Building a startup is a difficult task that relies on the expertise of the founder, as well as previous experience building startups. Building a startup requires planning, and usually, this plan is the core issue. Founders often create business plans that look more like they are planning to launch a rocket than drive a car. Let me explain that analogy. When you are driving a car, you have to pay attention to the road and steer according to the road in front of you. Driving requires constant attention and readiness to steer in a different direction quickly and effortlessly. It also requires you to be ready to act in unexpected situations (another car making a quick turn) and safely return to driving straight. On the other hand, launching a rocket is an extremely difficult task due to the amount of planning to do before any action. Seldom can you alter a rocket launch plan after it has launched, simply because of its enormousness and inflexibility. The rocket will simply go in the direction you have pointed it at. What this means, is that a startup needs to be ready for drastic changes along the way, unlike an established business that might benefit from a more “rocket launch” approach. The Lean Startup considers building a startup to be a “human engineering” problem, which means that success can be achieved by following the right process. This process can be learnt, which means that it can be taught, as Eric points out.
Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught.
Value in a startup is not the creation of stuff, but rather validated learning about how to build a sustainable business.
To adopt the Lean Startup framework, one has to reconsider their goals as an organisation, the processes which are carried out to get those goals, and retrospective analysis that is used after the organisation achieves the goals. The main goal of any startup is to figure out the right thing to build—the thing customers want and will pay for—as quickly as possible. This may come as a surprise, because when one starts a company, they have a clear idea of what they are going to build, and that is perfectly fine. However, a startup is an organisation in such uncertainty, that it has to be able to pivot and rebuild its product depending on customer feedback. This can be done by releasing a Minimum Viable Product, which is a principle that saved many of today’s tech behemoths in their early days. At its heart, a startup is a catalyst that transforms ideas into products that are then analysed and concluded to be either a success or failure. For a startup, customer communication is vital for either rise or fall.
As Steve Blank has been teaching entrepreneurs for years, the facts that we need to gather about customers, markets, suppliers, and channels exist only “outside the building.” Startups need extensive contact with potential customers to understand them, so get out of your chair and get to know them.
Minimum Viable Product
The MVP is that version of the product that enables a full turn of the Build-Measure-Learn loop with a minimum amount of effort and the least amount of development time.
Traditional product development strategy involves a lot of planning and organising in front of a whiteboard. The Lean Startup model focuses on producing the minimum viable product as soon as possible to receive the most valuable information for a startup – feedback. At the early stages of startup development, it is vital to focus on customer needs and to make sure that the product that the startup is building will find its audience. The only way to achieve this is by putting stuff out there and communicating with potential customers, improving the product in iterations. Even if the initial version of the product is of low quality and impossible to scale, it is valuable for information gathering. Knowing what the customers want is the most significant piece of information for any business, but especially for startups as they need to create cash flow as soon as possible to improve on the quality of the already-developed product.l
One of the most critical moments of a startup’s lifetime is the persevere/pivot moment. This is where the founder/management decides whether to continue working on the current idea to attract more customers or pivot, throw all previous work away and start over. Often, the initial idea of the founder, the product that in their mind, is revolutionary and people will want to buy, is simply wrong and the only way to save the startup is to find the product/service the target audience is willing to pay for. This can be achieved by split testing, releasing two versions of the product with slightly different functionality or focus, and looking at the number of sign ups/interactions to figure out the right way to go. Moreover, it is not exactly easy to understand what pivot means, as it can be understood in many different ways. It isn’t simply a release of a new product, or removal of one product and release of a new one, a pivot can be the change of strategy within the organisation which yields positive results. There are many different types of a pivot. To give an example, a customer segment pivot is a pivot to a different audience. Simply put, this happens when a product manages to find its audience of paying customers, however, they are no the kind of customers the management had expected to target. As a result, the product development team pivots to satisfy the new customers’ needs.
Pivots come in different flavours. The word pivot sometimes is used incorrectly as a synonym for change. A pivot is a special kind of change designed to test a new fundamental hypothesis about the product, business model, and engine of growth.
The Five Whys
The five whys is a strategy to get to the root of any problem. It comes with pitfalls and needs to be used carefully. Simply put, when there’s a problem, we should ask 5 questions one after the other to find out the root cause of the issue. This strategy has been adopted from children, you must be familiar with how annoying children can be with their “whys”. This is, in fact, an extremely effective approach when evaluating the cause of an issue. To give an example, imagine there was an issue with the API and the management would need to find the cause to put in measures that will ensure that the same thing won’t happen again. The questions would be as follows.
- Why did the API call fail?
- Because the server returned response code 500
- Why did the server return such a response code?
- Because the script failed to insert data into the database.
- Why did the script fail to insert data into the database?
- Because a new engineer made a modification that broke the script
- Why did the engineer make such a mistake?
- Because he did not receive appropriate training upon beginning work.
- Why did he not receive appropriate training?
- Because the company does not have a new employee training system in place.
This way, the management found the root cause of the issue, unexpectedly, on the HR level. Now, they can develop a system for training new employees to avoid such mishaps in the future. This may seem simple and easy to carry out, however, the five whys can easily turn in to five blames, where the team is pointing fingers at each other to find the person responsible for the problem, even though the root of the issue lies elsewhere. To avoid this, a startup should have designated a person to carry out the five whys, some sort of a “five whys expert”.
Five Whys to overcome our psychological limitations because we tend to overreact to what’s happening at the moment.
The Lean framework can be used to build innovative startups, however, each startup should modify the framework to suit their situation. That is exactly what Lean thinking means, being innovative, adaptable and producing rapid growth.