“Startup success can be engineered by following the process, which means it can be learned, which means it can be taught.” -Eric Ries
As everyone knows, startups are synonymous with ‘risks and uncertainty’ and this is what makes them different from large established companies and businesses. Launching a new enterprise whether a tech startup, small business or any other initiative has always been a hit-or-miss proposition. “Unlike businesses, startups operate innovations; they are funded and scaled differently, and they have different aims. A startup’s aim is to bring an innovation to the masses rather than to follow a beaten path of the well known business schemes.” Eric Ries defined a Startup as “a human institution designed to create a new product or service under conditions of extreme uncertainty.”
Ries sees two reasons for startups failures:
1) “Application of traditional business instruments of management, success measurement, building strategies and market investigations that act in conditions of uncertainty.
2) Exactly the opposite reason; Entrepreneurs started ignoring the tools and many other management strategies”
To overcome all the challenges and failures faced by startups, an important countervailing force emerged- Lean Startup Methodology
The lean startup provides a scientific approach to create and manage startups in such a way so that the desired product reaches its consumer as soon as possible. It’s a practice of developing products based on ‘validated learning’ with the objective to eliminate uncertainty in the product development process. This idea was proposed by an American entrepreneur Eric Ries in 2008 and later on outlined in his book ‘The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Business’ in 2011. This methodology favors “experimentation over elaborate planning, consumer feedback over intuition and iterative design over traditional ‘big design up front’ development.” The lean method has transformed the developmental process of many companies and has become a successful norm to build a startup. It advocates development of those products that consumers have already demonstrated and desire for so that a market already exists before launching the product. In other words ‘gazing consumer interest’ and determining how the product might need to be refined.
DIFFERENCE BETWEEN LEAN STARTUP AND TRADITIONAL METHOD
“According to conventional wisdom every founder creates a business plan- a static document that describes the size of an opportunity, the problem to be solved and the solution that the new venture will provide. In short, it includes a five year forecast for income, profits and cash flow.” But today our startups do not function like this. They don’t ‘execute’ a business model, but instead ‘look’ for one. Lean startup method is an extensive research process, based on experimentation and practical analysis which stands more valuable than detailed planning. Customer reaction is paramount. They use different financial reporting metrics and focus on customer acquisition cost, lifetime customer value, customer churn rate and how popular their product could be. Instead of business plans, lean startup business models are based on hypotheses that are validated, tested and analysed rapidly. ‘Agile development’ also goes hand in hand with customer development. It eliminates waste of time and resources by “developing the product iteratively and incrementally.” Besides this they also practice the ‘build-measure-learn’ loop that forms the ‘fundamental’ activity of a startup in which a new creative idea is transformed into a sustainable product after which customer responses are measured. Thereby we can say, “Failure is the rule, not the exception.”
KEY METHODS OF LEAN STARTUP METHODOLOGY
- Minimum Viable Product (MVP)
It represents “a prototype of future service or product with a minimum amount of effort and time.” It is basically a customer oriented one. The basic aim is to receive feedback from potential customers and make quick and relevant adjustments that are required. It is much faster and even less expensive than developing the final product and facing the consequences. Through this, the lean startup methodology highlights its other characteristic feature i.e. ‘Fail Fast methodology’- if you must fail it’s better to fail in 3 months than put in 3 years of time, money and effort to build a product and then realize that it is not what the consumers desire for. This explains the importance of minimum viable products in the startup ecosystem.
Pivots are the “change in the direction in favour of a new hypothesis” which is then again tested for market success. For instance, changing technologies, changing projects scale, etc.
Hence we can conclude that “the lean startup method teaches you how to drive a startup: how to steer, when to turn and when to preserve and grow a business with maximum acceleration.” Irrespective of the fact that this method makes us resourceful, we must remember that sometimes “drive to eliminate uncertainty can kill artistic visions.” Therefore embrace not only the delicacies of product development but also the subtleties of the motivation behind the creation. This will be the best way to create your visions into reality.
Author – Stuti Dhawan