Going Lean

Whether you are an entrepreneur contemplating a your next business venture, a product manager looking for that next big development that will help your company forge ahead of the competition, or a nonprofit director thinking about how to create an innovative approach to advance your organization’s mission, you have got to consider the lean startup approach.

One of the latest wunderkinder of Silicon Valley is Eric Ries, and these days, the name Eric Ries is synonymous with the idea of The Lean Startup, which also happens to be the title of a book Ries published. His ideas are really catching on. Harvard Business School has put their imprimatur on Ries’ thinking, both by incorporating his material into their entrepreneurship program, as well as through an article in the Harvard Business Review, Why the Lean Startup Changes Everything.

Why is this idea catching on so swiftly? Among other things (and we quote the HBR) “it favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional ‘big design up front’ development”. Another way to put this is that lean startup methods focus on what customers want and need, and allow organizations to minimize investments of time, money and materials. You can get products to your public faster and cheaper – and since when has that been a bad idea?

Some key concepts that can help in understanding the underpinnings of the lean startup approach include:

Minimum Viable Product (MVP) – the simplest, easiest and/or cheapest product you can create that is marketable, so that you can get customers to try it and give you feedback. In some examples, this can include the promise of a product or process you haven’t even created yet.

Pivoting – changing direction – in product creation, market focus, or other business areas with quickness and agility.

Actionable Metrics – measurable data that is relatively easy to collect, and can actually be used as you move ahead.

Iteration – successively looping through a process of “build-measure-learn-rebuild”.

There are far more business failures than successes. This happens for several reasons. Sometimes companies have been around long enough, or are arrogant enough to believe that they know better than their customers what the customer needs. Some organizations have so much faith in their sales and marketing departments that they think they can sell anything. Even when an idea is solid, and actually represents something customers might want and need, if the production process to develop a marketed product, by the time it hits the streets, buyers’ priorities may have changed, or someone else might have beaten you to the marketplace. Too, when you invest a lot of resources in creating a product, there is an internal pressure to price it so that you can recoup this investment as quickly as possible, and your price may be more than people are willing to pay.

The lean startup model turns the traditional way of thinking about creating value on its’ head. The system is based on five principles, which are 1. Entrepreneurs are everywhere. That is, this approach is not just for new bootstrap businesses but can be used by everyone. 2. Entrepreneurship is just management. It’s about being responsible and accountable. 3. Regardless of the focus of the overall organization (traditionally being to make money, to make “stuff”, or to serve customers), the lean startup approach focuses on creating a sustainable business. 4. Accounting has to change, so that there is an increased focus on measuring progress, setting up milestones, and prioritizing your work. Using real data, rather than vanity metrics, is crucial. 5. The Build-Measure-Learn approach is critical. It is a continuous feedback loop where a key question in the “Learn” phase is “Do we pivot, or do we persevere?” More information on each of these principles can be found at the official website of the movement.

So, what about it? Is it time for you to consider “going lean”?