The value of a lean start-up approach is that you are not heavily investing upfront in unnecessary/unneeded expenses. Your budget/funds should be allocated toward developing a prototype/product to test against a small/large group and see whether or not your target audience love it or hate it. This will give you a more accurate idea of its potential value, cost to improve the product/market, and maybe a couple of example customers.
The Lean Startup has evolved into a movement that is having a significant impact on how companies are built, funded and scaled. As with any new idea, with popularity comes misinterpretation:
Tale 1: Lean means cheap. Lean startups try to spend as little money as possible
The reality is the Lean Startup method is not about cost, it is about speed. Lean startups waste less money, because they use a disciplined approach to testing new products and ideas. Lean, when used in the context of lean startup, refers to a process of building companies and products based on lean manufacturing principles, but applied to innovation. That process involves rapid hypothesis testing, learning about customers, and a disciplined approach to product development.
Tale 2: The Lean Startup methodology is only for Web 2.0, Internet and consumer software companies
Actually, the Lean Startup methodology applies to all companies that face uncertainty about what customers will want. This is true regardless of industry or even scale of company: many established companies depend on their ability to create disruptive innovation. Those general managers are entrepreneurs, too. And they can benefit from increased speed and discipline.
Tale 3: Lean Startups are bootstrapped startups
There’s nothing wrong with raising venture capital. Many lean startups are ambitious and are able to deploy large amounts of capital. What differentiates them is their disciplined approach to determining when to spend money: after the fundamental elements of the business model have been empirically validated. Because lean startups focus on validating their riskiest assumptions first, they sometimes charge money for their product from day one – but not always.
Tale 4: Lean Startups are very small companies
This focus on size also obscures another truth: that many entrepreneurs live inside of much larger organizations. The proper definition of a startup is: a human institution creating a new product or service under conditions of extreme uncertainty. In other words, any organization striving to create disruptive innovation is a startup, whether they know it or not. Established companies have as much to gain from lean startup techniques as the mythical “two guys in a garage”.
Tale 5: Lean Startups replace vision with data or customer feedback
Lean startups are driven by a compelling vision, and they are rigorous about testing each element of this vision against reality. They use customer development, split-testing, and in-depth analytics as vehicles for learning about how to make their vision successful. Along the way, they pivot away from the elements of the vision that are delusional and double down on the elements that show promise.
The old model of entrepreneurship was dominated by an over-emphasis on the magical powers of startup founders. Usually, the stories we hear about successful startups describe a brilliant visionary, fighting valiantly against the odds to create a new reality. As employees gradually fall under his or her spell, they execute his or her master plan, which leads, in the end, to world domination.
Anyone who has spent time around real startup successes knows this story is usually wildly untrue. Founders benefit from historical revisionism and survivor’s bias: we rarely hear the stories of the thousands of visionaries who failed utterly.
The Lean Startup moves our industry past this mythological entrepreneurship story and towards a methodology that is more scientifically grounded and accessible.
People who are truly committed to a vision of changing the world in a significant way can’t afford the luxury of staying in that cozy, comfortable place of building in stealth mode without outside feedback. If you really believe your vision needs to become a reality, you owe it to yourself to test that vision with every tool available.
I have to say i disagree with every point about these being fairy tales. Lean startups are really possible and the approach does work. The economics of running servers and developing software have radically changed in the past few years – its NOT a fairly tale at all, its just now possible and by taking away the need for external funding, it leaves founders with considerable more control of their own destinies. There is a lot of dogma in these statements; just because there are instances people still running startups in the old way it does not mean that the new lean way does not exist – it really does.
All too true, Kristina. The ideal scenario is minimal infrastructure needed to support production, sale and distribution of some product – with revenue-driven, organic growth following on from there. It’s amazing how often costs of sales and distribution are n
Hi Kristina. First time interacting with your blog. You make some good points but there is also a balance. I am an investor, entrepreneur and technologists. My reply is based on investing in companies in the US and around the world. I look for lean startups. These are possible and happen everyday. For the most part it shows passion, dedication and discipline in the early stages but of course has to pivot soon into the real world. So, not all lean startups are bad. I look for startups that validate their passion (vision) very early on with customer interaction and the real world. That is good. it doesnt mean that you are throwing in the towel but it means you are realistic. For companies to be funded there needs to be a strong balance between shear passion/vision and actual market knowledge and reach. the passion is always there, never dies and keeps everyone inspired!
you should add content more often great read, also like the theme of the blog.
Analytical and detailed definition of lean startup, including its current trends in business development and startup mentality.
A must read for both startup entrepreneurs and investors alike.
We run lean and very mean, it’s allowed us to continue on without bringing in outside investors and lossing control.