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USING BUSINESS OBJECTIVES TO
DRIVE PRODUCT DEVELOPMENT
A LEAN-STARTUP STRATEGY FOR BUSINESS GROWTH USING BUSINESS OBJECTIVES AS
DRIVERS FOR MVP PRODUCT DEVELOPMENT
PREPARED BY
WHITE FOREST CONSULTING
HTTP://WWW.WHITE-FOREST.CA
9/15/2013

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CONTENTS
Introduction..............................................................................................................................................3
Introduction to Lean Startup Concepts.......................................................................................3
The Minimum Viable Product ........................................................................................................4
Business Development vs. Product Development ..................................................................5
Understanding your Business and Products.................................................................................9
Frameworks..........................................................................................................................................9
BCG Advantage Matrix ................................................................................................................... 10
Value Benchmarking...................................................................................................................... 11
Conclusion............................................................................................................................................... 13
About White Forest Consulting and Author................................................................................ 14

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INTRODUCTION
According to Industry Canada, only about 50% of all SMB startups survive their first 3 years
in business. Although uncontrollable externalities such as macro economical play part in the
success and failure of companies, the dominant factors that contribute to the failure of half
of all startups are well categorized and studied. The report “Management Skills for Small
Business” published by Industry Canada in 2001, is unequivocal on the matter, concluding,
“the main reason for failure is inexperienced management. Managers of bankrupt firms do
not have the experience, knowledge, or vision to run their business.”
Around 2008, as if responding to the call for better entrepreneurial management, a
group of Silicon Valley entrepreneurs, led by Eric Ries, developed a set of management
philosophies and methodologies to increase the success rates of startups. They call their
methodology Lean Startup. Since its inception, the Lean Startup methodology has spawned
a movement that has gained momentum among both tech innovators and entrepreneurs in
other industries.
INTRODUCTION TO LEAN STARTUP CONCEPTS
The Lean Startup management style is inspired by the lean manufacturing production
techniques popularized by Japanese automakers in the 1980s. By applying Lean Startup
methods, entrepreneurs seek to eliminate wasteful practices and focus on value during the
development phase of the product. This focus gives startups a better chance of surviving the
uncertainty inherent in entrepreneurship without significant external funding, elaborate
business plans, or the “perfect” product. The key elements of the Lean Startup
methodology—minimum viable product, continuous development and validated learning—
form what is known as a Build, Measure, Learn Cycle (see Figure 1). In theory, this shortens
development cycles and tests hypotheses early in the development cycle, limiting risks and
uncertainties faced by the entrepreneur.

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FIGURE 1: THE BUILD, MEASURE, LEARN CYCLE
Proper application of Lean Startup principles may significantly speed up the
development cycle of your product and lower your requirements for funding, business
planning, and product management.
THE MINIMUM VIABLE PRODUCT
The minimum viable product, or MVP, is central to the Lean Startup. It is the start of the
learning process, and, as such, must be designed with the goal of allowing the development
team to collect the maximum amount of validated learning about customers for the least
amount of effort. Once the MVP is on the market, it will be embraced by early adopters.
These early adopters will contribute to further R&D for the product. Following Lean Startup
methodology, you would set up experiments to test your business hypotheses. The results
of these experiments will be measured by actionable metrics. Such results allow you to
make informed business decisions that can be rapidly transformed into product updates,
which can, in turn, be released immediately to the public for further testing and validation.
At White Forest Consulting, we believe that the MVP is an essential component of
your product portfolio, and it must be carefully developed according to a set of business
goals and objectives. While the uncertainty of your company’s startup phase may mean that
you’ll be changing your target customer or the product during the development cycle, the
initial MVP must be refined to an acceptable level, as defined by the objective of the product,
before being released. However, it doesn’t need to be the perfect product. We stress: the
MVP is built to develop the business, not the other way around.
Learn
Ideas
Build
Code
Measure
Data

