Taking on a Market Leader through Validated Learning

Posted by Christina Coleman on

The winners of the March, 2012, Washington, DC, LSM workshop were successful because of three things:
  • One, they were able to validate some of their riskiest assumptions.
  • Two, they were able to collect currency on both sides of a two-sided market.
  • And three, their pitch focused on the photo-sharing space on the web.
The latter doesn’t exactly relate to Lean. But it’s timely. The photo-sharing space is now big, especially after the photo-sharing juggernaut Facebook bowed down to Instagram, to the tune of $1 billion in shares. Impressive? Yes. Normal for mobile apps? No. Instagram created a more compelling mobile photo experience by simplifying the process. Take a photo. Add a filter to make it look professional. Add a caption. No status involved, no signing into a social network, no creating a photo album. Demonstrating that users wanted or needed this no-hassle photo app—despite Facebook’s apparent hold on that market—was a call for Lean Startup practitioners to test their way into other problem hypotheses. Now it was PhotoCache’s turn.

Riding the Wave

With the idea to infiltrate the photo app world, LSM DC’s winning team had to find a way to make that experience unique.

The juggernaut: Geocaching (www.geocaching.com), a huge community of real-world treasure hunters that allows users from around the world to find hidden containers (geocaches) using GPS. From there they can share their experiences online.

The challenger: PhotoCache, a virtual treasure hunt that allows users to explore their surroundings with just the use of their mobile phone.

The difference? Accessibility. “Geocaching requires a lot of dedication and it’s a little inaccessible. You have to find an object and trade it in. I thought, to bring this idea to the greater community, we could make it a photo scavenger hunt. It’s a great way to explore your surroundings. I want people to be able to show off their city, and we wanted to put a fun twist on that,” said Rohan Puri, team leader for PhotoCache and creator of Wahoobus, a bus finding mobile app.

Currency from the non-paying side of a two-sided market

The PhotoCache team (Avi Edery, Patrick Costello, James Stern, Ricardo Saavedra and Puri) initially assumed that the Geocaching community would be interested in the app. However, they didn’t find many of them, and decided to test a different customer persona. Through a weekend of experimenting, and luckily encountering the Cherry Blossom Festival in DC, they validated their real niche market: tourists and families with children. Building a concierge minimum viable product, Patrick Costello passed out images of the Lincoln memorial to tourists in DC, instructing them to hunt for the same angle and take a picture using their phones. Of the 20 people they asked, 17 went out and did it without incentive or reward, verifying that users were willing to participate in the photo scavenger hunt. This form of currency—users being willing to give up their time to participate in the activity requested by the experimenter—provided the necessary validation around their first riskiest assumption. PhotoCache was born.

Validating the paying side of a two-sided market

PhotoCache quickly turned the other side of its market—the businesses—to validate their assumption about the problem that they might be able to solve for them. The team hypothesized a business model. If users of the app were able to complete the scavenger hunt, they may be able to receive discounts from nearby businesses. Although this incentive wasn’t needed to validate their audience, it was needed to garner some money for the business. “At that point, we ventured into businesses to see if they were willing to pay commission for foot traffic,” Rohan said. Forming a letter of intent, PhotoCache asked businesses if they were willing to come on board. Out of eight managers, seven were willing to sign the form, promising a dollar to PhotoCache each time it delivered a visitor.

More Experiments Needed

In true Lean fashion, validating never ends. Even though the team was able to secure letters of intent and broadly identify their customer persona, they are aware that there is still work to be done. “Currently we have a list of assumptions that we are exploring. First, if businesses are willing to pay $1, how much more are they willing to pay commission per person? Second, are people going to be willing to do this without human interaction? Remember, we had Patrick there to pass out packets the first time. Would they do this without a representative?” Puri said. With potential for sticky growth, some currency on both sides of the market, and customers “foaming at the mouth,” the PhotoCache team will be successful in the future because they recognize one thing: validation is key.