“The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”
By Nolan Bushnell.
It is a methodology to develop businesses and products. This methodology aims to shorten product development cycles by adopting a combination of hypothesis-driven experimentation to measure progress, iterative product launches to gain valuable customer feedback and validated learning to measure how much has been learned.
The lean startup methodology is based in that if startup companies invest their time in iterative construction products or services to meet the needs of the first customers, they can reduce market risks and avoid the need for large amounts of initial financing or big expenses to launch a product.
It was originally developed in 2008 by Eric Ries with high technology companies in mind, the lean startup philosophy has been extended to apply to any individual, group or company that seeks to introduce new products or services within the market. Nowadays, the popularity of lean startup has grown outside USA and has spread around the world, to a greater extent due to the success of Ries’s bestseller book: The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.
Lean startup philosophy is based on lean manufacturing, the philosophy of tight production developed in the 80s by Toyota. The lean production system considers as waste all that expenditure of resources that is dedicated to an objective that is not the creation of value for the final consumer, and therefore an objective to be eliminated.
In 2008, Ries followed the advice of its mentors and developed the idea of lean startup, using their personal experiences adapting the principles of lean management to the world of high-tech start-ups.
Similar to the precepts of lean management, lean startup philosophy seeks to eliminate inefficient processes and focuses on increasing the value of production during the development phase. In this way the startup can have more opportunities to succeed without requiring large amounts of external funding or elaborating business plans. Ries believes that the opinion of customers during the development of the product is an integral part of the process of lean startup, and ensures that the producer is not going to invest time in designing features or services that the client does not want. This is carried out mainly through two processes, using Key Performance Indicators and continuous development. Because startups typically can not afford total reliance on their investment in the launch of a single product, Ries maintains that by launching a viable minimum product, even if it is not finalized, the company can make use of it. of the opinion of the customers to adjust their product to the specific needs of the same.
The philosophy of lean startup separates web-based startups or technology areas from the ideology of the previous dot com companies in the sense of achieving an effective production in terms of cost by building the minimum viable product and using the opinion of the customers to refine it.
Minimum viable product
A viable minimum product (VMP) is the version of a new product that allows a team to collect with the minimum effort the maximum amount of validated knowledge about consumers. The objective of a VMP is to evaluate the hypotheses fundamentals of a business and help entrepreneurs begin the learning process as quickly as possible.
The continuous production is a process “where all the code that is written for an application is put into production immediately”, resulting in a reduction of product delivery cycles.
A split-test experiment is one in which different versions of a product are offered at the same time. The objective of a split-test experiment is to observe changes in behavior between the two groups for measure the impact of each version on an actionable indicator.
The experiments can also be done in series, so that a group of users a week can see one version of the product while, the next, they see another version. This way of working can raise doubts in the circumstances where external events can influence the behavior in one period, but not in another.
They allow business decisions to be made with criteria and establish the actions that are relevant. On the contrary, the vain indicators offer biased measurements but do not adequately reflect the authentic growth engines of a company.
A typical example of a vain indicator is the number of new users per day. Although a high number of new users per day seems beneficial for any company, if the price of acquiring each user through expensive advertising campaigns is significantly higher than the revenue generated per user, then increasing its number could quickly lead to bankruptcy.
It is a structured correction designed to test a new basic assumption about the product, the strategy and the growth engine.
Accounting of innovation
This topic refers to how entrepreneurs can maintain their responsibility and maximize results, measuring progress, planning milestones and prioritizing tasks.
The Create-Measure-Learn circuit is the central core of the lean startup methodology and explains what should be done between the phases of ideation, coding and verification of data. In other words, it is an iterative process of transforming ideas into products, measuring the reaction and behavior of customers against the products and learning whether to persevere or pivot from idea. This process is repeated continuously.
This circuit puts the focus on speed as the critical ingredient for the development of a product. The effectiveness of a team or a company is determined by its ability to devise, quickly build a viable minimum product of that idea, measure its effectiveness in the market, and learn from the experiment.
This rapid interaction allows teams to determine the most appropriate way to find a market place.