Lesson 5: The Lean Startup

The lean startup

Eric Ries, a successful entrepreneur, coined the term “lean startup”. The term refers to any organisation that follows the principles of hypothesis-driven entrepreneurship. By following a hypothesis-driven approach to your business, you can reduce serious risk factors, such as developing a product or service no one wants.  

The term “lean” is often misinterpreted as a business that applies bootstrapping to the development of the startup, but this is not the case. Instead, “lean” refers to embracing a process of reducing waste and doing things quickly, while also learning and improving as you go.

Early-stage entrepreneurs who wish to follow a hypothesis-driven approach should focus on learning how to build a sustainable business over time, as opposed to quickly scaling. This means optimising a startup’s key resources and minimising waste. A lean-focused startup might eventually invest large sums of capital into customer acquisition or operational infrastructure, but they will only pursue this after they have validated their business model via fast and thrifty testing.  

Lean processes

Lean innovation is focused on increasing efficiency. Startups can achieve this by gathering customer feedback early on, and often, as well as reducing waste in the product development cycle. The lean approach is also a great way to develop a prototype and test assumptions and hypothesis. We often use the phrase “get out of the building”, which literally means get out of the room you’re developing your idea in and test it with your users – gather feedback, improve on the design, and test again.

Lean Startup is a concept and approach centered on a “build, measure, learn” feedback loop. Companies using the Lean Startup approach need to build a minimum viable product (MVP) – a stripped-down version of a product, website, or brochure that early adopters can test. As a general rule, an MVP should have the core features that make the product work and act as a guide for future development.  Giving a user your MVP allows a startup to quickly learn and discover what works, what doesn’t, what needs to be improved on, and what needs to be left out completely. Feedback is the constant driver in this process, so once changes have been made to the MVP, keep testing with your users.

The lean startup cycle (source)   

The Lean Startup approach differs greatly from the traditional business approach, as outlined in the table below.  

Lean vs traditional business approaches (Innovation and Entrepreneurship)

Benefits of the Lean Startup approach

  • Minimises waste: A clear idea of the project and all its constituents enables you to organise a better working process that doesn’t involve any unnecessary targets.
  • Audience participation: Involve your users early in the development process so that there’s a greater likelihood of your product or service surviving in the marketplace when you finally launch it.
  • Flexibility: Lean philosophy can initiate pivoting. Pivoting involves changing the way you perform specific tasks or develop a specific product or service. Pivoting occurs when you don’t get the required results from your user testing and can improve your work efficiency.
  • Fail forward: The lean process encourages organisations to learn from what went wrong, apply the lessons, and move forward.

Lean processes allow startups and employees at existing large organisations to test their hypotheses and build better products or services faster, with fewer resources. It also challenges leaders to continuously test assumptions and iterate on their product offerings. Perhaps the most beneficial element of adopting a lean process is that it pushes people to leave their comfort zones of being satisfied with their business’s current success. In addition, lean processes can reduce overall research and development risk, while improving a company’s competitive advantage.

Lesson Content