From Idea to Reality: The Lean Startup Methodology

What is Startup Methodology? 

Hello readers, and welcome to our entrepreneurship series. Here, we talk about everything entrepreneurship in a way anyone can comprehend. Do you ever find that you are listening to a marketing or sales podcast, watching an interview on the startup culture, or just chatting with friends, and someone mentions a term that you may have heard of but do not clearly understand? Happens to all of us. 

So then, what do you do? Google the term and hope for an easy enough explanation, right? This is the blog we want to write – the blog that helps when you are looking for a quick and easy explainer on anything related to entrepreneurship. 

Let’s get started. Today, we will talk about “The Lean Startup Methodology”. To make this easy to understand, let’s take the 7 most frequently asked questions (FAQs) about the methodology and answer them. 

What is the Lean Startup Methodology?

The “Lean Startup Methodology” is a scientific method or approach of building and managing a startup and delivering a product to customers at a fast pace. The methodology was developed by entrepreneur Eric Ries and introduced in a book he wrote in 2011, titled “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses”.

The methodology is based on getting a startup’s product to a subset of customers quickly, incorporating customer feedback, and responding with changes to the product or even dropping the original product entirely if needed. The methodology allows a startup to quickly determine if a business model is viable. The lean startup methodology employs the concept of “growth hacking” and uses funding in small, incremental rounds, reducing financial risk.

Why Does The Methodology Use The Term “Lean”?

With reference to an industry or company, the meaning of the term “lean” is “efficient and with zero wastage”. Hence, the lean startup methodology makes use of the term “lean” to encourage eliminating waste and focusing only on the essential features of a business. For example, building features nobody wants or spending too much time on perfecting a product before release could be considered a waste in business, and the lean startup methodology aims to do away with these aspects. 

The lean startup methodology is inspired by Lean Manufacturing (Toyota production system), which optimises efficiency by reducing unnecessary processes in manufacturing. 

What Are The Core Principles Of The “Lean Startup Methodology”?

These are the 5 core principles of the lean startup methodology:

1. Entrepreneurs Are Everywhere: Anyone who owns a business, whether it is a large or small business, is an entrepreneur, and the lean startup methodology is applicable to any business in any industry.
2. Entrepreneurship Is Management: A startup is not just a smaller version of a big established business. It is an institution, and it requires management that is specifically tailored to its needs. 
3. Validated Learning: Startups have to learn how to build a sustainable business with measurable experimentation and testing, and this learning can be validated scientifically with real-world data and customer feedback. Actionable, auditable, and accessible metrics are applicable to validated learning.
4. Innovation Accounting: There is a new type of accounting specific to startups to help them set up milestones, prioritise, and measure progress using metrics like customer retention and engagement.
5. Build-Measure-Learn Loop: This is the core principle of the methodology and is in the form of a cycle. 
   1. Build a Minimum Viable Product (MVP)
   2. Measure feedback from a specific set of early users
   3. Learn from the feedback whether to change direction (pivot) or keep making improvements (persevere).

What is MVP in the “Lean Startup Methodology”?

MVP stands for “Minimum Viable Product”. When startups apply the lean startup methodology, they release an early version of their product to gather customer feedback. This product version is called a minimum viable product because it has just enough features to function and satisfy customers, from whom feedback is derived for future product development.

An important differentiating aspect of an MVP is that it is not provided to all customers but only to a certain subset of customers across a range of demographics.

What Is A “Pivot” According To The Lean Startup Methodology?

As the name suggests, a pivot is a structured course correction or change in business strategy that a startup may make based on validated learning from customer feedback and data. A pivot allows startups to adjust their direction without abandoning their business idea altogether.

A startup may opt to pivot when it learns that its product isn’t gaining popularity or acceptance.

It can also pivot if the market conditions change or if the business model seems unsustainable.

What Are The Two Major Differences Between The Lean Startup Model And A Traditional Business Model?

First, as seen in the core principles, startups based on the lean methodology encourage experimentation and a shift in the business plan based on customer feedback, while businesses based on the traditional model are persistent in sticking to the original long-term plan.

Second, startups based on the lean methodology launch a Minimum Viable Product (MVP) to test the product through quick market research, whereas traditional businesses take time to develop complete products that are ready for the market. 

Is The Lean Startup Methodology Applicable Only To Tech Startups?

No, the Lean Startup Methodology is not limited to tech startups. Although it gained popularity in the tech industry, its principles can be applied to any business or industry, such as healthcare, education, or even non-profit organisations.