Learning to Implement the Lean Startup Methodology
Launching a small business or a tech business needs effective planning to avoid risks. But in reality, most of the startups fail according to a research by the Harvard Business School. Recently, a concept of lean startup has emerged, that has made the commencement of business less risky. It is all about experimentation, trimming the product development cycles, and iterative design. It was first proposed by Eric Ries in 2008.
It has basic three main principles –
- Business model canvas – Rather than writing a business plan, it is all about sketching the hypotheses framework known as the business model canvas. Transforming the traditional methods of starting a business by eliminating the wasteful activities is all about this new concept.
- Reach out to the customers –The idea focuses on the customers for the development of the business. The approach is more towards customer development to test the hypotheses. Meeting the potential customers, partners and purchasers asking their preferences, likes and taking feedback about the business models related to distribution channels, product features, pricing, and customer acquisition strategies.
- Era of Agile development – This theory started in the software industry. It means to work effectively parallel to customer development. It focuses on how to create viable products in minimum time to achieve maximum customer satisfaction.
The Lean Startup Methodology proves that making a startup successful can be learned and taught. It can be engineered with a systematic process, and explains the right direction, objectives and growth of the business. It is an effective process to provide products to the customers faster with success. Many startups get started and spend years and years to accelerate the growth of their business and generally fail; this is because they never talk to the prospective customers and determine the flaws of the product and expectations of the customers.
The basic objectives of the Lean startup methodology are-
- Continuous innovation- Creating a loop to save time, meeting customers to get ideas, formulating plans, take inputs, measure and create new products to meet the
expectations of the customers.
- Eliminate uncertainty- A non-customized management process can create problems and obstacles for a startup business. The new concept is not only about spending less money, or less time, it is about creating an effective process for the development of a new product.
- Work Smarter- Today is an era of working smartly. Rather than focusing the question on how to build this product, managements should focus on the question “whether this product should be built or not”. It is about finding answers to build a sustainable
business around a set of products and services.
- Building a MVP- MVP is the minimum viable product which is the key of the lean startup methodology. It has three major steps: build, measure, learn feedback loop. It focuses on the development of metrics, and focuses on cause and effect situations.
What went wrong for most startups that failed?
The growth of startups was restricted due to certain factors. The factors are listed below-
- High cost of acquisition – Getting the first customer proves to be very costly. And if the product goes wrong, it increments the loss
- Long technology development phase increases the cost of the business
- The real expertise for the success of startups is very few. No sharing of knowledge happens to
make the business work
- Venture capital firms are limited that invest in handful of startups expecting high returns
- Very few people have the ability to handle risks to make startups work
Be creative and innovative and experiment to give what customers want. Progress inch by inch and build a high quality product that meet the needs of the customers by focusing on actionable metrics and validated learning. Once the entrepreneur focuses on the effective validated learning process, the development process automatically shrinks.
Once the product reaches the customers, measure how customers respond and input the feedback into the system. After the feedback process, you can decide whether to preserve the product or to twirl. Accelerating the feedback loop gears your startup. Swiftness in reaching out to the customer’s needs and expectations is extremely important. Entrepreneurs should focus on actionable metrics than vanity metrics. Actionable metrics helps to take informed and accurate decisions whereas vanity metrics provides a rosy picture or an ideal situation. Actionable metrics determines the key drivers of the business and presents the real picture to take an informed decision.
Traditional accounting is basic and follows certain rules based on certain assumptions. To be successful as a startup business, entrepreneurs need to focus on innovative accounting that enables to measure the product’s success, startup’s success, sustainability, and prioritize work.
Validated learning – To be successful as a startup, traditional methods can lead to failures and losses. Any startup’s vision should be to build a sustainable business and not only make products and sell. Experimenting and adding value to business by iterative and incremental processes is necessary. To trim the wasteful activities of traditional business can make entrepreneurs successful in their business.
Every business runs under risk and uncertainty. The startups generally bury their vision under business and financial risk. After making a product, the startup tries to acquire customers. Learn Startup focuses that by that time the product is developed, it would have established customers.
It is not one individual’s game, rather startup means effective management. Entrepreneurship means to have effective management skills to work effectively and achieve business objectives. To focus on problems and exploring the 5 whys to determine the cause and effect relationships has become imperative. It is an interrogative technique to figure out problems and find answers to difficult situations. It includes – Define, Measure, Analyze, Improve, and Control. Testing the vision simultaneously is the crux of the latest methodology.
Entrepreneurs can be made as they can learn and imbibe the skills to be effective in determining the root problems, what customers want and develop quality products. A business should be sustainable and focus on meeting the expectations of the customers. Continuous innovation and feedback adds value to the business.