During a conversation yesterday with an entrepreneur friend of mine i came across this argument that Lean and Iterative product development is a very good concept but is use in Offline businesses is not possible at all . I understand that it is much easier to test a product development assumption online because with little money (adense money) and some research it is easy to indentify a hypothesis and test the same within a short period of time.
This lead to an interesting discussion where i was arguing that it is possible to apply lean methods even in the offline world with some effort and some smart thinking. So a challenge was thrown at me … and here is what i proposed could be done to apply lean methods of iterative development.
Challenge -> Changing the positioning of a Biryani Chain
Background : My friend runs 3 small quick service format Biryani chain serving local (Bangalorean/Karnataka ) style Biryani. The problem which is being faced by my friend is that with his product offering and initial positioning he is attracting a clientele which is lower middle class to middle class. This segment is extremely price sensitive hence he is unable to charge a high premium for his stuff . The business though profitable is no where compared to ‘Ammi’s Biryani’ which has made Biryani into Pizza equivalent with great packaging and positioning. So my friend wants to change his offering so that he can appeal to different segment of middel to upper class customers and charge a higher price. The dilemma is how to test the same without effecting business in any one or the 3 outlets. Business now is profitable and has good traction so he does not want to risk existing business to try the new positioning. This means he would now have to setup another outlet to test the positioning and new offering. Setting up a new outlet is expensive because of high real estate costs and setup costs of the basic outlet would cost anywhere between 10lakhs – 15 lakhs.
Approach Suggested by me
List out the assumptions which needed to be validated, so below are the 2 main assumptions which needed to be validated
a) Position Local Flavour of biryani in better package and see how consumers react to the offering
b) With this positioning can i charge a price of 140 Rs / plate of Biryani (instead of the current 80 Rs).
So i told him to look for a small outlet in high traffic locality like inside a mall , inside a large super market etc and explore the possibility of shop in a shop. Upon detailed enqueries it was found that such a place exists in RT Nagar . The place is Foodworld at RT Nagar and one can rent a small space having a 4×4 counter just in front of Foodworld. The place has a rent of 20k/Month and we need to setup a good quality kiosk inside this space of 4×4 , this would cost around 1.5 lakhs. Now we can simply offer the same biryani at increased pricing with better package and test market the concept !
Yes it is not as cheap as online hypothesis testing but is surely cheaper then setting up a new outlet.! Overall we can test market this offering for 6 months to see what is the repeat uptake of the biryani. To facilitate repeat uptake measurement i suggested that he introduce a coupon which provides 20% off for the next order.
Thus my friend was convinced that he can look at using lean approach in offline business , and he is now planning to setup the experiment. I would be helping him to required changes !