Which of the following sounds most familiar?
Fat Startup “Method”:
- Venture Capital funding
- Waterfall development
- Product/Marketing launch
- Missed revenue targets
Lean Startup Method:
- Self-funded or friends and family
- Minimum viable product
- Agile development, fast fail
- Customer development
- Funding to scale
“Lean startup” is an pioneered by Eric Ries of Startup Lessons Learned, based on the confluence of three trends. First, the web 2.o phenomenon whereby user generated content and low cost, opensource software allow entrepreneurs to bring “new products to market faster and cheaper.” Second, the Engineering practice of agile development, which allows developers to quickly iterate the process of coding, deploying, and testing with live customers new features and products. Finally, the emergence of customer development, which is a process-oriented approach to “discovering” and “validating” your customer assumptions, as articulated by Steve Blank.
While agile and customer development principles can be effective in all product endeavors, there’s a particular grace when lean startup principles are applied to online ventures. This is because online development and online marketing are attached at the hip. There is no other venture I can think of which can match the speed of iteration through a product lifecycle.
Imagine you have a new product idea. In the past, you might first work on writing a 50 page business plan, with which you shop your idea to the VC community. The likelihood of your product seeing the light of day, let alone the light of customer feedback is infinitesimally small. Even if you were to somehow get funding, you will be held to the revenue plan, complete with the requisite hockey stick growth concocted while your product was merely a glimmer in your eye. It’s sort of like paying for your kid’s Ivy League tuition before you’ve met your partner!
Today’s online products, on the other hand, can be shaped by your customer, in near real-time. And not only will your customers tell you the products they want, i.e., what solves their problem, but they’ll also tell you how they buy, where they shop, who influences their decision, and how much their willing to pay.
To accomplish this feat of startup bliss, you meld customer learning with agile development to form a virtual feedback automaton:
Source: Eric Ries (http://www.slideshare.net/startuplessonslearned/20090608-the-lean-startup-tokyo-edition)
Customer feedback will not always result in answers that entrepreneurs like. Even a highly flexible organization, adept at adapting, may not find a market worth pursuing. These are gut-check moments. Ultimately, it’s better to learn quickly that an idea’s time has not (yet) come, than to believe that past experience, perseverance, working harder than the competition, etc., can overcome the obstacle of no customer demand.
Lean Startup Internet Memes
Often when a concept gets traction on the Internet, a series of “Internet memes” accompanies it. Lean Startup is no exception. So here are some of pithy phrases you should know:
- Fail fast – while no one wants your business to fail, you do want lame features to fail and fail fast. Fast iteration requires that you deploy code quickly and fix or kill features that aren’t used. The same concept is used in marketing to optimizing a landing page or fix messaging. (That being said, if your business is going to fail to do lack of customer demand, you might be better off it also failed quickly.)
- Get out of the building – Many entrepreneurs don’t want to speak directly with customers. But that is who most likely has the answers you seek, grasshopper. (RIP)
- Don’t sell, listen – How you interact with potential customers is as important as interacting with them. Customer development is neither about selling or gathering feature requirements. It’s about understanding customer pain.
- Ask why 5x – How to dig through the symptoms and find the root cause of a problem. Useful for uncovering internal inefficiencies as well as discovering core problems customer is trying to solve.
- Triple A of metrics – Actionable, Accessible and Auditable. Measure what matters.
There is quite a bit of information circulating right now regarding Lean Startups. Below is a comprehensive list of resources. I urge you to look at Eric’s presentation and read his and Steve Blank’s blog to get you going.
Andrew Chen – great how-to blog for web 2.o businesses
Dave McClure – big metrics guy, must see famous pirate metrics presentation
Sean Ellis – customer development blog
Google Group – Lean Startup Circle – This is an active group discussing lean startup practices put to the test in their own organizations.