Lean startup

Posted: May 5th, 2020

Lean startup

Lean startup processes shorten the development cycles of new businesses through a combination of business hypothesis derived from experiments, learning, and iterative product services. Managing startups ensures a successful business in the long run since it provides a scientific approach that gets the desired products to customer’s hands faster. Introducing a new product to the market can be a hard task. Lean startups offer principled approaches that teach how to move with a startup method, when to turn and when to persevere and let the business grow with maximum acceleration. The presented paper will focus on the dynamics of a startup, its disadvantages, and advantages.
Many startups fail because when a business begins with the idea that they think that people want them to fail to present the product to a prospective customer. Instead, they spend months perfecting the products then end up failing to reach a broad of customers. Pursuing potential customers determines whether the product is of interest or not. Knowing if customers would be interested in a particular product dictates the success or the failure of the startup. For example, in his book The Lean Startup, Eric Ries explains his personal experiences when he was starting his high tech companies. In his book, Ries states that his first company failed because they did not comprehend their target market wants because more focus was on the initial product launch. He adopted the startup management principles and hence since then expanded to apply to other companies that intend to introduce new products into the market (Ries ,2012).
When companies want to introduce new products they experience levels of uncertainty to the customers’ reception. The purpose of the lean process is to eliminate risk. A tailored management process prevents the do it approaches that avoids all forms of management. By using the Lean startup, approach companies can turn chaos into order by establishing told that keep testing the vision hence longevity. Besides, the lean process provides a ground for companies to fail cheap and fail fast while putting a methodology and a process around the development of a product.
Building a sustainable business around a set of services and products allows a manager to get started with a campaign. By identifying prospective customers, the product becomes a sure bet, and a company can begin enlisting early adopters while adding employees that further the product experiments. By the time the product is entirely built, the customers will have been established and real problems solved through offering detailed specification of what needs to be developed (Rise & Euchner,2013).
The primary key to lean startups is to create a build-measure-learn feedback loop to determine the proceedings of the project. The loop cycle creates the concepts of Minimal Viable Product (MVP) which is a representation of the product that can be put in front of prospective customers for learning purposes. Developing the MVP highlights the problems to be solved and outsets the learning process as quick as possible. The build stage of the MVP conducts experiments by building prototypes of the product that let the customer test the business hypothesis. By examining the hypothesis, the interaction with the product generates feedback through quantitative and qualitative data(Rise & Euchner,2013). Measuring the data found allows the company to know what the customer thinks about the product. On the build stage, the company will decide whether the strategy needs pivoting or perseverance. The process should be as quick as possible to foster learning.
In his book, Ries suggests that testing hypothesis by conducting experiments is time efficient that strategic planning. Strategic planning of launching a product takes months or even years to achieve while conducting experiments are immediate and more accurate regarding a hypothesis. He also claims that experiments are superior to strategic planning because it gives a better analysis of the customer’s opinion. Conducting surveys through strategic plan requires the customer to express their feelings in an objective way which is not as effective. Asking questions while observing is more accurate to achieve the wants of the customer through their different behaviors in different situations. For example, conducting split tests where the company makes two different versions of a product and tests them on two different groups of customers. The difference in responses to such an experiment can be analyzed and measured to derive a valid hypothesis.
The MVP represents a basic version of the product. It lacks some of the features that will be present in the final product but has the necessary features that measure the customer’s perception of the value of the product. Allowing the customer to get in contact with the product sooner or later prevents waste of resources that might have been used to add unnecessary features to the product. The MVP model can be built in several ways. For example, Ries mentions the concierge MVP in which the entrepreneur manually makes the product instead of a computer building it. By taking the role of a computer in the building, the entrepreneur gets a better understanding of the customer’s needs. After the innovation, the MVP’s performance is measured to indicate the progress of the development to the company. In his book, Ries introduces a concept called innovation accounting which derives the data of the company progress through quantitative methodology(Ries ,2012). The first step of achieving accounting of the MVP process is to establish a baseline by measuring data obtained from the existing MVP by mapping out the current situation. Rise names the second step as tuning the engine in which the MVO is tuned and optimized from the baseline towards the desired ideal. The third step I s done after the experiment to decide whether the business strategy needs pivoting or perseverance.
By following the building measures learn feedback, the company gets insight into when to persevere or pivot the business strategy.
