So everyone's heard the buzzwords and maybe even read the book, but is lean start-up methodology (Lean) really a smart practice, and how can it help start-ups succeed?
The Lean Startup
According to Eric Ries, author of The Lean Startup, most start-ups fail because they built something that nobody wanted.
Technological advancement and open source technology have made it cheaper and easier than ever to build a product, but as Eric wrote in his book, "The question is not 'Can this product be built?'... The more pertinent questions are 'Should this product be built?' and 'Can we build a sustainable business around this set of products and services?'" It doesn't matter how great the user interface is or how cool the design is, if no one wants the product, the business will fail.
It's much less risky to rely on feedback from customers than on predictions or guesses. As Eric wrote:
The old model of entrepreneurship was dominated by an over-emphasis on the magical powers of startup founders...The Lean Startup moves our industry past this mythological entrepreneurship story and towards a methodology that is more scientifically grounded and accessible... Lean startups are driven by a compelling vision, and they are rigorous about testing each element of this vision against reality. They use customer development, split-testing, and in-depth analytics as vehicles for learning about how to make their vision successful. Along the way, they pivot away from the elements of the vision that are delusional and double down on the elements that show promise.
"Lean is a process-driven approach for testing the riskiest assumptions about your business," says Ryan MacCarrigan, VP of Marketing at Lean Startup Machine. "We begin by outlining our assumptions about the problem, the solution, and our target customer. In most startups -- even ones driven by a compelling vision -- these variables are still highly unknown and must be validated or invalidated. By talking directly with early customers and testing our assumptions, we can quickly identify a viable and scalable business model. This is a disciplined, measurable and evidence-based approach to entrepreneurship that rests squarely on the scientific method. Lean is the future of business."
In his outstanding book, titled The Startup Owner's Manual, Steve Blank defines "startup vision" as "a series of untested hypotheses in need of "customer proof." Practitioners of Lean use "customer development" to get in front of potential customer to test customer perception of the problem, their need to solve it, and their reactions to the proposed solution.
Many business education programs teach best practices for managing larger companies, but start-ups are not just smaller versions of large companies. Larger companies know their customers and their customers' problems. Start-ups are creating a brand-new product or market and they have less capital to experiment with -- which requires different methodologies and skill-sets.
Lean Start-up Machine
It seems like everyone's heard of Lean, but I still meet entrepreneurs in my class and otherwise who seem to have misunderstood the process or not used it at all and have sadly spent a lot of time and money building a product that no one wants or plan to spend a lot of time and money building something without ever talking to potential customers to confirm their hypotheses. Lean Startup Machine (LSM) is a company that aims to "advancing the science of entrepreneurship" and are an authority on Lean. The company runs intensive three-day workshops, which teach Lean and its applications for product, customer, and business model development.
I had a chance to sit down with the LSM team to get advice on implementing the process and hear their vision for the firm. The team believes understanding Lean is different from actually putting into practice. "It's impossible to leverage Lean Startup just by listening to lectures about it. Lean Startup is ultimately learned through disciplined practice." LSM workshops push students through the process of "getting out of the building" and talking to customers in order to validate or invalidate hypotheses, making the decision to "pivot or preserve" and developing a "minimum viable product" to serve perspective customers.
One concept I found particularly interesting is the use of a concierge style approach to building a minimum viable product (MVP). Using a concierge MVP, an entrepreneur can find creative ways to manually deliver on the customer experience, even if the company doesn't exist yet. It may seem inefficient to manually perform a task when you can get a software program to do it for you, but it can be a valuable opportunity to get early feedback from customers and validate a solution hypothesis at very little cost.
The concierge minimum viable product is of course not an efficient way to solve the problem at scale -- the objective is to maximize learning and reduce the risk of building something no one wants. Vinicius Vacanti, co-founder and CEO of Yipit provides a great illustration of this concept in his blog post titled "Have Idea for a start-up? Don't Launch a Company, Launch an Experiment."
The LSM team provided some great advice based on their experience working with entrepreneurs. A common pitfall they see is entrepreneurs falling victim to confirmation bias -- the tendency to favor information that confirms their beliefs or hypotheses. To combat this, Grace Ng, Director of UX & Design at LSM, recommended deciding what results will validate or invalidate a hypothesis before running the experiment.
LSM also does consulting for larger corporations to teach them how to adapt and remain innovative in the face of changing market conditions. "Traditionally new ideas are dictated by senior management and do not undergo any sort of testing to validate whether they will produce a positive benefit," says MacCarrigan on the traditional approach to product development in the corporate world. "With Lean, we have a way to discover game-changing ideas that will ensure the future success of the company. It fosters a "trickle-up" approach to innovation stemming directly from customer feedback. This approach will produce dividends for companies interested in keeping their customers happy -- and their bottom lines healthy."
A start-up should be viewed as continually evolving entity, not a static product or service. Entrepreneurs should use Lean to learn from customers and iterate accordingly. Decisions should be made based on data from customers, not purely a vision.
Entrepreneurs can use Lean to avoid wasting time and money on starting a business and maximize their returns when raising money from outside investors. I like Niki Scevek's advice: "Instead of raising money, writing code and then proving the business, do the complete reverse." I expect this new process of entrepreneurship to become the norm -- and that the startup team with the best ability gather data and iterate effectively will be more important than just a vision.
This piece only scratches the surface of Lean. I highly recommend reading The Lean Startup and The Startup Owner's Manual to get a more thorough understanding and attending one of LSM's three-day workshops to learn how to put the ideas into practice.