Venture builders are always striving to find the perfect business model. And while there’s no one size fits all approach, the lean startup model is one which some have praised.
What is a lean startup?
A lean startup is a venture formed using a lean startup methodology in order to launch a new company or product in a short period of time. Lean startup is a methodology that allows businesses to adopt a scientific approach to creating, managing and validating products and business models. By adopting business-hypothesis-driven experimentation and iterative product releases, businesses are able to greatly reduce development cycles and ensure the viability of business models before the incursion of wasted costs, resources and time.
The method focuses on establishing whether a business is viable by launching a product at the same time as gaining customer feedback. A business will look to establish that there is a desire for a particular product so a market for it will exist on launch. This is usually established by the release of a minimum viable product (or MVP) to a small number of customers. This aims to reduce business risk and have a refined product or solution with a ready-made customer-base.
Although the lean startup model was proposed in 2008 by author and business expert Eric Ries, this method is derived from Toyota’s 1930 operating model, ‘The Toyota Way’, which also popularised concepts that can be seen in businesses all over the world, such as Kaizen (Continuous Improvement) and Genchi Genbutsu (Going to the Source). This was a mode of production where the manufacturer enabled its workforce to make improvements and updates to processes to boost the speed of manufacture and product quality.
Lean startup success stories
The benefits of lean startups can be seen in some successful examples. You might be surprised at some of the big name companies to have used this methodology enroute to success.
Dropbox is one of the most well known lean startup success stories. This popular online service is a sharing platform, designed to send files between users which are too big to be sent as email attachments.
Founder and CEO Drew Houston initially launched Dropbox as a screencast. This was their MVP and helped demonstrate why their product was unique and necessary. Their tongue-in-cheek launch video helped drive subscribers so the Dropbox team could begin the process of refining their product and align it with customer needs. In less than 18 months, Dropbox’s list of registered users rose from 100,000 to more than 4 million.
Buffer is a social media content management platform designed to help users schedule and share posts and content. Rather than directly launching the app, founder Joel Gascoigne instead decided to come up with a MVP in the form of a landing page with a call to action button around plans and pricing. This strategy aimed to work out whether there was demand for the app and give the product validation in the form of a user base. Interested customers clicked and continued to click once different package details were added. Over a decade later and Buffer is a multi-million dollar digital success story.
Slack is an online messaging platform beloved by businesses. It was initially created as an internal office tool for a gaming startup called TinySpeck. The company attempted to launch a game called Glitch but with little success. Instead they chose to develop their messaging tool as it had proved so popular among staff. It was gradually released to external users and larger groups, using their feedback and thoughts to help refine and review their product. This eventually became the Slack platform we all know and love. According to estimates by GP Bullhound, the number of monthly active Slack users is expected to reach 79 million by 2025.
Lean vs agile startup methodologies
Agile is another business methodology and, like the Lean Startup approach, ultimately aims to offer customer satisfaction. However, although similar, the Agile approach offers some subtle differences and understanding them will help you work out which is the best approach for your business. Agile is about helping companies build better products. Lean is about improving the process around their manufacture by developing better product quality. Lean is often applied to a repetitive, predictable process and includes everything from completing a firm online to manufacturing a car. On the other hand, Agile focuses less on the process, and more on how we can make a better product.
Lean Software Development is a subculture within the Agile community, applying Lean Startup principles to the software world. Adapted from the Toyota Production System, it is emerging with the support of a pro-lean subculture within the Agile community.
Best books on the lean startup methodology
We explore some of the best books outlining the lean startup approach and why it has worked for their business ventures.
The Lean Startup | Eric Ries
‘The Lean Startup’ is one of contemporary business world’s key texts, a work by the forward thinking Eric Ries who first clarified the lean startup methodology for today’s digital world. His emphasis is around the MVP, so businesses should never expect to have all the answers when starting out. Instead, they should embrace the unknown to help them build and learn what products work and which don’t simultaneously.
Running Lean | Ash Maurya
In this book, business expert Ash Maurya guides readers through an effective strategy for creating a product/market fit for a new venture. He utilities his own experiences working with various product developments to demonstrate concepts such as the lean startup. He advises venture builders to test a variety of hypotheses and explore different customer segments to see which offer the potentially biggest pay-outs and market expansion.
The Four Steps to the Epiphany | Steve Blank
This book by Steve Blank is one of the most influential and practical of all the business publications. It helps define the differences between startups and existing businesses and provides some great insight into what success looks like for fledgling entrepreneurs. Testing assumptions, utilising customer feedback and enhancing the speed of product iterations are all rigorously explored and discussed.
The lean startup methodology for your venture
Whether the lean startup methodology works for your venture depends on your business and what it needs. Different approaches are developed to solve different issues but the processes of Lean Startups and Agile are not mutually exclusive. A combination of approaches can be used - it ultimately depends on what you and your venture need.
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