Most businesses fail. It’s a harsh reality to accept, but the awful truth is that the odds are against you as soon as you decide to play the game. This applies to businesses in all industries – from a local pizza shop through to a high-tech startup – and the statistics are daunting; on average a quarter of businesses will fail in the first year, only 50% of businesses are still trading after four years, and 70% fail within 10 years. What’s going wrong here? Why do businesses fail and how do we reduce the risks? How can you avoid being on the wrong side of those statistics? That’s where a mini-revolution in the field of management comes into focus, a scientific system of processes wrapped into a catchy buzzword that is on the lips of every entrepreneur worth their salt: The Lean Startup.

Overview of Lean Startup

The term ‘Lean Startup’ was coined by entrepreneur Eric Ries, building upon lessons he learned from his mentor Steve Blank, who expounded the Customer Development methodology as a means to minimize risks and serve markets efficiently by talking directly to customers and developing products in an iterative cycle. Ries further developed these ideas in conjunction with methods derived from Toyota’s ‘Lean Manufacturing’ principles, which include the concept of ‘Kaizen’ (continual improvement) and the elimination of wasteful processes. Over time, Ries refined these ideas into what we now call ‘Lean Startup’; a thorough, step-by-step process that can guide you all the way from concept to market. The primary problem that Lean Startup principles can assist you in circumventing is that of making unfounded assumptions and then acting upon them without feedback or data from the target market - a major cause of business failure.

A simple example of acting upon unfounded assumptions could be a small team of entrepreneurs that have an idea for a website and mobile app focusing on the health industry. They spend months designing, programming, launching and then marketing their products in 'stealth mode', only to find that their target market doesn’t find the products particularly useful. Without sufficient incoming revenue, and no traction, the startup will soon run out of capital and fail. All of this initial effort, money and time could have been conserved (or at least minimized) by following Lean Startup principles.

Rather than beginning with a solution, and then trying to find a problem, the most efficient path to success lies in understanding problems that a market needs solved, and then developing a solution that they are willing to pay for (or willing to give their undivided attention and data to). If you are interested in creating a new business, then you can increase your chances of success by following a few logical, easy to execute techniques which I’ll cover in the next section.

Lean Startup Techniques You Can Apply from Day One

The traditional concept of how to start a business usually involves beginning by writing a 50-page business plan replete with 5-year forecasts and mind-blowing revenue projections. If that’s what you’ve been taught – stop. Despite the title of this article, planning in advance is never a surefire path to success. As Steve Blank is known for saying, “No business plan survives first contact with customers”. Try a new approach with some of these Lean Startup techniques:

Engage in Customer Discovery - The first technique you can apply – starting today – is known as Customer Discovery. It might sound fancy, but at its core this involves simply talking to potential customers about their industry and the problems that they face. Find people in your target market and then conduct Customer Development interviews to find out areas where there may be demand for a solution, and soon you’ll find an exciting niche or understand that you may have to look elsewhere.  

Build a Minimum Viable Product – Also known by the acronym ‘MVP’, this is a prototype of your product or service that enables you to collect as much data as possible about your early-adopter customers using the least effort. This is often confused to mean ‘build a crappy product and see if anyone will buy it’, but that’s certainly not the case. The MVP is all about learning as much as possible about what your target market wants without wasting effort and capital. An example of an MVP could be as simple as driving people to a landing page using Google Adwords and then measuring the number of visitors that ‘convert’ by signing up for additional notifications.   

Turn Data into Validated Learning – Eric Ries is fond of disputing the fallacy that startups are just ‘shrunken-down big companies’. The truth is that startups need to search for traction – proving the viability of their business model before attempting to scale. Essentially validated learning is a process of measuring assumptions, learning from each iteration of a product or service and using quantitative data to inform each additional iteration. This ties into the MVP, and when used in conjunction with both the MVP and Customer Discovery, can be a powerful way to increase your chances of success.

Use the Build-Measure-Learn Loop – Derived from a programming methodology, the Build-Measure-Learn loop is an Agile approach to creating products in small cycles (known as ‘sprints’) that gives developers the opportunity to learn quickly from each version of their product and make the necessary adjustment. Whether or not you think that the loop should be in reverse, the goal is to make your way through the loop as quickly as possible.

Resources to Improve Your Knowledge of Lean Startup

The above information is just a primer - if increasing your chances of success and reducing wastefulness is something that interests you, check out the following resources to help you expand your knowledge of how to apply Lean Startup principles to your own ventures:

Have you implemented Lean Startup principles in your own ventures? Do you plan to? Share with us why you will or won’t – we’d love to hear your thoughts!