Lean Startups (Part 1)

What Lean Startups Teach Us About
How to Start a Business
Part 1

Starting with Minimum Viable Products

Part 2

The term "lean startup" has only recently become part of the business vocabulary. It is taken from a book of the same name by Eric Ries and published in 2009.

The basic idea behind lean startups is to apply principles of lean manufacturing to the process of starting a new business. Because Ries lives in the Silicon Valley and is a computer programmer by training, he focuses on rapid deployment of internet and software applications in high-tech startups..

But encore entrepreneurs and anyone else launching a business can benefit immensely from his counsel.

The problem with startups, Ries stresses, is that entrepreneurs don't truly know what their customers will want from the product. Even if ownership relies on extensive market research, there is no way to fully anticipate how customers will react to a product until they actually see it or experience it.

The problem with startups is that entrepreneurs don't truly know what their customers will want from the product.

Thus, lean startups are designed from day one to be "learning organizations," a phrase popularized by Peter Senge in his seminal book The Fifth Discipline in 1990. Lean startups position and profile themselves to be constantly learning from their customers.

A Minimum Viable Product

Rather than bringing a fully mature product to market, lean startups focus on what Ries calls a "minimum viable product," or MVP. This is a functional product (or service) that satisfies the core purpose for which it was developed.

Lean startups focus on first producing a minimum viable product

But it does not have many bells and whistles. After all, no one yet knows whether the customers will want bells and whistles. Or perhaps customers will want bells and whistles, just not these particular bells and whistles. Thus the rationale for a minimum viable product.

Once this MVP is in the market place, the startup then relies on extensive end-user feedback to determine the direction in which the product or service should evolve. For this reason, Ries has jokingly described a startup as a product in search of a business plan. End-user feedback will determine the company's agenda moving forward.

For lean startups market research is a scientific experiment in the literal sense of the word.

This feedback, moreover, is of a unique variety. Lean startups are little interested in the typical marketing focus group, which asks whether the participants would use a certain product or service, and if so, how they would use it. Such exercises have proven notoriously unreliable in predicting a product's marketplace success. Why? Because there is often a major disconnect between what people say they would do and what they in fact truly do.

Lean startups will have none of that. Lean startups want feedback they can count on. So they seek feedback on what customers actually do with the product. Or in the case of a service, how they utilize the service.

  • Do they like it enough to have purchased it?
  • How often do they use it?
  • What kinds of things do they do with it?
  • Do they find it helpful enough that they have recommended it to others?
  • What do they tell others that it will do for them?

Market Research — Lean Startup Style

Questions like these reflect the way that lean startups think of market research. To them market research is an experiment — a scientific experiment — in the literal sense of the word. And scientific experiments do not yield a collection of personal feelings or preferences, as focus groups are prone to do. Experiments yield a body of data. Thus, when seeking customer feedback, whether for products or services, lean startups ask action questions, not preference questions.

  • What are you doing with the product?
  • Have you tried to do something with it, but could not because it lacked some feature?
  • What have you told your friends about the product?
  • Are any of them using it?
  • How do they use it?

Questions along these lines gather information about actual customer behavior. And customer behavior is a far better indicator of a product's reception than any number of opinion surveys.

Part 2