The method thus proves to be resource-friendly – which is a great advantage not only in the start-up environment. But how does Lean Startup work and how can you use the innovation process in your company or your business idea?
„Lean Startup is about Learning what your customers really want. It’s about testing your vision continuously, adapting and adjusting before it’s too late“ – is the tagline of Eric Rie’s bestseller The Lean Startup, which was published in 2011.
Before Eric Ries gained international fame as an author, he tested Lean Startup in his own companies. While Ries’ first startups failed, as co-founder and Chief Technical Officer (CTO) of IMVU, he enjoyed immense success: As early as 2009, the balance sheet was extremely positive, with revenues of $22 million. Today, the social network has more than 40 million users and excellent customer feedback.
Lean Startup is therefore a method that has emerged from practical experience in the startup environment. It is hardly surprising that its uncomplicated “trial-and-error” principle is a key characteristic of the Lean Startup innovation process.
Fail fast, fail often, and let go of the superfluous.
This scientific approach can be summarized as a practical innovation approach based on data and repetition as well as customer centricity. In this way, Lean Startup also differentiates itself from the classic waterfall method known from traditional product development. Learn more about customer-centric product development in this article.
When we talk about Lean Startup, we often hear about an iterative approach and an MVP (short for Minimum Viable Product ). While the iterative approach focuses primarily on step-by-step optimization, an MVP focuses on the cost-saving development of business models or concrete products.
Iterative – i.e. repeated – procedure is also known under the term incremental procedure model. This agile approach has proven particularly successful in software development. Known as the agile manifesto, in 2001 17 American software developers defined a standard for agile thought and behavior patterns that are still used in development today and have been merged with other frameworks such as Scrum.
Individuals and people over processes and tools.
Functioning software over extensive documentation
Coorperation with the customer over contract negotiations
React to changes over following a strict plan
Small-step optimization makes it possible to approach the desired result successively and to make improvements to the product again and again. But not only improvements to the product: Through the constant repetitions and the constant learning and optimizing from the previous attempts, new insights are gained. This iterative approach and working with multiple development cycles is the basis of Lean Startup.
Small-step development rounds are also accompanied by an MVP: The Minimum Viable Product is a product that initially meets only minimal requirements. Based on such a product, optimizations can be carried out – again step by step. This approach is not only efficient and measurable, but also cost-effective.
The advantage of this is that in order to test whether products or business models work (are well received on the market, i.e. are customer-centric enough), large sums of money are not invested in full-scale (product) development or the product is developed only on the basis of the founder’s idea. Rather, the customer is involved in the development process and asked for feedback. Let the customer or potential user participate as early as possible, bring him into the game and collect his valuable and usually uncensored customer feedback.
This saves valuable personnel and financial resources and brings a change of perspective to development. That means: With an MVP you can avoid wasting already scarce goods – an advantage that also characterizes the Lean Startup method. The innovation process is cost-effective and, in a way, almost risk-free. If you don’t spend large sums of money, but instead create hypotheses that you can validate peu à peu, it’s not expensive. Quite the opposite!
Lean Startup is an iterative model that relies on a recurring cycle of three steps: (1) build – (2) measure – (3) learn. This cyclical approach is associated with continuous feedback loops, the lead time of which should be as short as possible. The aim is to constantly optimize the initial situation in order to be able to draw the targeted end result in ever more contours. The objective of this process is to develop a marketable product, a marketable service or a burning business idea.
The first step of Lean Startup is to implement an existing idea. The idea is therefore “built”. Whether it’s a prototype of a product, an initial business idea or a concrete design – the first output should be kept as simple as possible in the sense of an MVP. It sounds bizarre, but that’s how you quickly achieve the greatest benefit.
However, this exactly is the challenge. Especially at the beginning of a development process, many things are still unclear:
Those who get lost in details at this point, which may not even be needed, waste valuable resources. And one more tip: Don’t philosophize and guess what the customer might need and then decide according to your gut feeling. If you are looking for answers then get active and ask your potential users. Tell them about your idea and the problem you are trying to solve. Feedback from such conversations will definitely help you. Learn more about customer development and getting customer feedback in this article.
Whether the built Minimum Viable Product is going in the right direction must be evaluated in the next step. This requires measurement, and you should think about the most important KPIs in advance – ideally during construction.
The customer journey is one starting point for identifying important metrics around your product idea or business model. You can read how to map the customer journey and the touchpoints with your company in the magazine article Customer Touchpoint Analysis.
Important is also when measuring: Don’t get too detailed. Too much data and too frequent validation do not lead to the goal, but only open up a selection of detours – which in turn counteract the best case of fast and nuanced further development. At the same time, however, it is important to focus on really relevant data in order to be able to test hypotheses in the next step, for example.
Step 3 compares the information gathered so far and records the lessons learned.These serve as a starting point for the further procedure, which in turn is to be validated. This example illustrates the third step once again:
Company A has created the prototype (an MVP) of an education portal. Selected, interactive learning games and video clips are offered. Now the company measures and analyzes user behavior:
Based on the results of the analysis and your conclusions, the further offer can now be adjusted. If hardly any users use learning games, there is no need to push this branch further. If, on the other hand, many users access the learning games, but hardly anyone uses the video session, the learning games can be expanded further. In further correction loops, the company can now tailor its offer to the users in even more detail (playful gamification vs. serious design, personalized landing page, etc.). In parallel, users can be asked about their experiences with the MVP. Perhaps user feedback will reveal why the video sessions are not being used. This makes the whole system more functional.
