The Lean Startup has become much more than just a book and a methodology. The author (Eric Ries) refers to it as a movement. And it truly is. The ideas put forward in the book have changed how most of the (tech) world approaches starting new companies, but also how many large corporations approach innovation.
Inspired by the broader lean movement, made famous by Toyota, Eric has applied the same basics to innovation, such as small rather than big batches. While the original ideas were all about production, Eric felt that they could help him with an issue he had when starting a new business.
So what problem is The Lean Startup trying to solve?
Fundamentally The Lean Startup methodology is about finding out if your innovation is on the path to success. And this in a situation which is very uncertain and where traditional ways of measuring success simply don’t work. In most traditional businesses financial accounting is how we determine success. Is revenue increasing?
The problem in early stage innovation is that measuring revenue doesn’t help us. Even worse, it leads to situations where huge up-front investments are done to build “complete” products before putting them on the market. An incomplete product can never reach main stream customers and therefore it can never compare with established business. And because of this it will most likely never satisfy its revenue targets. So measuring success with traditional accounting means that based on an idea we pour tons of money into building something we don’t even know if customers want.
And how’s The Lean Startup approach different?
The lean methodology is about reducing waste. And the biggest waste in startups is that too many people build too many things that nobody wants. Therefore The Lean Startup focus on customer validation. Making sure that everything we build is something that the customers want and will actually use.
To know this we need to get the product in the hands of customers as early as possible. And this is where the most famous idea from The Lean Startup comes to play, the minimum viable product. A product that consists of only features, functions and attributes required to validate your startups hypothesis with real customers.
But The Lean Startup methodology also acknowledge that we live in a reality where investors and other stakeholders require measurements of progress and success. Therefore building that minimum viable product and see if customers “like it” is not good enough. The key is to work with clearly defined metrics and measurements. Such metrics could be things like customer acquisition, activation and retention. If your new feature does not improve your startup metrics, then your new feature is not helping your startup succeed. And until you know if a feature does, having implemented it provides no value.
So by getting new features and functions in the hands of customers early and measuring if they actually help your startup in the right direction you have a new approach to innovation. You don’t need to wait for the product to generate revenue. Instead you will know very early on if what you build is the right thing.
If investors and other stakeholders agree with your metrics and see how they improve over time they tend to let you to build your product in increments rather than in one big “complete” chunk. Applying the lean ide of small batches and the minimum viable product approach. Something that improves your changes of success and reduces the cost of failure to the cost of one or a few experiments.
And my take on the book?
I view this book as mandatory reading for anyone starting a new (tech) company or working with innovation inside an existing organization. I already knew about The Lean Startup concept before reading the book. I also knew and had already applied the minimum viable product approach, which I’ve written about in the past. But I was missing the last piece of the puzzle, the measurements. For me the approach to measuring success was my biggest takeaway and Eric does a great job at explaining how and why measurements need to be different in startups and early stage innovation than in established businesses.
Like other data driven approaches, such as growth hacking for marketing, the ideas in The Lean Startup are easier to apply to digital / software based innovations than others. While the concepts can be applied in any environment, most examples in the book are from online businesses and this is also where it is most straight forward to apply the concepts.
But knowing if product changes actually contribute to your success, knowing when to change direction and knowing how to communicate progress to stakeholders are all extremely important in any business. And to me The Lean Startup does a great job at describing how to do so in startup environments. Something that on its own makes this a worthwhile read no matter if your startup is a tech company or not.
The Lean Startup provides a methodology for figuring out if your startup or early stage innovation is on the right track or not. The idea of getting your product in the hands of customers early is key and described in the book as the minimum viable product concept. But more importantly the book provides ideas and tools for measuring if your changes and improvements actually contribute to the long term success of your company.
All in all, the book gives you a set of tools and ideas that will help your startup succeed. Therefore I would claim it is mandatory reading if you are starting a new business or creating a new product.