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BUSINESS DEVELOPMENT VS. PRODUCT DEVELOPMENT
White Forest Consulting recommends that entrepreneurs integrate business objectives and
goals into the development cycle of the MVP. Remember: the MVP is developed to meet
business objective. Business objectives are not developed for the product. By having a
clearly defined target market for which the MVP is deliberately built, startups are more
likely to offer a competitive product earlier and to a more selective segment of customers—
a segment of customers who will appreciate the added value of the MVP.
Our recommendations are based on our staff’s experience consulting with new
product development and R&D analysis in Fortune 500 companies, as well as through our
own analysis of failed Silicon Valley startups. Our findings suggest that entrepreneurs will
enhance their chances of success if they follow a more systematic, business-oriented
approach while developing and building their MVP. Based on this knowledge, we believe
that a significant number of failed startups failed because:
 They did not thoroughly understand their customers
 They did not thoroughly study their competitor’s substitute products
 They did not bring value to their customers
Failing to understand your customers
We have identified two ways in which entrepreneurs fail to understand their customers: by
assuming that customers have the same perspective as the entrepreneur and by neglecting
to pay attention to customer risk behavior.
1. Assuming that customers share the perspective of the entrepreneur.
Tech entrepreneurs sometimes suffer from what we call “San Francisco Syndrome1”: the
assumption that everyone in the world spends their time on an iPad or iPhone, fidgeting
with apps.
While developers may spend their days coding in PHP or .net and are likely to be
fluent in the languages of tech, customers are more likely to think that an Apache server is
an Aboriginal waiter. As tech visionaries, entrepreneurs dream big and often change the
way we behave and live by building interactive media, social and commercial platforms.
However, we have to realize that tech entrepreneurs are avant-gardists and, as such, do not
represent the mainstream of consumers.. For your business and product to succeed, you
need to provide an insightful solution to a real problem, not simply a flashy demonstration
of your capabilities as an innovator and designer.
Your MVP needs to be designed with the needs of your customers in mind rather than the
dreams of the entrepreneur. Consider an example: an entrepreneur we know developed an
MVP which serves as a platform to connect customers with off-shore content developers.
His MVP has a very high customer satisfaction rate. From a tech perspective, the MVP is
1 The phrase comes from the high concentration of tech startups and innovation centers that is
located in and around the Silicon Valley, directly south of San Francisco.

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simple, requiring a tech base of Excel spreadsheets and phone calls. But, despite providing
customers with value, the entrepreneur laments that his attempts to introduce an app to
perform the task have failed.
According to Lean Startup principles, we’d say that this entrepreneur is disconnected from
the needs of his business. His current MVP has a very high satisfaction rate, probably from
the very element he hopes to automate via a flashy new app—the customer service afforded
by live chats. His business objective should be to develop a platform that maintains the high
level of customer satisfaction, whatever it may look like. Instead, he had a product objective:
to build an app.
The profound difference between having a business objective and a product R&D objective
is the difference between means and ends. Business objectives should deprioritize
technology, and focus on the development of the company through satisfied customers. The
entrepreneur may build an app, a message board, a chat room, or keep operating on Excel
and Skype. They are all legitimate platforms, and they may all serve get the business off the
ground. When product R&D is prioritized at the expense of meeting a business objective—
developing an app for the sake of developing an app, for instance—the startup decreases its
chance of success. In the rush to be on the cutting edge, other valid, cheaper, and easier-to-
implement tech solutions may be overlooked.
From a customer’s point of view, the app adds very little value over talking to a live
customer service representative. The customers know the final product they want; they
don’t care about how it’s done. They have no preference for technology. They want working
solutions. In short, entrepreneurs need to learn to speak the language of the boardroom, not
just that of the server room. They need to offer practical solutions, not just incredible
technology.
2. Failing to pay attention to risk behavior of customers
A major blind spot that we identified in existing Lean Startup literature is the concept of
customer risk attitude. We at White Forest Consulting view the understanding of your
customer’s risk tolerance to be a fundamental step in building a successful product aimed at
more serious customers. To begin with, customers generally exhibit one of three risk
behaviors:
FIGURE 2. RISK ATTITUDES OF CUSTOMERS
Risk-averses customers preferentially receive less value than the cost
rather than the possibility of receiving no return or negative return.
Risk-neutral customers seek to receive full value for their cost.
Risk-loving customers are willing to gamble to receive more value than the
cost, even at the risk of receiving no return or negative return.

