lean startup

By Anastasia Nenova · Updated November 10, 2022

The basis for the Lean method began in the form of The Toyota Production System, which the Japanese carmaker established to increase the effectiveness and adaptability of its manufacturing after World War II.

Lean business models offer advanced thinking about how large companies can improve their processes. Of course, Lean business models don't only offer innovation for large companies, young tech ventures can use them as well.

In terms of product development, Harvard Business states that the lean startup method gets you from point A to point B as quickly as possible, taking the quickest route while making sure point B is the best place to go. If not, the lean startup method will assist you in finding a different and superior point B. Many startup lessons can be learned from Lean development.

In fact, according to the Harvard Business Review, the lean startup method makes the process of starting a business less risky. The lean startup method uses innovation accounting, actionable metrics, split-test experimentation, and measuring progress.

What Is the Lean Startup Methodology and When Was It Invented?

The lean method offers new business models used to launch a business or a product on behalf of an existing business. The lean startup methodology encourages developing products that customers have demonstrated they want. This is done to ensure that a market will be ready when the product launches, as opposed to developing a product and waiting for demand to grow. Essentially, this method focuses on practices that shorten product development cycles.

Beginning in the early 2000s, the idea of the lean process developed into a methodology by 2010. Sharethrough co-founder and CTO Rob Fan promoted this startup method. It was established by Silicon Valley entrepreneurs Steve Blank and Eric Ries with a focus on customer development.

When to Apply the Lean Methodology

Although the Lean model has only been around for forty years, it was developed more than seven decades ago.
It emphasizes the ongoing development of the following three business concerns:

  • Purpose
  • Work Method
  • People

A business must put its focus on finding solutions to the problems of its customers if it wants to succeed. Additionally, it should implement Lean Six Sigma as a process improvement methodology with the objective of eliminating problems, decreasing waste, and improving working conditions. Finally, shared leadership and responsibility should be used by an organization that is undergoing a Lean transformation.

The Lean model was initially implemented in manufacturing, but it's now widely applied in a variety of industries to test a vision continuously.

Its increasing popularity is a result of the positive impact its core principles have on overall business performance.

The Lean technique is used now in a variety of industries, including manufacturing, software development, healthcare, and venture capital firms.

The Lean technique is built around the following two ideas:

  • Courtesy for others
  • Ongoing development

According to the Lean methodology, the finest ideas are frequently generated by those who are directly involved in providing the service or making the product.

Because of this, a Lean-based organization considers the viewpoint of those closest to the customer or the finished product.

This approach puts emphasis on everyday continuous improvement. Additionally, each project team member is accountable for improving the organization's procedures.

The Guiding Concepts of the Lean Method

The Lean method is built around two main concepts. Without an entrepreneur embracing them both, a business can't practice Lean as a scalable business model.

Continuous Innovation Processes

Processes can be continually improved, according to lean leaders, and improvement is a daily task that falls on each member of the business. An improvement cycle, such as PDSA (Plan, Do, Study, Act) or DMAIC (Define, Measure, Analyze, Improve, Control) is implemented. Lean actions are frequently organized, monitored, and reported on using software development for continuous improvement.

Respect for People

The best ideas frequently originate from those who are directly in charge of creating the product or providing the service, according to lean thinkers. So they oppose top-down management and give equal voice to those who are closest to the product or the client.

One key Lean technique involves managers visiting the location where the work is done, to observe workplace conditions and process activities firsthand. Opportunities to improve and experience startup success are frequently produced by this procedure.

Giving employees the resources and instruction they require for success is another way established companies show respect for their workforce. Lean leaders take the effort to make sure that everyone is familiar with the methods the company will employ.

Lean leaders make an effort to ensure that everyone is familiar with the methods the company will use to implement, oversee, and track improvement activities and actionable metrics. They also spend money on software, training, customer acquisition, and other resources needed to achieve operational success.

What Are the Five Key Lean Startup Principles?

According to Eric Ries, there are five main principles for creating lean startups:

Entrepreneurs are everywhere

Eric Ries describes a lean startup as "a set of practices for helping entrepreneurs increase their odds of building a successful startup." By definition, startups operate in settings of extreme uncertainty and are viewed as a "hypothesis".

For the hypothesis to result in validated learning, it must be tested by a feedback loop.


startups can't be defined by size or type. Just like you, there are hundreds of other entrepreneurs trying to find ways to make the most out of their startup. The competition is there. You're not the only entrepreneur in your target market.

