One of the success drivers is to maximize customer value while minimizing waste. Lean means creating more value for customers with fewer resources. As we are fans of Agile methodology, we couldn’t miss lean startup & lean software development topics. So today is the day, let’s discuss why lean became so popular and what are the main benefits of it. 

What is lean startup?

The key idea of Lean startup is to avoid creating a product that doesn’t work. It is about avoiding creating a product that people don’t need. But finding a problem worth solving first and building a business model around it.

Lean Startup is ideal for entrepreneurs and startups that are still looking for a business model or product that drives genuine value. But it can also be used by large organisations, if they have the flexibility to respond quickly to new information and listen to customer needs.

In other words, Lean startup is a methodology for developing businesses and products. This methodology aims to shorten product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning.

The idea of lean startup methodology is that if startup companies invest their time into iteratively building products or services to meet the needs of early customers, they can reduce the market risks and avoid the need for large amounts of initial project funding and expensive product launches and failures. Launching a new product in a tech start-up, a small business, or an initiative within a large corporation has always been a win or lose game.

Traditional method is to write a complete business plan, pitch it to investors, create a team, introduce a product, and start selling as hard as you can. But the lean startup methodology is about eliminating unnecessary practices and increasing value-added practices during the product development phase so that startups can have a better chance of success without requiring large amounts of funding, elaborating business plans, or creating perfect products. Customer feedback during product development is integral to the lean startup process, and ensures that the developer does not invest time designing features or services that consumers are not interested in. Here what lean startup methodology proposes is using key performance indicators and a continuous deployment process.

Startups typically cannot afford to have their entire investment depend upon the success of one single product launch. The lean startup methodology proposes that by releasing a minimum viable product that is not yet finalized, the company can then make use of customer feedback to help further tailor their product to the specific needs of its customers and guarantee that what the company is developing will be in demand.

Although the methodology is just a few years old, its concepts such as “minimum viable product” and “pivoting” have quickly gained traction in the start-up world, and business schools have already begun adapting their courses to teach students how to become successful entrepreneurs.

The Lean Startup provides an approach to creating and managing startups and getting a desired product to customers’ hands faster. Too many startups begin with an idea for a product that they think people want. They spend months, sometimes years, perfecting that product without ever showing the product to their potential users. When they fail, it is often because they never spoke to their potential customers and never tested whether or not the product was interesting. This is the top reason why most of the startups fail.

It is very important to understand and let’s repeat it again. Instead of spending months in planning and research, entrepreneurs accept that all they have is untested hypotheses, basically, their guesses. So instead of writing a solid business plan, founders summarize their hypotheses in a framework called a business model canvas. Basically, this is a diagram of how a company creates value for itself and its customers.

Also, Lean start-ups use a “get out of the building” approach. They go out and ask potential users, purchasers, and partners for feedback on all elements of the business model, including product features, pricing, distribution channels, and affordable customer acquisition strategies. Then, using customers’ feedback, they revise their assumptions, they start the cycle over again, testing redesigned offerings and making further small adjustments, iterations.

Lean start-ups practice agile development, which originated in the software industry, but now it is used in other departments as well. Instead of typical yearlong product development cycles, agile development eliminates wasted time and resources by developing the product iteratively and incrementally. It’s the process by which start-ups create the minimum viable products they test. 

Main concepts of Lean Startup approach 

• Test Frequently & Learn Quickly. Don’t build a product before you have undertaken numerous tests along the way. Organize focus groups and watch how real customers behave, how they use your MVP to understand what should be developed next and what should be redeveloped to meet user needs.
• Pivot based on key learnings. The word “lean” refers to speed and agility. Startups take advantage of the discovery mode to quickly learn what is not working so they can make changes immediately. You need to pivot or stop what you are doing if the initial plan is not working. There is no sense to continue if you see that your product is not what your customers need.
• Focus on actionable metrics. Avoid vanity metrics. For example metrics that create a favourable impression about performance when they are illusory. For example, what's the point of having 1 million users if none of them convert? Instead entrepreneurs need to focus on actionable metrics.  

Lean startup benefits 

Smart working process

The Lean Startup methodology has as a premise that every startup is a grand experiment that attempts to answer a question. The question is not “Can this product be built?” Instead, the questions are “Should this product be built?” and “Can we build a sustainable business around this set of products and services?”. Iterations, iterations, iterations. Feedback, feedback, feedback. Work on a product that you know will bring you money, a product that will satisfy your users. And once the MVP is established, a startup can work on tuning the engine. This will involve measurement and learning and of course actionable metrics that can show valuable results. 

Control your business & reduce risks

Using the Lean Startup approach, companies can create order not chaos by providing tools to test a vision continuously. Lean isn’t simply about spending less money. Lean isn’t just about failing fast, failing cheap. It is about putting a process, a methodology around the development of a product to develop a product you know will succeed later on.

Lean startup allows entrepreneurs to fully control their businesses. That’s because it teaches business managers how to create new business models and products that are demanded. 

Lean startup basically eliminates the project failure, because you go where your stakeholders show you to go. Always having a working and quality product, you just make it better and better step by step. 

Flexibility

Lean startup makes it possible for entrepreneurs to pivot when they realize that initial assumptions are incorrect. By applying the “release early, release often” principle, a business person can identify problems and make adjustments when needed. 

Quality product & customer satisfaction

Lean startup gives you relevant product, relevant features. Not all of them, but the ones you have you are 100% sure you invested your money right. Lean startup is about focusing on the right feature, focusing on something one, do it well and then switch to another feature. 

Once again, at the end of the day you deliver requested features to your customers, they can’t be unsatisfied. 

Faster ROI

The fact that lean startup and agile development is iterative means that the features are delivered incrementally, therefore benefits are realised early while the product is in development process. You get a first mover advantage, you already have something to show to your investors and you have something to work on to start generating money. Don’t think that your users think about 100 functionalities you have in mind, they don’t know about them, but they already have something they can use and pay for. Other functionalities can be added value, but don’t give your users everything at once, they will be bored very soon. 

Lean startup focuses on business value. By allowing the client to determine the priority of features, you understand what’s most important to the client’s business, and can deliver features in the most valuable and fast way.

Why does LEAN matter?

Lean thinking has been associated with the slogan: “Think big, act small, fail fast; learn rapidly”. Lean comes from Lean Manufacturing and is a set of principles for achieving quality, speed & customer alignment. Lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste. And the idea behind lean is to achieve continuous improvement.

To accomplish this, lean thinking changes the focus of management, in a nutshell, you should eliminate anything that isn’t adding value. And leave only what we absolutely need to be doing at this moment in time. Eliminating waste means eliminating useless meetings, tasks and documentation. But it also means eliminating time spent building what “we know” we’ll need in the future. Also we know that things are constantly changing so we often end up not needing them, so don’t take it into account if you don’t work on it right now. Otherwise you will waste your resources to rework them because conditions have changed. It also means eliminating inefficient ways of working, for example multitasking, so that we can deliver fast.

So thanks to the lean approach, Dropbox went from 100,000 registered users to over 4,000,000 in 15 months. Wealthfront company now manages over $200M and processes over $2M a day. IMVU has reached 50 million registered users and a $40+ million annualized revenue run rate.

7 Principles of lean software development

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About the Author

Ekaterina Novoseltseva

Styling Agency

Social Media Management, Marketing Strategy and B2B Content Marketing, especially in start-up environments.