Tag: product development

Benefits of Lean Start-up

small business productivity

What is Lean-start up?

Launching a new business – whether it’s a tech start-up, a small business, or an initiative within a large corporation – has always been a hit-or-miss proposition. According to the decades-old formula, you write a business plan, pitch it to investors, assemble a team, introduce a product, and start selling as hard as you can. And somewhere in this sequence of events, you’ll probably suffer a fatal setback. The odds are not with you, because about 70% of all start-ups fail.

In the last decade however, a new approach to managing start-up has emerged, one that can make the process of starting a company less risky. It’s a methodology called “Lean start-up” and it favours experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development.

We like Lean Start-up as a start-up philosophy for four reasons:

1. Lessen Uncertainty

Using the Lean Start-up approach, companies can create order instead of chaos by utilizing tools to test the start-up’s vision continuously. Lean isn’t simply about spending less money, or just about failing fast, and failing cheaply. It’s about putting a process, a methodology around the development of a new business and its products and services.

2. Work Smarter Not Harder

The Lean Start-up approach has as a premise that every start-up is a grand experiment that attempts to answer a question. The question is not “Can this product be built?” Instead, the questions are “Should this product be built?” and “Can we build a sustainable business around this set of products and services?”

This experiment is more than just theoretical inquiry; it’s development of a first, and early, product. If it’s successful, it lets a business owner get started with his or her start-up: enlisting early adopters, getting first sales, adding more features to each further experiment or iteration, and eventually starting to build scale into the business.

By the time the product or service is ready to be distributed widely, it’ll already have established customers and solved real problems.

3. Learn When it’s Time to Pivot

A core component of Lean Startup methodology is the build-measure-learn feedback loop. The first step is figuring out the problem that needs to be solved and then developing a minimum viable product (MVP) to begin the process of learning as quickly as possible.

Once the MVP is established, a start-up can work on tuning the engine. This will involve measurement and learning, and must include actionable measurements of success. Ask simple questions to study and solve problems along the way. When this process of measuring and learning is done correctly, it will be clear whether or not the company is moving the drivers of the business model. If not, it’s a sign that it is time to pivot or make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth.

4. Validated Learning

When you focus on figuring out the right thing to build – the thing customers want and will pay for – you don’t have to spend months waiting for a product beta launch to change the company’s direction. Instead, entrepreneurs can adapt their plans incrementally, inch by inch, minute by minute.

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Entrepreneurial inspiration from Eric Ries

 

What is a pivot, and how can it help your business?

Making the decision to pivot is one of the hardest aspects of the Lean Start-up method of managing start-up. Founders and entrepreneurs are emotionally tied to their products, and energy and money have been invested. A pivot isn’t necessarily a failure – it means that you will change one of your hypotheses about your product or service. There are different variations on the pivot – read more in our blog post Lean start-up: Is it time for your small business to pivot?

“Pivots are a permanent fact of life for any growing business. Even after a company achieves initial success, it must continue to pivot.”
– Eric Ries, in his book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

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Get out of the building – get to know your customers

lean start-up customer feedback

When we last talked about Lean Start-up, we discussed how you’ll need to create a minimum viable product, or MVP – a basic version of your product that early customers can give feedback on. Then, you develop based on measurement and learning.

So now, it’s time to talk about getting that feedback, and what to do when you get it!

Customer feedback and a product or service hypothesis

Here’s what you’ll need to do:

1. Identify potential customers who could give you feedback on your product or service ideas.

2. Develop testable hypotheses around metrics (market test results) that will give you enough information to pivot or persevere with your idea, such as the number of sales or sign-ups for example.

For example, you believe that running an ad campaign will be a cost-effective way to gain customers, but you don’t have the data to prove it. That’s okay! You should still run the campaign, but when you use Lean Start-up methodology, you’ll do it within the structure of a hypothesis. The goal of Lean Start-up methodology is to help you move quickly, iterate rapidly, improve your product (or service) and your company. You shouldn’t spend your time inventing a new way to write hypotheses.

The basic structure is this:

I believe [target market] will [do this action / use this solution] for [this reason].

There are three parts:

  • The belief
  • The target market
  • The measurement

It’s all too easy to write a hypothesis and say, “well, it hasn’t been proven one way or the other yet, let’s just give it more time.” Instead, your hypothesis should be time-bound and short-term. Creating a great hypothesis is an excellent first step, but it won’t help anyone if you don’t keep track of it. There are many ways to do this, but the easiest one is to create a simple, shared spreadsheet that people can enter their hypotheses into. Not only will tracking your hypotheses make it easier to organize your experiments, but it will also help you refine your assumptions and see if there are patterns. If you see 10 hypotheses in a row with similar assumptions all proven false, you can see an area where you need to rethink your approach to the problem. Without tracking, you won’t be able to see those patterns.

Want to learn more? Check out our online small business training for this and dozens of other entrepreneurship skills.

 

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Lean start-up: Is it time for your small business to pivot?

small business feedback

Launching a new business has always been a hit-or-miss proposition. According to the decades-old formula, you write a business plan, pitch it to investors, assemble a team, introduce a product, and start selling as hard as you can. And somewhere in this sequence of events, you’ll probably suffer a fatal setback. The odds are not with you, because about 70% of all start-ups fail.

Meet Lean Start-up

In the last decade however, a new approach to managing start-up has emerged, and it can make the process of starting a company less risky. It’s called “Lean Start-up” and it favours experimentation over elaborate planning, iterative design over traditional development, and customer feedback over intuition.

First, you’ll need to create a minimum viable product, or MVP – this is a basic version of your product that early customers can give feedback on. From there, you develop based on measurement and learning. When this process is done correctly, it will be clear whether or not the company is moving in the right direction. If not, it’s a sign that it is time to pivot – make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth.

What is a pivot, and how can it help your business?

Making the decision to pivot is one of the hardest aspects of the Lean Start-up method, because founders and entrepreneurs are emotionally tied to their products, and energy and money have been invested. A pivot isn’t necessarily a failure – it means that you will change one of your hypotheses about your product or service. There are different variations on the pivot:

  • Zoom-in pivot. A single feature in the product now becomes the entire product.
  • Zoom-out pivot. The opposite of above. A whole product becomes a single feature in something much larger.
  • Customer segment pivot. The product was right, but the original customer segment wasn’t; this changes the customer segment, but the product stays the same.
  • Customer need pivot. Through validated learning it becomes clear that a more important problem needs to be solved for the customer than the original.
  • Platform pivot. Often platforms start out as an application, but due to success it grows to become a platform ecosystem.
  • Business architecture pivot. 
  • Value capture pivot. Changing how value is captured fundamentally changes everything else in the business (marketing strategy, cost structure, product, etc).
  • Engine of growth pivot. Start-ups typically follow one of viral, sticky, or paid growth models, according to the founder of the Lean Start-Up movement, Eric Ries. Changing from one to the other might be necessary to fuel faster growth.
  • Channel pivot. The internet has created more channel options for start-ups, and complex sales or advertising channels are far less dominant. A start-up has many more options from the get-go.
  • Technology pivot. A new technology can offer substantial benefits in cost, efficiency, or performance, and let you keep everything else the same.

Want to learn more about Lean Start-up and other handy methodologies to build and measure business success? Check out our industry-leading small business training video program.

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