Incubated in The Valley, the Lean Startup movement has been gathering momentum and shows all the signs of changing the way businesses are run all over the world. Lean Startup principles are not only being used in new business, but it has even made its way into the US government in the shape of the new US CTO, Todd Park.
1. Lean Startup means keeping costs low
Lean is not about being cheap: it's about being efficient and reducing waste. If spending more gets relatively more value, then that's what you should do.
Lean warns us against micro-optimisations – things that reduce the cost of one thing, while increasing the cost of the entire system. Back when Lean thinking started, Toyota discovered that while it was cheaper to manufacture parts in large batches, the overall cost of making cars was reduced when the parts were manufactured just in time.
Lean Startups are about maximising the rate of learning. Spending more in the short term can be less expensive in the longer term when it gets you to your product market fit more quickly than a more spendthrift approach would.
For example, when developing a Minimum Viable Product (MVP) prototype for your killer web-app, engaging a faster and more experienced development team can work out cheaper than engaging a slower, less-skilled team, even if the slow team has lower rates: the better team will write something usable and early enough for you to learn about your product and customers.
2. Lean Startups change their business plan every five minutes
Lean Startups try and validate their assumptions. They change their approach if they find their assumptions to be wrong and refer to this as pivoting. But they don't pivot like a weather-cock in a tornado.
Founder of the whole movement, Eric Reis, tells us that the Lean Startup approach is to start with a strong vision and test that vision against the real world. Everything possible is done to validate that vision, and only if that can't be done do we decide to pivot.
Neither does pivoting mean completely abandoning the previous plan. Pivoting only involves abandoning the aspects that are not working; those that work are retained. It’s about learning what works more rapidly and discarding what doesn’t so you end up with the optimum product.
3. The first thing to validate is your solution
We all have a natural tendency to think in terms of solutions, rather than problems. However, the first phase of Lean Startup is Customer Development, which is about identifying problems, not solutions. It invites us to step back and ask: "What problem is this solving and for whom?" and, "Do those people really feel pain from that problem?”
One startup has a solution to help scruffy men look smart. They assumed that the scruffs hated shopping, and would jump at the chance to smarten up if they could make it easy enough. During Customer Development they discovered that the down-at-heel did hate shopping, but also did not care about looking smart. It was among the well-groomed gentlemen of Knightsbridge that they found their initial market.
The Customer Development part of the Lean Startup Cycle is about the fact you may have a great solution, but if no one has the problem it solves, you need to pivot and solve something useful.
4. Lean Startups are internet Startups
Fabsie is an innovative startup manufacturing physical products directly from digital files uploaded by a community of designers. They are starting with customised furniture at reasonable cost and made locally to the end customer. Fabsie was started at a Lean Startup Machine event in London. "The Customer Discovery phase showed us that our initial assumptions about appealing to the cheap-end of the market were wrong," explains founder James McBennett. "It was the designers, design-conscious and those interested in technology and innovation who were most excited. They are our early-adopters."
James is continuing to use Lean Startup principles to guide his quite physical business.
5. Quality is not important in a Lean Startup
Lean Startups are designed to thrive in conditions of high uncertainty. In these circumstances some changes of direction are continually needed. For web and mobile startups, high rates of change can take quite a toll on the codebase. Cost accumulates and initial architectural decisions become invalidated by later changes in direction. Eventually the rate at which the code can evolve slows to a crawl, as each change causes increasingly alarming bugs in seemingly unrelated areas of the system.
The only proven way to maintain this level of flexibility is to follow the high-quality and high-discipline practices of Agile/Extreme Programming, such as Test Driven Development and Refactoring. After all, the Extreme Programming motto is: Embrace Change.