How to Raise a Lean Startup – I

Lean Startup

Most of you would be aware of the term “Lean”, thanks to its overuse by a lot of organisations these days (and some slimming centres too). Startup, again, is not an unfamiliar term as every new tech company calls itself a startup.

However, what you might be wondering is “what is a lean startup”. It isn’t a startup with very few employees (as almost all of them already are). It is a startup that has been founded on the principles of Lean and following an MVP (Minimum Viable Product) based approach to starting-up.

Wikipedia describes MVP as “a strategy used for fast and quantitative market testing of a product or product feature“. Also mentioned alongside is the name of Eric Ries. For those familiar with startup landscape, Ries is a celebrity. He is said to have popularised the term MVP. Some attribute the term entirely to him.

Ries has a very popular blog on Lean Startup and a site that serves as a selling platform for his bestselling book “The Lean Startup” (which doesn’t need selling though). His blog has a very interesting quote from his book:

Startup success can be engineered by following the process, which means it can be learned, which means it can be taught.

Now this is in stark contrast what some of us might think or have even experienced. Startup success has been considered enigmatic, even elusive like a mirage. But here is Ries claiming that there is a definite process to it. This gives the impression that it can be synthesised as if in a Chemistry lab or manufactured as if on an assembly line.

But what gives him that confidence to make such a bold statement. He attributes it to the concept of MVP or in his words, “the build-measure-learn” feedback loop. Through this loop, the entrepreneur builds a bare minimum product in order to test his assumptions / hypotheses, measures the reactions of customers thus validating / invalidating the hyotheses, and generates learnings in the process.

Ries outlines 5 principles of a lean startup:

1. Entrepreneurs are Everywhere
Ries considers anyone who fits the following definition as an entrepreneur: “a human institution designed to create new products and services under conditions of extreme uncertainty”. A person doesn’t necessarily have to work out of a garage to be one.

2. Entrepreneurship is Management
Even a startup requires management, in fact, more than traditional organisations because a startup might have bigger and frequent challenges. However, traditional management is not of much help here and one needs to think out of the box that various business schools have created.

3. Validated Learning
Ries defines this as the single most important measure of progress in a startup. The startup iterates through multiple failures to arrive at success and, in the process, gains invaluable lessons that help it in the next iteration. This learning is validated by its customers who either accept or reject its products / services.

4. Innovation Accounting
As boring as accounting may be, its importance for startups cannot be overstated. Measuring progress, defining and tracking result metrics, setting up milestones are all tasks that an entrepreneur needs to fulfil zealously.

5. Build-Measure-Learn
Startups must continuously churn out products, measure their acceptance with the customers, and incorporate their feedback so as to either turn their strategy on a sixpence (pivot) or continue to push harder (persevere).

Continue to Part II >>

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