After hearing a few friends talking about this new approach for starting up a business, called the Lean Start-up, I decided to find out what it’s about.
These are my observations…
What is it?
Taking a formal systematic approach to starting a business is now common, with the advent of the Business Plan. What a Business Plan seeks to do is to layout a map of a business, that has yet to exist, over a five year period. It covers a whole range of desktop research on the area of business, and projections of financial statements. I will say again, this is all done before the business has come into action.
Although this approach allows you to articulate your business idea in a structured way, it has one downfall: Because all the planning is done in advance of the actual business coming into action it can sometimes be unrealistic. The goals that are set out may be unrealistic, with very little room for course-correction.
This is where the Lean Start-up claims to get it right.
It favours experimentation over rigid planning. The new entrepreneur is encouraged to go test out the new product with customers as quickly as possible, rather than wait to have the whole story before beginning.
The information obtained in the testing out of the product is then used to ignite the planning.
The idea is that you only collect as much data as you need to proceed to the next step. You then quickly return to the customer again to do further testing of the product, then the feedback is used to expand the product.
Benefits
Course-Correction: The benefits of this kind of approach is that it encourages course-correction of the business in its early stages of existence. It also builds into the business an organic culture of improvisation.
Compared to the traditional Business Plan approach, it’s kind of like the difference between the classical musician and the jazz musician. The one plays music composed beforehand, the other makes the music-up as she goes, she may even change the course of the music if the crowd is responding a certain way.
Cost effective: “Lean startup is about being less wasteful and still doing things that are big,” says the business experts. Because you only get what you need for every stage of development the approach is cost effective.
Drawbacks
Intuitive: For me this approach feels like what we all do intuitively anyway. If a product is not working for your customers you obviously change it, you don’t need an expert to tell you that.
Gimmick: Of course anything new tends to bring with it a whole lot of promises than its predecessors, such is the nature of gimmicks. We know this very well from the realm of politics.
But it’s an approach still worth checking out for the budding entrepreneur.
The method is pioneered by Eric Ries, see above image.
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Here is a list of further reading on it:
http://oanasagile.blogspot.com/2012/11/test-driven-business-featuring-lean.html
http://www.liveplan.com/blog/2012/08/the-lean-startup-benefits-and-criticisms/
For something more academic: http://hbr.org/2013/05/why-the-lean-start-up-changes-everything/ar/1