Lean Startup: How the lean method works
Lean startup is a method of developing businesses and products that focuses on customer feedback, iteration, and efficiency. By gathering data as early as possible, a business can quickly learn whether their product is viable—and if not, why.
Let’s take a look at the core concepts of the lean startup approach, its pros and cons, and some of the businesses that implement it today.
What is Lean Startup?
In the lean startup method, businesses quickly develop the simplest version of their product, test its performance with their target consumers, and draw evidence-based conclusions based on the results. They then iterate on the product with a new version for testing, repeating the development cycle.
A lean startup focuses on concretely identifying and meeting the needs of their customers, then works backward from those needs to shape their business or product. This flexible approach minimizes failed product launches, shortens development cycles, and cuts down on wasted time and money.
Origin and history
While Eric Ries first coined the term in 2008, the lean startup method has its roots in longstanding strategies like lean manufacturing and customer development.
Toyota first implemented lean manufacturing in the 1950s, although the term wasn’t coined until 1988. Their strategy was to reduce waste—such as from overproduction or overly complex products—and focus on adding value for consumers as directly as possible, by understanding their needs and delivering products that met them. To meet these goals, they developed a logistics system called kanban, variants of which are now used in all kinds of management.
The success of Toyota’s approach led to many other companies adopting their principles, including those outside of manufacturing. The general strategy is often referred to as lean management and was brought to the world of product development by Steve Blank as customer development.
Like lean startup, Blank’s customer development focused on identifying the customer’s problem and validating that a product was the solution as early as possible, before scaling the business.
In 2008, Eric Ries proposed the lean startup methodology as a synthesis of lean manufacturing and customer development and later went on to publish his bestselling 2011 book on the topic, The Lean Startup. Since its publishing, the lean startup method has continued to grow in popularity.
Why lean startup?
In today’s fast-paced markets, few companies can afford to waste time and money on ventures that may not be successful. The traditional approach of spending months or years of resources to launch a fully realized product that may not meet customer needs is increasingly risky.
For many businesses, the lean startup method is the solution.
Thanks to a quick and streamlined process of iteration, lean startups can minimize their financial risk as they try a wide variety of ideas and products. This allows them to identify successful products early, test and discard ideas that won’t work, and avoid the wasted time and money of failed launches.
Concepts in the lean startup method
The principles of lean startup apply to many product development strategies. The two most foundational concepts are the minimum viable product, or MVP, and the “Build, Measure, Learn” cycle.
Minimum Viable Product (MVP)
Lean startups begin with the development of a minimum viable product. This is the product in its simplest state, with only the features necessary for testing whether it meets the needs of the customer.
By testing the MVP’s performance with potential customers, a lean startup can assess whether their proposed product is likely to succeed without spending the time and money to fully develop it. An MVP can be as simple as a cohesive proposition for a solution to a problem.
Amazon is an example of a major company that began with a simple MVP. After reading about the high predicted growth rate of internet commerce, Jeff Bezos decided to identify the ideal product with which to test an online marketplace. He chose books for their simplicity, low price per unit, and variety, and launched Amazon as a bare-bones book marketplace based in his garage. Amazon’s MVP was a success, and the company soon began to expand to new products.
Build, Measure, Learn
The Build, Measure, Learn loop describes the three main steps of the lean startup method. First, a “draft” version of the product is designed to test a hypothesis (the build step). Next, the reactions and feedback of a group of target customers are collected (the measure step). Finally, that feedback is analyzed to identify what works about the product, as well as where it needs to change (the learn step).
The first cycle of Build, Measure, Learn is the development and testing of an MVP. Once a plan is in place to iterate on the MVP, the Build, Measure, Learn cycle starts again. The faster a business is able to move through the loop, the more quickly it can test and develop viable products.
Usually, some of the hypotheses a business is founded on will be proved incorrect—maybe an approach worked for a previous product, but it’s not working for your target audience. Instead of giving up, a lean startup pivots, identifying what was wrong with the previous attempt, changing, and trying again. When developing a product with the lean startup approach, flexibility is key.
Actionable metrics aim to provide a logical and objective assessment of the key drivers of a business—unlike “vanity metrics”, which portray a product in the best possible light. Using actionable metrics, lean startups make informed choices by developing a clear picture of what’s working about their product, and what isn’t.
Split Test (A/B-Test)
In a split test, a business offers two different groups of customers two different versions of their product, then examines the actionable metrics of each group. By limiting other variables, a split test can be used to make an informed decision about the product. This scientific approach aims to provide the best possible chance of developing a product in the right direction.
The lean startup method is popular with many businesses thanks to its key advantages.