Entrepreneurship is management

Just like any other startup, there needs to be entrepreneurial management- although it may not be traditional. Eric Ries proposes a new type of management, one that is designed for managing successful startups.

Eric Ries states that management "requires creating conditions that enable employees to do the kinds of experimentation that entrepreneurship requires."

Traditionally, a business plan that's executed on time and within budget is considered a victorious entrepreneurial business. However, this startup methodology emphasizes that what's worse than building a bad product is "building something that nobody wants."

Traditional management focuses on strategic planning, whereas lean startup management focuses on experimentation.

The primary focus of the lean startup approach is understanding what creates value for customers.

Validated learning

One of the most crucial lean concepts is validated learning, which is based on performance tracking. This includes conducting experiments, getting results, and basing future decisions on relevant data. Additionally, it makes a modern company leverage human creativity and be more capital efficient.

This method helps entrepreneurs make the right decisions and choose the best strategies according to the ongoing situation.

Eric Ries suggests that for a startup to "demonstrate valuable truths about a business prospect", it needs first to obtain "validated learning". For instance, how to establish a sustainable business and for whom. This needs to be done before the financial resources of startups run out.

Innovation Accounting

You need to focus on how to assess progress, define milestones, and prioritize work if you want to improve entrepreneurial outcomes and hold founders accountable. This requires a unique, startup-specific type of accounting.

It's all too easy to slip into what's described as vanity metrics that don't align with business objectives. This type of accounting involves testing the existing metrics of a lean startup against the three A's of good metrics; actionable, accessible, and auditable.

Build-Measure-Learn

The tools of feedback is what create verified learning in new startup ventures. Although it may seem contradictory, the feedback process begins with "learn" at the end.

The question that initiates this process is "what do we want to learn". Most of the time, business owners take a "just-do-it" approach or experience analysis paralysis and spend too much time refining their plans. In either case, it's already too late once entrepreneurs have developed something that nobody desires.

The second step of this process is the concept of a minimum viable product (MVP).

The feedback loop of this startup model allows you to learn quickly, make constant improvements, identify the most effective plan, and use innovation.

What Are The Three Stages of The Lean Startup Method?

The Lean Startup method is nothing more than conducting experiments continuously to reduce risks, applying specific findings to prevent potential setbacks, and continuously interacting with potential customers to understand their needs better.

The best thing is that this startup approach uses its three stages of agile development to do all of this without completing the final product.

Stage of Problem-Solution Fit

A startup essentially tries to determine in this initial stage if the challenge it's attempting to take on is worthwhile or not.

An entrepreneur can prevent spending months or even years on a product that no one will buy by doing this.

Furthermore, as you are surely aware, ideas are generally free, but their implementation can be costly. In order to demonstrate that the relevant problem is being solved and the company's overall idea is good, it's crucial to start with concrete facts.

Simply put, you must have definitive responses to the following three questions:

  • Is there a technical way to solve the issue?
  • Do your customers actually need the product or service you're building?
  • Are customers willing to pay for the service or product you're developing?

Stage of Product-Market Fit

The second stage of establishing a startup essentially involves testing the dependability and marketability of its product or service.

To put it in simple terms, an entrepreneur needs to test various models before settling on one that works for his or her startup.

Additionally, a startup must regularly attract repeat customers through that particular business strategy.

Simply put, the lean startup method aids in identifying the main features of a product that customers are willing to pay for and that addresses their core problem.The second stage of establishing a startup essentially involves testing the dependability and marketability of its product or service.

To put it in simple terms, an entrepreneur needs to test various models before settling on one that works for his or her startup.

Additionally, a startup must regularly attract repeat customers through that particular business strategy.

Simply put, the lean startup method aids in identifying the main features of a product that customers are willing to pay for and that addresses their core problem.

Stage of Growth

Growth is the third stage of a lean startup, during which time entrepreneurs concentrate largely on broadening the scope of their business model.

The typical method for achieving this goal of expanding reach is to combine marketing, sales, and channel selection.

Remember that choosing the appropriate marketing and sales channels is essential for fast development because they systematically gather client feedback at each stage.

Why Is The Lean Startup Method Useful?

The lean startup methodology produces a better product with maximum acceleration. But what about the other benefits of working with these lean startup practices?

Reduced Uncertainty

Developing a new product frequently involves taking a risk. You lack past performance data to use as a guide. You want to bring your idea to life. The temptation might be to just go for it without thinking it through and embrace the uncertainty at first.

