How Lean Startup Methodology Can Help Your Business Grow
Are you an aspiring entrepreneur involved in the startup world? Then you must have come across the term “lean startup.”
But, what exactly does it mean, and why do we think it’s vital for your business?
What Is Lean Startup?
Lean Startup Methodology represents a scientific approach toward building products. It was introduced by entrepreneur Eric Ries in 2018 in his renowned book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.
Lean startup methodology is focused on launching products quicker and more in line with customer needs. It can help your startup shorten development cycles and minimize the amounts of funding needed to launch a product.
Many startups spend many years and large amounts of money on building a product without ever making a survey of whether customers actually need their product.
In other words, the greatest risk startups face is investing in a product that nobody needs. This is the problem that lean startup methodology can solve. The technique aims to increase entrepreneurs’ chances of building a business model that customers will be willing to pay good money for. Instead of making complex plans that are based on a lot of assumptions, the lean startup approach encourages new businesses to make constant adjustments to their products.
Instead of following a set of rigid rules, this methodology introduces five key principles that entrepreneurs can use as a guideline to approach building products with a broader vision.
Validated learning is one of lean startup methodology’s key principles. Source: Medium.
The Key Principles of Lean Startup Methodology
Entrepreneurs who practice the lean startup methodology are encouraged to constantly question everything that revolves around their product – from the relevance of their business idea, to their design choice, and any additional features.
In order to achieve this, entrepreneurs can follow the “build–measure–learn” model by building a minimum viable product (MVP). An MVP is a version of a product that has enough features to be released but is not a completely finished project.
This is important because by building a product that has only a minimum set of features, startups can put the product in front of an audience and gain relevant feedback. By doing this they will avoid wasting time and money on a product that might turn out to be unwanted by customers.
A minimum viable product is a version of a product that has enough features to be released. Source: CleverTap.
Companies can use the MVP to gain feedback and identify what customers really want. By doing this they will have the chance to implement customers’ feedback in the next version of their product. Additionally, releasing an MVP may sometimes indicate that the company should not release their product, or give them direction on how they can improve it.
By constantly sticking to the build–measure–learn cycle, companies have the chance to shorten development cycles and build products that meet customer needs. What Eric Ries basically suggests with build–measure–learn is that companies should build their products on the basis of validated learning, scientific experimentation, and iterative product releases.
How Can You Present Your Minimum Viable Product to Potential Customers?
Keep in mind that just creating a minimum viable product won’t be enough to enter the build–measure–learn cycle. You need to find ways to reach early adopters and potential customers and present them with your MVP.
One of the easiest ways to test how the audience will respond to your MVP is to create a two- or three-page website. By using this type of skeleton website you’ll have the chance to introduce your audience to the basic idea behind your project without overwhelming them.
I recommend using a very fast and intuitive website builder for this particular purpose. Wasting time on complex builders is not needed in this part of the process. You can try using Designmodo’s Startup website builder. By using the Bootstrap builder you can create a website within a few clicks – that’s just what you need at this point. Thanks to the unlimited number of web elements and premade templates, Startup is the perfect tool to create prototype projects.
Startup is a Bootstrap website builder that allows you to create all types of websites and prototype projects. Source: Designmodo.
With pre-made modules, styles, options, and templates, Startup will allow you to launch a website with ease and to reach early adopters. This website builder is a great tool that can be used by entrepreneurs to boost their MVP and gain customer feedback.
Entrepreneurs, aside from creating a minimum viable product, must also search for tools to help them make the most of the build–measure–learn cycle.
With Designmodo’s Startup, entrepreneurs can find great tools that will allow them to present their MVP. Source: Designmodo.
Entrepreneurs Are Everywhere
You don’t have to start in a garage to consider yourself an entrepreneur.
There are many different types of entrepreneurs and startups, as well as tons of opportunities in a variety of different fields – from technology, education, and health, to fashion.
The term startup, in fact, applies to any form of organization that has the goal of creating new products or services under extremely uncertain conditions. What this principle basically means is that entrepreneurs can be found everywhere – they can be aspiring apprentices or they could be working in a big-name company. Regardless of their position or the size of the industry they’re in, they can all capitalize on the lean startup methodology.
In a nutshell, the lean startup approach can be implemented on an undeveloped idea or within an established corporation, regardless of size, sector, or industry.
You don’t have to start in a garage to consider yourself an entrepreneur. Source: The Lean Startup.
Entrepreneurship Is Management
Think of your startup not just as a product but as an institution.
