If you want to launch an innovative business with little money while lowering risks, you absolutely must know the Lean Startup method.
Mind you: knowing it (for real) means knowing what the origins of this particular method are, the differences with other more traditional methodologies, and its basic principles. Not only that: you also need to be clear about how it can be applied effectively, when and, most importantly, why.
In this guide devoted to the Lean Startup method you will find all the information you need on what has just been said, as well as a list of practical examples of success and a list of recommended resources and readings on the subject.
What is the Lean Startup Method
The Lean Startup method is a revolutionary business approach focused on launching innovative products or services, designed specifically for the innovative startup and its specific needs but suitable, in reality, for any type of business.
It can be used to develop sustainable businesses in contexts of great uncertainty, whether the need is to start a company from scratch or in the event that the goal is to develop a new product within an already active enterprise.
In more practical terms, it is a scientific method for testing, with reduced time and cost, whether a product or service works in the market. The goal, in a nutshell, is to identify a product or service that the market has already shown it wants, without the need to create demand after it has been launched in the market itself. To achieve this goal, the Lean Startup method applies a process focused on information gathering and continuous improvement that, in addition to time and cost, also reduces the risk of failure.
Origins and fundamentals of the method
The Lean Startup method was first developed by Eric Ries in 2008 and then described in full detail within his book entitled “The Lean Startup” in 2011.
Eric Ries’ goal was to confront customer indifference (one of the main reasons for failure for startuppers). Very often a lot of time is wasted in designing a product or service with the belief that it is what everyone wants, only to find out once it is launched in the marketplace that no one actually cares.
The question Ries wanted to answer is this: is it possible to find out quickly and cost-effectively whether a market is interested in a product or service before it is even marketed? To find the answer, the inventor of the Lean Startup method was inspired by the Lean Thinking philosophy of the Toyota Production System (which focuses precisely on eliminating waste) while embracing its values based on learning and continuous improvement.
Differences from traditional models
The main difference between the Lean Startup model and a traditional business lies in the mode of market entry: with the method invented by Eric Ries, entry is the consequence of a preliminary validation process that minimizes risk, whereas in traditional businesses, first enters the market and then worries about optimizing business performance. Obviously, this second mode allows faster market entry, but it is also riskier and requires a higher initial investment.
The principles of Lean Startup
Having said the values behind the origin of Lean Startup, it should be pointed out that the method invented by Eric Ries has other fundamental principles, starting with the already mentioned adaptability to any type of Business Model (possessing the requirements of uncertainty and innovation). Let’s find out more about what the other fundamental principles of Lean Startup are.
Build, measure and continuous learning
You should know that the Lean Startup method consists of 3 steps:
- Build, which is when the product or service is developed;
- Measure, which is the step of performing tests and collecting results;
- Learn, the step in which what works is retained and what, on the contrary, does not work is discarded.
Regarding this last step, it should be emphasized that learning should be understood as continuous learning. The Build-Measure-Learn process is an operational practice that should be used to manage the entire life cycle of the product or service and, therefore, should be applied not only when deciding to start a startup, but also afterwards, to improve the product or service over time.
Innovation based on the elimination of waste
As we have repeatedly emphasized, innovation is an essential requirement of the Lean Startup method. For this method to work, however, innovation must be based on eliminating waste. You will recall, in fact, that the Lean Startup method originates from the Lean Thinking philosophy of the Toyota Production System, which focuses precisely on the elimination of all waste.
Entrepreneurial management as a mindset
Another fundamental principle of the Lean Startup method is entrepreneurial management as a mindset. The startupper should not act as a mere entrepreneur, but rather as a manager and thus take care not only of the developed product or service, but also of the entire business complex.
How to apply the Lean Startup method
To understand how to effectively apply the Lean Startup method, it is necessary to return to the three steps that characterize the Lean Startup method.
Main stages of the process
Recall that the three main stages of the process are: Build-Measure-Learn.
The first step is for you to create a prototype of the product or service from the Minimum Viable Product. Next you need to verify and evaluate the results of your attempt, gather feedback from the market, and examine the data you have collected. Based on the information you have been able to gather in the previous steps, you need to make the necessary changes, repeating the process until you can reach a sustainable model.
Practical tools for testing the market
Some practical tools can help you test the market.
The Javelin Board, for example, allows you to analyze the market, gather feedback and, based on that feedback, modify your proposal.
