The Lean Startup methodology and why we care about it
If you're reading this article, most probably you are involved in the startup world, and you’ve probably heard the term “lean startup” thrown around many times by now. What is it tho, and why do we care so much about it?
In a few words, the Lean Startup is a system for creating a business that was first introduced by entrepreneur Eric Ries in 2008 and then outlined in his 2011 book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Business.
Where did the Lean Startup come from?
It started with risk.
It's been said that risk is the characteristic that distinguishes a startup from any other type of business. And it's why Eric Ries wrote The Lean Startup — to help companies navigate and minimise these risks through minimum viable products (MVP’s).
Consequently, adhering to the lean startup methodology is all about creating a sustainable business with minimal waste of both time and money.
Ries's concept grew out of two things:
- Two failed businesses in Ries’ own portfolio and,
- The streamlined process of creating cars that was developed in Japan after World War II.
In the case of Ries’ failures, he saw that he’d spent a lot of time and money building products, without ever confirming that those products were solving a real problem. Guess what happened?
You got it — they flopped.
In the Japanese model of building cars, which involves reducing and eliminating waste in order to get the end product to the customer at the lowest cost for highest value, Ries’ saw a system that could be applied to entrepreneurship.
A look into the Build — Measure — Learn Methodology
Okay, just don’t get scared by the fancy terminology: this methodology helps your startup or business in shortening your product development cycles a lot.
The idea is quite simple: once you launch your MVP, keep an eye on your data and measure how customers respond to your features.
This is a great way of learning whether to improve your product, how easy is your product to use or understand, what are your customers’ expectations and most importantly how to solve their problem easier!
The general idea is that startup founders should follow the model — which Ries’ has named “build-measure-learn” — repeatedly, with the goal of turning that MVP into a sustainable business. Oftentimes, that feedback leads founders to pivot from one idea, market, or niche to another in their quest for a great product.
Of course, you can always have a great MVP and transform it directly into the product without so many changes if your customers are happy. :)
While the MVP is often extremely minimalistic, the feedback from the initial group of test customers helps entrepreneurs learn what’s working, understand what isn’t, and figure out what direction they should go.
Keep in mind that you still have to deliver a great product with a scalable architecture so your product won’t crash once you grow — that would be a very painful moment for you and you do not want it!
What does the Lean Startup Approach bring to the table?
The Lean Startup Methodology is all about knowing when to turn, and when to persevere and grow a business with maximum acceleration.
According to conventional wisdom, the first thing every founder must do before anything else is create a business plan, or, more simple, a document that describes the size of an opportunity, the problem to be solved, and the solution that the new venture will provide. Occasionally this might contain a five year forecast for income, profits and cash flow. So basically, this is a research exercise, made in complete isolation of the real product and the outcome it could bring to the table. The assumption is simple: it is possible to figure out most of the unknowns of my product in advance, before I even start executing the idea.
The entrepreneur builds a really convincing business plan, obtains money from investors and begins the developing process. The result? Hundreds of hours spent on developing a product with very little if any real customer input. When the sales force attempts to sell the product, the founder gets the real market feedback. And very often, the founders learn the hard way that customers do not need or wants most of the existing product’s features.
What do we learn from here?
1.Most of the business plans do not survive a five contact with the customer.
2. No one besides the late Soviet Union requires five-year plans.
3. Startups are not smaller versions of big enterprises.
While existing companies execute a business plan, startups are still looking for one. And this exact differentiating criterion strands at the heart of the lean startup approach: a temporary organization designed to search for a repeatable and scalable business model. These are the core principles we consider while working with our clients, startups that came to us for building a scalable MVP.
The Lean Startup Methodology has three key principles:
First and utmost, rather than engaging in months of planning and research, entrepreneurs accept that all they have on day one is a series of untested hypotheses, or good guesses. This is why, instead of writing a business plan, founders summarise their good guesses in a framework called a business canvas.
Second, lean startups use the customer development approach to test their hypotheses. They take all of their good guesses out in the world and and ask potential users for feedback on all elements of their product. Then using their potential customer’s input, they start the cycle all over again.
Third is the agile development. Agile development works hand in hand with customer development. It eliminates wasted time and resources by developing the product iteratively and incrementally. It’s the same process by which startups create the minimum viable products they test.
In a ore simple way, the lean startup approach helps new ventures launch products that customers actually want, far more quickly and cheaply than traditional methods.
The lean startup approach helps new ventures launch products that customers actually want, far more quickly and cheaply than traditional methods.
If you’re interested in using the lean startup methodology to build your next venture, do the research. Read the books. Really study the methodology.
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