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Eric Ries: Lean Startup Method and How to Adapt It to Your Small Business

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Lean Startup Method

Aspiring Entrepreneurs get excited when researching and testing their ideas months before launching their business. Although these processes are time-consuming and expensive they help these entrepreneurs to test waters. It also prepares them on what to expect when they open the doors to their businesses. Still, it’s a lengthy process.

Eric Ries, on the other hand, introduced the lean startup methodology which helps businesses to develop products in a short period. Taking a shorter period helps the creator to quickly determine whether to proceed with the business model or abandon it.

Further, businesses that opt for the lean startup method focuses on two elements, namely; developing the product and collecting customer feedback. They do this by going live with a minimum viable product (MVP) to the market or a section of the target customers and then improving it based on their real needs. This is the lean way to success.

What is the Goal of the Lean Startup Method?

Generally, the initial stages of a company are characterized by wasteful practices; however, by adapting a lean startup method, the company is put on a path with a higher possibility of long-term success. For instance, a startup can succeed even without comprehensive business plans, increased funding or a product without flaws.

Companies that tend to be successful when implementing a lean startup process are those that focus their efforts on obtaining customer feedback when they release their initial product.

They use the feedback to make changes and iterations on their products thus improving them gradually to fit the customers’ wishes.

Further, this feedback shields you from investing in services and features that they don’t need. Indeed, the lean startup methodology is geared towards minimizing the amount of resources you use during the production phase.

Eric Ries published a novel in 2008 that emphasized innovation and creating successful businesses. His goal was to introduce a method that minimizes inherent risks associated with launching a startup. By releasing an MVP, constantly experimenting and learning during the development process a startup is able to lower these risks.

Why did Eric Ries create such an idea? Ries learnt from Japan’s streamlined process of making vehicles adopted following WWII as well as the lessons he gained when his businesses failed. According to him, efficiency is key and the only way to minimize the wastage of necessary resources.

Characteristics of Lean Startup Approach

  • The business assesses the market and the target customers’ reactions using the MVP.
  • The entrepreneur develops a product according to the target market’s desires.
  • Determines the customers’ interest using validated learning.
  • Instead of sticking to a strict business plan, the lean approach prefers experimentation.
  • Lifetime customer value and product popularity are the two metrics embraced in lean startups.

Lean Strategies for Your Small Business

Going lean means different things to different people. Some people think it means keeping a small team while say it means cutting costs. Actually, going lean simply involves embracing failures and uncertainty as part of your business. This applies to both young and well-established businesses.

The following are lean strategies that you can apply in your small business.

1.    Shun Extensive Business Plans

The lean startup method doesn’t advocate for a perfect business plan because the potential of it succeeding is still unknown. At times, business plans never survive the initial contact with customers.

Still abandoning the plan doesn’t mean you ignore the finance and market part of your business. Every small business has to have the details about its funds at its fingertips the same way it does with its competition.

What embracing the lean method means is accepting the uncertainty of the real world because after all, no one knows what the future holds. Therefore a 5-year business plan can turn out to be pure fiction because you keep on changing it along the way.

2.    Go Live with Minimum Viable Product (MVP)

Startups that adapt the lean method use the imperfect product to go live and perfect it along the way. The logic behind this concept is that a product might only look perfect in your eyes and not in the public eyes.

Still, pre-launch surveys and market research might not give you the accurate information that you need because some respondents might not answer the questions truthfully.

So the solution is to go live with an imperfect product, learn from the mistakes and keep on fine-tuning it. Actually, technology and trends change very fast and waiting until your product is perfect might cause you to join the market very late.

Further, your funding needs are extremely low when launching an MVP and many business angels will be willing to fund your startup along the way as your business progresses.

3.    Focus on Real Customers

Lean startups create products in conjunction with the consumer and not alone. Companies spend huge amounts doing market research as well as defining their target groups only for them to realize that their assumptions were wrong.

However, with the lean method startups focuses on real customers rather than abstract markets. As a result, these companies develop their products while at the same time growing their business.

Take for example an eCommerce brand that focuses its attention on the product but end up losing customers due to a complicated payment process. Going out with an imperfect product could have helped such a company identify the problem earlier before launching it in the market. Therefore using the right questions to ask customers what they want can be profitable in the long run.

4.    Stay Always Agile

At times startups stick to complicated and inefficient workflows due to fear of failure. However, a process should be changed if it’s not working as it should. Actually, the lean startup method applies the agile development principles and one of its goals is to deliver early and continual improvement.

According to agile development, processes are evolution, not straight development. It involves adapting products to ever-changing environments.

Companies shouldn’t fear failure because it provides lessons that help them achieve the highest possible quality.

However, you can only achieve that when you have good communication, short decision-making paths and an agile team.

Principles of Lean startup Technique

Build

It’s the first aspect of the lean startup methodology. Building starts with creating an MVP or a product and service that has features that can satisfy customers. This imperfect product allows a company to test the market to see how successful it is in that state and what can be done to improve it or make it perfect.

MVP is only released to a subset of target customers across different demographics and should be done in the early days after launching a startup business.

Measure

It involves evaluating the results of the MVP and continual development of the product. Your target customers provide feedback about how satisfied or unsatisfied they are with the imperfect product. Use such information to fine-tune the product and rich it with features.

On the other hand, your target customers may dislike the product. In other words, the basic product may fail to get traction which indicates that it’s not the solution they are looking for. That means you have to get rid of it and start all over again.

However, you will not have spent a lot of your resources compared to if you had perfected the product but then the target consumers reject it.

There are many ways of getting customer feedback. For instance, you can use surveys and website analytics to gather customers’ feedback or evaluate the traffic, leads, conversions, and sales, if you’re operating a purely online business. Such data can help you see what you’re doing well and areas that need improvement.

You can use testers if you’re dealing with an actual product and get their feedback directly from them. Learn from all the data that you receive regarding your MVP and look for ways to improve it.

Learn

After placing the MVP on the market and collecting as much information as you can, the third component of the lean startup method is to use the data to make improvements. This step helps you to eventually place on the market a perfect product and services as per what customers want.

Some of the feedback you will gather from the initial customers might not be relevant or directly affecting the MVP. But you can use such information to identify the aspects of the basic product that is working, the way that is not working and what should be refined. Actually, learning from customers’ feedback can help you develop a product that meets your target audience’s needs.

Comparisons between Traditional Startup and Lean Startup Approaches

The two approaches are different. For instance, the traditional startup approach demands that a young business should have a 2-5 years business plan that explains how its ideas and goals will reach success. The plan is also used to raise funds to help the startup achieve its business goals. The learn startup method does not have such business plans.

Further, in the traditional approach, the company produces its products quietly until it’s perfect to its investors and employees eyes but the target customers don’t know about it. While this approach can be applicable in mature companies, it’s not useful in early-stage startups.

Young entrepreneurs prefer the lean method because it helps them find the right business model and test the idea they have before a large outlay of resources. Further the feedback that small businesses gather from their target audience help them to iterate on the product and improve it.

So the traditional and lean methodology have distinctly different core principles, can be successful and have few similarities.

I'm a passionate full-time blogger. I love writing about startups, how they can access key resources, avoid legal mistakes, respond to questions from angel investors as well as the reality check for startups. Continue reading my articles for more insight.

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