Lean startups are not about saving money and getting development done on the cheap. They are not about saving money by doing work at home rather than a rented office. That’s not what the word lean means here!
Lean is about elimination of waste in development, marketing, selling, and growing a company. And making course corrections quickly and efficiently so that you are precisely pointed to success. And believe me , there is a lot of wasted time, effort, money before startups start making profits and grow because of mistakes.
So where is waste when you are building a product and a startup company, you ask? Products built that users don’t buy and use, product features that are built but are not used, effort going after a market that does not pan out, partnerships that are built that do not generate business for you are all waste!
These days, there is no excuse for any startup, consumer facing or enterprise-oriented, to not know about lean startups, educate their entire founding and initial teams on this way of doing things, and practicing what they learned here in everything they do. After all, when your time, money and effort is so limited at a startup stage, who wants to waste any of it?
There are a few good places to start and that too for free! Here is a free online course – How to Build a Startup ? taught by Steve Blank. He knows what he is talking about. He has built 8 startups, a couple of them being sold for a billion dollar plus (like e.phiphany) but more importantly, has failed a number of times also! He teaches entrepreneurship at Stanford University and a number of other top 10 universities. You can view the entire course in a few hours but it is worth taking it lesson by lesson and completing the assignments relating to your startup thoroughly before going on to the next lesson.
Did I mention that it was free? Now, there is really no excuse!
The book, The Lean Startup by Erik Ries is another good resource to start with. The nice thing about Steve Blank’s course above is that it expands on concepts put forth by Erik Ries on product development to other areas a startup needs to pay attention to, such as business models, pricing vs. revenues, marketing, selling, and partnerships.
To really understand the details of what the waste is and how lean startups avoid them, you need to spend some time with the above resources.
However, here are some of my observations presented in the form of 5 Essentials!
1. Your Idea Vs. What’s Really Needed – In my over a quarter century of programming and then, management experience, if there is one thing I have learned is that the hardest thing to manage in services is Requirements Gathering. What people actually need and what they think and say they need, may be two entirely different things. This may not show up in the beginning but at some point in time, we have all had users say “Yes… But….” when asked how useful the system is for them. On top of this, product companies are responsible for coming up with their own requirements as to what their potential users need. This is even tougher! On top of this, you have the fast pace of technology change – hardware (from Mainframes to Minis to PCs to mobile devices now), software languages, styles of computing (centralized to distributed to mobile distributed) and delivery devices (PCs to mobile devices of various form factors). By the time your idea bears fruit, conditions have changed and your users need something different. Lean Startups provide an elegant way of addressing this – your idea or requirements you have gathered are only hypotheses and they need to be validated with a minimum viable product before you waste time, effort and money implementing the whole thing! In other words, they help you iterate towards the right product-market fit!
2. Pivoting – Failing Early and Changing Direction Quickly – When your startup grows from a startup to an on-going successful company, your product’s growth (and your business, revenue models) may be something like this:
The only problem is that you don’t have precise idea of which one of the above represents your product. Or your pricing or your business model, revenue model, partnerships, etc. Lean methodologies require you to commit minimally at first to any of the approaches towards any of these things, test your hypotheses and then proceed. Fail early and often when you have not spent too much time, effort and resources to experiment with different approaches before settling on the right ones!
3. Startup teams need to be different from traditional management teams: As Steve Blank emphasizes in his course, a startup is not a smaller version of a larger company. So you need to set aside the traditional larger company management team or MBA approach and focus only on those people necessary for the startup stage. You may not need a VP-Sales as yet. You may not need a VP-Marketing as yet. Many startup companies I have been with had a technical and business founder (complementary skills) iterating the product initially, then adding a junior product management person to coordinate between what is needed in the market and the ordering of features that need to go into the product. Then they hired sales people that can actually do the selling, then a director of sales. They hired a junior marketing and social media person that actually did the work before hiring a VP of Marketing! So what needed to be done initially drove who was hired. I have seen this happen even when some of the startups I was at had raised even a Series A round.
4. Measuring the Right Metrics: Measuring the right metrics is important if you are a consumer facing startup or an enterprise one. If you are a mobile consumer-facing startup your metrics need to be one set, while if you are a SaaS enterprise play with a Freemium business model, your metrics may need to be another set. They may or may not be in terms of money (like facebook was for a long long time – they were just measuring members and member engagement!). Not measuring the right metrics have a lot of consequences in a startup company – being able to raise additional investor money, planning ahead in terms of people, timing, facilities and other things that go into a startup.
5. Appropriate Product Management: There is the story of GroupOn being born as a consumer feedback portal. When they featured the Pizza Shop’s offers, downstairs from their offices, they found takers! They pivoted and created a whole new product and eventually a product category by themselves! Iterating product functionality helps startups discover completely new uses for the product and spin out different products with variations or address a related market with a modified product, etc. Product Management is helped a lot by listening carefully to the people who look at your product. Especially those that need a different version of the product, a higher priced one with additional features, a lower priced one with lesser features or may be a free one since they want to try it out before making a committment. Most importantly, out of the norm features can be identified and spun off into a separate services component (consulting). We had a golden rule in one of our product companies – if 5 prospects asked for a feature it is in the next agile sprint. If 3 prospects ask for it, it goes into the next major release. If only one prospect asks for it, we make a note of it. If they would buy today if it is available, we separate it out architecturally and offer it as an additional, expensive, services component!
These are some of the Lean Essentials. Lean Startups are processes in themselves.
If there is one thing that the Lean Startup methodology does not address it is that it does not teach you how to create those hypotheses about what your prospects need. For those, you still need to build a creative culture! Here my other article in this forum – Think Big! Build a Creative Culture or Transform Into It!
Why do we exist and why should anyone care? (key question every startup should ask) – Bill Gross