What Is Lean Startup Methodology and How Can You Use It in Your Business?
When you’re researching how to start a business, you’ll probably read about the traditional method, which looks like this:
- Think of a business idea to address a need in the market
- Create a business plan
- Pitch the plan to venture capitalists or angel investors to get funding
- Launch the business and start selling
While this is a common method, it may not be the best. It can take months or more than a year to go from drafting a business plan to getting funding and launching your business. By the time you open your doors, you may find out there isn’t a need for your products and services any more, or that someone else beat you to market.
The lean startup methodology can help you avoid this situation. This startup strategy looks at business development as an experiment. It focuses on testing and actively working with potential customers to help you create a product or service they need. You can use the lean startup method to help you save time and money and put you in a better position for success.
What Is Lean Startup Methodology?
Author and entrepreneur Eric Ries created the lean startup methodology. This strategy can tell you if your business model is practical, and it helps with developing products or services. In a review of Ries’ book, “The Lean Startup,” the New York Times wrote, the “concepts apply both to designing products and to developing a market.”
What Are the Three Steps in Lean Startup Methodology?
The three steps that make up the lean startup methodology are:
Think of the lean startup approach as a loop. As you learn and go through each step, you’ll return to the first step to update your products and services.
If you’re trying to start a business, you should have an idea of what market need your product or service tries to address. In his book, Ries writes that you shouldn’t be asking, “Can this product be built?” Instead, you should focus on questions like:
- Should this product be built?
- Can we build a sustainable business around this set of products and services?
During the first stage of the lean startup methodology, you’ll build a product to find answers to these questions. This is a minimal viable product, or what Ries calls an MVP. Think of it as a research project for your business. Your MVP won’t be a ready-to-ship product or even a prototype. Remember, it’s supposed to be minimal and shouldn’t take a lot of time to make.
Zappos, an online shoe retailer, used lean startup principles in its early stages and eventually grew into a company Amazon bought for $1.2 billion.2 Zappos’ MVP involved going to a local shoe store, taking pictures of products and putting them online.3 If anyone went to their site and bought shoes, Zappos’ staff would go to the shoe store, buy the product, and ship it to the customer. The site was a way for the company to test their business model.
After creating your MVP, you’ll take it to different customer segments, who will test your product and offer feedback. You’re now in the second stage of the lean startup methodology.
Before you even created your MVP, you probably had a theory on which customer needs your product or service addresses. Now, you can use the data from your MVP and compare it to your initial idea. You can use your customers’ comments and experiences to make changes to your MVP. This is a process called agile development.
If you find there’s not enough interest in your MVP, it can be a sign that it’s not viable, and you’ll have trouble building a sustainable business.
Once you have your MVP, customer feedback and data, it’s time to decide how to move forward with your business idea. Is there enough interest in your idea that it makes sense to create a business and go through product development? Or do you have to change your idea and repeat the loop? This is the third stage of the lean startup methodology. It’s where you’ll choose whether to bring your business idea to life or pivot to a new approach.
As you continue through the build-measure-learn loop, you can use Ries’ method for measuring progress. You can use customer feedback to measure how close your updates and changes are to meeting customer needs. It’s a process Ries calls “validated learning.”
How Does Lean Startup Methodology Help Entrepreneurs?
Ries used his real-life experiences to create the lean startup methodology. As an entrepreneur, he had several business ventures fail and realized putting hours into trying to create a final product or service was a backwards way of thinking. He may have created well-written business plans, but they were based on assumptions that he never tested in the market.
So, he created the lean startup methodology to teach people to think of their startups as experiments.4 By creating a simple version of your business and testing it with customers, you’ll quickly find out if it’s really a good idea. The lean startup method can prevent wasted time and help reduce your risks when starting your business.
Lean Startup Methodology Summary
Just because other businesses may have had success with following a traditional startup growth strategy, it doesn’t mean you have to. The lean startup methodology is a way for you to use a feedback loop to test your business idea. The build-measure-learn loop is a way for you to see if there’s customer interest in your idea. If there’s not, you can use the data from your test to help you pivot and change your business plan.