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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:
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.
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.
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.
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.Benefits of Lean Start-up first appeared on GoForth Institute | Canadian Entrepreneur Training. Visit the GoForth Blog