In the fast-paced world of e-commerce, launching a successful product often requires significant upfront investment and risk. But what if you could validate your business idea and grow a loyal customer base with minimal resources? That's exactly what Modify Watches accomplished by embracing lean startup principles, transforming a small side project into a thriving business generating over $1 million in annual revenue.
The Birth of Modify Watches
Founded in 2010 by Aaron Schwartz and Gary Coover, Modify Watches began with a simple idea: customizable, interchangeable watches that allow customers to express their personal style. The concept was born out of the founders' observation that people often changed their outfits daily but wore the same watch. They saw an opportunity to create a product that could adapt to different styles and occasions.
Embracing Lean Startup Methodology
The lean startup methodology, popularized by Eric Ries in his book "The Lean Startup," emphasizes rapid iteration, customer feedback, and data-driven decision making. Modify Watches embraced these principles from day one, allowing them to navigate the competitive landscape of the watch industry with agility and efficiency.
Start with a Minimum Viable Product
One of the core tenets of the lean startup methodology is launching a minimum viable product (MVP) as quickly as possible to start learning from real customers. For Modify Watches, this meant releasing an initial product that was far from perfect.
Aaron Schwartz recalls, "Our first watches had a 30% defect rate. They were pretty much broken watches. But the test we wanted to run wasn't about product quality – it was about how people would purchase and use interchangeable watches."
Rather than spending months perfecting their product, Modify Watches launched with a basic website and imperfect watches to start gathering data. This allowed them to validate key assumptions:
- Would customers be interested in interchangeable watch faces and straps?
- How would people mix and match different components?
- What price points and product combinations resonated?
By getting an MVP into customers' hands quickly, Modify Watches was able to learn and iterate rapidly based on real-world feedback. This validated their core business concept before investing heavily in inventory or manufacturing.
Test Core Assumptions
Another key aspect of the lean startup approach is identifying and testing core business assumptions. For Modify Watches, some key assumptions included:
- Customers want to accessorize and customize their watches
- People will mix and match watch components, not just buy complete watches
- There's a market for affordable, interchangeable watches
To test these, Modify Watches tracked key metrics like:
- Average number of straps purchased per watch face
- Ratio of individual components vs. full watches sold
- Customer feedback on interchangeability and customization
"For our first couple hundred sales, we saw customers buying an average of 1.3-1.4 straps per watch face," says Schwartz. "This validated that people were actually taking advantage of the interchangeable nature of our product."
By systematically testing assumptions, Modify Watches was able to confirm their core business model before scaling up.
Leveraging Word-of-Mouth Marketing
In the early days, Modify Watches had virtually no marketing budget. Instead, they focused on delivering an exceptional customer experience to drive organic growth through word-of-mouth.
Some key tactics included:
- Including handwritten thank you notes with every order
- Adding free product or batteries to packages
- Providing direct contact info for customer support
- Encouraging customers to share photos and stories
"Our strategy was to invest a ton of money and time in delivering an exceptional customer experience," explains Schwartz. "We were hopeful that our customers would have such a great experience that they couldn't help but talk about our brand."
This focus on customer delight paid off, with most of Modify Watches' growth in the first two years coming organically through referrals and word-of-mouth. According to a study by Nielsen, 92% of consumers trust recommendations from friends and family over all other forms of advertising, making word-of-mouth marketing an incredibly powerful tool for startups.
Iterate Based on Customer Feedback
A core principle of the lean startup method is using customer feedback to drive rapid iteration. Modify Watches embraced this by actively seeking input from early customers and making quick improvements to their product and business model.
Some examples of how they iterated based on feedback:
- Reducing watch size after customers said initial designs were too large
- Improving water resistance based on customer requests
- Expanding color and design options to meet demand
- Adding customization capabilities as customers asked for more personalization
"We basically white-boarded everything we knew about selling products, which wasn't very much," says Schwartz. "Then we proceeded to test our assumptions and iterate based on what we learned from customers."
This customer-driven approach allowed Modify Watches to continuously improve their product and business model. According to a study by PwC, 73% of all people point to customer experience as an important factor in their purchasing decisions, highlighting the importance of this iterative, customer-centric approach.
Focus on Key Metrics
Rather than getting distracted by vanity metrics, Modify Watches honed in on a few key performance indicators (KPIs) that truly mattered for their business model:
- Number of straps sold per watch face
- Repeat purchase rate
- Customer lifetime value
- Net promoter score
By focusing on these critical metrics, they were able to optimize for sustainable growth rather than just top-line revenue.
"We realized that if customers were buying multiple straps per watch, that validated our interchangeable model," explains Schwartz. "And if they came back to buy more components over time, that showed we were building lasting relationships."
This focus on key metrics aligns with the lean startup principle of "innovation accounting," which emphasizes measuring progress in a way that demonstrates real business value.
