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The Lean Startup Frenzy

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Oliver Milman, with Startup Smart, wrote an article on Lean Startup. Indirectly the article asks a valid question: is Lean Startup just a fad or does it generate real value for venture capitalists and founders? 

The article's opening sentences signify the debate: 

Entrepreneurs should be naturally wary of fads and trends. They need to be analysed to determine whether they are genuine, sustainable or even useful. Plenty of start-ups have rushed into “the next big thing”, only to promptly fall on their faces. 

But sometimes a new way of working emerges that provides tangible results. 

The article goes on to summarize Eric Ries' theory but also shows how Eric's ideas are probably not that new. In fact other writers have published books with similar theories of keeping costs low and continuously seeking feedback, among them:

  Steve Blank

Ash Maurya

Traditionally, results for company success are measured as a return on investment to it's owners over time. Since Lean Startup is relatively new, and the companies adopting it, young, we may have to wait for a true assessment of Lean Startup's worth.

But, this doesn't prevent debate over Lean Startup. A discussion surfaced in 2010 on the merits of Lean Startup.

William Pietri illustrated one side: 

The "lean" in Lean Startups has two meanings. People here have mainly focused on the common meaning, "not fat." I want to focus on the other one: "lean" as Lean Manufacturing.

The short answer is nobody knows for sure yet whether more success will come, but there are theoretical reasons to think so. There are a lot of things that differentiate Lean from typical western business practices, but let me focus on four:

  1. capital efficiency - This is really an outcome of Lean's focus on waste reduction. For example, recall WebVan. Their investors paid something like $1bn to find out that the US wasn't ready for online grocery shopping. Could they have learned that for less money by, say, testing their core hypotheses on a smaller scale? Absolutely, and that's the Lean Startup's goal: testing assumptions as quickly and cheaply as possible.

  2. pull, don't push - Lean Manufacturing aims to start building something only when it is ordered. Similarly, the Lean Startup approach seeks to start with proven customer needs and use that to pull solutions from the team. The difference is subtle in explanation, but profound in experience, and I think you get much better products, and at lower cost.

  3. continuous improvement - Western business culture tends to focus on maximizing results, while Lean practitioners focus on improving the system that gets the results. (E.g., if your goal is to improve sales, a results-focused answer is the quarterly sales goal, but that can lead to problems like channel-stuffing.) This is especially helpful in startups: a company already in the habit of improving things is more likely to scale sustainably.

  4. customer-centered definition of value - Like many Lean ideas, this sounds obvious; the difference is mainly in how seriously it's pursued. For example, suppose somebody buys your product but never uses it. Some would focus on the sale and call it a win. But in the Lean analysis, it's a loss: resources were expended but no value was delivered. This focus helps startups build a satisfied customer base and discover the big steps forward in value creation needed to take a big chunk of a market. 

And an opposing view from Josh McFarland

To echo a component of David King's answer, the entrepreneurs I know who most religiously follow the tenets of the Lean Startup methodology also produce the least inspired products in my opinion... tired collections of other companies' features, designed by committee.  Yes, they run "leanly" as they try to find PMF, but in the cases I'm monitoring, I'm just seeing them fail slowly.  

I liken these disciples to the people who get "certified" for Product Management via any one of the myriad programs out there -- those PMs are always at the bottom of the stack when it comes to creating great new experiences or innovations. 

While the discussion over Eric Ries' ideas may continue, it hasn't stopped the growth of the Lean Startup marketing machine and book sales. Indeed, Eric Ries greatest venture may be the Lean Startup movement itself.

What are your thoughts? Do you work for a company using the Lean Startup methodology? How is it working? How do you see it growing, changing in the next few years?

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