Why the Lean Start-Up Changes Everything ?

Steve Blank wrote an very interesting article in the May 2014 Harvard Business Review on “Why the Lean Start-Up Changes Everything.” . The lean approach help new ventures launch products that customers actually want. “Lean start-up practices aren’t just for young tech ventures. Large companies, such as GE and Intuit, have begun to implement them.

« Launching a new enterprise has always been a hit-or-miss proposition and the odds are not with you. But recently ‘Lean Start-up” make the process of starting a company less risky. The lean start-up movement is not only a buzzword. “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” said Steve Blanks this article.

In the old methodologies; the first thing every founder must do is create a business plan. “A business plan is essentially a research exercise written in isolation at a desk before an entrepreneur has even begun to build a product. The assumption is that it’s possible to figure out most of the unknowns of a business in advance, before you raise money and actually execute the idea”.

Steve Blanks figures out 3 things about business plan:

• Business plans rarely survive first contact with customers.

• These plans are generally fiction.

• Start-ups are not smaller versions of large companies. (Existing companies execute a business model, start-ups look for one. It shapes the lean definition of a start-up: a temporary organization designed to search for a repeatable and scalable business model)

The lean method has three key principles:

I. Entrepreneurs accept that all they have on day one is a series of untested hypotheses. The founders summarize their hypotheses in a framework called a business model canvas that lets you look at all nine building blocks of your business on one page.

Business Model Canvas: Concept developed by Alexander Osterwalder and Yves Pigneur

II. Lean start-ups use “get out of the building” approach called customer development to test their hypotheses. They go out and ask potential users, purchasers, and partners for feedback on all elements of the business model. During customer development, a start-up searches for a business model that works. If customer feedback reveals that its business hypotheses are wrong, it either revises them or “pivots” to new hypotheses. Each stage of customer development is iterative.

Customer Development by Steve Blank

III. Lean start-ups practice something called agile development, which originated in the software industry. Agile development eliminates wasted time and resources by developing the product iteratively and incrementally.

Agile development -Customer Devlopment and Lean Start-up

Using lean methods across a portfolio of start-ups will result in fewer failures than using traditional methods. The founders of lean start-ups don’t begin with a business plan. They begin with the search for a business model. Only after quick rounds of experimentation and feedback reveal a model that works do lean founders focus on execution.

What Lean Start-Ups Do Differently ?

A lower start-up failure rate could have profound economic consequences. The creation of an innovation economy that’s driven by the rapid expansion of start-ups has never been more imperative. The lean approach help new ventures launch products that customers actually want, far more quickly and cheaply than traditional methods, and the third by making start-ups less risky. “Lean start-up practices aren’t just for young tech ventures. Large companies, such as GE and Intuit, have begun to implement them. Lean start-up techniques were initially designed to create fast-growing tech ventures. But I believe the concepts are equally valid for creating the Main Street small businesses that make up the bulk of the economy. t’s already becoming clear that lean start-up practices are not just for young tech ventures” said Steve Blank. »

« Now, we have the first set of tools for searching for new business models as we launch start-up ventures. The lean start-up approach will help every kind of organization start-ups, small businesses, corporations, and government -them meet it head-on, innovate rapidly, and transform business as we know it”

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Steve Blank is a consulting associate professor at Stanford University and a lecturer and National Science Foundation principal investigator at the University of California at Berkeley and Columbia University. He has participated in eight high-tech start-ups as either a cofounder or an early employee.
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