November 27, 2018
December 22nd, 2022
“The Lean Startup method is not about cost, it’s about speed” – Eric Ries
This fact is not to hinder you from carrying out your dream venture but a reminder that not every idea that shapes into a business model will succeed. And apparently, most of them don’t!
So, an entrepreneur must not take a leap of faith into a certain business idea and before venturing into a business, they must have a contingency plan for what if the business fails. When the business fails, an entrepreneur might not have lost all their finances and resources, but they lose their willpower to work on a new idea.
To avoid this issue, a solution to it is a methodology to make and execute a strategy to accelerate the go to the market time and the feasibility of business. Such methodology is called Lean Startup.
Lean Startup is a methodology of deriving the shortest possible way of developing a product by reducing the time and fund invested in development cycles and it is also used to undertake a feasibility test of whether it is viable to carry out a certain business or not.
But, most of the entrepreneurs and corporate leaders have misconceptions and faulty understanding about this approach.
However, in reality, any company big or small can benefit from Lean Startup techniques. GE FastWorks launched 100 projects globally by using the Lean Startup approach. The other supporter includes QUALCOMM, Intuit to the name of few.
Lean has nothing to do with how much money a company makes or invest rather it’s all about meeting the customer’s demand with the least amount of resources.
Let’s see why customer development is important and what methodologies can be used?
The Lean Startup Methodology is based on customer development methodology. Developed by Steve Blank it emphasizes “Learning about customers and their problems as early in the development process as possible.”
Customer Development helps to avoid mistakes and identifies the new market opportunities. Instead of assuming your beliefs about your businesses to be true, entrepreneurs must focus on scientific methods to validate the idea.
By employing these methods, the businesses will have a certain way of getting to a conclusion instead of employing trial and error method.
To understand how you can shorten the product development cycle and how you can check the feasibility of the business, below is the process of employing Lean Startup methodology:
The first thing that an entrepreneur needs to understand is that the Lean Startup is not a onetime process, it is a loop that needs to be followed at each stage of the business and the process of Lean Startup is actually a loop.
As said earlier, ideas and businesses are to be based on statistics and figures and not on sentiments and assumptions! While it might not be possible to study the whole market, but it is essential that a certain sample research is done before identifying a pain point or a gap in the market and then ideating it into a certain business model.
A business idea may comprise of many different products and services, but, an entrepreneur must understand that it is a bigger financial as well as strategic risk to launch a business to the end-customer only after completing the whole product or service. And instead of taking such risk, an entrepreneur must break their product into phases and launch it to the customers as soon as they have a Minimum Viable Product.
MVP is developing a product with all the basic requirements and launching it to a smaller group of customers. This will enable them to test and measure the performance of their product in the market and before the whole product is ready to be launched in the market for mass consumption, it will already have a strong base of established customers.
Even developing an MVP can be accelerated! Below are the factors to be employed to attain accelerated development of MVP:
As soon as the product is launched in the market, it is to be measured continuously. Continuous measurement can be attained by employing the following tasks and methodologies:
So, if the performance of the MVP is as expected, then the development can be carried forward towards the next phase, and if there are certain setbacks, they need to be rectified and ensured that they are not repeated in the further development.
But, if the product fails at capturing the market, it is a clue to the entrepreneur to initiate major changes in the business model by identifying the problem or to shut the doors permanently to avoid further damage.
One of the most important aspects of Lean Startup is learning, as soon as an entrepreneur launches a product in a market, they start generating data. And it is essential that all that data is analyzed and certain outcomes or learning is derived from it. Then that outcomes or results are to be used for the betterment of rest of the product and making the wider product more profitable.
Pivot is changing a business strategy to test a new approach for your product after receiving direct or indirect feedback. Taking a pivot decision is one of the toughest decisions for entrepreneurs as they have invested much time and money with the high expectations of the product. There are different types of Pivot, each designed to test the viability of the products. It includes:-
Apart from this, there are certain principles that an entrepreneur must follow for successful execution of Lean Startup methodology. Those principles are mentioned below:
Anyone who has a startup is an entrepreneur, according to Eric Ries. He defines a startup as “a human institution designed to create a new product or service under conditions of extreme uncertainty” Regardless what size the company is, what type it is; anyone can become an entrepreneur if they’re facing uncertainty. There has never been a better time to innovate than today. Think Big – Start Small – Scale Fast.
Accounting is just not only limited to financial-based documenting revenues, losses, profits, and sales but also refers to how to measure progress, how to set up milestones, how to prioritize work etc. This type of accounting is termed innovation accounting. Think of the creative ways to solve the problem so that it has enough points of differentiation to gain an edge in the market.
An entrepreneur must not forget that a business is not just a product, customer and an owner; it is an organization that comprises many different entities and subordinates. Today startups require a new type of management which have to be geared towards the context. Because there are many businesses that had amazing products and a huge market, but they failed because of their failure in management.
While most of the entrepreneurs wish to make big in the market and aim at developing a successful brand, they often restrict their vision to money making. When you run a business, it is essential to understand the market and to validate all the learning with scientific tools and methods to look over all the elements of the business and eventually develop a sustainable brand for a long and successful business future.
Lean startup is all about turning ideas into products by building the simplest product called the MVP. This is done by evaluating through tests and user feedback to collect data on how targeted user accepts the product. As stated earlier, to build a successful business, it should be processed in the feedback loop.
Lean doesn’t start with a business plan; it begins with a search of a business model. Only quick rounds of experimentation and feedback reveal that idea will be executed or not. Let’s see how it is different?
|Traditional Approach||Lean Approach|
|Works as per the Business Plan and is implementation Driven||Hypothesis-Driven – All scenarios are tested before implementing|
|New product development follows a linear or step-by-step plan||New product development focuses on gaining customer insights to generate test and optimize ideas for product and services.|
|Generally, the development of a product is iterative or fully specify the product before building it||Builds the product iteratively and incrementally|
|Focuses on releasing plan||Focuses on developing Minimum Viable Product|
|Sprint Review is done to inspect the increment and adapt the product backlog if needed.||Decision is made once the company passes from the build-measure-learn feedback loop. Business model/product can be modified based on MVP’s results in market|
|The team makes software ready before release when all functionality for the release has been developed. This takes a long time to release||The team keeps its software ready for release at all times during development. This takes less time to release|
|Cost can be higher||Reduces cost drastically|
Using lean methods across a portfolio of startups will result in fewer failures than using traditional methods.
Drew Houston – the CEO of Dropbox came up with an idea of providing storage facility in 2007. He validated his idea by releasing a simple video explaining what the product is about, how it benefits the user. He used the Digg platform and targeted the audiences that were early adopters of the technology.
Casually, the video looked like the product demonstration but fortunately, he received 5000 to 75000 sign-up forms overnight. After receiving an overwhelming customer feedback, Drew was confident about releasing the final product as it focused on solving the actual storage problem and secured file sharing. After coming up with the final version, Dropbox catered 1 million users in less than 10 months.
It is necessary to understand that a big bang product launch is the perfect recipe for failure in today’s marketplace. For this big-bang, all you have to do is follow principles, keep experimenting and focus on adding value for the customers with less resource. Learn to lean to achieve favorable outcomes.
This is all an entrepreneur needs to know about Lean Startup. And it is essential to understand that, the Lean methodology is a continuous process and it is to be carried out time and again in the business.
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