The Lean Startup concept first started with Toyota’s Lean manufacturing method. This transformative method brought about by the car manufacturing company emphasized an increase in productivity while reducing wastage.
Lean Startup takes this concept a step further. Now, it adds things like continuous improvement, identifying the big picture for each phase, and relying on continual feedback. This article takes a deeper look into the Lean Startup and the various aspects of it.
Let’s take a look
Understand what is a Lean Startup
The Lean Startup methodology exists to validate a business hypothesis through a series of short responses. These responses include the rapid release cycles of product features, strategies, and business models.
One of the primary objectives of this concept is to reduce market risk. The methodology does this by validating learning through the release of an MVP or Minimum Viable Product. The MVP is a low-barrier, first version of a product. The purpose of the MVP is to start driving value sooner. Then, the company consistently works to add more functions and improvements to the product.
The Lean Startup aims to get rid of a company’s excess
The concept behind a Lean Startup
The Lean Startup focuses on removing inefficient business procedures at the early stages of a company’s development. This removal contributes to the company’s continual prosperity in the long run. A small company can turn a profit without relying on large financing, comprehensive business strategies, etc. Here we see one of the many benefits this approach provides.
The best way to ensure the success of this methodology is to have the company place importance on customer feedback. Here, the company must take the customer’s input on the first version of the product. That way, the owner can use this feedback and make necessary changes to the product. Now, the product adapts to the customer’s desires.
Principles of a Lean Startup
The Lean Startup consists of five major principles. Let’s take a look at each of them.
Entrepreneurs are everywhere
Anyone who owns a business is an entrepreneur. The size of their business is secondary. The Lean Startup concept applies to any single person who owns and operates a business. It is a solution for anyone eager to reduce the usage of time and resources.
Enterprises have the enablers needed to operate as a Lean Startup. That said, they will face challenges that prevent them from fully executing a Lean Startup.
Entrepreneurship is management
Remember that a startup is not a product. Instead, think of it as an institution, and hence, it requires special management to function properly. The management here may not follow a rigid set of protocols seen in enterprises or large businesses. However, the owners should manage investors, react to unforeseen events, and let the staff explore. These steps must be undertaken before gauging the risks and not after.
There is no standard way to manage entrepreneurship inside a corporate structure. That said, a traditional management approach is equally not as effective. Hence, it is best to use both cultural and hierarchical changes to address the management needs found in a startup.
Validated learning
Many startups are not solely reliant on servicing clients or making a product. Instead, they aim to create sustainable businesses. Lean firms often rely on verified learning to create a working business model. Creating this model relies on running tests, gathering the findings, and making informed decisions based on the data provided.
One viable strategy is to have semi-autonomous teams within the organization. They can identify market needs and develop a solution before pursuing the market. This phase is where the MVP comes into the conversation. Businesses can always validate their ideas by sending an MVP out to the public.
Innovation accounting
Startups have to make data-driven choices to create a sustainable business. These companies must assess the processes, set clear milestones in place, and prioritize tasks. Lean ventures document their experiments and then analyze their findings before concluding what works. They see progress based on the information gained about the product and not through extra work.
Large organizations should reward experimentation and lessons learned through failure. A progressive enterprise embraces the culture of failing early and failing fast. That way, they can operate on a global scale and roll out features at the pace of a Lean Startup.
Build, measure, learn
Lean entrepreneurs rely on an MVP, the simplest product that works. They release the MVP before making it available to the public. Here, user reviews determine how well it is received. If successful, the business uses the feedback to improve the product.
This step is a continual loop consisting of four steps. It starts with the entrepreneur’s idealized product. Then, the cycle moves forward as follows.
- Develop and build the Minimum Viable Product and launch it for customers to use
- Customers try the product and then give feedback to the entrepreneur
- The entrepreneur makes a decision based on the data provided
- These insights help the business understand the customer needs and decide on keeping or removing an upcoming feature
The company must add new features or restart the cycle after reaching the fourth phase. This approach saves time and money. Additionally, the approach also allows the owner to expand with the knowledge the product has a strong customer base.
Lastly, teams working like this should move away from efficiencies and improvements that end up being a waste. Instead, they should learn what is required to solve the user’s pain points. Then, they focus all efforts on providing proper solutions to those problems.
Advantages of a Lean Startup
The Lean Startup approach promotes the testing and fulfillment of a product or service. A business uses a product to learn about consumer needs and gain insights into creating a solution that meets those demands.
However, that is not where it ends. Listed below are the many advantages this approach provides.
Reduce risks
Product prototypes are a great way to get projects off the ground. It also requires less capital investment and resources to start things off.
Here, the business uses feedback from real customers to modify the design or use. That way, they turn the product into something that fits the market.
Optimize efforts
Enterprises can survive one or several failed projects. These failures are only a setback to these companies. However, these mistakes can be devastating to a startup.
Lean Startup removes anything considered impractical to the company. That way, they focus resources on the company and the customer experience.
Match needs
Creating and using an MVP makes it easy to verify the fulfillment and usefulness of customer needs. It also ensures a successful commercial process.
Constant monitoring
The constant execution gives supervisors and managers the chance to follow operations in detail. Here, they can rely on key performance indicators and team coaching to progress further and further.
Reduced instances of failure
The valuable information provided by the MVP and customer needs helps businesses make insightful decisions. This way, they know what is certain and are on the right path to success.
How to Become a Lean Startup
The concept of a Lean Startup is easy for small organizations or startup firms to adopt. The reason for this quick adoption is their agility to shift to new market segments and strategies without facing risks.
However, at the Enterprise level, the product was released to a larger market. Now, it must be scaled to all customers to identify the true value to the users and the business. These changes mean the initial risks and costs that come with moving to a new business model can outweigh the benefits that come from making the changes. Other factors like changing the product features and strategies going forward.
While the costs of changing to a new business model can outweigh the benefits, failure to adapt to market changes comes with equal risks. Enterprises that cannot adapt to these changes are prone to losing their competitive strength against smaller companies that can make the shift.
Take a look at Uber for a good example. The startup first began as an MVP, offering a crowd-sourced ride-sharing platform. The idea here was validated and welcomed by the initial influx of customers. The success helped the company expand to more cities and countries. It eventually grew to the point it disrupted the global transport industry. The concept of a crowd-sourced service-sharing platform was completely new. Car makers and transport service providers could not replicate similar business models or the agility to disrupt the industry like how Uber did.
Example of a Lean Startup
Imagine, a healthy meal delivery service whose target audience is twenty-year-old singles working in urban areas. They learn there is greater potential in aiming for thirty-year-old mothers living in affluent suburbs. The company changes the delivery schedule and foods they serve to attract this audience. The company can also add an option for meals for spouses, partners, or kids in the household.
That said, the Lean Startup approach is not limited to startups. Enterprises like Intuit, Qualcomm, and General Electric also use this approach. GE in particular used this methodology to develop a battery for cell phone companies in developing countries. Here, electricity is unreliable so companies greatly benefit from this product.
Conclusion
This methodology provides a great outline for innovation and provides practical advice for helping companies mature. The philosophy is more than reducing instances of failure. It is about optimizing success and creating a solution that people truly need and want. Anyone from a budding entrepreneur or established enterprise can follow the principles of the Lean Startup. This approach helps illuminate your path to growth and innovation.
