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Are you an entrepreneur? Have you ever conducted any of the below-mentioned five activities?
- Wrote a business plan to improve the likelihood of success in new ventures
- Sought advice from experienced business tycoons within your family or close relations
- Gather secondary data that would improve the likelihood of success for new ventures
- Share a business plan with potential stakeholders to get feedback for improving the likelihood of success in new ventures
- Share the business plan with potential financiers and investors to gain insight on funding options
Read on to see why these questions are pertinent. You might find out exactly what type of entrepreneur you are. This way, you’ll know your strengths and weaknesses and become even better.
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What Is A Lean Startup?
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How Does The Lean Startup Method Work?
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Lean Startup Methodology
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Key Principles Of Lean Startup
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Lean Startups VS Traditional Businesses
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Design Thinking VS Lean Startup
What Is A Lean Startup?
The success of Toyota and Dropbox is widely known. Toyota, a Japanese multimillionaire venture, is popular for adopting lean methodology within the manufacturing sector. Similarly, Dropbox is considered to be the greatest example of implementation of a lean startup methodology. It made the tedious process of sharing files and information through emails much easier by providing an online storage facility. With more than one million new users subscribing over a period of seven months, the success story of Dropbox is incredible.
In today’s world of stiff competition among businesses, the concept of ‘lean startup’ teaches how to work smart rather than work hard. The concept of the lean startup process was introduced by an American entrepreneur, Eric Ries. The lean startup technique operates within the premise that each startup is a big experiment that tries to answer a query.
How Does The Lean Startup Method Work?
Here’s how you implement the model:
- Identify beliefs about what must be true for the startup to succeed. This is called leap-of-faith assumptions.
- Create an experiment to test those assumptions quickly and inexpensively. This is called the Initial Effort, also referred to as the Minimum Viable Product.
- Think like a scientist. Every experiment should be considered as an opportunity to learn what works and what doesn’t. This is called the unit of progress and, for startups, validated learning.
- Take the learning from each experiment and start the loop all over again. This is called the Build-Measure-Learn feedback loop.
- On a regular schedule, make informed decisions about whether to change strategy or stay on the course.
Now, let’s see what the methodology entails.
Lean Startup Methodology
In his book The Lean Startup, Eric Ries has emphasized making better and faster decisions. As per the lean startup methodology, it doesn’t matter how much an organization raises in terms of money but instead how successful it is in meeting its customers’ demands using the least amount of resources. The lean startup concept entails measuring the productivity of people differently. In many cases, startups don’t take into account customers’ feedback and end up wasting both time and resources. The goal of any startup is to figure out the right thing to build, customers’ requirements and the amount they’re willing to pay. In simple words, lean startup is a revolutionary approach to developing new breakthrough products that prioritize start and finish, customer insight and a big vision and ambition. A lean startup methodology has to be adopted right when you’re starting a business. However, there have been instances where organizations have resorted to the lean methodology after starting their business.
The recent pandemic has made businesses think about working in isolation. For makeup artists, hair stylists or baking professionals, it’s more profitable to launch their businesses online instead of investing in a physical space. It’s more cost-effective and many businesses have seen success in this kind of a lean startup business plan.
Key Principles Of Lean Startup
Remember the following aspects of the model:
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Entrepreneurs exist in bulk
One doesn’t have to work out of a garage to establish a startup as is the common perception based on many success stories. The ideology of entrepreneurship includes all those who work within the concept of a startup, defined as an institution devised to create new products and services under extreme uncertainty. Therefore, the lean startup approach can work anywhere and within large and small organizations.
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Entrepreneurship and management are related concepts
A startup is an institution and concept, not just a product. Therefore, it requires new kinds of management specifically geared to its context of extreme uncertainty.
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Validated learning
The job of a startup isn’t just to create things, serve customers or make money. Their existence includes learning about building a sustainable business. This learning can be validated scientifically through experimentation, enabling entrepreneurs to test each and every element of their goal.
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Build-Measure-Learn
The basic function of a startup is to convert ideas into products and keep it customer-focused. All startup processes should be geared toward accelerating a feedback loop.
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Accounting with innovation
To improve entrepreneurial outcomes and hold innovators accountable, there has also to be a focus on seemingly boring things such as measuring work progress and setting up milestones and prioritizing work. This requires a new kind of accounting designed for startups and the people who hold them accountable.
These points sum up the lean startup model for you.
Lean Startups VS Traditional Businesses
Most lean startup business plans look like they’re planning to launch a rocket ship rather than drive a car. Lack of planning results in errors in assumptions, leading to catastrophic results. There have been organizations that forecasted significant customer response—in billions—for one of its newly launched products. A fancy launch was planned and successfully executed. However, the product didn’t appeal to consumers. Moreover, the organization had invested in massive infrastructure, human resources and support to handle the influx of the customers it had expected. They failed by rigorously and successfully executing a plan that turned out to be utterly flawed.
The lean startup method, in contrast, is designed to teach you that based on assumptions, you can make constant adjustments with a steering wheel called the Build-Measure-Learn feedback loop. In this process, one can learn when to take a sharp turn or persevere along the current path. Lean startup offers methods to scale and grow a business with maximum acceleration. Throughout the process of driving, you always have a clear idea of where you are headed with your business.
Design Thinking VS Lean Startup
Here’s how the two are different:
- Aim: The aim of both a lean startup approach and design thinking is to innovate
- Scope/Focus: The focus of lean startup is to use high-tech innovations for startups, while design thinking focuses on general innovations
- Approach: Lean startup uses a customer-oriented approach, while design thinking is mostly user-centric
- Testing: In lean startup, pivoting is at the heart of the ‘fail fast’ concept. There’s a chance to rectify a mistake. In design thinking, testing focuses on the ‘fail early to succeed sooner’ concept
- Uncertainty: In lean startup, there’s an unclear customer problem. In design thinking, the uncertainty revolves around solving a wicked problem
- Qualitative Methods: Lean startup doesn’t focus on qualitative methods. In design thinking, there’s a strong focus on elaborated ethnographic methods, user research and observations
- Business Model: Lean startup focuses on a business model, while design thinking doesn’t
- Target Group: For lean startups, the target groups are customers (distinguished between users, recommenders, influencers, decision-makers and buyers). In design thinking, the target groups are the users (usually end-users, sometimes stakeholders)
These were the main points outlining the lean startup concept for beginners and experts alike.
Conclusion
It can be said that the lean startup model is a process of validating ideas received from customers’ reactions to a minimum viable product. The journey is analyzed and a decision is made based on whether the idea is to be persevered or pivoted. The lean startup method helps the product to be launched in the market with minimum risk. A suitable example is Facebook, which wasn’t the first social media organization. Similarly, Henry Ford’s automobile was also not the first in the market within the automobile industry. Both saw tremendous success as their founders were fast learners compared to first-movers in their respective domains. Business plans barely survive after their first interaction with customers. Moreover, it’s wrong to presume that startups are smaller versions of bigger firms.
There are times when startups succeed initially, but due to the absence of a long-term plan, they fail. New ventures hastily gather minimal possible products and immediately elicit patron feedback. Then, using customer feedback to revise their assumptions, they begin the cycle all over again, trying out redesigned services and making further small amendments (iterations) or more considerable ones (pivots) to ideas that aren’t working.
One of Harappa’s pathways to success, Rise in an Organization, keeps this context in mind while exploring the different ways in which you can harness the talent in yourself as well as in those around you. The pathway brings together different theories of business and management (one of which focuses on what is a lean startup) to instill in you the great benefits of good decision-making and strategizing ahead of time. Explore this and many other such pathways in your journey up the corporate ladder.