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Let’s use corporate taxes as an example to model different risk behaviors. A risk-
averse manager may hire an internal accountant, and hire an additional external auditor to
prevent errors from occurring. A risk-neutral manager would work with a competent
internal accountant and a proven software package, trusting that a good job will be done. A
risk-loving manager would jump on the latest cloud based software that automatically files
taxes by scanning your emails for tax related keywords. To such a manager, the risk
inherent in a new method like this is far outweighed by the time and money it might save.
Now, let’s apply this to how an entrepreneur might think. Suppose you are an app
developer. It’s important to know that the risk attitude of your customers will be very
different depending on whether you are developing a web-based game, educational
software or corporate tax software. Your attitude to your MVP, release cycle, and customer
adoption should differ correspondingly. The same logic applies if your startup is providing a
service instead of a product: a customer, like the manager mentioned above, may perceive a
higher risk associated with an unknown online technology compared to an established
service.
The risk that your customer is taking is not simply money, but, perhaps more
significantly, opportunity cost and reputation. If you fail to deliver a reasonable product to a
customer after working for a month, you may well decide to issue a full refund. However,
the customer still lost a month of time, during which he or she could have achieved actual
results with a less risky approach. Your customer may also get professionally ridiculed for
trying a new approach to an orthodox problem. If the customer works for a major
enterprise, there is a good possibility that their career might suffer too as a result for taking
a dangerous risk that didn’t pan out. To understand the risk-averse attitudes of many in the
business world, consider this saying: “No one ever gets fired for buying IBM.”
When developing an MVP, the entrepreneur must understand the risk attitude of
your customer, and keep this tolerance in mind while building your MVP. While you may be
able to get away with a less polished MVP for the risk-loving crowd, a higher level of
sophistication will be required to get the business of the more risk-averse consumers.
Failing to study competitor’s substitute products
Startup companies must always keep competitor’s substitute products in mind.
A substitute is simply a product or service that the customer may get from a competitor in
place of the products or service that you are offering. Entrepreneurs frequently fall into the
trap of believing their product to be unique. They commit this often deadly fallacy by
thinking only of perfect substitutes. But, in a business context, we ought to be concerned
with any reasonable substitute for the product. For example, although an automatic bread
slicer may be considered a superior good for cutting bread, a bread knife is far more popular
for its simplicity, versatility, and low cost.
While thinking of substitutes, it is absolutely critical to think strategically and outside of
your immediate market. Think about it: for some customers, an e-book reader, an online
movie rental website, and an online social platform can be substitutes for one another.
These services are all competing for the customer’s leisure disposable income and time, and

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for certain market demographics, the consumer may have little preference in choosing
between the above three.
Three factors determine the success of a substitute against your product:
a. Whether attractively priced substitutes are available
b. How satisfactory the substitutes are in terms of quality, performance, and other
relevant attributes
c. The ease with which customers can switch to substitutes
Awareness of substitutes and competition allows you to realistically look at the product you
are attempting to offer and gauge its marketability. Within your industry, what is the
product that has the highest penetration? What is the product that is generating the
greatest amount of cash for your competitors? What is the development trend of the major
competitors? What is the best way to develop so that you come out ahead of the product
R&D cycle?
You should find ways to align the product development with your business objectives. By
identifying the key value drivers for your customers, you can specifically tailor your MVP
for your customers.
Failing to deliver value to customers
At the end of the day, your MVP must bring clearly demonstrable value to your customer.
The cornerstone of a successful startup is to create customer value that is unrivaled by
competitors.
Remember: innovation by incorporation of technology does not create value. Releasing apps
with stable code or a streamlined interface does not create value. Using a modular approach
(or Agile development, or cloud service) does not create value. Of course, the previous
elements can contribute, but value, in the eyes of the customer, is created in four ways:
a. By incorporating product attributes and user features that lowers the customer’s
overall cost by using your product
b. By incorporating features that increase the ability of the product to meet the
customer’s needs
c. By incorporating features that enhance buyer satisfaction in noneconomic or
intangible ways
d. By delivering competitive capabilities that rivals don’t have or can’t afford to match
The MVP must be developed to provide a solution that is better than whatever exists
already. With the MVP, you must show that the value you bring to the customer is
proportionally greater than the risk that is undertaken. If this basic tenet is not met, your
product will not succeed.
The next step is to develop business situation awareness by understanding your
customer, product, and competition. To that end, we introduce several useful tools in the
next section through which you’ll gain a strategic understanding of the basic factors
necessary for the success of your product and company.

