Why the lean start-up changes everything by Steve Blank (2013)
Growth in the global economy is fuelled by entrepreneurship
Launching an enterprise is challenging: As new research by Harvard Business School's Shikhar Ghosh shows, 75% of all start-ups fail
Recently an important countervailing force has emerged, one that can make the process of starting a company less risky. It's a methodology called the "lean start-up," and it favours experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional "big design up front" development.
New ventures of all kinds are attempting to improve their chances of success by following its principles of failing fast and continually learning.
In this article I'll offer a brief overview of lean start-up techniques and how they've evolved. Most important, I'll explain how, in combination with other business trends, they could ignite a new entre- preneurial economy
The old business plan
According to conventional wisdom, the first thing every founder must do is create a business plan—a static document that describes the size of an oppor- tunity, the problem to be solved, and the solution that the new venture will provide. Typically it includes a five-year forecast for income, profits, and cash flow
The fault :
Only after building and launching the product does the venture get substantial feedback from customers - Business plans rarely survive first contact with customers
No one besides venture capitalists and the late Soviet Union requires five-year plans to forecast complete unknowns. These plans are generally fiction, and dreaming them up is almost always a waste of time.
One of the critical differences is that while existing companies execute a business model, start-ups look for one. This distinction is at the heart of the lean start-up approach. It shapes the lean definition of a start-up: a temporary organization designed to search for a repeatable and scalable business model
Three key principles:
1) Founders summarize their hypotheses
in a framework called a business model canvas. Essentially, this is a diagram of how a company creates value for itself and its customers.
2) Lean start-ups use a "get out of the build-
ing" approach called customer development to test their hypotheses. They go out and ask potential users, purchasers, and partners for feedback on all elements of the business model, including product features, pricing, distribution channels, and affordable customer acquisition strategies. The emphasis is on nimbleness and speed: New ventures rapidly assemble minimum viable products and immediately elicit customer feedback. Then, using customers' input to revise their assumptions, they start the cycle over again, testing redesigned offerings and making further small adjustments (iterations) or more substantive ones (pivots) to ideas that aren't working.
3) Agile development, which originated in the software industry. Agile development works hand-in-hand with customer development.agile development eliminates wasted time and resources by developing the product iteratively and incrementally. It's the process by which startups create the minimum viable products they test.
Start-ups often operated in "stealth mode" (to avoid alerting potential competitors to a market opportunity),
The lean start-up methodology makes those concepts obsolete because it holds that in most industries customer feedback matters more than secrecy and that constant feedback yields better results than ca- denced unveilings.
Customer development
During customer development, a start-up searches for a business model that works. If customer feedback reveals that its business hypotheses are wrong, it either revises them or "pivots" to new hypotheses. Once a model is proven, the start-up starts executing, building a formal organization. Each stage of customer development is iterative: A start-up will probably fail several times before finding the right approach.
The lean start-up approach will help them meet it head-on, innovate rapidly, and transform business as we know it.