8 Things to Remember about Lean Start Ups

Nonie Creagh-Brown

Nonie M. C. White is a fellow of Make a Wave, the  OGUNTE Incubator for Women Social Entrepreneurs. 

Nonie immersed herself in the LEAN Start Up book and shares her learning with us!

Reference: The Lean Startup, How Constant Innovation Creates Radically Successful Businesses, by Eric Ries (2011)

The Lean Startup seems to be one of those books we all want to read and many of us even buy and feel guilty as we watch it gather dust on our bookshelf. I finally got around to reading it recently and thought I’d share my reflections on the lessons it includes incase this might be useful to others considering reading it.

I confess that before I started reading The Lean Startup I believed it would give me some magic pointers about how one goes about starting up a company with a lean team (of one in my instance) and achieving success with a flexible and crafty strategy. It turned out I was wrong on two counts. 

Firstly, the ‘lean’ in the title does not reflect the size or bank balance of your organisation, but refers to a strategic approach to product development that aims to minimise waste and maximise value creation.

Secondly, according to the author Ries, my company would not be classified as a startup, which he defines as an organisation designed to confront situations of extreme uncertainty.  He clarified that a new business with similarities to other existing businesses is not a startup, as it could accurately model itself on those that went before and therefore its success would depend predominantly upon execution. Thus, although I’d argue my business had a couple of unique selling points that make it better than those currently on the market, Ries would probably argue it is not disruptive or innovative enough to be classified as a ‘start up’. 

Fortunately, I’m not one to be easily put off and so I carried on reading, to discover that The Lean Startup contains some techniques that can be fruitfully applied, or at least borne in mind, in relation to all businesses launching new products or services.  It is not a blue print to follow but instead a framework designed to be adapted to the conditions of each specific company. Using some of the techniques described you can build something perfectly suited to your company.

1- A GRAND EXPERIMENT!

The Lean Startup suggests startups must do more than just follow the tried and tested method of writing a business plan and following a strategy based on market research and assumptions.  It advocates a focus on what customers want, rather than what we think they might want or what they say they might want. It proposes extremely fast cycle times and a scientific approach to making decisions about your products based on frequent experiments and validated learning. To ensure you achieve your vision for your company, you must test every element of your offering to see that it is value creating and therefore working to realise that vision.

The concept is that you constantly subject your vision to constant testing and feedback. You experiment and pivot or persevere accordingly, incorporating all of your validated learning into your product development, marketing ideas and efforts.  Your start up is a ‘grand experiment’ to see whether you can build a sustainable business around this set of products. 

Many of the examples in the book come from Ries’ own experience of founding a new company, IMVU, which entered the Instant Messaging (IM) market to build a new IM add-on product that had 3D video games and virtual worlds. These examples of software experiments and builds might make it tempting to think that the notions of fast turnaround validated learning doesn’t apply to more parochial and long-cycle manufacturing companies, however, there are still elements of the framework that can be tailored to strategic planning of many different types of businesses.

Example of an early experiment at IMVU

IMVU changed their website, homepage and product registration flow to replace ‘avatar chat’ with ‘ 3D instant messaging.’ New customers were split automatically between those two versions of the site, half saw ‘avatar chat’ and the other, ‘3D instant messaging’. From this experiment IMVU were able to measure the difference in behavior between the two groups to see who was more likely to sign up for the product and more likely to become long-term paying customers.  

2- TWO MOST IMPORTANT ASSUMPTIONS THAT ENTREPRENEURS MAKE

In order to undertake validated learning entrepreneurs must identify the key ‘leap of faith’ assumptions that they make and figure out ways to test them. These key assumptions are:

  • VALUE HYPOTHESIS: Whether a product really delivers value to customers once they are using it.
  • GROWTH HYPOTHESIS: How customers will discover your product or service

3- FIND EARLY ADOPTERS

The point is not to find the average customer but to find early adopters, who feel the need most acutely for your product and will be more forgiving of mistakes and eager to give feedback.

4- BUILD A MINIMUM VIABLE PRODUCT & THE BUILD-MEASURE-LEARN FEEDBACK LOOP

The Lean Startup argues that we need to build a minimum viable product (MVP), which is a version of our product that enables a full turn of the BUILD-MEASURE-LEARN feedback loop, with minimum effort and minimum development time.

It should not include any feature, process or effort that does not directly contribute to the learning that you seek.

Once you get it – or a prototype version of it – in front of customers you must be able to measure its impact, through what the Lean Startup calls ‘INNOVATION ACCOUNTING’ – creating learning milestones to assess your progress accurately and objectively.

  • Use your MVP [Minimum Viable Product] to establish baseline metrics to where you are now.
  • Using validated learning, tune your baseline toward the ideal metrics.

Examples of MVPS:

  • Single MVP

This would test most of a company’s assumptions and establish baseline metrics for each assumption simultaneously.

  • Separate MVPS

These would be aimed at getting feedback on one assumption at a time.

  • Smoke test

Before building a prototype you might perform a ‘smoke test’ using marketing materials: does anyone want your product?

5- AVOID VANITY METRICS

Often gross numbers of customers paint a rosy picture but don’t tell us what we really need to know, so the Lean Startup method argues for actionable metrics to help better understand cause and effect. All features should be routinely tested and often developers will discover that those features they thought were essential do not impact customer behaviour.

For example, use cohort based metrics - launch new features on a split-test experiment (such as the IMVU example).

MAKE SURE LEARNING IS ACTIONABLE, ACCESSIBLE (comprehensible) and AUDITABLE (data must be consistent with reality and checkable with real customers).

6- SMALL BATCH APPROACH

Although it might seem counter intuitive to work in small batches, this actually enables you to get through the BUILD-MEASURE-LEARN feedback loop more quickly, to learn and identify quality problems faster. When you experiment with a new feature you need to run this experiment with the smallest batch size that will get the job done.

7- THE PULL TECHNIQUE

The problem of stockouts can be solved through achieving small batches all the way down to a single-piece flow along the entire supply chain. In manufacturing PULL is used primarily to ensure production processes are tied to the level of customer demand.  Each step in the line pulls the part it needs from the previous step. This ‘just in time’ approach to lean manufacturing results in a decrease of Work In Progress (WIP) inventory and less warehouse space.

8- WISDOM OF THE FIVE WHYS

Using the simple technique of asking ‘why?’ five times when a problem arises is a powerful organisational technique that allows you to get to the root cause of the problem, which often starts off by sounding like a technical problem, but is ultimately revealed to be a human problem. As start ups do not have unlimited funds or time to invest in training staff, this technique can be used to reveal problems and make incremental investments in so doing, to evolve a startup’s processes gradually.

The Lean Startup advocates that all people, of all levels, involved in a new problem are called to a meeting, wherein the problem is interrogated. This brings the team together through a common understanding and perspective. Mistakes should be tolerated once but never allowed to occur again.

Combined with working in small batches, Ries argues that these two techniques form a foundation that enables a startup to respond to problems as they appear, without overinvesting or over-engineering.

Connect with Nonie M C White on Twitter: @noniecb

 

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