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UNDERSTANDING YOUR BUSINESS AND PRODUCTS
It is important that you constantly examine the relationship between your product,
business, customer and competition. As you are developing a startup company with a new
product, this exercise needs be performed on a regular basis until your brand and product
consolidates past the development stage.
In this section, we will introduce tools that will help you to narrow down the focus of
your MVP by gaining a better business situational awareness. In particular, these tools will
help you to
a. Identify the key factors affecting your industry, competition, and customers
b. Identify the key substitutes that are available to the customers
c. Benchmark the substitutes based on your customer’s view of value
d. Understand the premium of innovation and value
If you identify the customer and the feature for which they are willing to pay for, then your
MVP and your startup have a better chance to succeed.
FRAMEWORKS
The first tool that we introduce is the Business Situation Awareness framework. A
framework is simply a structure that organizes your thoughts and analysis in a logical
manner. Using frameworks effectively is a topic in itself. If you are interested, we invite you
to read our whitepaper “Anchoring Your Business Plans with a Structured Framework” for a
more through treatment of the subject.
When working with a framework, you start with an objective and develop the issues
in a non-committed manner, until you have developed a complete issue tree that thoroughly
and concisely solves the objective that you laid out. A framework allows you to manage
large, complex issues by breaking them into logical components. By skillfully laying out the
issues, you can manage large amounts of data without confusion or repetition.
Frameworks are a way to organize your thoughts in a consistent and logical way. To
make the most out of the structure of frameworks, you need to start with the big, high-level
questions: What are your missions and business objectives? What expertise do you have to
bring values to customers? What inefficiency in the market are you trying to address?
Gradually, work your way to more detailed-oriented questions: What is the best way to
reach customers? How will you retain customers? Leave these questions to the last: What’s
the best platform for the software? How will you build the optimum user interface?
The Business Situation Awareness framework (see Figure 3) gathers the key
information regarding your startup and the market it exists in. Using frameworks, you will
be forced to think about your company, customer, product, and competition in a logical and
non-emotional way.

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FIGURE 3. THE BUSINESS SITUATION AWARENESS FRAMEWORK
BCG ADVANTAGE MATRIX
The advantage matrix, also known as the competitive advantage matrix, is a strategy model
that offers good results when used to analyze the product and competition of a startup.
Through the model, you will be able to better understand your MVP as well as your
competitors’ products by comparing and contrasting products’ economy of scale and
differentiation.
•Identify your customers
•What does each customer segment want?
•What price is each segment willing to pay?
•Are you serving another business or customers?
•What distribution channels do your customers prefer?
•How are customers concentrated?
Customer
•What is your product/service?
•Is it commodity goods or differentiable goods?
•What are the complementary and substitute goods?
•At what stage of its life cycle is the product?
Product and services
•What are your expertises and capabilities?
•What distribution channels do you plan to use?
•What are your intangibles?
•How is your financial situation?
Company
•Identify your competitor's behaviours and best practices.
•Identify your competition's concentration and barriers to entry
•Identify all relevant regulatory policies
Competition

