TL;DR – A blagger’s guide to Lean Startup

First, please indulge me in listening to my rant. Despite being the most popular business book of all time, I can’t help but get the feeling that no one has read the lean startup. I’ve lost count of the people I’ve met who claim they are Lean practitioners, but after a little probing, it seems that they’ve missed the point (or more likely we have a different understanding of what the book is about)

So if you are too lazy to read the book, a summary or the numerous articles, please read on for my take on the most important things.

1) Startups and Companies are different things that need different things

Startup doesn’t mean small or new. Just because this is a new venture for you doesn’t mean you should treat it as a startup.

In lean startup, we define “startups” as “entities that are in search of a sustainable business model”. This means that the things you need to build a successful startup are very different then the things you need to do keep the lights on (business per usual).

2) Anything can be built. The question is WHAT to build vs HOW to build

We live in a wonderful world, full of wonderfully skilled people. We can pretty much build anything we imagine.

Lean startup is not a delivery methodology, it’s more like a framework for learning.

Traditional approaches to building businesses is usually PLAN-DESIGN-BUILD- LAUNCH, which in turn usually translates to a 6 man team working for a year before the idea gets tested with end users. It’s a good approach if you believe your vision matches customer reality, but if not, congrats to you because you’ve just wasted at least 6 years of collective effort.

Instead, LS helps you DISCOVER what kind of product MAKES SENSE TO YOUR CUSTOMER, using an approach grounded in validated learning (which is a fancy way of saying you are getting feedback at very regular intervals from your customers).

3) Finding out what to build means validating your VALUE and GROWTH assumptions

Remember our definition of startups? The key phrase is “searching for a sustainable business model”.

If we simplify, we can think of a business model as a TRANSACTION OF VALUE BETWEEN MULTIPLE PARTIES.

Every startup has a VALUE ASSUMPTION, meaning, as founder you BELIEVE that you are able to produce some form of VALUE to an END USER.

Until you get feedback from your user (validated learning), your value assumption is something which is untrue. Do not carry on until you can prove that you are able to provide value for a user. If you can’t then there are only two options – 1) change users, 2)change value propositions. These are called PIVOTS.

Once end user value has been proven, your next task is to figure out a SUSTAINABLE way of delivering this value.

In this case, sustainable essentially means that the costs to acquire and service this customer are less then the total lifetime revenue from the customer.

There are many parts to making the unit economics work (explore other areas of the business model canvas) and to achieve the Hockey stick graph you desire, you need to identify what the correct growth levers – this is your GROWTH ASSUMPTION.

4) Use the BUILD-MEASURE-LEARN framework to validate assumptions

Probably the main takeaway from the people I meet and talk to about LS.

By taking a frame of “validated learning” we recognise that all our great ideas and plans are ASSUMPTIONS until proven otherwise. Instead of seeing this as a constraint, see this as libertarian – get OUT OF YOUR HEAD AND MOVE FORWARD.

First articulate how you think the world works and would respond to the value you are creating (ASSUMPTIONS). Next, identify how you would test this assumption (EXPERIMENT). Your experiment is a way to test your most riskiest assumption to get DATA that will give you confidence to DECIDE what the next move should be. Be true to the data and identify the key metrics (INNOVATION ACCOUNTING) as part of your experiment.

Take your thoughts and make it real in the form of BUILDING AN MVP. Conduct the experiment and MEASURE your key metrics.

Take the data and ask what did you LEARN? For this assumption were the results good enough to give you CONFIDENCE to move forward (so look at integrating this into your actual offering). Did the results prove the assumption wrong (it’s ok PIVOT) or were things inconclusive? If inconclusive, rethink your experiment plan and PERSEVERE until you learn enough.

Then do it again.

5) The FASTER you CYCLE the more chances you get before your RUNWAY expires

Startups are entities that are SEARCHING for a sustainable business model. Startups are hard because you are doing things which have never been done before.

Every team has certain constraints in terms of time, energy, attention and money. The BURN RATE is how fast these resources deplete and RUNWAY is how long you can sustain your current operations.

Because we value learning above all else, the more we can learn within our runway, the better our odds of “winning” are (which can be thought of as finding a sustainable business model).

To learn more, cycle through the BML as many times as you can. Increase cycle time by increasing EXECUTION SPEED or maximising the LEARNING:EFFORT ratio (so go smaller and more often). Be hyper aware of DIMINISHING RETURNS.

6) The MVP is the SMALLEST THING you can build to validate your assumptions

Contrary to belief, your Minimum Viable Product is NOT just a beta or early release of your product. The MVP is a vessel for LEARNING.

As you progress through your journey you should have MULTIPLE MVPs, each testing a DIFFERENT ASSUMPTION.

The point of the MVP is to build something of SUFFICIENT FIDELITY in order you to have more CONFIDENCE that your assumption is true.

In many cases, SIMULATION of the core customer experience is sufficient. Be mindful of what you are testing – role (does this make sense in the context of a user), aesthetics (how it looks or behaves) or feasibility (is it technically possible).

Simulate the front, fake the back. Keep things small so you have more chances.

7) Lean Startup will not guarantee success – you still need taste, heart and a lot of luck

Use the lean startup methodology as a means to DERISK your effort so that you don’t WASTE resources

It is not the golden ticket to success.

The big takeaway is that startups are hard. You can do everything right and still fail. Timing is a massively under looked component of startup building.

You started this venture because you have good taste. You fundamentally believe there is some new value you can bring into this world.

Stay courageous and be honest – if the world doesn’t respond to how you expect, it’s better to find out early and try something else vs burn all resources on one big shot.