Joe Johnson, Ph.D.
Entrepreneur. Investor. Startup Expert.
Entrepreneurship and business are replete with associated jargon: value-add, competencies, SMART goals, etc. One term that has been floating around for the past few years is ‘lean startup’ – and it’s no wonder. The phrase is enticing and so are the ideas behind it.
At first glance, you may think that adapting your business idea to the lean startup model is the best path to take. After all, starting with minimal financing seems ideal and you go to market quickly, but is it in your best interest long-term? Also, can lean startup strategies be applied to bring services to market rather than products?
Defining the Pros and Cons of ‘lean startup’ business methodology.
In this post, my goal is not to take a position on your use of lean startup principles, but simply to provide you with information. Once armed with this information, you’ll be able to determine whether the lean method is appropriate for you.
What is a Lean Startup?
In 2011, Eric Ries published The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. His goal was to illustrate that there was a quicker, data-driven way to get to market with a product and hopefully increase the chances of entrepreneurial success.
Now, countless companies have popped up to assist those looking to build a lean startup. By assisting with business model canvases, marketing, etc., they’re capitalizing on the popularity of the lean model with business services, conferences, and speaking engagements. However, few thoroughly explain the concepts behind the model and plenty of myths abound in that vacuum.
At its core, the lean startup focuses on data-driven results.
Many articles call it “scientific”, though a better term is probably “analytic”. Entrepreneurs are tasked with identifying a need or solving a problem. They then produce a minimally viable product to take to market for customer feedback. That feedback is analyzed to either hone and create future iterations or to completely scrap the project.
To some extent, the lean startup follows the “fail fast” method.
Get your product out as quickly as possible and determine whether people want it. If not, fix it or close up shop. All of this is accomplished while avoiding large expenses in the research and development phase. While this certainly saves money and time, it may also lead to missed opportunities and insights.
The lean startup proposes an iterative process.
The three general principles mentioned above work in a cycle and drive further development and innovation.
Build: Minimum Viable Product
Normally, businesses spend a great deal of time designing, manufacturing, and testing their products before going to market. The lean startup model suggests that entrepreneurs should trim this lengthy process by focusing on the minimum that a product requires to function and sell – the minimum viable product or MVP. Once the MVP is on the shelf, customer feedback can work its magic to let you know how users feel about it.
Measure: Customer Feedback
Customer feedback is a necessity for the lean model to work effectively. Once you have your minimum viable product, it is necessary to take it to market. Customer feedback about features, usability, manufacturing – anything, really – proves to be an essential driver of future iterations. The more feedback, the better.
The basic concept at work here is that customer feedback will inform future product iterations, thereby making it more successful. This is at odds with the traditional product development paths of beta testing and focus groups. Rather than having a small pool of initial users, the lean model serves to broaden the market considerably.
Learn: Analyzing Data
With the customer feedback, as well as your sales numbers and manufacturing costs in hand, you can begin analyzing your data to determine the changes required to make your product more successful. Rather than working in a corporate vacuum with only a few people generating ideas, you’re working with ideas from real users who may be able to pinpoint certain value-adds you hadn’t yet considered.
Not all feedback will be useful or possible to integrate into future iterations, but the hope is that there will be some consensus reached or striking new ideas broached as a result of utilizing this method.
Benefits of the Lean Startup
The lean model has introduced ideas and terminology to the business conversation that have become part of the common lexicon and are now being used by many entrepreneurs, regardless of whether they follow the lean model.
The lean startup model is believed to save time and money. By going to market quickly with an MVP and harvesting the feedback, you’re learning whether people are actually willing to buy your product without spending months (or years) and tens of thousands of dollars on research and development to create an amazing product that you love and no one else wants.
A lean startup can usually be gotten underway with a smaller investment, though that isn’t always the case. While “lean” may imply “low budget” to some, plenty of lean startups require outside starting capital and cannot be bootstrapped. Thanks, however, to the basic concept of getting to market quickly, less capital is required to produce a product when compared with those companies following a more traditional path toward production.
Although the lean startup seems particularly well-suited for internet and software companies, Eric Ries argues that any company can use the methodology to learn more about what consumers actually want in a product. It appears as though the ideology behind the lean startup can even be used to offer services at a local business level, so long as you’re willing to solicit customer feedback and implement any necessary adjustments.
Possible Issues with the Lean Startup Model
By relying on a customer feedback cycle, more long-term ideas may be missed.
Consider the device on which you’re reading this article. Had potential customers been interviewed and asked decades ago about the product, what would they have most likely said? Many would’ve had difficulty imagining something like a smartphone, tablet, or laptop and just how integral to our lives those devices would eventually become.
The lean startup model may not be the most appropriate way for certain companies to go to market. Companies that revolutionize particular products or methods must also convince customers that they need those new products or methods and that they provide inherent value. For example, polling consumers decades ago as to whether they’d be interested in buying books online, they might have stated that they could simply go to the bookstore. If Jeff Bezos had listened, Amazon might not exist today.
The lean model seems to apply best to products or services where a market already exists, rather than for revolutionary new ideas.
It’s clear that the lean startup model isn’t for everyone. In fact, it seems more geared toward the tech sector. If the lean startup model seems like a fit for your company and product, great! Go for it! If the entire model isn’t for you, consider that there may be aspects of it which can help you propel your business idea forward. Use what you can and discard the rest.
About the Author
Joe has a Ph.D. in Entrepreneurial Leadership and an MBA. He is the author of the upcoming book on The Science of Why Most Entrepreneurs Fail and Some Succeed.
Most importantly, having one amazing wife and father of six wonderful children make him an incredibly blessed man. He resides in Bradenton, Florida. For more information on Dr. Johnson and his work, go to www.JoeJohnson.com.