Embrace Constraints
Operating with limited resources forced Modify Watches to get creative and focus on high-impact activities. Some examples:
- Using free design services to win corporate clients
- Leveraging partnerships for distribution and sales
- Focusing on word-of-mouth vs. paid marketing
- Optimizing existing channels before adding new ones
"We didn't have a big marketing budget, so we had to grow through word of mouth," says Schwartz. "That forced us to really dial in our customer experience."
These constraints pushed Modify Watches to build efficient systems and processes from day one. This aligns with the lean startup principle of "doing more with less" and can often lead to innovative solutions that larger, more resource-rich companies might overlook.
Test Different Channels
Rather than going all-in on a single channel, Modify Watches tested multiple routes to market:
- Direct-to-consumer ecommerce
- Corporate promotional products
- Licensing deals with major sports leagues
- Custom products for events and organizations
- Retail partnerships
By experimenting with different channels, they were able to find the most profitable and scalable opportunities.
"We realized that corporate gifting and custom products were a great fit for our business model," says Schwartz. "So we doubled down on those channels while still maintaining our direct consumer business."
This multi-channel approach allowed Modify Watches to diversify their revenue streams and reduce risk, a strategy that has become increasingly important in the digital age where consumer behaviors can shift rapidly.
Leverage Technology and Tools
As a lean startup, Modify Watches relied heavily on technology and tools to operate efficiently:
- Shopify for ecommerce and inventory management
- ShipStation for order fulfillment
- Optimizely for A/B testing
- Mailchimp for email marketing
- Helpscout for customer service
"Leveraging the Shopify app ecosystem was critical for us," explains Schwartz. "It allowed us to add functionality as we grew without having to build everything from scratch."
By using these off-the-shelf solutions, Modify Watches was able to focus on their core business without getting bogged down in technical development. This approach is common among successful lean startups, allowing them to move quickly and scale efficiently.
Build a Culture of Experimentation
Perhaps most importantly, Modify Watches built a culture that embraced experimentation and learning. Some ways they fostered this:
- Running frequent A/B tests on their website
- Testing different pricing and discount strategies
- Experimenting with product designs and features
- Trying new marketing channels and tactics
"We basically tested everything," says Schwartz. "From button colors to pricing to product designs. That mentality of constant experimentation was key to our growth."
This culture of experimentation aligns closely with the lean startup principle of validated learning, where businesses use empirical data to inform decision-making and drive growth.
The Results: A Million-Dollar Business
By applying these lean startup principles, Modify Watches was able to grow from a small side project to a million-dollar business. Some key milestones include:
- Reaching $1 million in annual revenue
- Selling over 100,000 watches
- Featured on major media outlets like the Today Show
- Partnerships with major brands and sports leagues
Perhaps most importantly, they achieved this growth without significant outside funding, demonstrating the power of the lean startup approach to bootstrap a successful business.
Key Lessons for Entrepreneurs
So what can other entrepreneurs learn from Modify Watches' lean startup journey? Here are some key takeaways:
- Launch fast with a minimum viable product to start learning
- Test core business assumptions before scaling
- Focus on delighting early customers to drive word-of-mouth
- Iterate rapidly based on customer feedback
- Measure what matters – focus on key metrics tied to your business model
- Embrace constraints to force creativity and efficiency
- Experiment with multiple channels to find product-market fit
- Leverage technology and tools to operate leanly
- Build a culture of experimentation and learning
By following these lean startup principles, Modify Watches was able to validate their business model, build a loyal customer base, and scale to over $1 million in annual revenue – all without significant outside funding.
The Future of Lean Startups
As we look to the future, the principles of lean startup methodology are likely to become even more relevant. In an increasingly digital and fast-paced business environment, the ability to quickly test ideas, gather data, and iterate based on customer feedback will be crucial for success.
Some trends that may shape the future of lean startups include:
- Increased use of AI and machine learning for rapid prototyping and testing
- Greater emphasis on sustainability and ethical business practices
- More distributed and remote teams, requiring new tools and processes for collaboration
- Continued growth of the gig economy, providing startups with flexible access to talent
Regardless of these changes, the core principles of the lean startup methodology – rapid iteration, customer-centricity, and data-driven decision making – are likely to remain relevant for entrepreneurs looking to build successful businesses with limited resources.
Conclusion
The Modify Watches story demonstrates how embracing lean startup principles can help entrepreneurs validate their ideas, build customer-centric products, and grow successful businesses with minimal resources. By starting small, testing assumptions, and putting customers first, it's possible to build a thriving business in even the most competitive industries.
As Aaron Schwartz reflects, "The lean startup approach allowed us to move quickly and learn from our customers. That iterative process was critical to finding our place in the market."
For entrepreneurs looking to launch a new product or business, the lessons from Modify Watches provide a valuable roadmap. The lean startup journey may not be glamorous, but it can provide the foundation for long-term success. As Schwartz puts it: "Fail fast or die slow – that's the mindset you need when validating a new business idea."
In an era of rapid technological change and evolving consumer behaviors, the ability to adapt quickly and learn from customers will be more important than ever. By embracing the principles of lean startup methodology, entrepreneurs can increase their chances of success and build businesses that truly meet customer needs.
