The Lean Startup Methodology

The Lean Startup Methodology which was first expounded by Eric Ries in this book of the same name, is a systematic approach that aims to get start ups to deliver a product to the customer at the earliest possible time, win customer loyalty from the very start, create a positive cash flow or an assurance of one, even before having invested a single dime into the manufacturing or product development.

The goal is to invest in the product development and product just as soon as it gains accepted by an early crowd of adopters, iron out the flaws in the product design on the run, even as different versions of the product are released to the market.

The Lean Startup methodology was created as a solution to so many startups that invest months, even years, in product development, spending millions and involving several dozen engineers into perfecting the design, and releasing the product to the market only after the founders are truly satisfied with it, and don’t believe it can get any better – to realize with a shock that the public doesn’t care and their elaborately designed product has no takers.

The problem is that founders get so lost in their own creation that they release a product they are in love with, rather than something that customers fall in love with or care about. This serious lack of communication with the customers is one of the most important reasons that 80% of startups fold up within 5 years of opening for business.

Let’s discuss the main principles of the Lean Startup Methodology.

ELIMINATE UNCERTAINTY

Many startups operate without a plan or process. A Lean Startup operates by continuously testing its vision in the marketplace. Continuous testing and constant iteration based on the results of the tests, is how a Lean Startup operates. The goal is to test cheaply, and even if the tests fail to achieve results, nothing is lost, but a lot of critical knowledge is gained.

WORK SMARTER NOT HARDER

What Eric Reis says in his book is that startups should change their approach to product development completely. Rather than ask “Can this product be built?” they should ask themselves, “Should this product be built?” and “Can we build a sustainable business around this set of products and services?” The goal is to create a group of early adopters or a bunch of loyal customers right at the very start, and then to build upon that. This way, by the time mass production of the product begins, it will have already had a successful ecosystem built around it – which proves critical to its ultimate success.

DEVELOP AN MVP

Eric Ries talks about coming out with a Minimum Value Product on the very first day itself, releasing it to a small crowd of customers, learning from their reactions to it, iterating and developing the product on the go, fine tuning the product based on how various groups of customers react to it at different points of time. The goal is to try several strategies, test them out with the public, find out what works, and stick to the ones that do while eliminating those that don’t. Be ready to make course corrections at all times based on customer reaction.

VALIDATED LEARNING

According to Eric Reis, progress of Lean Startups is measured in terms of what is known as validated learning- which is a method that measures demonstrable progress achieved by a product in the midst of general uncertainty. To track validated learning achieved by a product, Reis uses the methods of Split Testing and Cohort Analysis, which basically refers to testing different versions of a product with select groups of people and finding out what works and what doesn’t. The goal is to base your product strategy on what customers want and will pay for, not on what you as a founder or engineer want or believe the customer wants.

This blog post is a part of our series on the book “The Lean Startup – How Constant Innovation Creates Radically Successful Businesses” by Eric Reis. We believe that reading this book would help you a great deal not only in your business, but also in identifying the right business partners. As always, we look forward to your comments and suggestions, so keep them coming. Ciao!