Over the past few years, a new approach to launching companies has emerged. Known as the “lean startup methodology,” it’s helping founders apply Agile philosophies in the earliest stages of a company or product launch to minimize waste, optimize investment, and generally ensure shorter development cycles.

But what’s the alternative?

In the past, if you were getting ready to launch a business, you would get busy and write a business plan. You’d research the competition, forecast, and hypothetically plan the next five to ten years of your company’s life. You’d then use your completed business plan to go out and raise the investment you need to build the product and launch the business. For the most part, you’d be doing all this behind the scenes; meaning you’re not yet at the stage where you’re speaking to customers or soliciting feedback from them.

Lean startups, in contrast, start with a problem to solve. They build, test, measure feedback, revise the design and rethink previous assumptions, gathering customer feedback at every stage. Products undergo constant iteration cycles to make them better. This strategy dramatically reduces waste because you won’t be throwing away time or money launching products that no one wants.

In the end, if you want your company to succeed, you need to know that it’s got an audience. Lean startup is a way to gain confidence in that area. It gives you a leg to stand on when you go to market, proving the concept before you waste a lot of time and effort on it. So, all in all, pretty easy to understand why it’s the better way.

What is a Lean Startup?

The term lean startup was coined by an entrepreneur named Eric Ries. He published a book (by the same name) back in 2008 that centered around methods that could be applied to new companies to minimize risk and improve the chances of success without excessive waste of resources.

The basic idea is that startups should focus on creating a minimum viable product (MVP) and then iterate based on customer feedback. That’s a lean startup in a nutshell. Instead of spending months hammering out a detailed business plan that maps out the next five to ten years of your life, you solicit direct input from the people you intend to sell the product or service to, and those insights inform how you proceed.

After all, no matter how convinced you are that your idea will fly, it will fail its worth.

Data and information gained during these critical early stages help you make the product better. It will also help you achieve a minimum viable product (MVP or prototype) faster than you would under normal circumstances.

The ultimate goal of lean startup methodology is to eliminate waste in the earliest stages of development. Done right, it will underscore your development cycles and help you reach your goals with a lot less effort, guesswork, and funding. You build, measure, learn, and then apply those lessons to the new and improved iteration. Then you repeat the process and continue to do so until you achieve your goals.

Need more data? Let’s deconstruct.

Why a Lean Startup is Better

Launching a business isn’t easy. In fact, according to the Bureau of Labor Statistics, 20% of new companies in the US fail in their first year. 45% fail within five years, and 65% in just ten years.

The odds are not with you! That being said, you can do many things to improve your chances of success. Lean startups go against the traditional mindset, but they make so much more sense in the current competitive business environment. Getting to market fast is critical if you want to dominate your niche, and the time and resources required in a traditional workflow might put you on the wrong side of the eight-ball as your competitor’s race on past.

To summarize the benefits of lean startups, here are a few things to consider:

  • Accelerates time-to-market. The faster you get to market, the more likely your product will be viable for the market at the time.
  • Reduces waste and costs. You won’t waste a lot of time and money on activities that don’t matter.
  • Reduces risk of failure. The faster you can produce an MVP, the lower your risk.
  • Progressive and measurable improvement. You learn and measure as you go. Each iteration improves on the last, and changes are implemented based on actual data.
  • Establishes a sustainable business model. The iterative process is Agile and sustainable, meaning you will continue to learn, grow, and evolve because it’s built into your company’s DNA.

Key Principles of Lean Startups

Understanding the core principles of lean startups is critical to success. The framework can be adapted to any type of business in any industry, but it is especially relevant for startups because it helps reduce risk and increases the potential for a positive outcome.

1.      Customer Development

Customer development requires open dialog with key stakeholders. These people should, ideally, represent your ideal buyer (or what you think is your ideal buyer—your research might prove otherwise, but let’s start there). You’ll need to be constantly speaking to these prospective customers to validate your assumptions about the problem you’re solving and the solution you’re offering. This feedback is essential to help you determine whether you are on the right track.

2.      Build

Can your product be built? Should it be built? Can you create a sustainable business based on this product?

Think of the initial build stage as research. You’re creating an MVP. The product won’t be ready for the market but will represent a basic example. Keep the “minimum” aspect in focus. Don’t overcomplicate the thing. Make something that contains the basic framework.

3.      Measure

Now that you have your MVP, you’ll need to take it to your prospective customers, get them to test it, and find out what they think. Most founders have a good idea of what their customers want and feel that their product solves a problem for them. The feedback you receive in this stage might confirm or tell you otherwise. Once you have that input, you’ll measure it against the initial idea and make changes, so it better aligns with what your customers tell you. In the software world, this is called agile development.

4.      Learn

At the learning stage, you’ll have your MVP and should have a pretty good idea of whether you should move forward and create a business around your product. Is there enough interest to indicate that the product will be well-received in the market? Or are there concerns pointing you back to square one? Generally, at this stage, you’ll be deciding whether it’s a “go” or a “no.” Sometimes the “no” is still a positive – anything that contributes to improvement is good.

5.      Iterate

If you need to change your idea, you’ll repeat the build-measure-learn loop. You’ve validated assumptions about the product and may be able to leave others behind; either way, the result is always an improvement over the previous version. Since you are getting your data directly from your target customers, you’ll be able to focus on details that really matter instead of relying on intuition alone.

Final Thoughts

Launching a new business is exciting, but like anything else in life, it’s critical to give it a good environment to grow. Lean startups achieve their goals faster, meet customer needs, and succeed more reliably than those that apply a traditional approach.

Related Read: How do You Know You Have a Good Business Startup Idea?

Aniket Warty

Aniket Warty

Adventure Capitalist. I need no sanction for my life, permission for my freedom, or excuse for my wealth: I am the sanction, the warrant, and the reason. The creation of wealth is merely an extension of my innate freedom to produce.
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