What First Time Entrepreneurs Need to Know about the Lean Startup
An amazing idea — it’s what experienced founders and first time entrepreneurs alike live for.
Whether it’s a new way for people to track their energy use, an app that connects first time gardeners to experts, or a new spin on a kid’s toy, the possibility of creating something that people really want or need is exciting.
If you’re considering putting an amazing idea into motion, you’re probably already thinking: “How do I know if it can be done? Will people want and pay for it? What are the basics of building a team?”
The good news is that there’s an approach to building companies and products called the Lean Startup, and you don’t need a deep background in business to use it. In a nutshell, it’s a method that’s all about testing small, learning fast, and developing value and relationships with customers.
To start, let’s define what a lean startup is and demystify some of the terminology…
The Basics
At its core, a lean startup is a fundamentally different way of building companies. It’s not a complicated approach, but it is radical.
The idea comes from an observation that Eric Ries made back in 2008 — many companies simply aren’t aware of the process they are using to develop products and connect to customers, and so they can’t truly measure their efforts and continuously improve. Talking about customers and delivering products that they might like simply isn’t very efficient.
“The Lean Startup methodology has as a premise that every startup is a grand experiment that attempts to answer a question. The question is not “Can this product be built?” Instead, the questions are “Should this product be built?” and “Can we build a sustainable business around this set of products and services?” This experiment is more than just theoretical inquiry; it is a first product. If it is successful, it allows a manager to get started with his or her campaign: enlisting early adopters, adding employees to each further experiment or iteration, and eventually starting to build a product. By the time that product is ready to be distributed widely, it will already have established customers. It will have solved real problems and offer detailed specifications for what needs to be built.”
At its most basic level the idea refers to a company that tests itself at every step of the journey. Creating a flexible, smart process for that testing is what the lean startup is all about, and although building a product from scratch is not an easy process, it means that you’ll know for sure if there is a market for what you’re building, and you’ll use your resources (including money, but also, especially, time) wisely.
Key Ideas of a Lean Startup
- Minimum viable product (MVP)
- Split testing
- Actionable metrics
- Build-measure-learn
Minimum viable product (MVP)
You can think of a minimum viable product as the basic building block for your idea. You think you’re on to something, but you need data / feedback to find out if that’s true. An MVP is the smallest, most flexible version of your idea that allows you to collect enough information to learn about your potential customers. One example is Airbnb, the online platform that connects people with an extra room or space with guests / travelers. They employed the MVP approach to see if beautiful photography would drive bookings, and gathered information that validated the idea.
Split testing
Sometimes called an A/B test (because results are divided into Group A and Group B), split testing is all about offering different versions of a product to your customers or potential customers. You then observe their behavior, see which version is stronger, and try to figure out why. An example: if you’re developing a video series for the web, you might want to know if you should release 6 minute videos twice a month or 3 minute videos four times. As a test, you create two groups from inbound traffic to a landing page on your site, or use separate YouTube channels, and look at which group was most likely to view the whole video, recommend / comment on it, etc.
Actionable metrics
If you’re developing a new idea there are a lot of things you can measure. But the most important thing is to measure what you can actually act on. The easiest way to think about this is: do not measure the finish line, measure the road on the way there. Increasing revenue by $1,200 from January to February is nice, but being able to break that down and say that $450 came from a one-time customer and $750 came from advertising on another companies website will instruct you on where to focus your energies. In other words, don’t just measure the growth, measure how the growth occurred.
Build–Measure–Learn
You may have already caught, but in the lean startup speed is important. The Build Measure Learn loop is all about shortening that process of “hey we have an idea” > “let’s test it” > “ok we know this works but that doesn’t.” If you’re able to build a minimum viable product, test it, and look at actionable metrics, then you’ll be able to quickly make decisions about what to focus on.
Iteration As A Mindset
Eric Ries has a few more examples on his website of companies and products that have used the lean startup model.
The most famous is probably Dropbox, a file sharing and storing solution that made a 3 minute video, but the approach can also apply to ideas offline as well, like developing a new kind of hanging garden box for tomatoes.
One last note is that while there are plenty of people out there that advocate for it as a short-term “hack” that will get you ahead, at its’ core the idea really focuses on developing a relationship with your potential customers. That may include tactics, but it is the mindset of constantly improving, of understanding your customers and what matters to them, that really defines the approach.
WeGreenlight.com is a platform to help you validate your ideas, get feedback, and launch with early adopters. Join us and let’s help you launch your idea successfully.
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