Lean startup is a methodology that was popularized in the tech world around the time of the Great Recession. It has since become more widely used by software startups and other smaller businesses as they look to reduce risk, cut costs, and increase efficiency before market entry. And while there are many nuanced points of view on how to implement lean principles, at its core, it’s a very simple idea: Start with a minimum viable product (MVP) and iterate continuously until you have a product people will pay for. The lean startup methodology is based on five key principles that can be applied to almost any new business venture. Read our summary of these principles below.
This is one of the core concepts of the lean methodology. You build what you need to build, measure what you need to measure, and then learn what you need to learn. And then you start the whole loop over again.
Starting With a Hypothesis
The core of the lean startup process is to start with a hypothesis about your product or service and then use data to prove or disprove your hypothesis. When creating a new business, you should start with a single hypothesis about a product or service you can provide that solves a problem. That hypothesis should be testable and falsifiable, meaning that you can prove it to be true or false through some sort of experiment.
Ideally, you can use customer feedback to shape and pivot your hypothesis, but it’s also a good idea to start with a hypothesis that you can test objectively. For example, you might decide that you want to start a lawn mowing business by testing your hypothesis that you can mow 10 lawns per week and make $1,000. Once you’ve reached that goal, you’ll know that your hypothesis is correct and you can start growing the business.
Build an MVP
The second step of any lean startup is to build a minimum viable product (MVP). The MVP is a product that has just enough features to perform one core function. It should also have just enough design to get the job done and no more. The point of an MVP is to get to market quickly with a product that customers can understand and start using.
A great example of this is Uber. When Uber first started, it was essentially a way for people to hail a regular taxi. Now, it’s a sophisticated logistics company with a range of product offerings and an estimated value of $120 billion.
When building an MVP, it’s important to keep in mind that you can’t build the product that you want to build, you must build the product that your customers want. You can’t sell to yourself. Only when you’ve built something that people want to use, you can start measuring its success. At this point, you can start to learn what customers really want and how to build the right product for them.
Define Your Customer Problem Before Developing Solutions
When you’re working to build out your product, you don’t want to get stuck in the trap of building a solution to a problem you don’t know exists. Some of the most successful startups actually start with a problem and work backwards to find a solution. For example, Airbnb started by asking the question: “Who has a spare room and wants to make some extra money?”
Build what your customers want
Too many entrepreneurs get caught up in things like “vision,” “mission,” and “product roadmaps” before they’ve spoken to a single customer. The lean startup methodology can help you gain a clearer perspective on what you should build, and why, based on what your customers actually need and want. You need to put all other startup notions to the side and start building something customers will pay for once, and use again and again. Product-market fit is the engine that drives the lean startup methodology forward.
Be Fast and Be Frugal
These two lean startup principles are closely related. Building a lean startup involves a lot of learning by doing. You don’t want to spend too much time or money upfront on something that may ultimately prove to be a dead end. You want to be fast and frugal – make sure you don’t waste time or money on anything that won’t bring you closer to your goals. This doesn’t mean you should try to skimp on quality. But it does mean looking for ways to bring down expenses and focus your resources on the most important things.
Continuously experiment and learn
Once you have a minimum viable product, it’s important to keep it in beta and constantly experimenting. One way to do this is to have a process in place to generate and test new ideas. This can be as simple as writing down ideas and prioritizing them based on customer feedback. Again, keep in mind that you shouldn’t be building the product that you want to build. You should be working to build the product that your customers want, based on what you’ve learned from continuous experimentation.
This is perhaps the most important element of the lean startup methodology. You’re not just building a product and hoping customers will buy it. Instead, you’re continuously experimenting with your marketing, pricing, and other variables, to see what works and what doesn’t. It’s important to understand that the lean startup methodology doesn’t call for a few experiments here and there. Instead, you need to be testing everything that could possibly affect your business.
You also need to record the results of these experiments and learn as much as possible from them. Even if you don’t see an obvious benefit from a particular experiment, you may find it helpful down the line. You don’t know what you don’t know, so it’s important to record everything. These experiments should cover your marketing and sales efforts, your product and its features, your pricing, and your customer journey.
Continuously Discovering the Right Product
The lean startup methodology is based on a continuous discovery process where you build the minimum viable product, test it out with customers, and then iterate until you find the right product. In many ways, this is an ongoing process that doesn’t end once you’ve found product-market fit. Finding a product that people will pay for is something that you’ll probably need to do for the life of the business. When you’re building your lean startup, it’s important to focus on the core value that you’re providing for customers and how you can make that better through continuous discovery. To make this process easier, it’s a good idea to have an idea of the customer personas you’re targeting and a general idea of the problem that you’re trying to solve. As you learn more about your customers and their needs, you can pivot your product to make sure that it’s delivering the right value.
Be ready to pivot or change course
The most important thing to remember about the process of pivoting is to be aware that it is a natural part of the process. It is not a sign of failure, but rather a sign that you are learning and adapting as you go. When you are building your product, you should be constantly looking for ways to pivot or change course. Every customer conversation, every piece of feedback, every bug report should be viewed as an opportunity to pivot or change course. There is no such thing as a wrong decision when building a startup. Every decision might help you learn something new and bring you closer to your goals.
Finally, the lean startup methodology encourages startups to minimize investment in all areas where they can. This means that founders should not be investing in areas where they can be replaced by cheaper or more efficient solutions. These areas include everything from hiring employees to buying equipment and renting office space. One way to do this is by focusing on customer needs first and foremost when making investment decisions. For example, if you’re trying to decide between renting office space or continuing to work remotely, you should first look at what features make an office space valuable to your business. That way you can focus on the areas where you really need to invest in order to make sure that you only spend as much as you really need to.
Build a “Muda” Drop List
“Muda” is Japanese for waste. The idea is that every business has waste, inefficiencies that can be eliminated to save time and money. When you are building your product and testing your marketing strategies, look for Muda in every aspect of your business. Find ways to eliminate waste and increase productivity.
Some examples of Muda are:
- Extra features
- Deadlines that are too aggressive
- Bad hiring decisions
By the way: A lean startup is not the same thing as a lean company
Finally, a lean startup is not the same thing as a lean company. While many people use the two terms interchangeably, there are some important differences you should know about. In a nutshell, a lean startup is the methodology used to build your business and bring it to market. A lean company, on the other hand, is the ongoing effort to minimize waste in every aspect of your business.
The lean startup methodology is used to reduce risk and build a product customers want, while a lean company is used to reduce risk and waste throughout your entire business. In Conclusion The lean startup methodology is a great way to build successful businesses. It advocates starting with a minimum viable product, testing it with customers, and continuously improving. There are five core principles behind the lean startup methodology: Build what your customers want, start with a lean product, know your customer, continuously experiment, and learn.
At the core, the lean startup methodology is really about making sure that you don’t waste time and money building the wrong thing. It’s about getting to the root of your customer’s problems and building solutions that solve real problems for real people. The lean startup methodology isn’t for every type of business, but it does work well for technology startups and many smaller businesses. If you are interested in applying these principles to your business, we recommend reading the book.