The Lean Startup

Contents

1-Vision
2-What to do?
3-MVP
4-The Build-Measure-Learn Cycle

Vision


Why lean Startup?

Work Smarter Not Harder

 

The Lean Startup is a methodology that favors experimentation overelaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development. Although the methodology is just a few years old, its concepts—such as “minimum viable product” and “pivoting”—have quickly taken root in the start-up world, and business schools have already begun adapting their curricula to teach them.

 

Learn with practice, spend less time planning and work on your model.

What to do?

  1. Rather than engaging in months of planning and research, entrepreneurs accept that all they have on day one is a series of untested hypotheses—basically, good guesses. So summarize your hypotheses in a framework called a business model canvas.
  2. Use a “get out of the building” approach called customer development to test their hypotheses. They go out and ask potential users, purchasers, and partners for feedback on all elements of the business model, including product features, pricing, distribution channels, and affordable customer acquisition strategies.
  3. Third, lean start-ups practice something called agile development, which originated in the software industry. Agile development works hand-in-hand with customer development. Develop according to your customer’s need.

MVP


The first step in the Lean Startup process is to create an Minimal viable Product (MVP). An MVP is the version of a new product, which allows a team to collect the maximum amount of validated learning (trying out an initial idea, then measuring it to validate the effect) about customers with the least effort. It is the smallest thing (a minimal product with minimal risk)  that you can build or produce that can deliver customer value, test your idea, and hence be able to capture some of that value back in return. It saves you from wasting effort building a product and then finding out it’s not worth it, just  because you haven’t tested it. The MVP can be created based on a hypothesis that is tested over time and improved. Take Facebook as an example, where Mark Zuckerberg didn’t know if people are willing to interact on a social media platform. Hence, he started with Harvard and started testing if students were willing to connect with each other through social media. This was his hypothesis, which was proved to be true and therefore he went on and tested it on other campuses and eventually it took over the world.

 

Example of a successful MVP- Dropbox:

The challenge Dropbox’s team faced when starting was that it was impossible to demonstrate the working software in a prototype form. The product required that they overcome significant technical hurdles. To avoid the risk of waking up after years of development with a product nobody wanted, the team  simply made a video explaining how the product worked. The MVP, video, increased the Beta waiting list from 5,000 people to 75,000 people overnight. The MVP validated the assumption that customers wanted the Dropbox product.

 

 

The Build-Measure-Learn Cycle


The Build-Measure-Learn cycle is a feedback loop that is said to be one of the core components of the Lean Startup methodology. Its goal is to turn uncertainties, assumptions and risks into knowledge or “sure things” that will eventually guide organizations and business towards progress. Through this process, the key unknowns can actually be transformed into knowledge that the startup can use in its product development – and business operations, as a whole. This whole process can also be called an experiment.

The Lean Startup

Phase #1. BUILD

In this phase, the startup’s goal is to build or develop its MVP – “minimum viable product”, or the bare minimum product that can be built for the purpose of testing a number of assumptions, or the hypothesis formulated – as quickly as possible. Before it can do that, however, the startup must first figure out what the problem that needs solving is.

  • Design the experiment. First, you have to build out the details of the experiment and figure out how everything will fit and mesh together. For this, you must have a solid and reliable method of collecting data, meaning the data gathered must be reliable and actionable.
  • Build the experiment. In this stage, think simple and small. Many startups tend to go big and complicated on the get-go, and they end up being overwhelmed and unable to handle it. It would be better to build the smallest possible increment that will still be enough for you to use to validate or reject the hypothesis you have made previously.
  • Run the experiment. This is where you will collect the data. The most common methods include conducting interviews or distributing questionnaires. In some instances, others may come out with prototypes for testing.

Among the activities that Eric Ries identified as part of the Build phase includes conducting unit tests, usability tests, refactoring, and cloud computing.

Phase #2: MEASURE

In this second phase, the startup must then determine whether real progress is being made or not, and this involves measuring the results obtained from the experiment performed during the BUILD phase.

  • Data analysis. Analyze the data obtained from the experiment. What happened? What are the implications of the data to your hypothesis? Make a comparison on what you hypothesized to what actually happened
  • Data organization. Organize your data in a way that will make it easily understood, and for the whole scenario to be easily comprehended by whoever listens to it.
  • Data Presentation. Make your presentation of the data as compelling as possible. You want the members of the organization or the company to be engaged, so make sure you present it in a way that will truly grab their attention and hook them.

In order to speed up measuring, Eric Ries suggested conducting activities such as split tests, real-time monitoring, funnel analysis, cohort analysis and search engine marketing, to name a few.

Phase #3: LEARN

This is where the startup will have to make a decision based on the measurements accumulated: should it “persevere”, or should it “pivot”? Persevere, in this context, means carrying on with the same goals, while pivot entails changing or shifting some, or all, of the aspects of the product strategy. Afterward, you would have to document your findings and share them.

The questions that are to be asked in this phase include looking into the knowledge that has been obtained. How should that knowledge be preserved?

More importantly, what are the next steps that should be taken by the startup?

Ries cited several activities for this phase including, but not limited to, conducting customer interviews, split tests, customer deployment, and smoke tests.

The 3 phases of the cycle can be simplified in the following activities.

  • Ask whether the new idea of the startup actually solves a problem for the users.
  • Quickly come up with an action or a program that will test the idea with the users. Perform reassessment or reevaluation if needed.
  • Obtain feedback from your us Focus on getting information that is relevant and will be useful in helping you create the product / service that is wanted or needed by the users.
  • Consider the sustainability of the product or service. Will you be able to maintain the current level of engagement or service?

 

Example 1: Zappos

 

Zappos is one of the biggest online shoes and clothes store in the world. As a startup in 1999, it followed the lean startup methodology and the build-measure-learn cycle to develop.

 

  1. Build: started as a simple website where customers can order shoes with no involvement from manufacturers or retailers and did not have a shoes inventory. The simple website with no advanced features was Zappos’ minimum viable product.
  2. Measure: When the first orders started coming in, the founders of the startup went to a local store to purchase the shoes that have been ordered and shipped them to the customers who placed the order. This allowed the founders to put their business model in action, using minimum resources, to collect data about feasibility.
  3. Learn: Using the experience they learned from their first orders, adjustments and improvements were made and the cycle started once again. Relying on customer feedback and reactions, Zappos today has developed to a website and application that sells more than just shoes.

 

Example 2: Building a mobile app startup

 

Imagine that you are a startup building a mobile application. Your cycle will most likely be as follows:

 

  1. You come up with a mobile app idea.
  2. You create your business model canvas. (BUILD)
  3. Start talking with customers and ask them what features they are looking for in an app. (MEASURE)
  4. Obtain the feedback of customers. (LEARN)
  5. Using the feedback obtained, you will repeat Step 2 and make revisions on the business plan until you get it right.
  6. Once you get the business plan right, you proceed to the implementation of a prototype, or the MVP (minimum viable product) for testing. (BUILD)
  7. The prototype is then shown to the customers. (MEASURE)
  8. Feedback from customers is obtained and learned. (LEARN)
  9. Step 6 is repeated, making improvements on the prototype until you get the app right.