What is Lean Startup?
Lean startup is a method used to found a new business or introduce a new product on behalf of an existing business. The Lean Startup method advocates the development of products that consumers have already demonstrated that they want so that a market already exists from the launch of the product. As opposed to developing a product and hoping to see a demand emerge.
Key points to remember
- The Lean startup is the process of developing a product or a business based on the expressed desires of the market.
- The Lean startup uses validated learning, which is a process by which companies assess consumer interest.
- Lean startup methods focus heavily on customer information such as customer churn, customer lifetime value and product popularity.
- In lean startup practices, experimentation is more preferred than adhering to a rigid plan.
- Lean start-up standards will involve the release of small or early concept products to assess the customer’s reaction to the product.
Understanding Lean startup
Using simplified start-up principles, product developers can assess consumer interest in the product and determine how the product may need to be refined. This process is called validated learning and it can be used to avoid unnecessary use of resources in the creation and development of products. Thanks to simplified startup, if an idea is likely to fail, it will fail quickly and inexpensively instead of slowly and costly, hence the term “fast”.
The Lean Startup method was developed by the American entrepreneur Eric Ries, founder and CEO of the Long Term Exchange (LTSE). He explains the method in detail in his successful book, “The Lean Startup”, which has been translated into 30 languages.
The Lean startup is an example of consumers dictating the type of products offered to them by their respective markets, rather than these markets dictating which products will be offered to them.
Lean Startup vs Traditional Companies
The lean startup method also differs from the traditional business model in terms of recruitment. Lean startups hire workers who can learn, adapt, and work quickly, while traditional companies hire workers based on their experience and ability. Lean startups also use different financial reporting metrics; instead of focusing on income statements, balance sheets and cash flow statements, they focus on customer acquisition cost, customer lifetime value, customer churn and virality. their product.
Lean start requirements
The Lean startup method considers experimentation to be more precious than detailed planning. Five-year business plans built around strangers are seen as a waste of time and customer feedback is paramount.
Instead of business plans, Lean startups use a business model based on assumptions that are tested quickly. The data need not be complete before continuing; it should just be enough. When customers do not react as desired, the startup quickly adapts to limit its losses and return to the developing products desired by consumers. Failure is the rule, not the exception.
LikendisLikes who follow this method test their hypotheses by engaging with potential customers, buyers and partners to assess their reactions regarding product characteristics, prices, distribution and customer acquisition. With the information, entrepreneurs make small adjustments called iterations to the products, and large adjustments called pivots correct the major problems. This testing phase may involve changing the target customer or modifying the product to better serve the current target customer.
The simplified startup method first identifies a problem that needs to be resolved. He then develops a minimum viable product or the smallest form of the product that allows entrepreneurs to present it to potential customers for feedback. This method is faster and less expensive than developing the final product for testing and reduces the risk faced by startups by lowering their typical high failure rate. The Lean startup redefines a startup as an organization looking for a scalable business model, not an organization that has an existing business plan that it is determined to execute.
Lean startup example
For example, a healthy meal delivery service that targets busy 20-year-old singles in urban areas might learn that it has a better market for affluent mothers of 30 newborns in the suburbs. The company could then change its delivery schedule and the types of food it serves to provide optimal nutrition for new mothers. It could also add meal options for spouses or partners and other children in the household.
The simplified start-up method should not be used exclusively by startups. Companies such as General Electric, Qualcomm and Intuit have all used the light start method; GE used this method to develop a new battery for mobile companies in developing countries where electricity is unreliable.