The Lean Startup, by Eric Ries, has changed how we see the world. The Lean Startup is a New York Times bestseller used faithfully by entrepreneurs and large companies worldwide, with astonishing results.
Eric Reis has a long list of impressive credentials. He knows what he is talking about. Having worked as the CTO of the IMVU social network, the co-founder of FastWorks, the founder and CEO of the Long-Term Stock Exchange, and the entrepreneur-in-residence at Harvard Business School, IDEO and Pivotal, the Lean Startup business model is based on a wealth of lived experience.
Definition and Origins of the Lean Startup
Lean Startup is named after the Toyota Manufacturing Revolution led by Shigeo and Taiichi Shingo. Shigeo Shingo and Taiichi Ohno led the Toyota manufacturing revolution.
Ries is, therefore, adamant that the success of a startup is not about having the best idea or being at the right place and time. It is about following the correct processes.
The Lean Startup model is an innovative approach to product development and innovation that focuses on rapid iteration, customer insights, creative vision, and enormous ambition.
Validated Learning – A Novel Approach to Data
Lean Startup is based on a concept called “validated learning” by Reis. This learning method is faster, more precise, and concise than other methods, such as corporate planning or market forecasting.
To understand what validated education means, it is essential to identify which efforts create value and which are waste; instead of constantly trying to improve and update a product, we should determine whether our customers are even interested in it. Wasting money on anything that doesn’t provide value to customers is a waste.
How can we find out what our customers want from our product? It is essential to get accurate data by shipping out a product version as soon as possible. Validated learning involves drawing conclusions based on actual customer behavior, not hypothetical feedback from customers via surveys or interviews.
Please don’t rely on customers to tell you what they want. Trust their behavior with a tangible product version and use that data to guide future decisions.
Experimentation is essential
Lean Startup views an experiment as the first version of a product, not just a theoretical line of inquiry. As mentioned in the previous section, Reis emphasizes that it’s essential to get customers to interact as quickly as possible with a product. The results of these experiments determine the direction of a product.
Reis uses the example of Nick Swinmurn, who founded Zappos, the largest online shoe retailer in the world. Nick Swinmurn, the founder of Zappos, tested this method to see if customers were willing to purchase shoes online before online shopping became popular.
He asked local shoe shops if he was allowed to take pictures of their inventory.
He uploaded the photos online to see if anyone would be interested in buying them.
He would then return to the shop, purchase the shoes at total cost, and give them to the customer.
This is an excellent example of the Lean Startup method. Zappos did not organize a whole product line with warehouses, distributors, and inventories. Instead, he started small to test the hypothesis that online shoes were in demand.
In doing so, Zappos did not use traditional methods for market research, or customer surveys, which would have asked customers what they wanted rather than reveal their actual behavior. He was able instead to observe and interact with the customers and suppliers who participated in his small-scale experiment. Amazon purchased Zappos in 2009 for $1.2 billion.
Lean Startup is based on the principle of validated learning. Fast experimentation and validation are, therefore, integral parts of this business model. The first version of the product will have been tested by a few users and provide valuable data about what works and what doesn’t. This is much better than speculating on what might work shortly. Steve Blank, an entrepreneur from Silicon Valley, says that all the data we need about customers, markets, and suppliers is only available “outside of the building,” or in the real world. In the real world.
Minimum Viable Products are the foundation of lean startups
The Lean Startup method relies on Minimum Viable Products (MVPs), designed to validate learning as quickly and efficiently as possible. They are not the most miniature products that can be brought to the market. Instead, they are the fastest and easiest way to get through the Build-MeasureLearn feedback cycle. Build-MeasureLearn is the basis of a startup’s growth. The feedback loop of Build-Measure-Learn is the foundation upon which a startup grows.
MVPs can be as simple as advertisements or early prototypes, but they are all very different. Entrepreneurs tend to add too many features to their MVPs. If in doubt, simplify. Remove any part that does not contribute to the learning you want to do.
The traditional definitions of quality are one of the biggest challenges entrepreneurs and teams face when creating MVPs. It is not always the case that an MVP will represent a professional’s complete skill set. It is essential to adopt a new mindset where the MVP is seen by many as an essential step in building a quality product.
A further stumbling block is that MVPs cannot get positive feedback from their customers. While this data can still be valuable for validating learning and the Build, Measure, Learn feedback loop, it may discourage a team. It is essential to prepare your employees for these results and encourage them to embrace iteration and innovation. The MVP is only the first step in the learning process.
Lean startups must measure their successes and failures optimally
Startups often measure their progress by creating milestones, talking to a few clients, and comparing their numbers. But this is an inaccurate way to gauge success. How can they know that the numbers they see result from the changes they have made? Reis offers us two great Lean Startup tools that will help us measure our results effectively: innovation accounting and actionable metrics. Let’s begin by examining the former.
Startups can objectively demonstrate that they use validated learning to create a sustainable enterprise by using innovation accounting. The system works in three stages:
Implement an MVP to get accurate data about the current state of your company. Even if customers do not value the MVP, an MVP can be used to integrate baseline data from real customers into the growth model of a startup.
Startups should strive to reach their ideal baseline. Startups should focus every initiative they take on improving one of their growth drivers. A startup may decide to use the activation rate for new customers as its growth driver but determine that their baseline is currently too low. They may redesign the design to make it more user-friendly. These changes in structure must result in a higher activation rate. The design must be improved if it is not to be considered a failure.
