When a developer decides to create, the bane of their existence becomes how to find out what features their end-users need, and how to get to market quickly, before someone else launches the same idea before them. At some point in his career, serial startup founder, Eric Reis was faced with the same issues.
Eric Reis had gained a lot of experience, trying to scale at several instances of his innovations. With some successes and some failures, Reis was able to see that his innovations, on which he had invested a mountain load of resources, would not take off because he wasted too much focus trying to get the most quality product to market when he had not understood the wants of the products end-users, and if they needed it.((Connie Loizos. May 26, 2011. “Lean Startup” evangelist Eric Ries is just getting started. Internet Archive. Retrieved on December 26, 2021. https://web.archive.org/web/20200430114317/http://blogs.reuters.com:80/small-business/2011/05/26/lean-startup-evangelist-eric-ries-is-just-getting-started/))
Eventually, these experiences helped him to go on to lead more successful startups, become a startup advisor, and a campaigner for the lean startup. He believed that to make the best of one’s time and money, innovators need to find out what the end-users needed and quickly create a solution and bring it to market.
So much of a campaign did he pull that in 2011, he published a book titled The Lean Startup, and this book described the application of the lean methodology to startup companies.
What Is a Lean Startup?
Lean Startup is an approach to building new software that requires programmers to conduct research, document findings, test codes, and iterate as they create the product.((Mary P, Nicole L. April 2018. Lean Startup. Techtarget. Retrieved on December 26, 2021. https://searchcio.techtarget.com/definition/Lean-startup))
This is a concept that has been around since the beginning of the millennia, however, it soon began to get sophisticated. In Silicon Valley, circa the 2010s, Steve Blank, Eric Reis, and other startup founders and investors were at the forefront of developing the methodology and promoting it.
Eric Reis would go on to publish The Lean Startup, a book that highlighted lean startup methodology and how startup founders could use validated learning to create a business model that can be sustainable.
However, it is crucial to note that Lean is a production practice on its own that could be applied to startups as well as non-startups.((Guillaume Benveniste. June 26, 2014. The Lean Startup Explained to a Friend. The Innovation and Strategy Blog. Translated from French. Retrieved on December 27, 2021. https://theinnovationandstrategyblog.com/2014/06/26/le-lean-startup-explique-a-un-ami-12/))
Traditional Companies vs Lean Startups
Lean methodology focuses on removing every unnecessary process in production and maximizing value to the end user. And in the case of startups, a programmer might find it challenging to grasp what value means to the end users.
The problem with understanding “what is valuable to the end user” is that obtaining such information would take a lot of time and resources – things that startups may not have too much of.
And when you compare this to a traditional company, all that would be needed to bring a product to market would be a business plan that outlines user behaviour, and market dynamics, already optimized user flows, allocation of resources, and estimated launch time.
Traditional companies, also known as incumbents, have had a decent production and marketing history and are capable of producing ideas efficiently and in time with less fear of the uncertainties that startup companies would face.
Traditional companies have the luxury of already established models that they could use in structuring their teams and workflows, while startups would be merely grasping at several experiments that would take a lot of resources that should have been spent on other aspects of production.
Being that time is of the essence, this becomes an issue for startups. Every startup wants to develop their product and get it to market in time, and in the same stroke, present features that would be useful to customers.
In his book Lean Startup, Eric Reis highlights this problem, and directs a solution with a concept that he describes as validated learning.
Lean Startup Methodology
Lean Startup Methodology is based on several concepts that help startups approach development with a lean approach.
Validated learning
Eric Reis uses a concept called validated learning to test every idea in order to ensure its validity. It helps the startup to learn what the end-user wants at a given time – not what they say they want. And a startup learns what its consumers want via testing. With validated learning startups view their ideas or proposed features with two hypothetical thoughts in mind: value and growth.
Hypothesis 1 – Value: What is the potential benefit of the product to the consumer? What feature or code isn’t valuable and needs to be dropped?
Hypothesis 2 – Growth: How do the users find out about the product (in what market are these users?) How will the product spread within that market?
In order to test the value hypotheses, the lean startup methodology suggests that programmers rush to market with a minimum viable product also known as MVP. An MVP is the initial version of a product containing only the best of the basic features of the product. The basic features of this product will be tested through validated learning to see if they are valuable to the users and if the users in turn will buy.
After the MVP has been launched, the methodology proposes that user feedback on features and processes should be assessed to see what wasn’t useful to users, what was used, and how they used it. This sort of feedback will enable software engineers to add and remove processes in order to optimize the next version of the product.((Guillaume Benveniste. July 14, 2020. Book Review: The Lean Startup by Eric Reis. Retrieved on December 28th 2021. https://theinnovationandstrategyblog.com/2020/07/14/the-lean-startup/))
Subsequently, this practice of testing of products and building based on the results will become an unending process that will ensure the development of the best possible product, and build a sustainable workflow for the company.
In his book, Reis also suggests Split testing where the startup company releases two versions of the product and compares feedback gotten from both versions.
An example of split testing is when a company launches a beta version of a product that includes features that are not in the original product. The feedback gotten from the features added in the beta version can be used to determine if they will be added to the MVP or not.
Validated learning is a cycle. It is an unending process. Just as the startup wants to ensure that its product keeps providing value to its end-users and growing, testing and adding quality features to add to the product doesn’t end too.
Growth Engines
There are three engines of growth((Emily Smith. October 12, 2020. The three engines of SaaS growth. Retrieved on December 28, 2021. https://www.cobloom.com/blog/the-three-engines-of-saas-growth)) :
- Viral: This is the type of growth that is gotten through user referrals or recommendations.
- Paid: This is the type of growth that comes from paid advertisements and is advised for products that are making a profit.
- Sticky: This refers to growth that is attained due to the product’s ability to retain a user.
Eric Reis in his book advises that startups focus on one engine to drive growth. He encourages startups to select the growth engine that best fits their type of product and to stick to it.
Benefits of Lean Startup Methodology
Eliminates waste
The Lean Startup methodology is most effective in eliminating waste. It would be wasteful and disastrous for a startup to develop a product that has no market, and essentially has no value to the users. Applying the lean startup methodology, startups can safely test and build new features without wasting too much time and resources.
Provides a flexible guide for attaining structure
Startups are new companies that do not have a defined structure or model. And deciding to adopt the structure of an already established company might not be a wise decision to make. The lean startup methodology helps startups to learn as they build, and then they can iterate what works for them, and eliminate what doesn’t.
Easy to pivot
When a startup’s original idea refuses to scale, it is easier to pivot from original ideas by adding new features and removing irrelevant ones. In this case, since startup companies have followed the lean approach all along, there would be no need to make major decisions that would require a total overhaul of all progress made.
With his book, Eric Reis fairly tries to illustrate how it would be unwise for startups to approach innovation the same way a traditional company or incumbent would. He illustrates how traditional companies already have proven business models with defined structures that a startup lacks. He also shows how to use validated learning in ensuring that a product is presenting something that the end-users will find useful and check whether there is a market wherein such a product can thrive and grow.
Reis simply encourages startups to build first, test, learn, and build again – a never-ending cycle that leads to a successful company. As an option, he suggests that companies can pivot when they do not make any progress, or choose to persist with other strategies that may work.
True to its title, the Lean Startup is a book that gives quite adequate guidelines on how today’s entrepreneurs/startup founders can use continuous innovation to create radically successful businesses. It is a great book that comes highly recommended for startup founders who seek an efficient business model for their next successful company.
