Key lessons from “The Lean Startup”

Why shoud every businessman read „The Lean Startup” by Eric Ries?  Apart from the fact, that it is the New York Times bestseller, there is at least one more reason. It tells us, the entrepreneurs, how to waste less time and money and be more successful in introducing new products and services.

Although by it’s definition the book is aimed at startups, it’s equally relevant to all entrepreneurs, as Ries applies quite a comprehensive description of a startup: it is a human institution designed to create new products and serivces under conditions of extreme uncertainty. And the uncertainty is what most of the companies around the globe are exposed to nowadays in many market categories.

„The Lean Startup” puts forward a whole set of practices to help entrepreneurs increase their chances of building a successful venture. I lay out here some of my takeaways from vast set of rules described by Ries, which I personally find most useful in my everyday business practice.

The definition of a product

According to Ries, product is a source of value for the people who become customers. Anything those customers experience from their interaction with a company should be considered part of that company’s product. Folllowing this line of thinking, the key question in the new product development process should centre around uncovering the source of value for customers and the impact it will have on customers or their businesses, if the customer comes from a B2B category.

The definition of a customer

Start-ups do not yet know who their customer is. And since the product should encompass a value for those people who are to become customers, the company should continuously strive to define the target consumer. The lean thinking is all about defining the value and providing the benefit to the customer. Anything else is the waste. Early contact with potential customers should help to clarify a basic level of understanding who our customer is and what problems he or she has. With this understanding we can craft a cusotmer archetype – a profile of the target customer that will then guide further product development and that will help us to prioritise our decisions regarding the other elements of our business model.

Taking product to Customers

This rule sounds obvious, yet from my observations it still isn’t the overriding pattern that companies immediately talk to potential customers once the new idea comes up. The clue of creating real value is to test the product with real customers. We need to ask the potential client if he would like to use our product by himself. We need to discover what excites him about our product and what irritates him. We need to see whether they want to use it. Or why they don’t want to use it.

Setting clear targets for early days of the product

As Steve Blank says, no business plan survives first contact  with customers. The reality of a new venture is unpredictable. A start-up is a rollercoaster of events, that we cannot forsee in the first version of our business plan. However, as Ries emphasises, the quantitative targets create the motivation to engage in the early inquiry with customers and test the relevance of the idea, when we initially fail to move the numbers up.

Validated learning

Startups exist to learn how to build sustainable business from the initial product idea. The products that startup build are experiments. And the question in the experiment is not even „can this product be built”, or even „should this product be built”, but „ can we build a sustainable business around this set of products and services”. In the Lean Startup model every product, every feature and every sales and marketing activity is understood to be a test designed to achieve validated learning.

Strategy from the beginning

Like any other company, a start-up should have a vision. In order to achieve this vision, start-up should employ a strategy, which includes a business model, a product roadmap, a point of view about partners and competitors and ideas about who the customer will be. The product is the end result of the strategy.

Last but certainly not least – sales and marketing

The international evidence shows that 9 out of 10 start-ups fail. In the world of saturated and highly competitive markets companies should always remember that without right sales and marketing channels they can miss the market even though their product is absolutely relevant. The business and marketing functions of a startup should be considered as important as engineering and product development and therefore deserve an equally rigorous methodology to guide them.

The „Lean Startup” has helped me to set out my personal agenda for the new ideas that I am crafting. I hope you may find it equally useful for your endeavors:

  • Always be focused on value for customer – we won’t sell unless we have something that’s worth paying for
  • Be inquisitive – we should keep on asking questions until we fully understand what represents value for our potential customer
  • Keep on improving – we should work on our idea until we are sure it’s sellable
  • Be focused on numbers – we should be vigilant to balance our high hopes with business reality by constantly asking ourselves „what will be the source of our profits”, „how can we control our costs” and „how can we make sustainable business out of this idea”.