There’s a new idea emerging for entrepreneurs with a drastically new approach to marketing: the Lean Startup.
I just learned about it from an entrepreneur, who hardly contain his passion for the idea. A bit of background:
The Lean Startup begins with the premise that startups are unlike any other business. Strangely, most startups use the same strategy employed by big corporations. Here’s a product development framework that you would find in any Corporate Strategy course [via Steve Blank]:
This works for big companies because they operate in defined markets with well-researched customers. Big companies know exactly who they are selling to and what motivates them. When Colgate creates a new toothpaste, it’s a matter of innovating a new technology, differentiating it from Crest, and marketing the hell out of it to consumers.
Startups are a different beast. It’s not that the product didn’t have the right features, design, or technology. In contrast, over 90% fail because they didn’t find a market and customers. In short, no one wanted the product.
This is the fundamental problem. The Lean Startup preaches how startups can avoid failure and secure customers. It’s the culmination of work from Eric Ries, founder of startup IMVU, bringing together ideas from other entrepreneurs, like Steve Blank, Marc Andreessen, and Sean Ellis.
Why is this all so revolutionary? Suppose you’re a budding entrepreneur with an idea. The familiar process goes something like this:
- Spark of inspiration–you’ve got an idea
- Shop your idea to investors. Raise money–or empty your savings account.
- Hire coders to build your idea.
- Hire designers/marketers. The big fish hire VPs of marketing and sales to begin pitch decks.
- Build press and buzz in anticipation of launch.
- Launch day.
For most startups, the next bullet is failure. Ries argues that this is of the worst ways to launch a product. Such startups operate on the assumption that they know who their customers are and what they want. Rarely do startups find success this way (e.g., Google, Facebook), and your idea is unlikely to be one of them.
The first step is accepting that your idea is probably crap. Ries stresses, however, that you likely have a “curl of insight” that the company can grow around–something that will resonate with people. If you can find the right customers and the right context, there is a higher probability that you can evolve this insight into a viable product.
What’s so different about The Lean Startup process? It takes a “built-to-learn” approach by incorporating a few important elements:
- Feedback loops — scientific, rigorous testing.
- Fast, agile — company quickly adopts to feedback.
- No wasted resources–building a product that no one wants is not an option.
This is where the Lean Startup differs so drastically from traditional product development. Just like a scientist, we’ll treat the entrepreneur’s initial idea as a hypothesis. And like any experiment, we’ll test our hypothesis by talking to customers. Steve Blank, pioneer of this methodology (customer development), writes that “you can run this experiment in a week. It will be sobering.”
By testing your hypothesis, you’re observing whether potential customers agree that your idea solves their problem. It’s not about “collecting feature lists from prospective customers nor running tons of focus groups”–that is, traditional market research [via Steve Blank]. Rather, we’re determining if there are customers to buy the product, potentially one that would require tons of your time and money.
What if customers think your idea sucks? Don’t just give up and jump to something else. Perhaps you’re wrong about who your customers are. Perhaps you have the right customers, but you’re not addressing a specific need.
After any test, ask what can be salvaged and tested again. By moving in a direction of rigorous testing and feedback loops, you increase the likelihood of finding a business that is worth building. Run enough of these tests and incorporate feedback, and you’re bound to land on something of substance. It’s this fast, focused, and iterative process that will sustain the likelihood of keeping a startup alive.
In short, we are finding our potential customers, learning about their problem, and rigorously testing our idea until it works. The “lean” of Lean Startup suggests that you should solve each of these problems as quickly as possible while minimizing resource waste, i.e., time, labor, and money. Unlike a big corporation, a startup is small enough to build an agile product, quickly change direction, and incorporate feedback in rapid cycles.
So is there any substance to this Lean Startup idea? This is the first time I’ve encountered such a structured approach to startups. It addresses many of the questions that I’ve pondered post b-school, like why founders will confidently invest their time and money to develop a product, only to learn that no one wanted it, after it’s built.
Eric Ries’s blog is now a no-brainer for entrepreneurs, and the Lean Startup will only get more popular. There’s already an entrepreneur running (and documenting) his startup using the Lean Startup as a strategy. The real potential is for it to hit main-stream acceptance with the McKinseys and HBSs of the world. Perhaps this is the next marketing framework, the Porter’s Five Forces for a generation of web-based companies.