Every institution requires management that is tailored to the context of extremely uncertain conditions. What I mean is that you need to direct your leadership skills toward minimizing the risks by implementing the build–measure–learn feedback loop in your startup.
Every startup faces customer risk or the chances that customers won’t value their product. You’ve come across an exciting idea and you want to pursue it because you believe people will be interested in it. But startup success rarely relies on an untested hypothesis. You assume that there will be a demand for your product, but, at the end of the day, that’s just a big assumption on which you risk losing both time and money.
The good news is that by implementing lean manufacturing in your management you can focus on product development on the basis of customer feedback. The other scenario is wasting years on building a product only to learn that customers don’t like specific features, or the whole product.
Entrepreneur Eric Ries believes that every sustainable business must run their vision through “validated learning.”
At the beginning, every startup has a business model that exists only as a hypothesis or a set of assumptions. In order to check their validity, entrepreneurs should implement the build–measure–learn feedback loop by doing surveys on user behavior, customer satisfaction, and the long-term efficacy of their project.
By releasing an MVP or the first version of their product, entrepreneurs have the chance to put the product in front of customers and gain feedback. Analyzing customer feedback or the process of gaining knowledge based on data is called validated learning. On the basis of validated learning, new businesses can adapt, discard, or even reimagine their product – the latter is known as a pivot.
For example, the creators of Twitter initially wanted to create a platform focused on podcasts, but they pretty quickly pivoted and changed their first idea. Instead, they decided to create a social network where users communicate in short messages.
Analyzing customer feedback based on data is called validated learning. Source: Medium.
Dropbox – one of the most popular cloud-storage solutions – used a minimum viable product before launching their product. The most interesting aspect of this is that the Dropbox team used a video as their MVP. They made a short 3-minute video and published it through Digg, a popular tech content platform. They demonstrated their core idea and showed early adopters how easy it is to use Dropbox to share files on different devices.
Once the video was published, Dropbox’s sign-up list went from 5,000 to 75,000 overnight. They implemented the feedback and made constant improvements over the years, such as Collaboration, integration with Microsoft Office, and adding Dropbox for Business.
Currently, Dropbox has over 500 million users and the company’s net worth is $10 billion.
Dropbox – a lean startup lesson well learned. Source: Dropbox.
Eric Ries believes that every new business needs a systematic, disciplined approach toward building products to help them achieve both progress and validated learning. Innovation accounting enables startups to grow a sustainable business on the basis of accountable metrics.
So, how does innovation accounting work?
It functions in three stages. First, companies need to use a minimum viable product so they can see where their product stands on the market. Without a clear picture of the current status of the minimum viable product – no matter how innovative the idea is – startups can’t track their progress.
Second, startups must make micro changes and product optimizations so they can improve their product according to their customer feedback. After going through this type of agile development, startups will reach a decision point.
This is the third step: pivot or persevere. If a startup is making good progress toward the ideal product, that means that they are applying validated learning effectively, in which case it makes sense to continue. If the startup concludes that their business model doesn’t function (on the basis of accountable metrics), then it’s clear that it needs a serious change. When a startup pivots, it starts the development process all over again by re-establishing a new MVP and by using the build–measure–learn feedback loop all over again.
Milestones for Accounting:
- Establish the Baseline
- Tune the Engine
- Pivot or Persevere
The Advantages of Lean Startup Methodology
Lean startup methodology can help your business because it focuses on reducing three major risks that every startup faces: product risk, customer risk, and business model risk. This approach minimizes the unpredictability of the market launch and will steer your company into creating more flexible and innovative services.
By showing your MVP to early adopters, you will be able to collect data on what customers really want. You can use this feedback and decide whether to build, tweak, or pivot the product.
Basically, by launching an MVP or an early version of your product, you’ll have the chance to see how customers respond to your product. You can implement the customer feedback in the new version of your product and start the cycle all over again. By constantly adapting, changing, and reimagining your business model, you’ll increase the odds of building a product for which customers will be ready to pay.
The general idea is that startups can capitalize on the build–measure–learn model because they’ll have the chance to turn their MVP into a sustainable business by using accountable metrics instead of untested hypotheses. Validated learning will help you optimize your business model and ensure that your business is headed in the right direction. Additionally, for progress to be measurable, it must be based on facts. Innovation accounting will help you prioritize tasks, maintain an overview, and record successes. This lean startup approach will push your company to build products through validated learning, scientific experimentation, and iterative product releases.
In a nutshell, lean startup methodology will help you establish a strategy that will increase the odds of building a successful business model.