You should try to find a problem that plumbers that employ less than ten people would have. There is a greater chance that you will find a problem that all small business plumbers have in common than finding a problem that plagues all small business owners.</p>



<h2>Startup Problem Types: Jobs</h2>



<p>Clayton Christensen, in his book the <i><a href="https://www.amazon.com/gp/product/1422196577" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">Innovator’s Solution</a></i>, reframes how we think of problems.</p>



<p><em>“The basic premise is that people hire products to get a job done. If you can uncover the job, it puts you in the right context for creating a solution.”</em></p>



<p>Jobs are not simple “tasks,” but speaks to the motivations that people have when trying to address the situation. It is not enough to merely correct the situation; you must satisfy the motivation.</p>



<p><i>The Job of a Milkshake - Which one to sell ?&nbsp;</i></p>



<div class="wp-block-image"><figure class="aligncenter"><img src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/03/Milshake-story-uncovered-problem-1024x681.jpg" alt="" class="wp-image-2061"/></figure></div>



<p>One of the best examples of how to think of a problem as a job is the milkshake problem. A few years ago, Christensen was asked by a major fast food chain to help them increase sales of their milkshakes. Before going to Christensen, this chain tried to do everything to improve the milkshake itself. They had convened focus groups and tried thickening the shake, making it thinner, changing the flavour profile, pretty much everything you could do to find “the perfect shake.” Despite their best efforts, none of the changes translated to more sales.</p>



<div class="wp-block-image"><figure class="alignleft"><img src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/03/milshake-story-uncovered-wrong-problem-300x154.png" alt="" class="wp-image-2066"/></figure></div>



<p>At first, Christensen and his team looked for the problem through traditional lenses.&nbsp;The assumption was people want milkshakes to solve the problem of desiring a cold, tasty treat with a meal and the competition was other milkshakes. That line of analysis didn’t get them anywhere. They decided to spend a few days at one of the restaurants and analyse the circumstances where people bought milkshakes.</p>



<p>The results stunned them because the data showed that the fundamental assumptions about what triggered milkshake purchases were all wrong. The assumption was that people bought milkshakes along with other food, like burger and fries, as part of a meal later in the day. Christensen’s team found that 80 percent of all milkshakes were bought before 10 am. The people who bought those milkshakes bought nothing else and immediately exited the store.</p>



<p>Christensen’s team then spent the next few days interviewing people who bought milkshakes before 10 am to inquire why they made the purchase that they did. It turned out that those people were trying to address a completely different problem than what the fast food chain was trying to fix.</p>



<div class="wp-block-image"><figure class="alignleft"><img src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/03/milshake-story-true-problem-300x182.png" alt="" class="wp-image-2069"/></figure></div>



<p>The majority of people were buying milkshakes because they wanted something to fill them up until lunch, that only required one hand to consume, and could break up the boredom on their ride to work. The milkshake’s competitors weren’t just other milkshakes, but breakfast foods that could be consumed on the go such as bananas, muffins and granola bars.</p>



<p>By removing the lens of what was the perceived problem, Christensen and his teams found the truth of the motivations behind the customer’s choices. It is customer’s motivations that define a problem; what do people hope to achieve and what keeps them from achieving it. If you can assume nothing and ask the right questions to understand motivations, you are well on your way to understanding problems.</p>



<p>Read more about&nbsp;<a href="https://hbswk.hbs.edu/item/clay-christensens-milkshake-marketing" target="_blank" rel="noopener noreferrer">Clay Christensen’s Milkshake Marketing</a>.</p>



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<h2>Startup Problems Are Contextual</h2>



<p>Once you have identified the customer base you wish to serve and their motivations, the next step is to find the contexts in which those people face the problems that challenge them most. Problems do not exist in a vacuum. It is generally the circumstances that exacerbate situations to turn something from a mild annoyance to a problem that must be solved. Take the milkshake story as an example. Hunger and boredom are general problems that people feel periodically throughout the day and can be solved different ways. In another set of circumstances, these problems might be best solved with a bowl of popcorn and a Netflix account.</p>



<p>It is the conditions of having to make a morning drive to work, combined with the need to have enough sustenance to get you through the day to lunch, that makes the problem the milkshake so specific and challenging to solve. The greater the number of complicating circumstances, the narrower the range of possible choices get, heightening the stress to try to resolve the issue. The circumstances trigger needs in the customer base; if you can understand what event trigger needs, then you have the basis for a strong, sustainable business model.</p>



