June 12th, 2017 | By: Emma McGowan | Tags: Lean
If you’re involved in the startup world, you’ve probably heard the term “lean startup” thrown around. No, it’s not a new weight loss plan — although I wouldn’t doubt that there are health and fitness apps out there who have used lean startup methodology.
It’s 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.
In our article 19 Startup Books Every Founder Should Read, Lauren Foundos, Founder & CEO, FORTË said the following:
“The Lean Startup is an incredible book because it recounts the experience of Eric Ries. He highlights his mistakes in an effort to help you avoid making the same mistakes. He discusses the importance of understanding your target audience, creating an MVP, focusing on actionable metrics, and knowing when to adapt and iterate without wasting too much time. All of his advice is extremely valuable, and helpful in order to avoid common founder mistakes.”
For the entire lean startup methodology and philosophy, you should definitely go read that book. Seriously — it will change your approach to business.
But for a quick overview — maybe just to pique your interest and see if this is a model you’re interested in — keep reading.
It started with risk.
Risk is the characteristic that distinguishes a startup from any other type of business. Imagine the experience of quitting a stable, secure job to venture into the unknown. It’s terrifying, and if you’re reading this blog post, you know how terrifying this experience is — because you’ve probably done it.
That’s why Eric Ries wrote The Lean Startup — to help companies navigate and minimize these risks through minimum viable products (MVP’s), rigorous experimentation, and a commitment to learning.
At its core, adhering to the lean startup methodology is all about creating a sustainable business with minimal waste of both time and money.
This concept grew out of two things:
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.
As Eric puts it, “we have to change our notion of what a modern company looks like.” Disruptive innovation comes from cross-functional teams, comfort with failure, and a rigorous commitment to learning. Every company, large or small, can become a startup. Entrepreneurship is a crucial function for almost any type of organization.
Entrepreneurs that practice the lean startup methodology are encouraged to question everything — from their initial idea, to their design choices, to any features they’re considering adding.
In following this process, entrepreneurs discover their minimal viable product (MVP), which Ries encourages to release to a select group of test customers to determine what improvements need to be made.
A good example of an MVP that fits within lean startup philosophy is a “smoke test site,” which can be used to validate interest in your product or service while offering a low barrier to entry.
A smoke test site is one that is just a facade. It looks like it’s a real service, but it’s really just a flat site with no back-end, nothing built out, and no real actions. They can be used easily to track and estimate demand for your business idea, and to help gather contact information for people who may be interested. The point of this site is to see if anyone tries to buy.
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.
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.
Innovation is a high risk sport on an idea by idea basis, but you can dramatically increase the quality and reliability of your outcomes in the way you manage new concepts.
Creating structured ideas and then figuring out creative ways to test them is central to the lean startup movement, not to mention the scientific method itself. And it turns out it’s a great way to innovative, even if you’re short on resources.
Build-measure-learn is a research-intensive process that can be emotionally fraught, as creators have to be willing to not only put their creations out into the world before they’re “finished” but also take feedback and implement it.
However, if done properly, the lean startup methodology can lead to a company that serves its client’s needs, is sustainable, and is verified before the founder even starts looking for funding. Ries’ website cites Dropbox as a prime example of a big company that used his methodology to get where they are today.
The goal of Build-Measure-Learn is not to build a final product to ship or even to build a prototype of a product, but to maximize learning through incremental and iterative engineering. (Learning could be about product features, customer needs, the right pricing and distribution channel, etc.) The “build” step refers to building a minimal viable product (an MVP.) It’s critical to understand that an MVP is not the product with fewer features. Rather it is the simplest thing that you can show to customers to get the most learning at that point in time.
This five-part version of the Build-Measure-Learn diagram helps us see that the real intent of building is to test “ideas” – not just to build blindly without an objective.
The circle labeled “code” could easily be labeled “build hardware” or “build artificial genome.” The circle labeled “data” indicates that after we measure our experiments we’ll use the data to further refine our learning. And the new learning will influence our next ideas. So we can see that the goal of Build-Measure-Learn isn’t just to build things, the goal is to build things to validate or invalidate the initial idea.
The focus on testing specific ideas counters the concern that Build-Measure-Learn is just throwing things against the wall and see if they work.
What Build-Measure-Learn misses is that new ventures (both startups and new ideas in existing companies) don’t start with “ideas” – they start with hypotheses (a fancy word for guesses).
It’s important to understand that the words “idea ” and “hypotheses” mean two very different things. For most innovators the word “idea” conjures up an insight that immediately requires a plan to bring it to fruition. In contrast, a hypothesis means we have an educated guess that requires experimentation and data to validate or invalidate.
That the lean startup begins with acknowledging that your idea is simply a series of untested hypotheses is a big idea. It’s a really big idea because what you build needs to match the hypothesis you want to test.
The minimum viable product you’ll need to build to find the right customers is different from the minimum viable product you need for testing pricing, which is different from an MVP you would build to test specific product features. And all of these hypotheses (and minimal viable products) change over time as you learn more.
So instead of Build-Measure-Learn, the diagram for building minimal viable products in a lean startup looks like Hypotheses – Experiments – Tests – Insights.
Since the release of Ries’ book in 2011, there has been some pushback against the lean startup methodology. One criticism is that it’s too easy to oversimplify — a valid criticism. There have been thousands of blog posts written about lean startup (including, obviously, this one) and blogs tend toward simplification.
That’s just the nature of the beast.
But, while lean startup might seem simple — and the basic elements certainly are — it’s a complex system. And like any system, you can’t just pick and choose the parts that you like and leave the rest.
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.
It’s a research-intensive process, so consider this initial step a test to see if you’re up for the challenge. If you find yourself faltering, you might want to consider another approach.
And while its popularity might make it seem ubiquitous, lean startup also isn’t the only model out there for launching a company. Check out the Lean Analytics model, the Effectuation model, and the Timmons model for other examples of possible ways to build a successful startup.
Other lean startup resources:
Emma McGowan is a full time blogger and digital nomad has been writing about startups, living with startup people, and basically breathing startups for the past five years. Emma is a regular contributor to Bustle, Startups.com, KillerStartups, and MiKandi. Her byline can also be found on Mashable, The Daily Dot's The Kernel, Mic, The Bold Italic, as well as a number of startup blogs.
Follow her on Twitter @MissEmmaMcG.
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