This is the 12th article in a continuing series that examines the state of the ecosystem necessary to successfully bring technology to market. Based on dozens of interviews with entrepreneurs, venture capitalists, angel investors, business leaders, academics, tech-transfer experts and policy makers, this series looks at what is working and what can be improved in the go-to-market ecosystem in the United States, Canada and Britain. We invite your feedback.
It’s fitting that we follow up last week’s post on the strategic value of marketing in its purest sense as a process for enabling customer validation and iterative product development with a definition of this thing called lean startup.
Strategic marketing is a fundamental aspect of the lean startup methodology, a methodology first defined by Eric Ries almost three years ago. And lean startup itself as a process for bringing technology to market warrants careful consideration by any entrepreneur in the socially enabled age of Web 2.0.
It’s fitting because just this month, Ries updated his definition of lean startup based on how the concept has evolved since it was first coined.
Ries defines lean “in the sense of low burn. Of course, many startups are capital efficient and generally frugal. But by taking advantage of open source, agile software, and iterative development, lean startups can operate with much less waste.”
He also defines lean startup as an application of lean thinking, which at its most basic is about maximizing the value you provide to your customers while minimizing waste in your organization. If it ain’t focused on delivering value to the customer, get rid of it.
Ries further defines a lean startup as one that is powered by these drivers:
- The use of platforms enabled by open source and free software.
- The application of agile development methodologies, which dramatically reduce waste and unlock creativity in product development. (See his take on Customer Development Engineering)
- Ferocious customer-centric rapid iteration, as exemplified by the Customer Development process explained in Steve Blank’s Four Steps to Epiphany.
“My belief is that these lean startups will achieve dramatically lower development costs, faster time to market, and higher quality products in the years to come,” Ries wrote. “Whether they also lead to dramatically higher returns for investors is a question I’m looking forward to studying.”
Now, there is obviously a bias here in favour of software plays and web startups, but the spirit behind lean startup and its roots in the broader lean thinking philosophy means there are powerful lessons to be learned here too for hardware plays that have to manufacture and ship a physical product. The whole lean movement, after all, had its origins on the Toyota assembly line decades ago.
Lean doesn’t mean small
“Lean has nothing to do with small,” she said. “In fact the amount of capital you take in has nothing to do with whether or not your ambitions are big or small. I’ve seen some of the confusion in the market where the TechCrunch people are taking about the battle between the super angels and the VCs … and I fundamentally believe that this just reflects the confusion in that marketplace.”
She cited the examples of Microsoft and Apple as tech titans that got to market with only a couple of million dollars. “Even eBay, the amount that they raised, they never used.”
“And so the best companies end up being extremely capital efficient … lean is not small,” she said. “Lean is a tactic by which we help our entrepreneurs and our entrepreneurs help themselves in a data-driven way figure out how they’re going to iterate their product. And through data and through vision, we also pivot that business model if we believe the business model no longer works.”
Lean can be part of a big vision
New York entrepreneur and startup investor Mark Birch commented in a similar vein in a blog post last week, asserting that a big innovative idea and an iterative, customer-driven approach are not mutually exclusive.
“Quite the contrary, the best entrepreneurs incorporate lean techniques but are driven by the big vision,” Birch wrote. “Bill Gates, Steve Jobs, Larry Ellison, Larry Page/Sergey Brin and all other successful entrepreneurs had a clear vision in mind, and that is the story we all know well. What we did not see was the journey and the many steps (and missteps) that they took along the way in reaching that vision. There were pivots and dives and tucks and all sorts of contortions to get where they sit today.”
Birch advises startups to instead focus on what type of problem they are trying to solve, rather than on whether their idea is “big enough.”
“Are you tackling a broad and incredibly complex problem where there is no precedent or are you tackling a specific problem that has some proof points and validation of a recognizable problem?” he wrote. “Once you know the type of problem you are tackling, then you can better assess your journey and the tools to use in guiding your way, whether it is lean startup or some other approach.”
What’s that minimum viable product thingy again?
Now if you are confident that lean startup is the approach for you, how do you decide which features and functionality you should include in the first iterations of your product that you put at the mercy of those initial end users? Enter the minimum viable product (MVP).
“An MVP is simply the minimum set of features that provide the initial value to the user of your product,” he wrote. “It is crucial that this first incarnation of your product show your value differentiation. In other words, not only must it provide that initial functionality for your first users, it also needs to show off why your product is different or unique in the market place.”
As part of a lean startup’s go-to-market strategy, an MVP is critical to validating whatever assumptions have been made about the product’s commercial potential. “Getting the MVP into the hands of users as well as demonstrating it to experts in the target market, helps to validate some of the assumptions,” Hanschke wrote. “Course correction at this stage is easier and less costly than when the product is nearly complete.
We’ll leave you with this “genuine lean startup story of a mobile app” that Ries himself recently retweeted on Twitter.
Next week, we explore the culture of risk.