The Lean Startup core idea is to avoid waste of time and resources when developing a new product or service. The term Lean Startup was coined by Eric Ries, in a book named the same. The thing is that many startups begin with a new idea that they believe people want. Then, they spend several months, sometimes years, perfecting this product without ever showing it, even in its most rudimentary form, to potential customers.
When they fail to get paying customers, it is usually because they have never talked to potential customers and heard whether the product was of interest to them or not. And when customers finally test the product and it doesn’t meet their needs as they’d wish, the startup dies. It is a sad and extremely common journey. And the objective of Lean Startup methodology is precisely to avoid this journey.
Lean Startup Definition
The word “lean”, here, has been applied by Eric Ries, Harvard Business School researcher, towards avoiding waste. It involves identifying and eliminating waste in all the processes, from research to production. In short, in this methodology, the company begins by getting to the market to ask the opinion of potential customers about all elements of the business model: product features, price, distribution channels and economic strategies. With this data collected, the startup creates a minimum viable product (MVP) and ask for customer feedback as quickly as possible. Based on the answers obtained, it aims for new versions and adjusts until it finds the ideal product.
How to be Lean
It’s necessary to work on manners to identify systematically the waste in every and each step of production, sales, and after-sales. That said, it’s important to reduce or eliminate any and all wasting part, whether they are time, cost, or resources.
“Every activity that does not contribute to learning about customers is a form of waste.” Eric Ries
- First: before launching your product, instead of consolidating a long report (the Business Plan), you are going to use a Canvas to build your business model. This canvas will show how the company creates value for its customers.
- Second: you are going to test your hypotheses by customer development. You are going to talk to potential users, buyers, and partners to get their opinion on any and all elements of the business model. To get that, you are going to have your MVP built.
- Third: you are going to finally adopt agile development, where there is no waste of time or resources, as the product is developed in an iterative way.
Notice that everything is about interacting with your customers, testing hypotheses, and iterating during the process – all of that before launching your product on the market.
Lean Startup Principles
- Entrepreneurs are everywhere. You don’t have to work in a garage to be a startup.
- Entrepreneurship is about management. Your startup is not just a product, it requires management. A new form, designed specifically for your context of uncertainty.
- Validated learning. Startups must build a sustainable company. Your learning can be scientifically validated by experiments that allow you to test every element of your business.
- Innovation accounting. Yes, you also need to focus on boring things: how to measure progress, how to set goals, how to prioritize work. This requires a new type of accounting, specific to startups.
- Continuous deploy. The team’s work must be updated regularly for the end customer. You must build a new feature and make it available in a short time to receive a faster evaluation.
- A/B testing. Whenever possible, make more than one version of the product available on the market. This way, you have feedback on how customers react to different product models. From the reaction to these different possibilities, you may learn what the user prefers.
- Actionable metrics. Metrics that, when triggered, provide information necessary for the organization to make decisions about the business.
- Minimum Viable Product (MVP). It is the minimum version of a new product, with the purpose to capture more information and learn about the needs and expectations of the end customer. That avoids efforts to create resources that are unnecessary or uninteresting.
- Pivot. It is a complete change in the course of a product, a new strategic hypothesis that requires a new MPV to be tested.
- Build-Measure-Learn. A fundamental activity of a startup is to turn ideas into products, measure how customers respond, and learn if something needs to be changed or maintained. Every successful startup should accelerate this build-measure-learn cycle.
The Lean Startup cycle, known as Build-Measure-Learn, highlights the speed of a team or company to create an idea, build a minimally viable product, measure its effectiveness in the market and learn from that experience. To put it in a few words, it is the cycle to transform an idea into a product, measure the reaction to it, and decide if it is a good idea, that must remain, or a bad idea, that must be discarded. The cycle generates innovation, as the quick iteration allows teams to identify a viable way to adjust the product, in order to optimize and improve the business model towards success.
Differences between the Lean Startup and the traditional business plan
Lean Startup is based on hypotheses and utilizes a canvas to be designed. Traditional is based on implementation and utilizes a business plan.
Lean Startup seeks to be quick and uses data that are enough for action. Traditional operates slowly and only with complete data for action.
Lean Startup experiments hypotheses on the market and gets feedback from customers during the process. Traditional prepares the whole product for the market in a very linear plan.
Lean Startup pivots, offering new possibilities, features, and products. Traditional abandons the project and, sometimes, fires teams or executives.
Lean Startup Benefits
- More productivity. By focusing on what really matters, the company’s development will happen quickly and directly. Thus, productivity grows while saving money and time.
- Cost reduction. When waste is eliminated, costs are reduced. Because you can remove steps that don’t contribute to sustainable development, thus avoiding expenses and increasing profit.
- Greater proximity to customers. When the build-measure-learn cycle is well applied, customer needs and expectations will be better known. This will provide a greater intimacy between them and your brand. And that is the first step to get loyal consumers.
Although there is no guaranteed formula for success, the Lean Startup method can be very useful for any business, as it helps the company to test ideas with its target audience in a faster and more economical way. Download here the Lean Canvas in PDF