In a traditional business startup method, a thorough, well-constructed business plan with a business model and financial investments lined up with fully developed products ready are all required before before a company is ready to launch. However, time and resource investments aren't always feasible for new business owners, especially if the product doesn’t meet customer needs, and provides very little in return.
Enter the lean startup methodology, a paradigm shift popularized by Eric Ries, which champions a more efficient, responsive, and iterative approach to starting a business. This methodology isn't just a set of principles; it's a robust strategy that challenges entrepreneurs to embrace agility over exhaustive planning.
The goal is simple: launch quickly, gather invaluable feedback early, and refine rapidly.
This approach ensures that entrepreneurs can steer their venture in the right direction from the outset, significantly reducing time, cost, and resource waste. Lean startup is about building businesses that are finely tuned to the demands of the marketplace, responsive to customer feedback.
Through real-life success stories from companies like Dropbox, Zappos, and Uber, learn how the lean startup methodology is not just theoretical but a practical blueprint for modern entrepreneurial success.
The Buzzword Breakdown
A lean startup is typically associated with the tech or manufacturing industry, but effective lean startups can be applied to every business sector. The lean methodology is based on the concept of continuous improvement, which true to its foundation, is how it grew into the business building buzzword it is today.
Lean Practices Influenced by the Automotive Industry
While the premise of lean can be traced back to the 1450’s, Henry Ford first manifested the idea in the modern age at his automobile factory in 1913. Seeing the potential in Ford’s work, Japanese businessmen Kiichiro Toyoda and Taiichi Ohno elevated the process and developed the Toyota Production System (yes, exactly like the Toyota cars). The unparalleled effectivity and efficiency of the Toyota factory then set the standard for lean operations and continuous improvement that are still used worldwide.
Today, businesses across the globe in every industry are finding success in beginning their new ventures with the lean startup process. By learning what their customers want and need, businesses are developing products guided by user feedback, reducing monetary investments in products that are not wanted, time spent in development, and elongated launch periods to finalize complete products.
With less upfront investments, particularly monetary, businesses are more likely to see quicker returns on their new, highly-curate, highly-desired offerings.
What is a Lean Startup?
Lean Startup Definition
Lean startup is a term popularized by entrepreneur and author Eric Ries. Faster, more effective, less wasteful, and more in tuned, lean startups are based on creating, testing, refining, and repeating the process to discover what a product or idea really needs to be in order to best meet the target audience’s needs.
Objective:
The premise is to get a minimum viable product (MVP) – a smaller-scale working product – in front of your target audience to gain their invaluable feedback and move your new venture in the right direction from get-go.
Differentiation from the Traditional Methodology
This is quite the contradiction to traditional business building which expects a fully flushed business plan, business model, and completed product / concept catalog prior to launching. Lean startups are launching, learning, and revising simultaneously, ultimately reducing massive amounts of time, monetary, and resource wastes.
By taking the foundation of the product or idea to your ideal customers, you are able to pivot and scale to meet their needs the first time, rather than change course well down the road. It's much easier to paddle downstream with the current, than realizing you took a wrong turn at Albuquerque and must reverse course. Therefore, understanding the lean startup definition and methodology is paramount for an effective and timely launch.
Keep It Simple: Lean Startup Coffee Shop Example
Imagine you're planning to open a coffee shop. Instead of opening a full café with a big menu right away, you start by setting up a small coffee stand. At this stand, you sell just two types of coffee — regular and espresso. You notice which one sells more and ask your customers what they think about the taste, the price, and additional options, like flavored syrups or creamers.
This small coffee stand is using the lean startup method. It's about starting with something small and simple, the minimum viable product (MVP). By doing this, you can learn what your customers really like and don't like without spending excess money and time setting up a full coffee shop right away with items your target audience may not even want. If your customers love the espresso and ask for lattes, you can then decide to buy a machine that makes lattes. This way, you build your coffee shop step by step, ensuring each new decision is based on customer demand.
Business Case Studies
Many well known businesses you interact with regularly began as lean startup companies. Often times, lean startups are born out of a personal problem where finding a solution for the individual is developing a solution for the mass. Take a look at how Dropbox, Zappos, and Uber started as personal solutions and grew to the industry giants they are today.
Dropbox - A Storage Solution and Viral Video
Business Case Study No. 1
Dropbox, a well-known cloud storage service, is a classic example of the lean startup methodology in action. When co-founder Drew Houston was trying to solve his personal problem of needing to access files across multiple computers, he created the first version of Dropbox. Instead of building a full-fledged product with all possible features, Houston developed a simple demo video showcasing the concept of cloud storage in a simple, accessible way on technology forums like Digg and Reddit, knowing where his target audience spends their time to get the most effective feedback.
