Lean Startup Approach

Lean Startup Approach

Any startup with a transformative idea would require just two things: 

  1. A supportive economic environment. 
  2. An innovative solution to the problem.

When the right chord is struck, the startup begins to reach new thresholds of success. But, the certainty of any achievements and growth is hazy, to say the least. Some managers arbitrarily attempt different solutions to see what will work, creating as many failures as success – thus wasting time, talent, and resources. 

The chances of being successful can be significantly increased simply by taking a rational and systematic approach to finding the best strategy for running the business. 

How it All Started

First used in Toyota (supposedly), the Lean Startup methodology - initially named the Toyota Production System – is a series of steps taken to ensure fresh entrepreneurs to efficiently navigate through chasms of ambiguous growth checkpoints. 

Applications of this method can be found abundantly in the entrepreneurial and business market. Toyota, which was apparently the first to adopt the lean methodology. The automobile giant worked with two primary processes that allow its goals to be reached.The first is a process called Jidoka, which translates to “mechanization with the help of humans.” In this case, although some aspects of the jobs are automated, humans are continually checking the quality of the product. Programs are employed in the system that allows the machines to shut themselves down, if a problem is spotted.The second part is known as the ‘Just In Time’ or JIT model. This ensures that the next step of a process only commences once the previous phase is completed. This way, if there is a flaw in the assembly line, no extra and unnecessary work will be completed. 

Corporates Using the Lean Method

Following in on the efficiency and success of the method, Nike, the sportswear magnate adopted principles from the methodology. Nike has been able to integrate lean workplace principles with innovation and make it the cultural norm within the organization.  Nike has two overarching pillars:

  1. Make Today Better (Lean)
  2. Design the Future (Innovate)

Nike treats Lean manufacturing as both a business system and a continuous improvement opportunity aimed at producing the highest quality product while eliminating waste. Employees are trained in the power of teamwork as a key to improving operations.

Why do we need the Lean Methodology?

Companies need to learn the tricks to shift directions any minute with flexible plans at hand always. A business methodology that lets entrepreneurs adapt quickly and sensibly, thus testing their vision continuously. The mantra is to consolidate slowly but steadily rather than going full throttle; adapt and survive rather than crash and burn.

However, the essence of the methodology doesn't dictate triumphant growth rates in only companies with large capital to experiment. It has applications in every possible startup with an idea considered “experiments” by author Eric Ries.

The Lean Startup, as can be gathered from the examples, is an efficient method to develop and manage startups. This system includes: attending to the ideas and knowledge of the workers; making smaller batch sizes; implementing just-in-time production; and accelerating cycle times. Long-range planning is a useful strategy in an environment where the future is predictable. 

First used in Toyota (supposedly), the Lean Startup methodology - initially named the Toyota Production System – is a series of steps taken to ensure fresh entrepreneurs to efficiently navigate through chasms of ambiguous growth checkpoints. 

Applications of this method can be found abundantly in the entrepreneurial and business market. Toyota, which was apparently the first to adopt the lean methodology. The automobile giant worked with two primary processes that allow its goals to be reached.The first is a process called Jidoka, which translates to “mechanization with the help of humans.” In this case, although some aspects of the jobs are automated, humans are continually checking the quality of the product. Programs are employed in the system that allows the machines to shut themselves down, if a problem is spotted.The second part is known as the ‘Just In Time’ or JIT model. This ensures that the next step of a process only commences once the previous phase is completed. This way, if there is a flaw in the assembly line, no extra and unnecessary work will be completed. Corporates Using the Lean Method

Following in on the efficiency and success of the method, Nike, the sportswear magnate adopted principles from the methodology. Nike has been able to integrate lean workplace principles with innovation and make it the cultural norm within the organization.  Nike has two overarching pillars:

  1. Make Today Better (Lean)
  2. Design the Future (Innovate)

Nike treats Lean manufacturing as both a business system and a continuous improvement opportunity aimed at producing the highest quality product while eliminating waste. Employees are trained in the power of teamwork as a key to improving operations.

Why do we need the Lean Methodology?

Companies need to learn the tricks to shift directions any minute with flexible plans at hand always. A business methodology that lets entrepreneurs adapt quickly and sensibly, thus testing their vision continuously. The mantra is to consolidate slowly but steadily rather than going full throttle; adapt and survive rather than crash and burn.

