Most businesses begin trading in a context of uncertainty, and this could be one of the reasons why over 50% of small businesses fail within the first four years. The Lean Start-Up is a way of doing business that fans say address these issues at their core. The emerging school of thought is considered to be an optimal alternative to the classic business plan, but what does it mean and what are the benefits of adopting a lean start-up approach?
Providing a simple yet principled approach to product development, the ‘Lean Start-up Methodology’ has revolutionized the classic business model. Popularised by Silicon Valley entrepreneur Steve Blank, the founder of Dropbox, this is a way of doing business that avoids mistakes, reduces risk, and enables entrepreneurs to turn on a dime and react to market changes in real-time.
What is the ‘Lean Start-Up Methodology’?
Enabling companies to get their products to their customers more efficiently and offering a scientific approach to creating and managing start-ups, the lean startup methodology is a principled methodological approach to product development. It was first introduced by Eric Ries in 2008 and later and outlined in his 2011 book. The concept was developed based on two failed businesses in Ries’ own portfolio and the streamlined process of manufacturing cars that were used in Japan after WW2.
It follows the adoption of a Build-Measure-Learn feedback loop, and it is all about failing fast, and recognizing that the journey is one of continuous learning.
Benefits of the Lean Start-up Model
Customer Interaction: We have always known the customer knows best, and one of the biggest advantages of this method is the increased Customer interaction. Product development is based on what the customers themselves think, allowing you to test your hypothesis. Furthermore, in ensuring direct communication with customers, you can figure where the gap in the market is.
Avoid Mistakes: By listening directly to your customers, this can also result in businesses avoiding costly mistakes. Instead of releasing products that they assume customers will appreciate, the increased interaction should enable entrepreneurs to identify new market opportunities and apply appropriate feedback.
Intensive Research: The Lean Start-Up methodology is a research-intensive process that encourages entrepreneurs to question everything. This research process ensures the people who are responsible for steering the company to success possess a clear and comprehensive understanding of the process. By prioritizing customer feedback and constantly evaluating practice this will then enable you to tailor your product to fit the client’s needs.
Minimal Waste: The adoption of a lean startup methodology reduces the amount of time and cost needed to bring a product to market; providing you with enough space to test, measure and learn as you develop your business. It can also speed up product development as it prevents companies from getting stuck in the creation phase.
Reduced Risk: Adopting a lean startup methodology enables companies to take risks that they would not have been able to do otherwise. Some of these risks pay off, but others are considered a learning opportunity, the success of this approach is thus dependent on your ability to move quickly from failure to failure.
Flexibility: Rapid analysis and constant customer interaction mean that lean start-ups are able to adapt easily to the changing business and consumer market. This improved flexibility also means you can innovate quickly and efficiently, making pivot decisions to react to market opportunities at the time.
Tracking and Analysis: The process of learning in itself can be validated significantly- providing hard numbers and data about what works and what doesn’t. This then allows you to track and analyze, and keep your eye on the bigger picture.
Welcoming Failure: Not only does the Lean Startup Methodology reduce risk, but it is also a model that appreciates the importance of failure. The main message behind a lean startup methodology is to recognize mistakes and respond accurately and swiftly, with mistakes being a welcome step in the progress.
