Most of the Startup community in Melbourne is all about the Lean Methodology. I believe that every Startup can benefit from Lean, and so I’ve decided to do a quick recap for those getting started now. This will help you launch your Startup better and smarter.
Many Startups fail. According to research done by Statistic Brain half of all Startups fail within four years. The rate of Startups still operating after these first and vital years lies between 38% and 58% – depending on the industry. One of the reasons for failure is the order of the steps Startups take in their earliest phase. The traditional formula for starting a business goes a bit like this: you write an elaborate business plan, you find a team, and start raising investment. Once you have enough money, you build your product and then launch it to the market. At this point, the marketing machine starts running and you do all you can to sell as much as possible. But ask yourself: do you actually know if your product-market fit is great? Does your market want your product and do they want to pay your price for it? Have you ever stopped and researched these questions, or have you been making assumptions? In most cases the answer is “no, you haven’t, you have just been assuming all this”. Lean offers a different approach.
How to become Lean
Steve Blank has written about the solution to these problems in his publications about Lean Methodology. He can explain why the Lean Startup changes everything. Blank says: do it differently, from the very beginning. Don’t waste time on writing a huge business plan, it will most likely be tossed away after the first contact you have with your customers anyway. As Mike Tyson puts it: “Everybody got plans, until they get hit”. As a Startup you don’t look to execute an existing business model, you look to find a new one. After all, you want to disrupt existing markets, make a dent in the universe. That’s the difference between you and everybody else.
A great start is creating a Business Model Canvas, on which you can write down all your hypotheses without losing valuable time. Time which is valuable and needs to be spent on testing your hypotheses with possible prospects. This is called “customer development” and means you will go and talk to as many potential customers as humanly possible. This doesn’t include going up to family and friends who love you dearly and would be willing to pay much more for your product because it’s you. It means you go and talk to your actual target audience, embrace their answers and use it to your advantage. Be open, inquisitive and take all feedback in. Remember, these are the people who will have to spend money on your product, and you can be sure that they won’t unless they really think you solve an important problem/pain with your idea. Based on their feedback about your product features, pricing, distribution channels and acquisitions strategy, you adapt your hypotheses. And then you do it again. And again. You continue until your product-market fit is perfect, not according to you – according to your clients. This probably means you have to make many iterations, and maybe even pivot.
And you must, because in the end it’ll all be worth it. Lean will allow you to move quickly and cheaply from failure to failure until you have found a business model that works for you. As Steve Blank puts it: “Get out of the office. You just have to talk with your customers to test your assumptions. Your market will tell you if its the right thing.” Talk to any Lean adept and they will add something along these lines: “Stop planning and start measuring to build something worthwhile. Challenge all your assumptions and try to talk to your peers. Validated learning is the key to success. If you know any other Startup, let them brainstorm about your Business Model Canvas. Peer to Peer mentorship is priceless.”
So, if you’re a Startup, looking to become successful in the most effective and efficient way: go Lean. Throw away your old-fashioned business model, and start validating. Get as much feedback as you can, iterate, improve and measure. Continue to build-measure-learn until you have found your own perfect formula and are ready to change the world with your Startup.
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