Principle 1: Fail Fast! (or, Everything Is a Hypothesis)

Instead of waiting for the plan … to get funded … then implemented, social entrepreneurs practicing lean start with educated guesses (or hypotheses) about how they expect the overall innovation to work. Then they test those guesses relentlessly, failing fast, but also speeding the way to development of solutions that actually do work.

Each element of how you intend to operate successfully is quickly mapped out, often on a tool called the Business Model Canvas. You lay out your core “guesses,” but you test only those critical to early validation of your initiative. The model is broken down into vital components that can be tested quickly when the time is right. You develop hypotheses on the key components of your innovation, including your value proposition, who you’re targeting, how much it will cost, and how much it can raise (covered in much more depth in chapter 4).

The focus is not on planning, but on relentless testing.

In Monica’s case, she and HSC simply started trying new ways to put homeless people into permanent homes. Their early hypotheses centered on the importance of community involvement, developing good will on the part of landlords toward the homeless, and new partnerships (such as one between the local Veterans Administration and the county housing agency).

The HSC team had set a goal of housing 180 people at the highest risk of dying on the streets within thirty months. After twelve months, they evaluated their hypotheses and weren’t happy with what they found. They had, in fact, housed 20 people, but their metrics showed that they would land far short of their goal and end up housing a total of 50 or fewer after thirty months of effort.

The lean startup methodology had emboldened Monica and her team to innovate, to measure, and to test. It also enabled them to learn. A year into the program they focused down to one hard number. In the language of lean startups, it was “the one metric that counts”: the length of time between when a homeless person gets a housing voucher and when he or she signs a lease.

They had failed fast. Rather than taking twenty-five years to understand the persistence of homelessness in Santa Cruz, the Homelessness Services Center had learned in just twelve months that their approach wasn’t fast enough, even though it was still doing some good. They had not let themselves drift into change that was important but, finally, insufficient. Rather, they had experimented, measured, and found themselves wanting. Then they pivoted.

In the process, the lean approach had forced them to constantly revisit the most basic question: What are we trying to do? The single metric they settled on not only drove unprecedented results, but fully embodied their innovation and their intention—getting the homeless into homes.

Fail fast means getting out of planning mode and into testing mode, eventually for every critical component of your model of change. Customer development is the process that embodies this principle and helps you determine which hypotheses to start with and which are the most critical for your new idea.