The Lean Start-up Methodology
The Lean Start-up Methodology
By Samantha Garner, GoForth Institute
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 along the way, you may suffer a setback. To put it another way, about 70% of all start-ups fail.
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.
Lean Start-up comes from Lean Thinking, which was a management approach famously applied in Toyota’s factory production system as they rose to prominence in the 1970s. Since then, Lean Thinking has proven useful in a lot of different areas. The Healthcare and Construction industries have had their own Lean movements. In the ‘80s and ‘90s, you might have heard about Supply-Chain Integration or Total Quality Management. These were corporate movements also based on Lean. A version of Toyota’s approaches have been central to General Electric (GE). Lean has even been employed in software development - for over a decade! Lean Start-up is the latest addition to the family.
Three Key Principles of Lean Start-up
Business Model Canvas
Rather than engaging in months of planning and research, entrepreneurs accept that all they have on day one is a series of untested hypotheses - basically, good guesses. So instead of writing an intricate business plan, entrepreneurs can summarize their hypotheses in a framework called a business model canvas (from Class 4). Essentially, this is a diagram of how a company creates value for itself and its customers.
Second, lean start-ups can use a “get out of the building” approach called customer development to test a hypothesis about their product or service. You go out and ask potential users, purchasers, and partners for feedback on all elements of the business model, including product features, pricing, distribution channels, and affordable customer acquisition strategies. The emphasis is on nimbleness and speed - new ventures quickly assemble minimum viable products and immediately getting customer feedback. Then, using that feedback to revise assumptions, you start the cycle over again, testing redesigned offerings and making further small adjustments (iterations) or more substantive ones (pivots) to ideas that aren’t working.
Third, lean start-ups can practice something called agile development, which originated in the software industry. Agile development works hand-in-hand with customer development. Unlike typical year-long product development cycles that presuppose knowledge of customers’ problems and product needs, agile development eliminates wasted time and resources by developing the product (or service) iteratively and incrementally. It’s how start-ups create the minimum viable products they test.
Samantha Garner is GoForth Institute's Director, Communications. Contact Samantha by email: firstname.lastname@example.org