Buyer personas are then used for you to identify the characteristics common to the customers you will target so that you can develop a product tailored to them.
In terms of communicating with the market and collecting feedback, you can make use of interviews and validation questionnaires.
The problem-solution fit canvas is a useful framework to better customer problems and optimize your proposal.
The next steps involve creating the Unique Value Proposition and defining the 4Ps of marketing (Product, Price, Placement, Promotion), based on which to direct your communication strategy. Then follows the creation of the Minimum Viable Product (MVP) i.e., the prototype of your product/service.
Common mistakes to avoid
As for common mistakes to avoid in applying the Lean Startup method, there are a few aspects in particular that you need to keep in mind.
Remember, first of all, that if you decide to adopt Lean Startup method, you have to activate a much faster production cycle than the traditional one.
Consider, too, that your goal should not be to (only) save time and money, but also to avoid creating something that is superfluous, producing innovation only if and when it is really needed.
Then don’t forget the limitations of this approach: collecting too much feedback, for example, can lead to confusion. Also watch out for false negatives: there is no single, certain rule that makes it possible to tell when a test has failed or passed, and because of this, with the Lean Startup method you risk seeing even “good” ideas shelved.
Examples of success with Lean Startup
Despite the limitations of Lean Startup just mentioned, this model has been used successfully by many companies. Below you will find some examples.
Buffer and the minimum product test.
Buffer is a platform for organizing social media and scheduling posts.
Instead of launching the service directly, the founder created a landing page with a single button labeled “Subscription Plans and Pricing,” so that clicks could be measured and audience interest in the service could be assessed. Gradually different packages were then added so as to further validate the idea. Only once the goodness of the idea was established was the service actually developed.
Grockit and the accelerated product launch.
The Lean Startup method is also behind the development of Grockit, a company that specializes in facilitating social learning.
Grockit, in fact, used Lean Startup principles to quickly launch its product (specifically for test preparation such as the LSAT, for admission to law school in the United States of America) on the market, and then continue to develop it later.
Zappos and innovation in retail
Zappos is a startup with a fashion e-commerce that boasts a wide variety of handbags and shoes.
In 1999, the year Zappos was born, the practice of online shopping was not so widespread, so its founder decided to validate his idea by posting on a site photos of shoes that were being sold in stores in his city. The moment a customer made a purchase, he would go to the store, buy the chosen shoes, and proceed with shipping the order. Only when he took note of the great interest in his project did he invest in purchasing his first operations center.
Why choose Lean Startup for your business.
There are several reasons for choosing to adopt the Lean Startup method. Let’s recap some of them.
Benefits for startups and large enterprises
The name Lean Startup should not mislead because, as mentioned above, this model is also suitable for large companies that want to enter a new market, as well as, of course, for startups that want to pitch their innovative project.
Either way, remember that there are two requirements that cannot be missing for the Lean Startup method to be applied: the context of uncertainty and innovation.
But what are the benefits? The Lean Startup method reduces time, costs, and risks, but not only that: it simplifies the process of creating an entrepreneurial project and adapts more nimbly to business model changes and environments with a high degree of uncertainty. All this has a double benefit: it appeases investors and adds confidence to staff.
At the product or service level, then, this method allows us to work closely with customers and thus incorporate demands from the market into the strategy itself.
Adaptability to different market sectors
The great adaptability of the Lean Startup method should also be interpreted in another way: it can be adopted in different market sectors.
The examples cited earlier are already a very valid testimony to this, but it will be useful for you to know that the Lean Startup method has also been used by many other companies operating in a wide variety of fields, from Facebook to Dropbox, from Alibaba to Uber, and AirBnB.
How to start implementing Lean Startup
This guide dedicated to the Lean Startup method is drawing to a close, but before we say goodbye, we have one last piece of advice for you: there are a few sites belonging to the Lean Startup galaxy that you should take a look at so you can start implementing this method successfully.
Useful resources and recommended readings
The first site we feel we should recommend is, of course, the official site of The Lean Startup. There is, then, the site of The Lean Startup Company, which contains webcasts and podcasts with useful pointers on how to implement this method. The site just mentioned was co-founded by Lean Startup method creator Eric Ries, who also has his own site/blog entitled Startup Lesson Learned. We salute you precisely with a “lesson” from Eric Ries:
“The only way to win is to learn faster than anyone else.”
