The goal of a startup, according to Ries, is “to figure out the right thing to build—the thing customers want and will pay for—as quickly as possible.” Thus, the Lean Startup is a new approach in the development of innovative new products that emphasizes “fast iteration and customer insight, a huge vision, and great ambition, all at the same time.”
Ries identifies the five principles of the Lean Startup which are as follows:
1. Entrepreneurs are everywhere. Entrepreneurship is a human institution designed to create new products and services under conditions of extreme uncertainty. Thus, entrepreneurs are everywhere and the Lean Startup approach can work in any company size, sector or industry.
2. Entrepreneurship is management. A startup is an institution, not just a product, and so it requires a new kind of management geared to its context of extreme uncertainty.
3. Validated learning. Startups exist not just to make stuff, make money, or even serve customers. They exist to learn how to build a sustainable business. As Ries puts it - every product, every feature, every marketing campaign—everything a startup does—is understood to be an experiment designed to achieve validated learning.
4. Build-Measure-Learn. The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere. All successful startup processes should be geared to accelerate that feedback loop.
5. Innovation accounting. To improve entrepreneurial outcomes and hold innovators accountable, the following should be done - measure progress, set up milestones, and prioritize work.
The greatest takeaway for me is the concept of MVP or Minimum Viable Product. Sometimes when we create products and services, we want so many features available at the beta stage when in fact, we’re not sure yet if the core components would even click to the target market. What needs to be done first is to identify the assumptions we want to validate and define the bare minimum features that would prove/disprove those assumptions.
Case in point, when Groupon was launched, it wasn’t intended for ecommerce but to urge groups into collective action such as fundraising or boycotting a certain retailer. But the original idea didn’t click so the founders tweaked the concept and tried something different. By using a WordPress blog and reskinning the template, they published a new post about an item each day e.g. a shirt, and they emailed the PDF coupons (sometimes totaling 500 coupons per day) via Apple Mail to the buyers. With such simple mechanics and using free tools, they were able to validate group buying behavior. But just imagine, if the founders developed a full-blown solution for their original concept, they would have spent a fortune for something that the market didn’t even want.
For more info on the Lean Startup Methodology and useful diagrams, you can check out http://theleanstartup.com/principles.