However, the essence of the methodology doesn't dictate triumphant growth rates in only companies with large capital to experiment. It has applications in every possible startup with an idea considered “experiments” by author Eric Ries.

The Lean Startup, as can be gathered from the examples, is an efficient method to develop and manage startups. This system includes: attending to the ideas and knowledge of the workers; making smaller batch sizes; implementing just-in-time production; and accelerating cycle times. Long-range planning is a useful strategy in an environment where the future is predictable. 

Termed "validated learning' - it includes counter-intuitive practices such as fervent R&D required to accelerate product development cycles, new-age metrics that reflect customer needs, and more. Translating lessons learned from lean manufacturing onto business ventures, Eric Ries helps create agile companies of every shape and size that are ready to take the bull by the horn at any given moment.

Around 50% and 75% of the startups fail within 5 to 10 years from their genesis. The need for a resourceful model cannot be downplayed in such a situation. The further mentioning of the principles and the nature of “wastes” will give a better perspective of the vitality of this methodology. 

Principles of Lean Startup Approach

  1. Eliminate waste/Lean Manufacturing: It refers to the resourceful production of products, avoiding unnecessary transport, sensible use of machines and tools, etc.
  2. Build quality: This refers to the mindful implementation of automation, test-driven improvements, and establishing a good feedback system.
  3. Defer commitment: This is seen as an important quality in a startup with a lean method. This principle requires its entrepreneurs to avoid a passionate commitment to their precursor ideas and/or projects. This gives them room to flex upon new feedback.
  4. Optimize the whole (Lean Startup Method): This principle is what makes the lean methodology as effective as it is. With minimal investments in the initial products and a low cost of failure, the startup will have an ample amount of time to revisit and optimize the product constantly. This goes a long way in terms of validated learning and the maturation of the startup.

To Build a Lean Startup From Scratch

The lack of a detailed blueprint and an unhealthy belief in your idea often paves the way to bankruptcy. Most business plans are flawed to the point of great capital risks and uncertainty. The odds of succeeding in an assumptive startup where you exhaust all your resources in the hopes of things going right is stacked against you.

Without the proper messaging, marketing, or necessary finances, great or even brilliant ideas are bound to fail. The Lean methodology is aimed at helping foster companies to become capital efficient while handling human creativity with finesse.

Here, we help you chalk out a step-by-step guide to a Lean Startup Approach through 3 Phases.

Find a Problem/Solution Fit: Find The Business Idea

Taking from up to a few weeks to a few months, this phase helps you understand whether or not your business idea revolves around a problem worth solving. The “billion-dollar idea” fairytale can disappear in minutes had it not been for the dedicated entrepreneurs with the eye to identify opportunities that are scalable, and grounded in reality.

Your idea must help people combat everyday problems to gain traction.

Step 1: Documentation

It's 97% likely for one to get their first product or business idea wrong. Facing certain failures, one must pivot immediately, as was the case with the likes of Facebook, Groupon, or Paypal. They improved upon their original idea and became wildly successful from the brinks of failure. 

Expect your plan to change at every turn and be willing to shift to what works.

Few read it and even less refer to the untested assumptions in the “pro forma”. With a 90% business failure rate whilst sticking to the plan, it’s a safer and wiser bet to stick to the ‘Business Model Canvas’ of Lean Startups that is agile and viable – a better market fit for every company. 

Step 2: Customer-Centric Development

Identify the riskiest assumptions with your business model, assumptions that, if proven wrong, would invalidate the business. Form a testable hypothesis about what you believe to be true.

Decide upon the minimum result necessary for success, before you start testing.  Talk to customers to find out if your hypothesis is true or false. Dig into their issues – identify the problems and costs that follow, and how they currently solve it.

If they express interest in your solution, find out why. Understanding why is much more important.

Ask them what they see as the most valuable features and benefits, discuss your proposed pricing, and find out their concerns in trying out your product. 

Step 3: Testing

This is to establish a problem-solution fit. Ash Maurya's 10x approach tells us to work backward from setting goals to calculate the kind of response needed from 1% of one's target audience. 

Product/Market Fit: Execute the Business Idea

Now, it’s time to build your Minimum Viable Product (MVP). Treat it as a prototype, a “version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort”. 

The “Kickstarter Approach” is also heavily perpetuated wherein one drives up both customer interest as well as funds by selling the product before it gets finished building.  

