When it hit the bookstores in 2011, The Lean Startup tuned into an instant best-seller. It was a road map to success for innovators and entrepreneurs that relied on the principles of the 21st century. Still among the most popular books for startup founders, it encompasses the principles and approaches for efficient management. Let's go over The Lean Startup summary and learn what startups need to succeed.
Disclaimer: This post is not The Lean Startup review. It is also not an attempt to substitute reading the book or The Lean Startup certification. I merely want to introduce you to this efficient approach and its critical principles and help you understand whether it suits your business.
What is the lean startup method?
The Lean Startup history started in 2011 when Eric Ries began to describe his experience with IMVU. Formalizing his knowledge and findings, Eric Ries developed The Lean Startup as a scientific method of creating and running startups. According to his best-selling book, a startup is a person or a team working on a new product or service in risky or uncertain conditions. In The Lean Startup summary, I'll go over critical concepts that make Eric Ries' approach so beneficial for businesses.
In his words,
Five principles of the Lean Startup
The Lean Startup summary would never be complete without the five principles that form the base of the scientific approach to building a successful startup. They introduce the basic concepts of startup management aimed at minimizing time and expenses on getting from idea to product and customer feedback. The five principles are:
Is knowing these principles enough for your business to succeed? According to The Lean Startup statistics, using Eric Ries' scientific approach is not a guarantee for success, but avoiding it is almost guaranteed to fail.
Three steps of Lean Startup loop
Most startups fall into one of two categories.
Some take their sweet time researching, analyzing, and planning. However, for a new product or niche, it's impossible to predict customers' needs, demand, or even market size. They waste months on preliminary work. The results either never make it to the market or come out too late and have to outperform the competition.
Others forego the planning and management altogether, believing structure and strategy hinder the startup's creativity. Their "just do it" approach can produce quick results. Still, few become hits, and most turn out to be tragic misses.
The scope of Lean Startup management tailors traditional approaches to fit the new generation of entrepreneurs and helps them succeed through the BUILD-MEASURE-LEARN cycle.
Build. Create and test your Lean Startup hypothesis
Before you start working on a product, you need to formalize your value and growth hypotheses. Wherever you want to take a startup, the direction you follow should generate value and promote growth. Value-destroying enterprises can find short-term success, but they always fall out of business in the end.
When you develop the idea that generates value and can return profit, it's time to test your hypotheses. A minimum viable product (MVP) is the easiest and fastest way to accomplish this. It does not need to be ideal or a final iteration of the product. Instead, it should give your potential customers an idea of what they will receive in the end. Your ultimate goal here is not to sell the MVP and return your investment, but gain customer feedback to move on with the build-measure-learn cycle.
We've talked a lot about building an MVP before, but it bears repeating in The Lean Startup summary that high quality is not critical at this stage. Most customers, early adopters included, do not care how long it took you to build a product; they care about solving their problems. Focus on delivering value fist, design and quality - second.
Measure. Establish the baseline and tune the performance
Innovation accounting starts with establishing the current state of affairs using the MVP. Once you understand where your startup is now and how far away it is from the ideal, you can create a hypothesis to promote growth. Finally, you will have enough data to analyze and make the strategic decision to persevere with the current approach or pivot.
Before analyzing the results of your efforts, you need to weed out vanity metrics and find actionable ones. The former are usually cumulative sales or user numbers. They make you feel good about your startup, but provide no useful information about your business approach. If you continue to follow vanity metrics, you can one day find yourself out of business with no idea how you got there.
Useful metrics can vary, but they are
There are many ways to steer your startup towards business plan goals. Split-testing (or A/B testing) is one of the most efficient approaches that originated in direct-mail marketing but is now successfully used by startups. Split testing will help you understand what your customers want and don't want. As a result, you will eliminate the need for costly startup development by removing the features your customers do not appreciate.
Kanban methodology is another example of a simple and effective approach to prioritizing the MVP development tasks. Moving through the four stages, every assignment is validated before the team switches onto the next. This learning and decision-making stage closes The Lean Startup loop.
Learn. Analyze the data and pivot (or preserve)
Small adjustments and course-corrections within the build-measure-learn loop help you steer the startup towards better results. However, The Lean Startup validation stage brings the time to make a strategic decision. If your initial value and growth hypotheses were wrong, and no amount of small changes produces desired outcomes, pivot becomes the logical solution. The pivot is a quintessential course correction that questions your hypotheses about the product and the long-term growth strategy.
Following the innovation accounting principles accelerates the build-measure-learn loops. As a result, the interval between pivots shortens. Whenever your startup runs out of cash, you can try to extend your runway by reducing expenses, or you can conduct several pivots to land on a successful strategy.
The standard pivot options include:
Zoom in and zoom out
Customer need or customer segment
Platform or technology
Business model or channel of distribution, and more.
Every new MVP iteration takes less time to build and test, as you rely on knowledge and experience accumulated throughout previous iterations. Even the companies that do not capture market share on their first or second run have a chance to succeed if they use the power of a timely pivot.
Embrace the Lean Startup superpower
At the end of The Lean Startup summary, I'll share one of my favorite quotes from the book. Eric Ries believes that if the principles of Lean Startup empowered all startup employees