Can B2B Companies Use Lean Startup Techniques?

by Oliver Jay

Why can’t they launch as early? 

Early vs. Late Adopters.  Eric Ries commented that “early adopters are so small that there is minimal reputation risk” for startups to launch early and learn as soon as a MVP is built.  I’m not sure if this applies to B2B companies.  In many B2B markets, the number of potential customers is generally far fewer and companies are often challenged with customer concentration.  For Rentjuice, launching early targeting a few Boston realtors can be a risky endeavor.  Rentjuice does not have the luxury of consumer-based companies like Triangulate, for example, which can keep pivoting by appealing to different sets of early adopters until it reaches PMF.  A half-baked B2B product shown to a few “early adopter realtors” runs the risk of 1.) losing that potential customer forever as it would be much more difficult to get in the door again, or 2.) irreversible reputational loss in Boston if the customer landscape is a tight and chatty one.  In fact, in other B2B tech industries like cleantech, the value of launching early is even questionable as early adopters are completely different from the mainstream target customers, making the value of initial customer leanings less relevant.  Aquion Energy’s case demonstrates this point.

Why can’t they pivot as much?

MVP Close to PMF.  By launching later, the MVP of B2B companies tends to be much closer to PMF and as such does not require as much hypotheses-testing.  B2B companies generally solve an existing market need whereas B2C companies often create a market need (ex. IMVU and arguably Triangulate’s initial hypothesis).  As a result, B2B companies already know which critical features and core functionality will be necessary and can build a MVP that is close to PMF.  B2B companies also tend to build initial products with one or two particular customers in mind that they feel are either 1.) a gateway into the industry or 2.) representative of the mass market customers.  The MVP therefore is typically built-to-suit with a fairly known list of customer requirements.

Long Feedback Cycles.  While B2B solutions are generally more complex and thus naturally require more time to iterate, another reason why the feedback cycles are so long is because of the complex decision making process of B2B customers.  B2B customers traditionally involve a number of stakeholders: the actual users, multiple VPs, the CIO/CTO, etc.  I believe it is this complexity of managing the expectations and needs of multiple decision-makers that makes for not only long feedback cycles but also prevents startups from being able to effectively test isolated hypotheses.

What Can Actually Be Applied to B2B Startups?

As Eric Ries commented, ultimately lean startups is a philosophy and a mindset.  Any new venture needs a culture of learning and capital efficiency.  Where this philosophy can be applied in the B2B world is with SaaS companies, particularly those targeting SMBs in fragmented markets.  Consider salesforce.com’s initial go-to-market strategy where they first targeted actual field sales people much like a B2C startup would target early-adopters.  There are enough individual sales people to limit reputational risk, allowing the company to launch a MVP earlier and run A/B tests to learn from initial users.  By directly appealing to the end-users, salesforce.com was able to bypass the long DMP B2B startups are typically faced with.  In essence, salesforce.com sold a B2B product using lean B2C startup strategies.  Dropbox can likely use this strategy to enter the B2B space.

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