The advantage: small-step adaptation not only allows hypotheses to be tested. At the same time, it is possible to respond to customers’ wishes or address potential new customers by adjusting the offer. Thus, Lean Startup is not only an opportunity for founders to work in a customer-centric way. Traditional companies and established firms also benefit from the method and the associated continuous feedback.
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Many agile paths lead to the desired destination. A special feature of Lean Startup is the combination of rapid product development and an iterative process, which has a direct impact on value creation. Thus, the method developed by Eric Ries builds a bridge between Design Thinking and Scrum. While a Design Thinking Sprint is primarily about the rapid realization of a prototype (“build”), Scrum focuses on the iterative improvement process (“measure and learn”). The following graphic illustrates the principle behind Lean Startup.
Lean Startup combines both approaches and remains small-step. In this way, each cycle offers the opportunity to respond to the customer in an even more targeted manner. Market changes or changing customer needs can also be addressed quickly and efficiently with the Lean Startup method. In this way, learning processes can be directly implemented and mapped when passing through a new loop.
Lean Startup – used correctly – holds an opportunity for numerous industries and business models. This is because the cycle model can be used both for startup ideas and for the optimization of specific business sectors, services or products.
Moreover – as described – not only founders and start-ups can benefit from the method. Of course, it is clear that medium-sized companies and corporations do not face the same challenges as start-ups. While freshly founded companies often lack capital, grown structures often struggle with innovation backlogs, silo thinking and models, and change management. But to mitigate the challenges a bit, I like to quote Peter Drucker who said, “the purpose of an organization is to enable ordinary human beings to do extraordinary things.”
However, Lean Startup offers established companies the opportunity to first align individual business processes or products more closely with the customer through simple adjustments and an iterative approach. Startups, on the other hand, benefit in terms of personnel and finances from the resource-saving Lean Startup method. The drivers of strong growth are customer centricity – agility – data-driven decisions. Factors that can all be found in Lean Startup and must not only be preached in meetings, but lived in the organization and aligned with customer needs.
Needless to say, Lean Startup also has its limits: The “quick and dirty” approach to establishing a Minimum Viable Product means that meticulousness initially takes a back seat. It has to fit the target group and the company. Nevertheless, Lean Startup opens up new perspectives and – especially for established medium-sized companies or corporations – the path to agile(re)work.
Thus, the Lean Startup method is by no means a concept of the hip startup world. Rather, it also offers new opportunities in the SME and corporate environment. This proves useful not only in product development, but also in optimizing an existing offering. The advantage: Those who apply Lean Startup, measure it correctly and then optimize it, can optimally align their own offering with their customers – and thus act in a customer-centric manner. Sooner or later, this allows for scaling.
After questions about suitable literature on Lean Startup, agile organizational development (keyword: agility) and Customer Centricity also arose during workshops and discussions in companies, I would like to mention a few book recommendations here:
The term “Lean Startup” originates from the USA.” Lean Startup methods can be used to found companies, to further develop existing organizations in an agile way or to develop products together with the market and the customer.
The focus is not on large project plans, long and elaborate rounds of meetings with lots of PowerPoint slides, but rather on learning-by-doing consisting of experimentation, constant feedback and rapid implementation.
Lean Startup, like other agility methods, requires a Growth Mindset from everyone in the organization. You can learn more about what a growth mindset is in the article Company Growth.
Entrepreneurs and innovators of all types and disciplines are using Lean Startup methods. These techniques are now being used in large companies such as GE, BMW, and JPMorgan to redefine product development processes and departmental functions to make them more agile. Lean startup principles are used by customer-centric founders to turn brilliant ideas into marketable products. The German federal government also use Lean Startup methods to quickly and effectively overcome the hurdles of German bureaucracy.
Absolutely, it’ just hasn’t sunk in with many companies yet.
As the world changes at an unprecedented rate, companies have realized that they must always keep pace with an evolving marketplace. The principles of entrepreneurial management can be applied to many sectors and companies of varying sizes. Although Lean Startup methods were developed in small and young companies, the process is at least as applicable to ongoing innovation and product development efforts in mature companies.
In addition, Lean Startup also brings a 100 percent customer focus and, when applied, does not lose sight of the customer at any step in the process.
Since medium-sized companies often still focus on their organization as such and not on the customer, the approaches and methods are very helpful in constantly maintaining the change in perspective.
In medium-sized companies, the profit jump may well be higher, as the path to the customer may be obscured by far more waste, bureaucracy, and distance than in a startup.
For a growing startup or a project team of a mid-market company, a Lean Startup provides the framework to maintain the entrepreneurial spirit in the face of rapid growth.
It is much easier to list the industries where Lean Startup is not applicable. Because: there aren’t any.
Your company could be in technology, software, engineering, healthcare, energy, management, construction, consumer products, it doesn’t matter. Any company that delivers something of value to a customer (and that would be any company) can apply Lean Startup and integrate it into their existing processes.
The only real difference between B2B and B2C in terms of Lean Startup is that B2C has a larger customer base to experiment with, measure and optimize the Value Proposition.
The only reason Lean Startup works, however, is that it uses a small group of customers to measure value, i.e., if I build this product, will my customer buy it? Similarly, customers can be very broad and perhaps be an internal department or focus group within an organization.
Hence: lean startup is probably suitable for B2C, as well as B2B companies. The important thing is to apply the methods correctly across processes and departments.
As a customer insights expert and certified Scrum product owner, I experience the importance of customer-centric product and marketing development on a daily basis.
In combination with agile optimization processes and a corporate culture open to experimentation, you will bring your growth fully on track.
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