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FIGURE 4. BCG ADVANTAGE MATRIX
In order to place your products onto the matrix, you need to, with as much objectivity as
possible, give the products in question a ranking along these two axes:
 Size of advantage/economy of scale: the size of advantage describes a company’s
ability to gain economy of scale.
 Number of approaches/differentiation: the company’s ability to differentiate itself
from competitors.
Products from your startup and its competitors are divided into four categories depending
on the above two factors.
 Fragmented: these products gain advantages from product differentiation, but gain
little from economy of scale. Service differentiation will minimize competition.
 Specialization: these products gains advantage from both differentiation and
economy of scale. Gaining market leadership should be the goal of these
companies/products.
 Stalemate: these are the products or services that will benefit neither from economy
of scale nor product differentiation. For products in this segment, the main way to
compete is to reduce costs.
 Volume: these are the products that have considerable economy of sale, but have
little chance to differentiate. Consumer electronics fall under this category. The key
to competition is to become the volume leader of the segment.
VALUE BENCHMARKING
The benchmarking process is an advanced topic in business intelligence. The process
involves breaking down a firm’s cost structure for performing specific activities. The
disaggregated data is used to develop cross-company cost comparisons for narrowly
defined activities. The process of benchmarking can be tedious and imprecise, and such
high-level activity is unlikely to yield actionable conclusions for a startup. Nonetheless, it

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can offer some insight. Here, we are benchmarking the perceived value that a customer sees
from products.
Value benchmarking has the capability to strategically and qualitatively analyze the
market. The process often pays itself off by exposing the value and weaknesses of particular
products offered by you and your competitors.
The objective of benchmarking is to understand the strengths and weaknesses of
your product in relation to the market. When weaknesses are revealed, actions can be taken
to increase the competitiveness of your product in delivering value to your customers in
proportion to the cost and risk.
Here’s a real world example of value benchmarking: it’s a survey of the cost and
performance (in lumens) of LED light bulbs that are available in the U.S. market through
Home Depot. The price we quoted were baseline prices, without discount. In this case, to
increase the perceived value of customers, we can either maintain the same cost but
increase performance or maintain performance and decrease the cost.
FIGURE 5. LUMEN / COST BENCHMARK OF LED LIGHTBULBS
When the customers are purchasing the LED light bulbs, this is the chart that they might
conjure up mentally. Philips leads the pack with the highest performing LED bulb at 830 Lm
and it commands the premium price for this performance. EcoSmart and Cree offer the
cheapest product, although at a much lower price point. In order for your LED lightbulb to
be competitive and deliver value against these established products, it must either surpass
Philips in terms of performance, or surpass Cree/EcoSmart in terms of affordability.

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CONCLUSION
Above, we have described frequent mistakes that tech startups make while building and
developing their MVP. These oversights generally take these forms:
1. Failure to understand customers—either through generalization of customers or
failing to understand risk from Customer’s point of view.
2. Failure to understand competition environment—either through lack of knowledge
of substitutes, or ignorance of market conditions.
3. Failure to deliver value to customer due to eagerness to apply technology.
In order for you as an entrepreneur to better understand your customers and competitors,
with the ultimate goal of developing an ideal MVP, we have introduced three tools in this
paper:
1. The Business Situation Framework—applied to understand customer, company,
product, and competition.
2. The advantage matrix—applied to understand competition products vs. your own
products.
3. Benchmarking—an advanced tool applied to attempt to quantify value offered to
customers.
We hope that these three tools combined will give you the tech entrepreneur better
business situation awareness. This awareness translates into a more focused MVP and
increased appeal to sophisticated, risk-averse customers.

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ABOUT WHITE FOREST CONSULTING AND AUTHOR
White Forest Consulting Ltd. is a Vancouver, BC based boutique consulting firm, with
expertise in providing startup and business development consultation and management
services.
We welcome you to browse through our publications library located at http://www.white-
forest.ca for additional publications that might be of interest. You may also post questions
and comments regarding the contents of this whitepaper on our message board, located at
http://white-forest.freeforums.net/.
This paper was prepared by Mo Zhang. Mo has a B. Sci in Engineering from Cornell
University as well as extensive background working in Fortune 500 Companies, consulting
in Business Development, Process and Product R&D, Management Consulting, Statistical
Consulting, and R&D Consulting.
If you would like consultation services on business startup & development, product
differentiation, process R&D, or enterprise experimentation, please contact us by email at
contact@white-forest.ca.