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Innovation by Iteration: Lean Startup 101


Innovation by Iteration: Lean Startup 101
Photo by Flickr user betsyweber

You may have heard the term "lean startup" if you follow the tech press -- it's taken the startup world by storm. But how can you use this ultra-hot business trend to help grow your enterprise? Here's how. 

What is the Lean Startup?

The term was first coined by startup founder and advisor Eric Reis on his blog, Startup Lessons Learned, in September 2008. The general approach borrows both name and philosophy from the lean manufacturing framework developed at Toyota by Taiichi Ohno and Shigeo Shingo. Some of the core principles of "lean" manufacturing have to do with empowering employees to share their knowledge of manufacturing processes, along with the concept of "just-in-time" production which increases innovation and decreases waste.

In the context of entrepreneurship, the "lean startup method" refers to the 5 following principles, as outlined by Reis:

  • Entrepreneurs are everywhere -- whether you're a bootstrapper or a major corporation, entrepreneurial ideas and techniques can help you break through to new markets, make more profit and operate more efficiently.
  • Entrepreneurship is management -- and accordingly, it deserves a new kind of management geared toward its specific challenges and opportunities.
  • Validated learning -- "Startups exist not to make stuff, make money, or serve customers. They exist to learn how to build a sustainable business," writes Reis. Thus, elements of business practice should be constantly tested and validated.
  • Innovation accounting -- While milestones, measuring progress, productivity might be the boring parts of business, they are essential to holding entrepreneurs accountable. Thus we need to choose the right metrics to develop a system of accountability.
  • Build - Measure - Learn -- Turning ideas into products, measuring how customers respond, and learning whether to stay the course or pivot are the bedrock of scaling a successful startup, so all processes must be aimed at accelerating that feedback loop.

Popular Lean Startup terms:

  • Customer feedback: In order to excel and innovate, startups need to be closely aligned to customer needs and wants. For this reason, learnings from the minimum viable product process are stressed. Learn more about customer service here.
  • Minimum viable product: The goal of a minimum viable product (MVP) is to test out a business hypothesis through a quickly produced, stripped-down model of a product that can be brought to market quickly and inexpensively. Examples include Zappos, which, early on, took photos of shoes in local stores, posted them online and then bought the shoes from the stores and shipped them out instead of building a large inventory. Groupon also launched with a incredibly simple version of its eventual daily deal email -- it was simple a PDF and a WordPress site to begin with.
  • Continuous deployment: In tech oriented startups, continuous deployment refers to a process where code is deployed into production on a faster than normal timetable. Other types of businesses have grabbed onto the term to foster a quicker cycle between ideation and product development.
  • Actionable metrics and vanity metrics: Every startup must determine which types of metrics will lead them to informed business decision and profitable action, and eschew those metrics, like pageviews, that might produce a temporary feeling of satisfaction, that do not lead to a specific business gain (what Reis calls "vanity metrics"). New users gained per day is an example of an "actionable metric." Learn more about business analysis here.
  • Pivot: Stay the course or change things up? It's an important "moment of truth" that all entrepreneurs must face. But if your initial assumptions and hypotheses turn out not to be working out, a pivot can represent a "structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth."

Lean Startup in Action

Numerous startups employ "lean" principles, including Dropbox, the file sharing service that famously has an incredibly simple sign up page and a large user base. Lean principles are taught at Harvard Business School and implemented in government applications through Code for America. The Lean Startup Machine hosts conferences and classes to help implement lean principles in a variety of businesses.

Further reading

Check out Eric Reis' site and book, The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Learn how others are using "lean startup" lessons in "What I Wish I Knew Before Starting Up."

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