The Lean Startup method has been a small revolution in the way of thinking of companies today. The concept comes from the book ‘The lean startup’ by Eric Ries, which exposes a new methodology for business development. A method with the aim of shortening development cycles and evaluating progress trying to find out what consumers want. What elements does the Lean Startup revolve around?
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Index of contents
What is Lean Startup
Launching a new company, be it a technology startup, a small business or an entrepreneurial initiative within a company has always been a proposal with unpredictable results .
In recent decades, a certain formula was followed . You started writing a Business Plan, you looked for financing, you set up a team, you introduced a product and you started selling with a lot of work. In some sequence of these events you probably suffered a fatal setback. According to a report by Shikhar Ghosh, 75% of startups fail .
The Lean Startup methodology defends that the start of any company can be made less risky. This approach favors experimentation over planning, takes into account customer feedback on intuition, revolves around the design of an iterative plan, and advocates that design comes first.
New companies are trying to improve their chances of success by following their “fail fast, learn continually” principles . It is important to point out that, in the long term, many of the successes of large companies have been thanks to the implementation of this methodology.
This new methodology does not replace the Business Plan, it simply postpones it while waiting to check the business model and its viability at present. It is in any case an exercise prior to the Business Plan . Thus, the failure rate is reduced, or at least an attempt is made to reduce.
The founders of Lean Startups begin by looking for the business model . Only after several rounds of experimentation with clients do they come up with a model that works and then they focus on execution.
The principles of the Lean Startup method
The Lean Startup method sets a pattern for companies that are being born, so that they have an agile way to grow and learn by listening to their audience . That marks the lines to follow and the points where they must pivot. This methodology is based on these basic principles:
At first everything is hypothetical
Entrepreneurs have come to accept that all they have is a series of untested assumptions or hypotheses . Instead of writing a Business Plan, the founders should make the canvas and put everything they think there. In essence, it is a tool that allows us to see how a company creates value for them and for their clients.
A Startup goes beyond an idea or a product. The Startup is an institution that lives under a climate of uncertainty, so it needs management and an organization according to its characteristics .
Build, measure , start over
Lean Startup practices the so-called Agile development , originally coming from the software industry. It is about working hand in hand with customer development, developing the product iteratively and incrementally. In contrast to long product development cycles that presupposed understanding customer issues and needs, agile development eliminates wasted time and resources. It is the process by which startups create the minimum viable prototype to start testing.
Get out of the building and get closer to your clients and use customer development to validate the hypotheses . Interview your buyers, your partners about all the elements of the business model, including functionalities, price, distribution channels …
Startups always build the minimum viable product to elicit customer response . When they have all the input from customers, they review their proposal and the cycle begins again. Testing and redesigning the offers and making small adjustments (iterations) or if the changes are larger and more substantial we call them pivots. The difference is agility and speed .
The Lean Startup method accepts the life of startups as a cycle consisting of three parts :
- Building the product from the idea
- Measure your reach
- Learn to introduce the necessary changes or continue along the same line.
Only startups that know how to introduce and adapt quickly to change will be successful.
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The Startup path is born from difficult beginnings until you learn to build a viable and sustainable business . How do you get to sustainable business? Eric Ries is clear about it: with a learning method obtained from experiments that allows entrepreneurs to test each element of their startup. Learning from results and experiences, through practice .
Steve Blank tells us that two of his students in the Stanford class had a vision to build an automatic lawn mower for commercial spaces. After talking to more than 100 clients in 10 weeks, they learned that their initial leads (golf courses) did not validate their solution.
But when they started talking to farmers, they found a spectacular demand to remove weeds from their fields in an automated way and without using chemicals. Nine months later the Startup obtained 3 million dollars of investment. The team expected to have a commercial version of the product 9 weeks later.
Entrepreneurs can be anywhere
Possibly you know many models and have many images of the figure of the entrepreneur. The Lean Startup method defends that there are different ways of undertaking and that all of them can be valid , since the entrepreneur is one that fits this definition: “A human institution designed to create new products and services under conditions of extreme uncertainty.”
Customer Development Methodology in Startups by Steve Blank
After decades watching hundreds of startups, Steve Blank says he has learned at least these three things:
- Business Plans rarely survive the first contact with customers . As Mike Tyson said “everyone has a plan until the first punch in the mouth arrives”
- No one, except the Venture Capitals and the Five Year Plans of the Soviet Union, takes 5 years to plan for uncertainties. These plans were generally fiction and dreaming that they were going to be carried forward was almost always a waste of time .
- Startups are not small versions of large companies and they do not deploy large master plans. What happens is that they quickly go from failure to failure, adapting and iterating or improving from their initial idea as they learn from customers .
During the .com period, startups operated in “stealth” mode to prevent arousing interest in the competition, exposing prototypes to customers when they already had the “beta”. The Lean Startup methodology makes these concepts obsolete because it maintains the theory that in most industries customer feedback matters more than keeping the value proposition secret .
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An economy of entrepreneurs based on innovation
For a startup to be successful, it depends on many things that a methodology cannot guarantee 100%. The only thing we can say is that using Lean methods for both Startups and existing companies you will have fewer failures than using traditional methods.
A lower failure rate has direct economic consequences that, from the point of view of existing companies, result in staff layoffs.
The creation of an innovative economy will lead to the rapid expansion of companies and Startups that has never been more necessary than before.
In the past, startup growth was limited by 5 important factors that added to the failure rate:
1- The very high cost of obtaining the first customer and also the high cost of creating the wrong product
2- Long development cycles
3- The limited number of people with aversion to risk
4- The ecosystem of investors
5- The concentration of real expertise in the creation of Startups that was concentrated in the United States , mainly on the East and West coast.
The Lean approach reduces the first two limitations. New companies launch products that customers want , faster and cheaper than by traditional methods, limiting risk. The third point is supplied by training and the combination of all these things is modifying the horizon of the entrepreneur.
Where to learn more about the Lean Startup Method?
If after reading this, you are interested in continuing to learn about how to implement this methodology in your business, I recommend that you learn about the Master in Digital Business & Lean StartUp . An online and practical Master, focused on your learning, so that you can learn about the Lean StartUp method and apply it to your projects.
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