Pivoting the business strategy is when the company decides the trajectory in which the business should be steered. Through the analysis and testing of a hypothesis after the MVP the company can understand the value it will offer its customers. If The MVP reveals the company efforts aren’t building towards customer satisfaction, the company resolves to establish new hypothesis to be tested for improvement(Rise & Euchner,2013). Realizing the need for alteration and elevation should be done early in the product development stage to avoid extra expenses and a waste of time. Also, Ries points out the value of analyzing and measuring the right metrics from the customer generated data. He points out on vanity metrics which focus on favorable numbers that fool the company into believing an achievement of great results. Having an increasing number of customers using a particular service or product does not necessarily indicate a sustainable growth in the business.
Ries suggests the company should do a cohort analysis instead. Focusing on the revenue and the magnitude of customers that use a particular product does not guarantee the longevity of the company’s product or service in the customer’s life. Instead, the focus should be on investigating the performances of different customers that interact with the product. For example, an online service company conducting an MVP will base their conclusion on the customers that registered but failed to log in or the customers that used the services multiple times as well as the customers that used the premium service(Rise & Euchner,2013). Hypothesis based on these data promotes cohort analysis and indicates the sustainable growth of a company.
Lean startups are advantageous for products and service companies that intend to achieve instant success in the market. Small companies that just began can get closer with their customers using the model. Having direct access and input from the customers enables the company to implement changes on the input hence serving the customer better. Some big companies do not follow such methodologies; therefore, the startup process gives a small company an opportunity to win over them(Ries ,2012). A small company can achieve successful linear startup by study the customers’ interactions through the employees. Introducing the employees to the customer creates an effective feedback loop. Big companies are known for the agility and nimbleness qualities. The significant status of the company put it in a dependent and established a structure which kills productivity. Starting companies can take advantage by picking on products that have long-term innovation potential and rapidly evolving through the lean startup method. The process provides a company with a focus domain towards their target niche market.
Large companies focus on large scopes which aim at a plethora of customers. The products are also distributed through many approaches. According to Raise, a laser focus on one specific segment can be beneficial than the spread out concept. Big companies have numerous resources but spread all these resources across a variety of product markets. Having a laser focus on a single product provides an in-depth understanding of the customers which creates value for the product. For big companies, a lean startup could be a declaration of change which may not be quickly embraced due to the risks that a big organization may incur(Ries ,2012). However, a small company that is starting you can easily adapt the process. The lean startup allows beginning companies to be innovative and authentic. A business set on authentic innovation becomes hard to duplicate. Also, the startup process allows the product or service company to operate as a high-efficiency profit machine. Through learning the customer’s wants and needs, a company can convert the target customers into loyal customers with reduced experience and no experience in marketing.
However, the lean startup method has received negative criticism. A Harvard business review criticized the Raise concepts claiming that strategical approaches are equally crucial to the lean startup approaches. Testing different marketing approaches may not be effective without a strong strategy (Ladd,2016). The review argues that a strong strategy provides a vision and a purpose that guide the direction of the business strategy. Strategy validates assumptions as well as lean startup. However, a rigid strategy will not be sufficient. The management should be willing to questions their strategies.
Lean startups possess pitfalls such as vanity metric which bring about false validation. Companies that make a poor application of the method may receive false validation hence failure in the process. For instance, asking the open-ended customer questions that end with yes or no cannot be counted as a valid hypothesis. Some companies that do not know the application of the Lean startup base their conclusions on the open-ended answers from the company and use the data to validate themselves hence the failure(Ladd,2016). Finding smarter ways to design the experiments prioritizes the focus of the tests thus eliciting valuable learning with fewer resources. Another negative impact of the lean startup is the fact that so much feedback from customers can confuse the entrepreneurs. At such points; the company should learn on how to scale on the feedback that will be most effective to their product and serve the customers efficiently.
The best thing about lean startups is that it leads to the strategy that can establish a strong business with value. However, through many feedbacks and interviews, the great thing is deciding what not to do and learning to apply the method in a disciplined fashion. Experimenting should go further than just the products. It should also be applied to the tools and methods of application. Discarding the lean startup method due to failure is unnecessary. Instead, the company should focus on their points of weakness during application and improve on them.

References
Ries, E. (2012). The lean startup methodology. The Lean Startup.
Ries, E., & Euchner, J. (2013). What large companies can learn from start-ups. Research-Technology Management, 56(4), 12-16.
Ladd, T. (2016). The limits of the Lean Startup Method. Harvard Business Review, 94(3).