What is the lean startup concept?

the lean startup myleanmbaIntroduction

Lean Startup is a method for developing businesses and products first proposed in 2008 by Eric Ries and claims that startup success can be learnt, following the right process.

Based on his previous experience working in several U.S. startups, Ries claims that startups can reduce the market risk and shorten their product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and what he calls validated learning.

Originally developed with high-tech companies in mind, the lean startup philosophy has since been expanded to apply to any individual, team, or company looking to introduce new products or services into the market. Today, the lean startup’s popularity has grown outside of its Silicon Valley birthplace and has spread throughout the world, in large part due to the success of Ries’ bestselling book.

Philosophy

The lean startup philosophy is based on lean manufacturing, the streamlined production philosophy pioneered by Taiichi Ohno by combining flow principles used by Henry Ford starting in 1906 and the TWI (Training Within Industry) programs introduced to Japan in 1951.

toyota lean manufacturing myleanmbaLean manufacturing as a management philosophy derived itself mostly from the Toyota Production System (TPS). The steady growth of Toyota, from a small company to the world’s largest automaker, has focused attention on how it has achieved this success.

Similar to the precepts of lean management, the Lean Startup philosophy seeks to eliminate wasteful practices and increase value-producing practices during the product development phase so that startups can have a better chance of success without requiring large amounts of outside funding, elaborate business plans, or the perfect product.

In order to avoid designing features or services customers do not want, the entrepreneur must “get out of the building” to receive feedback before and during the whole development process, based on cycles as short as possible. This is done primarily through two processes, using key performance indicators and a continuous deployment.

Lean Startup is about speed, learning and focus.

5 Principles

Entrepreneurs are everywhere: In any sector or industry, in any kind of company, whatever its size.                

Entrepreneurship is management: A startup is an institution, not just a product, and requires a new kind of management geared towards its context of extreme uncertainty.

Validated learning: The ultimate goal of a startup is to build a sustainable business. Learning should be validated by running frequent experiments that allow entrepreneurs to test the assumptions that they made in their business model.

Build-Measure-Learn: The fundamental activity of a startup is to turn ideas into products, measure how customers respond and then learn whether to pivot or persevere. All successful startup processes should be aimed at accelerating that feedback loop.

Innovation accounting: To improve entrepreneurial outcomes and hold investors accountable, we need to focus on the boring stuff: how to measure progress, how to set up milestones, and how to prioritize work. This requires a new kind of accounting designed for startups and the people who hold them accountable.


This article is an excerpt of the Entrepreneurship module of the 1-year, 100% online Lean MBA™ program. The Lean MBA provides training in 12 functional areas of business administration.

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