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Lean Startups

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The lean startup movement is growing and all over the world local user groups are meeting to discuss, learn, and build successful businesses.  But what is a lean startup?  Is it two hackers in a garage, or is it more?

According the Harvard Business School:

A dozen years ago, it seemed like all it took to launch a successful technology company was a vague idea, a PowerPoint presentation, a trade-show booth with a sexy spokesmodel, and a URL. Then the dot-com bubble burst and investors got wiser and warier. Gone are the days when entrepreneurs could spend years burning through venture capital while they figured out their strategy. These are the days of the lean startup.

"Most startups fail not because they can't build the product they set out to build, but because they build the wrong product, take too long to do that, waste a lot of money doing that, and waste a lot of money on sales and marketing trying to sell that wrong product," says Tom Eisenmann, a professor in the Entrepreneurial Management Unit at Harvard Business School. "It takes a lot of time, time equals money, the money runs out, and the startup fails painfully."

So lean startups are those startups that take lean principles and create a startup singularly focused on customer value and learning from customer feedback as soon as possible.  Wikipedia tells us:

Lean Startup initially advocates the creation of rapid prototypes designed to test market assumptions, and uses customer feedback to evolve them much faster than via more traditional software engineering practices, such as the Waterfall model. It is not uncommon to see Lean Startups release new code to production multiple times a day, often using a practice known as Continuous Deployment.

Lean Startup is sometimes described as Lean Thinking applied to the entrepreneurial process. A central tenet of Lean Thinking is to reduce waste. Lean Startup processes use Customer Development to reduce waste by increasing the frequency of contact with real customers, therefore testing and avoiding incorrect market assumptions as early as possible[5]. This approach attempts to improve on historical entrepreneurial tactics by reducing the work required to assess assumptions about the market, and to decrease the time it takes a business to find market traction. This is referred to as Minimum Viable Product.

Last week, there was a lean start-up conference in San Francisco that was showed at over 100 remote meet-ups around the world in real time and you can catch the talks on  Chris Matts briefly shared his views on the Agile_BA_Requirements usergroup:

I caught a couple of the talks and the message seems to be that the lean start up approach applies to any company facing uncertainty. Its not just about two geeks in a garage hacking out code but relates to major corporations as well. One of the stand out techniques is hypothesis testing. Testing your business model using a hypothesis as soon as possible. If necessary, you pivot your business model.

And Prashant Ghandi shared his favorite talk:

If you have to watch just one talk, then I'd recommend watching Steve Blank's 30 minute talk on how he intends to change the board meetings ( in reality changing the metrics that they look for). This relates to the hypothesis testing that Chris mentions. He is using this model at the course he teaches at Stanford and has validated the approach with VCs and Private Equity folks.

Agile and lean techniques continue to spread out of software development into the business world and more.  What experiences have you had with lean startups? Are there lessons that we can take back into the software development world?

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