The journey from a business idea to a successful launch is quite a long one, especially if you’re still relying on a traditional outdated approach.
Sitting on your business idea for months trying to build a perfect product, securing funding, and waiting for everything to be just perfect will leave you behind your competitors.
In this fast-paced world, clinging to the old ways of launching a business can put you at a disadvantage.
This is where lean startup methodology steps in. With its agile approach focusing on rapid experimentation and continuous feedback—principles of lean method can bring your ideas to life with less risk.
We will learn more about it in this blog post with real-life examples. But before that…
What is a lean startup methodology?
The lean startup methodology is a blend of multiple techniques for building a business or introducing a product based on feedback from your target customers.
Its primary role is to:
- Reduce risk
- Test the viability of a business model
- Reduce product development time
- Increase the product usability
Lean startup methodology follows a process that involves envisioning a viable business idea, developing and testing prototypes, and collecting user feedback to create a great product. It’s an iterative process that helps reduce the wastage of resources and time.
Eric Ries’s 5 principles of lean startup methodology
The lean startup methodology was developed by American entrepreneurs Eric Ries and Steve Blank in the early 2000s. In his book, The Lean Startup, Ries states the five principles that drive the lean startup methodology.
1. Entrepreneurs are everywhere
This principle says that innovations can happen anywhere and anytime. You don’t necessarily need to have an office to build a startup. All you need is an idea, the vision to make it big, the willingness to start small, and the ability to scale it with rigorous and consistent efforts.
2. Entrepreneurship is management
Unlike an established business, startups don’t have a loyal customer base and haven’t figured out a business model that works well for them. Due to this, they are subject to numerous risks and can’t rely on a standardized business plan.
What they need is management that’s tailored to serve their unique needs and is capable enough to handle unpredictable roadblocks.
Some helpful business tools include strategic planning templates, a startup business plan, and the lean business plan template which are flexible, learning-oriented, and quick to adapt to.
3. Validated learning
Building a startup is like laying the groundwork to ensure a long-term sustainable business as they help you test ideas, determine viability, identify flaws, and develop creative solutions.
By doing so, you are able to scientifically examine your startup and make changes based on validated data. This then helps you minimize risk and increase the chances of success.
4. Innovation accounting
Metrics such as ROI, revenue, and market share are great for established businesses, but they aren’t of much use to a young startup because they don’t represent potential, only results.
That’s where innovation accounting comes in. It’s a procedure to quantify, track, and communicate the growth in innovation and the state of R&D in your startup.
5. Build-measure-learn
This principle is the central idea of the lean startup methodology. It describes the process of building the ideal product that aligns perfectly with your target customers’ needs. This is done by setting up a feedback loop to consistently improve your product with each iteration.
That’s the popular Eric Rie’s 5 principles of lean startup methodology.
3 stages of a lean startup approach
Instead of following a standard plan, the lean startup methodology prioritizes experimenting, recording results, and implementing learnings. There are three stages in the lean startup methodology.
Stage 1: Problem-solution fit
When you stumble upon a brilliant business idea, the first thing to do is to check whether or not that idea is solving a problem that people have.
The lean startup methodology addresses this in the first step. It involves discovering a problem worth solving and identifying creative solutions to it.
You can determine this by interviewing customers you believe might need your solution. After multiple interviews, you learn whether the problem exists or not. If it does, you can now pitch your solution and collect their feedback.
Using the feedback from one responder, you can then improvise your pitch and present it to the next one. Once you’re done with the interviews, you will have adequate data to proceed to the next stage.
Stage 2: Product-market fit
In this stage, you determine whether or not your product has a market. Even if the product you’re building is really innovative, it’s not of much use to you if it won’t sell. To do so, you need to make sure there is enough demand in the market for such a solution.
We do this by testing its viability via a minimum value product (MVP). An MVP is essentially a prototype tested by various early adopters and focus groups who give their opinions and feedback to help improve the product.
This process helps remove defects and is repeated until you build a product that matches your ideal quality standards. Once done, the product is ready to be sold in the market. This iterative process includes five key steps:
- Build: Build your product or service
- Test: Test the product to ensure quality
- Measure: Collect data and analyze feedback
- Learn: Use the data to improve offerings
- Repeat: Start again with an improved offering
Stage 3: Scale
Once you have a business that addresses the pain points of your target customers and generates profit, the next step is to scale it. In this stage, you make small but impactful changes to your product to drive sales.
Now that your product has a proven track record, you can invest in building more units or in R&D to develop more competent versions. It involves running A/B tests to conclude which version of your product is more preferred by your target customers.
Scaling also includes setting SMART goals and milestones to identify, measure, and track your growth. It allows you to detect which aspects of your startup are growing and which aren’t.
Enough about theories. It’s now time to see if the lean methodology has built any successful businesses.
Success stories of lean startup methodology
Here are a few successful companies that have used lean methodology to build their multi-billion dollar startups.
1. Dropbox
The popular file-sharing platform Dropbox which happens to have more than $500 million active users started with a very basic MVP. Their MVP was a 30-second screencast demonstrating what a Dropbox can do.
They used the insightful feedback from their target customers to develop their products, create a better product-market fit, and gather an initial audience for their launch.
2. Slack
Slack was initially created by Tiny Speck to manage their internal office communication. While their gaming startup didn’t pan out well, this communication tool became a potential business opportunity after becoming popular amongst staff.
After a couple of feedback rounds and iterations, slack was released to external users and larger groups. Today it’s a thriving startup with millions of active users.
3. Uber
Uber didn’t invest in a fleet of vehicles to launch its cab services. Instead, it
developed an app that connected drivers to riders, iterated the platform with continuous user feedback, and perfected the product to meet the evolving customer needs. Not long after its launch, Uber became a dominant player in the ride-sharing market.
4. Buffer
Instead of directly launching an app, Buffer created a landing page with CTA to get product validation from a substantial user base. When they validated a substantial need for a social media content management platform, they launched Buffer in the marketplace. Today, it’s a multi-million dollar successfully catering to the needs of a vast marketplace.
5. Zappos
Back in 1999, when Zappos founder had an idea of selling shoes online, he tested the hypothesis by launching a basic website. He didn’t build inventory or distribution channels right from the beginning. After validating the marketspace where people would buy online shoes, he scaled the idea and went on to build a billion-dollar store.
These are just a few of the examples that vouch for the success of lean startup methodology. The list is pretty exhaustive.
Said that, in this fast-paced world, lean methodology is a way to build a really thriving business.
Build a better product with the lean startup methodology
Building a startup is a very taxing process, especially when you don’t know what to offer to the market. With the lean startup methodology, you can create a product that your customer needs.
Through the lean methodology, you mitigate the risks, prepare for uncertainties, and reduce the duration of product development duration.
Don’t let your idea sit around for too long. Quickly whip a lean business plan using Upmetrics and test your strategies in the real marketplace.
Continuously learn from your findings and build a sustainable product that can satisfy your customer needs to the core.
