The Lean Startup Methodology is a way to bring analytical rigor and a systematic process to understanding and refining a new venture or growing enterprise and making it successful. Lean Startup reduces the risk of failure and ups the odds of success. Lean startup has become incredibly popular because of how effective it is. It was developed and promulgated by Steve Blank and Eric Ries.
The Lean Startup Methodology applies the Scientific Method to venture development. It starts with a set of hypothesis (guesses) about the various elements of the business model, tests them against customer expectations, and revises and refines them based on the feedback.
There are three basic components of Lean Startup methodology:
· Business Model Design
· Customer Discovery
· Agile Development
Lean Startup is an iterative process searching for a Business Model that is stable, reproducible and sustainable. The goal is to develop a Business Model that works over and over, each and every day and that is scalable. This means that there is a profit or net income relative to sales. If you put one dollar in, you get two out. This is the mechanism and model that allows a business to thrive and grow.
The first step is to fill out the Business Model Canvas. As you fill out the Business Model Canvas you end up with a series of thoughtful first guesses about:
· Who do we think our customers are?
· What are we making for them?
· How much to charge?
Odds are these initial guesses are wrong but it’s a great first step. Next we will change those guesses into facts through the Customer Development process.
Lean Startup Process
Crafting a viable Business Model is an iterative process of exploring the relationship and engagement between your core product/service features and feedback from potential customers.
The goal of this process is to achieve Product/Market Fit. This is where your product or service offering resonates deeply with a customer base and they can’t get enough of it even in its limited prototype configuration. The two components of this process of moving towards product market fit are a Minimum Viable Product (MVP) and Customer Discovery.
The Value Proposition Canvas and mapping is a great tool to help formalize this process.
We want to perform this process Lean, meaning we want to conserve our limited resources in this exploration and discovery phase. We need lean discipline in order to deploy our resources in a way that allows us to refine our offering in the face of customer feedback until we hit on a truly compelling match. We need money to go back to the drawing board.
Most startups fail because they run out of money. We want to limit that risk. In order to run lean, we develop our prototypes with just the core essential features and present that to customers ASAP in order to get feedback. This is the MVP idea. Get something meaningful in front of potential customers and start the learning and refining process. The MVP can be a website splash page, a PowerPoint slide, a wireframe or cardboard mockup, or a working prototype. It needs to embody a feature set that customers can respond to, but little more, so it can be changed, tuned and calibrated to meet customer needs.
This type of development process is called Agile Development. It’s a set of engineering principles designed to quickly iterate around feedback from customers. Also check out other development frameworks like TRIZ, Scrum, and Six Sigma.
Customer Development is about by getting out and talking with potential customers, partners, and vendors centered on presenting the MVP and getting feedback. We do this, not in a random way, but with some rigor and a process:
1. Design Experiments
2. Get Data
3. Get Insights
4. Rinse and Repeat
By keeping the development costs low and lean and focusing on learning from customers we can course correct, iterate, pivot, or persevere in search of the holy grail of Product/Market Fit and a viable, scalable Business Model.
When you have achieved this goal, then you are ready to write a business plan, negotiate funding, and build a company!
The OODA Loop is a tool for better decision-making. The OODA Loop refers to the decision cycle of observe, orient, decide, and act, developed by military strategist and U.S. Air Force Colonel John Boyd. It has been adopted by entrepreneurs as a learning tool and method for dealing with uncertainty. The OODA loop concept complements the Lean Startup methodology in customer discovery, assessing MVP feature sets, and product/market convergence. Use the OODA Loop approach to course correct as you iterate forward.
Lean Startup Video
Here is a little video I made on Lean Startup.