Lean Startup

Lean Startup aims to shorten product development cycles and rapidly discover if a proposed business model is viable by implementing a combination of experimentations, validated learning, and iterative product releases.

The Lean Startup was first proposed in 2008 by Eric Ries, using his personal experience in adapting Lean Management and Customer Development principles to high-tech startup companies. Since then, the methodology has been expanded to apply to any individual, team, or company looking to develop new products, services, or systems with limited resources.

Startup success can be engineered by following the process, which means it can be learned, which means it can be taught. ___ Eric Ries

Central to the Lean Startup methodology is the assumption that the company can reduce market risks and avoid the need for large initial capital and expensive products. However, Lean Startup isn't about being cheap, but rather being less wasteful and still doing things that matter the most. It provides a scientific approach to get a desired product into the customers' hands faster.

The Lean Startup mainly backs the developing process of products that consumers have already showed their desire to and there is a market as soon as the product is released, in contrast of developing a product and then hoping that demand will occur.

Lean Cycle

Image

Lean Startup vs. Traditional Business Model:

The Lean Startup method is in some ways different from the traditional business model. Lean Startups hire people who can learn, adapt, and work quickly in a new environment, unlike the traditional businesses which hire their staff based on their existing experience and ability.

A Lean Startup also uses different financial reporting measures like customer acquisition cost, lifetime customer value, customer churn rate, and how viral the product could be instead of the traditional way of focusing on income statements, balance sheets, and cash flow statements.

In Lean Startup, we begin with identifying a problem that needs to be solved. Then we develop a Minimum Viable Product (MVP) that allows us to introduce it to possible customers and collect their feedback. This is technically faster and less expensive than developing a final product simply for testing purposes and reduces the risk of failure. Lean Startup redefines the organization as an entity who is in search of a scalable business model, not one which has a pre-defined business plan to be executed precisely.

Instead of a business plan, Lean Startup uses a business model based on hypotheses that are swiftly tested. As soon as we collect sufficient data, we move forward to the next decision point. If the customers do not react as predicted or expected, the startup quickly adjusts itself and returns to developing products which are more desirable by consumers. In Lean Startup method, to fail is a tool for making better decisions, not a loss.

Startups using Lean method make hypotheses and put them to the test by engaging with potential and real-life end users to assess their reactions about the product’s features, pricing, distribution, and customer acquisition. The collected information is the ground for making adjustments (iterations) to products or large-scale changes (pivots) in order to correct any concerns. This method sometimes may result in changing the target customer or making major modifications in product as well.

Lean Canvas

Lean Canvas

Lean Startup & Design Thinking:

Lean Startup and Design Thinking both are customer- or user-driven approaches for innovative development of products, services or businesses. Although they both keep the end user or customers as the most important stakeholder in their core, they have significant differences.

Design Thinking method has a linear process of stages and always starts with understanding the situation and generating a thorough insight. The better insight you can generate in this stage of the method, the easier you can follow the rest of the process and achieve to better results. The circular process of Lean Startup makes it possible (not all the time) to engage the method at any phase of development process. For instance, if you are already in prototyping phase of your startup you can start there and follow the cycle of stages. However, this may not be the best idea nor even possible in some start-ups or businesses to do.

Ideation is the strong suit of Design Thinking where the method usually results in a significant improvement of the outcomes compared to the existing or similar solutions. Following the process of the method, solutions are created based on the understanding of the situation and ideated concepts. In Lean Startup, the product or solution is created around the vision or the introduced idea at the entry level of the process. In other words, Design Thinking works a lot around the question of “What is the best idea?” while in Lean Startup the main purpose is “Finding the best solution that fulfils the goals of a specific idea”.

Lean Startup uses a wide variety of quantitative data collection, analysis and making decisions based on the results while in Design Thinking most of the research is based on qualitative analysis. This would be very helpful especially when you want to solve a problem that you have no idea initially about the answer.

A useful abstract for comparing the two methods could be found in a paper by Roland Mueller & Katja Thoring published in 2012 in International Design Management Research Conference as illustrated in the following table:

What  Design Thinking Lean Startup

Goal

Innovations

Innovations

Scope, Focus

General innovations

High-tech innovations for Startups

Approach

User-cantered

Customer-oriented

Uncertainty

Solve wicked problems

Unclear customer problem

Testing

Fail early to succeed sooner

Pivoting is at the heart of the ‘fail fast’ concept. The sooner you realize a hypothesis is wrong, the faster you can update it and retest it.

Iteration

Yes (“Iteration”)

Yes (“Pivoting”)

Ideation

Ideation is part of the process; solutions are generated in the process

Ideation is not part of the process; product vision is initially provided by company founders.

Qualitative Methods

Strong focus: elaborated ethnographic methods, user research, observations, etc.

Not a focus.

Quantitative Methods

Not a focus

Strong focus: metric-based analysis; provides matrices, and testing.

Business Model

Not a focus

Focus

Adaption of deployments

Not a focus

Five Whys Method

Typical Methods

Shadowing, Qualitative Interview, Paper Prototyping, Brainstorming (with specific rules), Synthesis, etc.

Qualitative Interview, Smoke Test, Paper Prototyping, Innovative Accounting, Split (A/B) Tests, Cohort Analysis, Funnel Metrics, Business Model Canvas, Five Whys, etc.

Hypothesis Testing

Not a focus

Focus

Prototype Testing

Yes

Yes

Rapid iteration

Yes

Yes

Target Group

Users (usually end users, sometimes other stakeholders)

Customers (distinguished between Users, Influencers, Recommenders, Economic Buyers, Decision Makers)

 

 

 

Our Vision

Our vision is accelerating local and global development process and increasing growth rate of SMEs by providing innovative R&D activities for their products, services or organization, and implementing that through their organization.

Join Our Newsletter
© 2016 Linné Innovation AB - All Rights Reserved.