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Lean Start-up – What is it exactly?

A funny thing happened to me recently. I met with a specialist venture capital firm in London in relation to a program they wanted to launch to build new ventures. Their idea was to set up an in-house team to go from idea to funded investment. The person I met with was an ex-corporate type now venture capital partner who was in charge of the program. Our conversation quickly turned to how this process should run and the discussion that ensued left me reeling. It made me realise that despite all the thought-leadership that abounds on the internet there’s still so much skewed interpretation of the practices. Most people will know of the “Lean Start-up”, a book and method authored by Eric Reis. People in the community talk about it as if it’s crystal clear how to go about building a start-up using this method. But from my meeting I could see that it’s not the case. The main point of contention in my meeting was whether you need any sort of plan and whether you should speak to customers or not at the start of the journey.

Back in the 1980’s and 1990’s prior to the advent of the internet most IT systems projects were about automation of workflows. Sally in accounting would have to do things like enter invoices into a system. Other folks would produce reports or write cheques. So implementing a new system was a process of understanding what everyone does, designing a complete strategy, building the system and then transitioning from the old to the new. There weren’t too many variables in the mix and it was somewhat binary as to whether it worked or not. Roll the clock forward a couple of decades and now we’re in a whole new paradigm. We can’t tell anymore what will work or not because it’s not so obvious. We’re interacting with a changing landscape and even others can invent around ideas that we put out there. The Lean Start-up was essentially a timely recommendation to experiment and iterate until it works. But there’s a lot more to it than that. Well, a whole book’s worth to be precise with lots of great thinking and recommendations. So why do people have such different views of how to go about it? Perhaps they haven’t really read it or just skim read it? Could be. Another fact is that Mr. Reis isn’t the only the expert in the room. A glance through YouTube reveals some more fantastic thought-leaders who speak for 90 minutes on very specific parts of the process.

So is there a definitive method for starting-up or not? Or does everyone have to develop their own flavour of a process based on what they think is right? Maybe. It’s not unrealistic to expect that every organisation large and small will now be looking to launch new business models either with the hope of grabbing a big chunk of a market and building a unicorn as a start-up, or as a corporate looking to maintain their brand and franchise and serve their customers in new and better ways. Or like the venture firm I mentioned at the beginning, looking to capitalise on their position in the market and set up a repeatable process to generate new start-ups either for opportunistic reasons or in the absence of investable teams.

So what is it exactly? Well, I won’t repeat the whole book here but I think it’s worth highlighting the core steps which are:
• Vision
• Steer
• Accelerate.
Essentially the idea is to create an idea, formulate a hypothesis, create a minimum viable product, test the product and validate the hypothesis, and then learn from that and fine-tune or redefine the idea or hypothesis. And the idea is to go around this cycle as fast as possible. The last part of the fast cycle is the key enabler of the method. It’s no good going around the cycle and performing the activity to the nth degree of precision. That takes it away from being a lean process and it essentially falls back into a clunky long-winded process that probably never gains enough momentum.

I’ll go into each of the core steps in other posts but I want to address one key topic which is whether to involve customers. My VC friend was aghast when I proposed that it’s important to speak to as many customers as possible. She almost choked expressing that they never know what they want and will lead you astray. I think she was referring to Henry Ford’s quote that if he’d asked his customers they’d have asked for faster horses. A closer look into The Lean Startup reveals that my opinion was sound. Eric Reis recounts a story where they built an MVP before talking to customers only to find out they were on the wrong path completely and had to re-do everything. He makes clear that “lean thinking defines value as providing benefit to the customer; anything else is waste” and concludes that “it’s easy to kid yourself about what you think customers want and easy to learn things that are completely irrelevant – thus validated learning is backed up by empirical data collected from real customers”. In other words don’t assume you know what customers want but instead conduct experiments that collect empirical data. And do this quickly.

The other part of the opening question was about whether a lean start-up cycle within a start-up, venture firm or corporate should have a plan. We’ll leave that to another post.

Azfar Haider
Founder, CMS360.org
CMS360 is a set of management practices and solutions designed for today’s high growth companies. Our frameworks guide teams to be successful in launching and scaling businesses and the online program consists of courses, coaching and community. www.cms360.org

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