Where traditional development guesses at key customer needs based on the success or failure of existing products, lean startup aims to identify and meet those needs as early as possible with early feedback and experimentation. There’s no way to guarantee that a product will succeed, but lean startup ensures that you’ll be able to quickly identify potential reasons why it won’t.
By reducing risk, the lean startup method saves time and money that might have been wasted on unviable products, and by iterating quickly and failing forward, it allows companies to keep up with shifting advancements and trends. This flexible, iterative approach enables businesses to develop better processes and products, faster.
While lean startups are often more successful than traditional, planned product development, they can also be more challenging to manage.
The flexible nature of the lean startup method can sometimes complicate planning, budgeting, and marketing. Identifying and polling target groups during the process can also be tricky and expensive, but is a must for reducing risk and developing a viable product.
Additionally, lean startup just isn’t right for every venture—not all products can be developed quickly or iteratively, especially those that need to meet established standards of safety and quality. Some companies may also need to avoid showing products to customers before they finish and polish them.
Lean Startup: is it worth it?
Although some businesses are less suited to the lean startup method, the efficiency, flexibility, and speed it offers make it an option worth looking into for most companies.
Whether or not the method as a whole is right for your business, the core principle of lean startup—adjusting early and often to customer needs—is a valuable concept to build into your approach.
Lean startup movement
Beyond its founders, the lean startup movement has many supporters. These include prominent tech companies like Intuit and Dropbox, multiple United States Chief Technology Officers, and Harvard and UC Berkeley, where the principles of lean startup are taught in classes.
The lean startup method in practice
As automation and digitization continue to accelerate the pace of global markets, the lean startup method has grown increasingly popular. Today, companies of all types and sizes apply lean startup principles, often alongside approaches like design thinking and scrum.
Design thinking is an iterative planning process that helps teams understand their customers and challenge their assumptions about the problem before them. It’s often useful to apply design thinking before beginning the cycles of lean startup, to quickly develop an excellent MVP as a starting point.
Scrum is a management framework that helps teams self-organize while working on problems, then reflect on the outcomes. Scrum often relies on sprints, or short time periods with a set amount of work to be completed. This agile, flexible framework is effective when paired with the lean startup method.
Dropbox began when Drew Houston forgot a flash drive and set out to create the first-ever cross-platform cloud storage service. Houston created a video pitch for Dropbox—before work had started on the platform—to gauge interest. The pitch was a success, and Houston continued to implement the principles of lean startup throughout Dropbox’s early life, growing it from 100,000 to 4,000,000 users in just 15 months (Dropbox at Startup Lessons Learned Conference, 2010).
In 2013, General Electric founded an internal program called FastWorks based on the lean startup method. The small team was tasked with developing an MVP in 3 months or less, and fully developing the product in 12 months. They began testing their MVP after just 1 month, and GE as a whole now plans in 1-year iteration cycles with customer feedback, instead of 5-year redesigns behind closed doors.
Uber began as a simple idea—what if you could call a taxi with just a few taps on your phone? Rather than spend time and money building a complete platform and workforce, the service launched in New York with just 3 cars. The test was a success, and they used the data they gathered to launch in San Francisco later that year. Uber continued to iterate on the feedback of its expanding user base and now operates around the world.
svaerm is an established online marketing agency founded by Steffen Mai, a marketer with over 25 years of professional experience. Although we’re not a startup, we employ many of the key concepts of the lean startup method to bring added value to our clients.
In our social media advertising, we conduct lean test phases to identify ad groups and individual high-performing ads. Once we identify ads with a high Relevance Score, we boost those ads with extra funds in the growth phase, using an iterative approach to ad selection to generate the most value for the client’s money.
Our SEO services also take advantage of the lean startup method. We launch MVP webpages which we optimize until we think they can rank (the build step), then publish and evaluate the page after a few months (the measure step). If the page isn’t ranking or converting visitors into leads, we reoptimize it through a content update, semantic SEO, internal linking, or by increasing its linkability (the learn step). If the page ranks immediately, we save the client time and money. We use this lean approach for clients that have room for flexibility in their feedback process, but we are always able to adapt if multiple reoptimizations are not realistic.
Our lean approach also extends to our other projects, such as our client Conzoom Solutions, Messe Frankfurt’s online magazine and e-learning platform. We launched a lean exchange of experiences forum on a small scale through the online platform and invited several retailers to participate. Our lean test of the forum showed that users still preferred physical events, and we avoided wasting excess time and money on the online exchange.
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If you’re looking for an online marketing agency that offers all the advantages of the lean startup method, get in touch with us using the contact form below to start working with svaerm.
Interested in working at a lean company, but concerned about the job security of a startup? svaerm offers both a lean startup culture and the stability of an established company with prominent clients.