However, the lean startup approach provides you with the tools for generating confidence. All of which include explicit objectives, detailed hypotheses, focused testing, and feedback to create radically successful businesses.

Increased Efficiency

The lean process reduces the risk involved in developing products. Because of the structured principles, testing, and feedback, you are not simply "placing everything on the red" and spinning the wheel as an entrepreneur.

Instead, you're swiftly but thoroughly evaluating every key aspect of your future product, ensuring that each step or phase is essential and effective before moving on. Your time and money are being used wisely by doing this.

Additionally, by involving prospective clients right away, you're raising audience anticipation and interest in your future product.

More Successful Entrepreneurial Business

Startup success may be the greatest advantage of lean methods in a new startup environment. The lean startup principles can be a survival strategy that can measure actual progress in a business model.

This is done by establishing structure, boosting productivity, and reducing spending. The lean approach also dares you to challenge everything, rationalize with customer validation and engage in customer discovery.

Minimum Viable Product (MVP)

As already mentioned, one of the lean startup principles is to test features. In reality, the running lean process is completely user-centered because it can't function without customer feedback.

The term "minimum viable product" refers to a product that has nothing more than the features or functions that you intend to test with customer feedback.

The entire product must be developed and tested, which is costly and time-consuming. Additionally, if the final product has to be refined, you will need to make additional modifications, which will take extra time and work.

Testing an MVP with only the features you're currently focused on can help eliminate wasted effort from the development of your minimum viable products. Even if you design an MVP with features you decide not to use, the testing process has still provided you with useful information that has allowed you to refocus your process in the right direction.

Remember that you're developing a new product, so despite your best efforts, you won't truly know how it will turn out until you get started. You can efficiently reach that final version by using lean thinking.

Lean Startup Development Process Q&A

How does Lean Startup vary from Agile Development and Design Thinking?

The Lean Startup business model may eliminate the need for some aspects of either, but the tools, objectives and many of the practices are still compatible. Agile development originated in the software industry and works hand-in-hand with customer development. According to the Lean Startup business model, startups are human endeavors created to develop a new good or service in the face of great uncertainty. This startup method aims to eliminate this state of uncertainty.

Once a client has been found and their value has been established, the conditions are in place for production to move forward with a reasonable degree of successful assurance and confidence. The fact that the business can now provide a focused product to a ready customer is more significant than how the course of action looks or is named. That culture is much better to work in.

Why Is Lean Manufacturing Useful?

Businesses can introduce new products or services in highly uncertain environments by using the Lean Startup business model. Every business startup environment must deal with some form of uncertainty. Although uncertainty is stronger at first, it never really goes away. Because of this, we use agile methods. Everything is an assumption until it is validated. Lean manufacturing helps assist you in making decisions about what to do next when faced with this uncertainty. Find the assumption that poses the greatest risk to your business, then seek the most straightforward experiment to support or oppose it.

Why Is Customer Development Important In Lean Development?

The favorable outcome of a business and product relies on customers. Without customers willing to buy a product or use a service, startups fail. Lean startups focus on understanding the customer, their needs, and how to deliver solutions to them by prioritizing customer development. This method reduces business risks by challenging the assumptions made about customers.

What Types of Problems Can Lean Manufacturing Eliminate?

The lean startup method can eliminate waste in the following seven areas: overproduction, inventory, defects, motion, over-processing, waiting, and transportation. Lean Startups have been formulaically proven to reduce these seven wastes. 

Summary

The lean startup movement has led to a break from conventional thinking throughout the past decade and beyond by using continuous innovation. When you consider the build-measure-learn cycle's testing, feedback, and pivot components, it becomes evident that lean startup empowers you to ask, Should I Build This Product? rather than How Do I Build This Product? If the response is "No, you shouldn't," lean principles offer a method for identifying and creating the product you ought to be developing for your customer.

Remember that you're developing a new product, so despite your best efforts, you won't truly know how it will turn out until you get started. With the help of the lean startup process and its core basic principles, you can create that final version efficiently.

Disclosure: We want to be completely transparent with you – our readers are important to us, and we would never do anything to jeopardize your trust. With that said, we want you to know that our blog is supported by our readers. We sometimes earn affiliate commission when you click through the affiliate links on our blog. This helps us to cover the costs of running the blog and provides us with a little bit of extra income. However, we only ever promote products or services that we believe in and think would be helpful for our readers. We would never recommend something just for the sake of earning a commission. Thank you for your support!

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}
>