<h3><figure><img class="size-medium wp-image-2075 aligncenter" src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/03/stop-talking-listen-300x300.jpg" alt="" width="300" height="300"></figure></h3>



<h3>Ask astutely and listen carefully.</h3>



<p>Once you have a grasp on the relationship between people, circumstances and problems, you need to “get out of the building” and talk to people. This is why it is vital that you narrow down your original target market to a very narrow subset of people. You won’t find what you are looking for by asking simple questions and taking the responses you get at face value. You have to follow up and dig deeper to find customer motivations and what they are doing when the frustration with a particular problem manifests. That takes time.</p>



<p>This is harder than it sounds and requires patience and strong communication skills. Since people tend to express their problems in terms of the solution they think they need, it is very difficult for them to discuss problems in terms of context, triggers, and personal motivations. They might have a hard time finding the words to express those ideas in terms you can use.</p>



<p>You might feel the need to help them find the right words, but there is a risk here too. &nbsp;You are not a disinterested party like Christensen and his team. You have an idea of what problem you want to solve and how you want to solve it. In your effort to help your customers articulate what you need, you might guide them to saying what you want. While that might be gratifying in the short-term, it will be devastating in the long-run when you build a product no one buys.</p>



<p>Finding the balance so you help people articulate what you need without coaching them to say what you want is a challenge that you must be aware of when conducting your out of the building interviews. But if you do it right, you will be richly rewarded with the foundation for a strong business plan.</p>



<h3><b><figure><img class="size-medium wp-image-1959 aligncenter" src="https://www.cobbleweb.co.uk/wp-content/uploads/2018/02/Optmisation-vs-emperiment-min-300x300.jpg" alt="This illustrates Optimisation and Experiments aspects for startups" width="300" height="300"></figure> Measuring problems</b></h3>



<p>In the lean startup method, a key component is measuring the right thing. Measurement helps inform you whether you are on the right track, or <a href="https://www.cobbleweb.co.uk/pivoting-startup-business-purpose/">whether you need to pivot</a>. In the later stages, measurement is quite easy. If you have a product to sell, you can measure your progress based on the amount of traction you have. Whether people are repeatedly buying your product or service is a good measure of how well you are doing.</p>



<p>Traction, as traditionally defined, does not work when you are looking to define the problem. The goal is to define the problem <i>before</i> you build the solution to mitigate the risk of building the wrong thing. But having a metric in mind before you start problem finding is critical, because it keeps you honest. If your idea does not match the reality of the problems your customers face, then a good metric will break through the cognitive dissonance and force you to pivot.</p>



<p>There is no single metric that works in this case; whatever metric you choose is dependent on how you structure your experiment to discover the problem. In the early stages of problem finding, focus on <a href="https://www.cobbleweb.co.uk/design-test-mvp/">building a low-fidelity MVP</a> to help reveal the contours of the problem space<i>.&nbsp;</i>Develop a story about a set of circumstances that might speak to your potential customer base and begin to share it in conversations.</p>



<p>Unfortunately, the early stage testing will probably not allow for strong qualitative evidence to support that you have the right problem. The metric you need to use in the early case testing is enthusiasm in your test base. If, when you are telling your story about what you think the problem is, you consistently get enthusiastic responses, that is your early metric. If you believe the enthusiasm for your problem description is great enough, build another low-fidelity MVP more focused on that problem story to test among a larger group of people. Your understanding of what you think the problem is should provide you with a quantitative metric for testing that MVP and provide the verification you need that you have the right problem.</p>



<h2><b>Solutions are Temporary, Problems Are Forever</b></h2>



<p>Never fall in love with the solution you create for the problem you are trying to solve. As horse drawn carriages taught us, solutions change but it is the problem that lasts. Business is filled with uncertainty, but consistency of problems can provide security to your business if you understand those issues in the proper context and aren’t afraid to pivot to a better solution to satisfy your customers. Understanding problems can be a difficult task, but richly rewarding. If you are an entrepreneur that wants to learn how to find a problem worth solving, then consider reaching out to CobbleWeb. Our experience and drive will help you to not just generate new business ideas, but to build a successful organisation.</p>

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Cobble Web discusses Lean Startup Pivoting On BBC Radio

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ADAPT OR DIECobble Web discusses Lean Startup Pivoting On BBC Radio

Your Lean Marketplace  Development Guide

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Cobble Web discusses Lean Startup Pivoting On BBC Radio