Companies tend to lose focus or get stuck in the second phase that is meant to understand if people really want the solution/product you have to offer. Months or years may pass before the need to scale emerges with a sustained growth of revenue and customers through several business quarters.

Step 1: Capturing Value

Value is inherent to how much your product matters to your buyer and not merely its material cost. Building a minimal version of your idea and then testing against a small group of real users helps validate its viability. In Lean Startup lingo, this pre-release prototype is your "Minimum Viable Product" that helps assess the market before making risky investments.

While customer feedback from MVP is mostly helpful in improving the project, often it could just be noise. Thus, the trick is to release early and very often; to help gauge the changes in registration, activation, retention, or referral rates. Measuring the impact of changes – one at a time leads to developing a new product.

Step 2: Delivering experience

For your brand to be counted among the remarkable ones that people gush over, there must be a human connection that entices them. Over-deliver on their expectations.  How you choose to treat your customers will be a differentiator with your nearest competitor, instead of competitive pricing. 

Step 3: Sustainable Revenue Model

Only optimized revenue models can acquire most users as well as generate profits. Offering low-risk entry points such as free or premium membership models or perpetual use licenses to customers not ready to commit is a smarter way to capture sales.

Tapping into current buying trends lets you lift off from the runway to profitability as Incubators and venture capitalists help you climb into the next phase of growth. Iterate to improve till you find the most profitable model using metrics such as acquisition volume, and activation & retention rates.

Step 4: Confirm Product/Market Fit

A “high demand” from your target market exemplifies a product/market fit.

If customers are lining up for your product, if revenues are soaring through the sky, and if bloggers or reporters start approaching you instead of dishing out damning reviews – you can be sure that your product is in “high demand”. Much credit often goes to word-of-mouth effects coupled with an effective sales cycle.

Failing to adapt to changing markets can also lead to losing the market fit.

Scale Up: Validate the Business Idea

Next comes the time for testing your MVP in the real world – the final test of your idea that decides the fate of your start-up. The feedback from real-world testers such as early adopters is crucial to deciding whether to continue to build your product (mostly positive feedback), modify it as per the needs of the customers (from mixed reviews) or shift around completely towards a different business strategy (mostly negative feedback).

The last phase is when you capitalize on the momentum needed to connect your product with the mass market. You explore and inspect the different avenues needed to accelerate growth, eliminate bottlenecks, retain customers, and ride the tide of exponential growth for as long as possible.

Step 1: Sustained Growth

Now that you have an MVP, have transcended into a remarkable brand capable of giving top-shelf customer experience, found yourselves a revenue model that enables sustainable growth – it is time to take the final step and scale-up. To do so, you need to fix a marketing channel and a viable model of growth. 

The Cost of Customer Acquisition when less than the average Lifetime Value of a Customer, makes for a viable marketing channel meant for growth. 

Product growth can perpetuate through:

a. Viral Models – each member inviting more members.

b. Advertising – each customer acquisition supplying cash flow to acquire 1.25 additional customers.

c. Retention – line extension into other products to churn more revenue per customer.

Step 2: Continuous Innovation

Frequent experimentation along scientific principles can help young entrepreneurs test every element of their vision board. The phase of product validation is key to building a successful Lean Startup where market feedback is incorporated to refine a product or decide to exit the market altogether.

The oft-repeated phrase “Innovate or Die!” refers to the need to build on past success through continuous innovation, or else run the risk of becoming obsolete.

The cardinal rules of continuous innovation require you to unlock the root cause behind each failure, test radical experiments freely but on small customer groups, on small groups radical experiments, and measure the impact of changes on key metrics. All this adds up to form loyal brand advocates

In conclusion

Instead of misusing your money, time, and years of youth only to learn through hindsight, the Lean Startup approach provides you a straight path to success. Committing to the Lean Launch model helps rethink the role of startup businesses where you don't go "all-in", but instead commit to de-risking your venture through careful customer conversations and feedback – to test your idea till it molds into a business model that works for you. 

Here at  "TheStartupBrops", we help the startups just like you to launch their maiden products, ideas, and dreams into reality. Now, the reality is unlike the big names and startups are often cash strapped. Even a brilliant idea needs a fine tuned and efficient approach. 

After all, only a lean ballerina is the one who can pull off all the moves to achieve the dream Olympic score of 10 by orchestrating the moves in a flexible manner with an unparalleled flair. To get your business up and flourishing, click here!