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THE LEAN STARTUP
According to Eric Ries the author of the book ‘The Lean Startup’, the way we
organize new product development is basically wrong. And that most of the
energy that we are investing into what is called 'entrepreneurship', when it's
two guys in a garage, or 'disruptive innovation' is wasting a lot of people's
time and everyone can do something about it. According to him
entrepreneurship is management but not the kind of general management
that is being taught in MBAs or something that is being studied for the last
hundred years, it is something fundamentally different. It is management of
a kind of work that is measured by validated learning, rather than just
making stuff. Entrepreneurs spend their time trying to figure out which
customers to listen to and who to ignore, how to prioritize product features.
According to Eric Ries startup is "A human institution designed to create something new under
conditions of extreme uncertainty." It doesn’t matter how big is the company or what sector of the
economy the company works in or even what industries it belongs to. If the company is
fundamentally operating with extreme uncertainty about who is the target customer, what product
do they actually want, and how to build a sustainable business, then that is an entrepreneur. And
“Lean Startup” model is to create a science of entrepreneurship that will help people stop wasting
their time. Presently most big companies are facing the problem developing the products very
efficiently that nobody wants. For example, in the beginning Web 2.0 was at its peak with different
startups but today most of those startups are either closed are at the brink of closing or big
companies buy them. Using the Lean Startup approach, companies can create order, not chaos by
providing tools to test a vision continuously. Entrepreneurship is management it's just a different
kind of management than the general management, it's simply a parallel discipline specifically for
Entrepreneurship.
Eric Ries presents 3 key concepts of Lean startup in his book ‘The Lean Startup’ and this report
goes through each concept.
VISION
When employing the vision, entrepreneurs must Start, Define, Learn and Experiment.
Learn
The Lean Startup model teaches you how to adjust your vision and strategy through a Build-
Measure-Learn feedback loop. The ideology of lean management takes place, adapting accelerated
cycle times, inventory management, and small batch sizes to that of a startup. A startup will remain
sustainable is through an “innovation factory” that utilizes lean startup techniques to operate on a
continuous basis throughout extreme uncertainty. Entrepreneurs must learn which components of
their strategy work, and which ones do not. Validated learning demonstrates that a team has
realized truths about the present and future of the business, getting rid of the waste and capitalizing
on the value.
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Experiment
An experiment starts with a hypothesis. A value hypothesis tests whether the product/service will
deliver the value to its users. A growth hypothesis tests whether new customers will be able to
discover the service. Starting with a concierge minimum viable product and targeting people
whose needs are solved by the product for their feedback. The results will guide you to validate
the hypothesis.
STEER
The Build-measure-learn feedback loop is at the core of the Lean Startup model. After building
the MVP, the goal is to rapidly learn and iterate upon the product based on the user’s feedback.
Leap
All startups take their own leap of faith (assumptions) related to product and customer interaction
or about their viability. One can keep repeatedly talking to customers and white boarding over and
over again. But many errors in such a strategy would go unnoticed since they depend on subtle
interactions between the user and the product.
Test
When testing your startup, you must be ready to enter the Build phase of your model with a product
or service (minimum viable product). This MVP allows the product to have a full turn on the Build-
Measure portion of the loop. This also assists an entrepreneur in quickly starting the process of
learning.
Measure
The ultimate goal of a startup is to measure its standing and take a hard look at what the metrics
reveal, then implement experiments to shift outcomes more in line with the vision. Startups must
ask the hard questions like, How are you making your product or service better? Or, Are the
changes we’ve implemented made a difference?
Pivot or persevere
Determining the progress of the product according to original hypothesis, based on the gathered
information according to original hypothesis and deciding whether to bring some changes (pivot)
or persevere on the original hypothesis. Pivots test new hypothesis on strategy, product and engine
of growth.
There are many types of pivots
Zoom-in Pivot
Zoom-out Pivot etc.
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ACCELERATE
Batch
Having small batches are much better for startups and they also help in early detection of problems
as well as quick feedback from the customer.
Grow
New customers come from the actions of the past customers. They inform others, end up showing
the product to others or end up purchasing the product again.
Adapt
As a startup grows, it has to adapt to the changing customer base. Early adopters are more forgiving
of the quality; later ones are not. Five whys help one to diagnose the problems and build the right
set of things which should go into an employee training manual.
Innovate
Every company has to deal with four types of works – launching a new product, scaling it for the
broad adoption, combating its commoditization by incremental improvements, and maintenance
of the product in the longer run as a part of the company’s product line. All the steps are important,
but the last step of becoming the status quo is a hard one to swallow as an entrepreneur.
“The big question of our time is not can it be built, but should it be built?
This places us in an unusual historical moment: our future prosperity
depends on the quality of our collective imaginations.”
- Eric Ries
