lean startup

Lean startup vs. traditional startup approaches

The ideas contained within lean startup contradict long-held principles about how entrepreneurs should approach launching a new business.

Traditional thought held that entrepreneurs should develop a multiyear business plan and then use that plan to raise money to fund product develop activities.

Moreover, traditional principles advise entrepreneurs to develop their product in "stealth mode," thereby keeping their product ideas unknown to anyone beyond the startup workers and their investors.

The lean startup methodology calls for entrepreneurs to start their business ventures by searching for a business model and then testing their ideas. Feedback from potential customers is then used to adjust their ideas as they move forward.

Characteristics/philosophies

The lean startup methodology also advocates for entrepreneurs to continually engage in this activity loop -- exploring and developing hypotheses that they then test among customers to elicit feedback, something known as validated learning. Entrepreneurs use that customer feedback to re-engineer their products.

Lean startup also advocates for iterative, or agile, development concepts adapted from the world of software development. A lean startup will build a prototype quickly, get it to market to gauge success of the product without expending unnecessary resources and use the data generated by early marketing tests to influence the next build phase. In lean production, this approach is called kaizen. In programming, the approach is called Agile.

Additionally, the lean startup methodology calls for entrepreneurs to develop a minimum viable product, or MVP, that they can test. This advocates for entrepreneurs to adjust their products based on customer feedback -- another key concept of the methodology that is called "pivoting."

What it means to be a lean startup

Proponents of the methodology say lean startup principles ensure that entrepreneurs develop products that customers actually want, rather than attempting to build businesses based upon untested ideas.

Proponents also describe this mentality as "fail fast, fail cheap" because the lean startup process is designed to limit the time and money invested in product ideas before entrepreneurs have to test and prove their potential value.

History of the methodology

Several publications helped popularize lean startup concepts. The most recognized is Ries' 2011 book The Lean Startup. Ries, who had studied a customer development course taught by Blank in the early 2000s after Blank had invested in his startup, drew inspiration from Toyota's agile approach to manufacturing known as lean manufacturing. Lean manufacturing, or lean production, is a manufacturing methodology that values the ability to change quickly.

Ries called his approach "lean startup." In 2012, Blank and Bob Dorf published their handbook The Startup Owner's Manual.

Rise as a trend

The principles of lean startup have gained traction in recent years, with business schools teaching the methodology and established companies and large corporations applying lean startup ideas to their own innovation initiatives.

Blank wrote in a May 2013 Harvard Business Review piece titled "Why the Lean Start-Up Changes Everything" that as lean startup methodology practices spread, "they're turning the conventional wisdom about entrepreneurship on its head. New ventures of all kinds are attempting to improve their chances of success by following its principles of failing fast and continually learning. And despite the methodology's name, in the long term some of its biggest payoffs may be gained by the large companies that embrace it."