The video quickly went viral, jumping from 5,000 people to over 75,000 overnight. This overwhelming response validated the market need for Dropbox’s solution. Based on feedback from these early users, Houston and his team prioritized which features were essential and began building them into the product. This was effective in allocating the proper resources to develop features that their users truly wanted, which led to a highly effective product that met their needs. By going directly to his target audience, Houston was able to develop the right product for the ideal customer, bypassing the missteps of multiple refinements to reach the final end product.
Zappos - An Inventory-Free Online Retailer
Business Case Study No. 2
Zappos, initially an online shoe retailer founded by Nick Swinmurn, began with a unique approach to validating the market without holding any inventory. Rather than investing heavily in inventory with the uncertainty customers would be willing to buy shoes virtually, Swinmurn took photos of shoes from local stores and posted them online. When a customer ordered a pair, he would purchase the shoes from the store and ship them directly to the ordering customer. This process allowed Zappos to test the market’s reaction without the significant upfront investment typically associated with stocking an extensive inventory.
Because of this approach, Zappos gathered critical data on customer preferences and buying behavior regarding online shoe purchases, particularly noting the return policy and customer service. This early interaction and understanding helped Zappos to identify and focus on their competitive advantage and main selling point: unparalleled customer service. It led to policies like free shipping both ways and a 365-day return policy.
Zappos used lean principles to validate a business concept, optimize resources, and scale with much lower risk and quickly adapt to consumer needs, impacting their satisfaction and brand loyalty.
Uber - Order a Ride Like You Order a Pizza
Business Case Study No. 3
Uber, initially named as UberCab in 2009, dramatically transformed urban transportation and disrupted the taxi industry when founders Garrett Camp and Travis Kalanick struggled to get a taxi in Paris. The idea of requesting a ride directly from your phone sparked the revolutionary business. With just 3 cars in New York City, the prototype was piloted with success; five months and an iPhone app later, San Francisco became ground zero for user experience testing. Uber tested the market’s response to app-based car services on a smaller scale, mitigating the complexities of managing a multi-city, full-scale transportation network right off the bat.
With positive feedback, Uber continued utilizing customer responses to gradually build new features and services based on user demand and regulatory environments, eventually adding UberX, UberPool, and UberEats. By iterating their service offerings and scaling their business model in response to user feedback and market conditions, Uber was able to rapidly expand both domestically and internationally, outpacing competitors and overcoming operational challenges.
The Lean Startup Impact on Your Business
Adopting the lean startup methodology can transform the way you approach building and growing your business. Starting lean mean you’ll know what to invest in and how to make it fit your customers’ needs. Here’s it can have a significant positive impact:
Rapid Prototyping and Feedback Loops: Introducing your idea as an MVP saves time and resources, reduces waste, and helps you make informed decisions about product development, focusing your efforts on features that truly meet customer needs and eliminating those that don’t.
Reduced Costs and Risks: Financial risks and initial investments can be significantly reduced in product launches by starting with hypotheses testing in your target audience and making evidence-based changes from their feedback. This is especially beneficial for startups and small businesses operating on limited budgets.
Customer-Centric Development: Many companies claim to be customer-centric, but lean startups are founded on actual customer desires and feedback. Building a product closely aligned with customers’ wants increases the likelihood of market success and higher customer retention rates.
Agility and Flexibility: In today’s fast-paced market, the flexibility and opportunity for swift changes the lean startups process possesses can keep you ahead of competitors who might stick to more rigid development plans.
Continuous Improvement: Iteration and refinement based on user feedback and metrics ensures products are relevant and satisfy customer needs over time, sustaining growth and fostering innovation.
By embracing these lean startup methodologies, you can enhance your business’s adaptability, efficiency, and overall competitiveness. This approach not only helps in managing resources wisely but also empowers you to create a product that truly resonates with your target audience.
Navigating the Path to Success with Lean Startup
The utilization of lean startup methodology underscores a powerful shift in the entrepreneurial landscape, prioritizing efficiency, adaptability, and direct engagement with customers. By embracing the principles of the lean startup, entrepreneurs can navigate the complexities of launching and growing a business with agility and precision.
Starting with an MVP allows the waters to be tested without committing extensive resources upfront, mitigating financial risks and turning customer feedback into a valuable asset that informs the development process. Each iteration, driven by real-world interactions and data, enhances your product’s market fit, ensuring that every step is calibrated to meet actual customer needs.
The lean startup methodology also develops a culture of experimentation, learning, and continuous improvement from the beginning. It encourages entrepreneurs to remain fluid, adjusting to market changes and evolving customer preferences seamlessly. This ability to pivot and adapt is crucial to stay relevant and in-demand. Whether you are refining an existing product or launching a new service, the lean startup offers a structured yet flexible framework for achieving sustainable growth and innovation, and resilience to handle future challenges.
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About the Author:
Em is the co-founder of L2Business and Director of Communication. With a passion for writing and helping others, "Kill the Jargon" is Em's favorite L2 project. When she's not busy with the business, you can find her yelling at the TV watching her alma mater Texas Tech or any hockey game she can find. If you have any questions, reach out via our contact page or connect on Facebook!
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