Every month we gather with entrepreneurs and listen to their business ideas. Most of the times, they don’t have experience managing startups or tech background at all. On the other hand, we also work with already established companies in which innovation doesn’t take part in their cultures and processes. For both kinds of organizations, our goal at eagerWorks is to provide them with the tools they lack and make sure they can succeed. To share with them our knowledge of Lean Startup is always a priority.
Why Lean Startup?
Every startup’s success is obtained by following the right process. It’s not a consequence of good genetics or, as the common belief states: being at the right place and time. We truly believe that success can be learned and taught, as Eric Ries, the founder of Lean Startup states in its manifest.
Lean Startup is a product development methodology, inspired by customer development and agile development, that helps us define the right process for creating products and services that are really necessary or desired by the audience. For this reason, even when its name relates to startups, it will also be of great use for big companies, perfect to avoid unnecessary costs and drifts, by improving cycles and budgets while optimizing their processes.
Fail fast. Succeed faster.
Based on Lean manufacturing (Japanese Toyota Production System), Lean Startup became the application of this system to the innovation process. This upgraded new way of thinking about product development saw its origins with Taiichi Ohno and Shigeo Shingo at Toyota, radically changing the way of organizing production systems and supply chain. It brought some outstanding new points of view:
Acceleration of the cycle time.
Just-in-time production and reduction of lots’ dimensions.
High focus on creating value for users/customers.
A scientific approach for decision making.
Design of workers’ knowledge and creativity.
Lean Startup takes all of these ideas and adapts them to the entrepreneurial spirit, to every human institution designed to create new products and services in conditions of extreme uncertainty, as Eric Ries defined startups. It proposes a different way of judging progress: “fail fast, then succeed faster”. In fewer words, Lean Startup will help you to:
Craft an idea
Transform the idea in experiments
Validate the idea
Learn and act according to the results
Diving into the five principles of Lean Startup
It’s time to dig deeper into the philosophy of Lean Startup. To understand if it could really apply to your business, take a look at the five defining principles of Lean, almost a bible for startups.
Entrepreneurs are everywhere.
No matter the size of the company, entrepreneurial spirit can be found everywhere. If someone is working under the Eric Ries’ concept of a startup, meaning innovating with products or services with a lack of certainty, then they can apply Lean’s approach. The industry or activity won’t ever be an obstacle.
The entrepreneurial spirit is management.
“...'entrepreneurial' should be seen as a qualification in all modern companies that depend on innovation for their future growth.” Eric Ries
When a startup is seen as an institution, it requires a specific type of management, a new one that will especially work when it comes to extreme uncertainty contexts. That’s the whole point of Lean Startup.
“Startups don't just exist to produce things, make money, or serve consumers. They exist to 'learn' how to create sustainable businesses.” Eric Ries
Validated learning relates to a scientific approach. The idea is to carry out frequent experiments within a process to test our initial idea or assumptions, in order to validate them. We are not talking about a one-time job, but a larger process of iterations in which when we learn something we can already apply it to the next phase.
Startups should convert ideas into products. After measuring how consumers respond the must have learned something about when to pivot or persevere. Speeding up this feedback cycle will make the difference to success.
Main activities of a startup:
• Convert ideas into products
• Measure how the customers respond
• Learn when to pivot and when to persevere
We know this is the boring part. But to improve business results, it is necessary to focus on “how we measure, how we establish milestones, how we prioritize tasks”, in Eric Ries’ words. It’s time to rethink startups-oriented accounting.
Assum, validate, develop, measure, pivot
The Lean Startup process is made out of five steps every innovative company should follow. This is how we apply it, hand in hand with our clients.
We select the problem that’s pending to solve.
The first time we listen to our clients’ ideas, we do this exercise: together with the entrepreneurs, we consider all the risks and advantages of their projects. First, we try to understand:
What problem are we trying to solve?
What type of problem is it?
Are we creating real value for users?
We define the assumptions in need of validation
Our strategy next will be based on assumptions. So we identify these things we are taking for true without proof and that we consider will take the project to success. By definition, as we’ve seen before, a startup exists in a context of extreme uncertainty. These uncertainties must be very clear because if we manage to mitigate them, the project will step forward.
We create an MVP to validate assumptions
Once we know our assumptions, we must define an MVP (minimum viable product) to validate them. We’ll team up with our clients to work with minimal test units, to quickly test each change and learn a little more in each iteration. In some cases, the suggested MVP won't even involve development. But what do we mean by MVP?
When we talk about MVP we usually refer to the smallest thing you can build that will create the value you’ve promised to your market. But, actually, for Eric Ries MVP is a slightly different concept:
“The minimum amount of effort you have to do to complete exactly one turn of the Build-Measure-Learn feedback loop.” Eric Ries
So we can say MVP is:
• A term that relates to a process and not to the physical thing, product, or service itself.
• An experiment with the goal of achieving validated learning about customers.
• An experiment to quickly validate an assumption.
This step is just about accounting. Now that we have a defined MVP we need to measure its success. It’s time to help entrepreneurs define actionable and auditable metrics. These metrics will be essential to understand if the project is gaining traction.
We pivot (or, luckily, we persevere)
Every month we analyze the data and metrics and assess whether the startup should continue or whether it should pivot. This means that your company might need a re-statement of your business model. The possible changes that are about to implement will be high-level strategy or execution modifications that will impact the whole business model.
If we discover something doesn't work well in your business, a change is necessary and desirable. Eric Ries suggests various types of pivots, most of them linked to the product or to its deployment to the market. Among others we’ll consider:
Change of target audience.
Change of platform
Change of business architecture
Change of technologies
Change of growth strategies.
New experiments to come
Our belief at eagerWorks is that we should never settle down. If there’s no need to change your initial hypothesis, will continue with the original idea, but always in search of new experiments. While we are walking on Agile, continuous learning and innovation will always be our drivers.
Now let the process begin! What is your next business idea?