The Lean Startup completely altered the way business owners see the process of starting and managing a business. It’s a bit relieving to know that there is a scientific approach to what many perceive to be a roller coaster ride called entrepreneurship; this scientific approach is called The Lean Startup and was developed by Mr. Eric Ries.
This book makes you feel like a young wizard discovering new magic tricks in each chapter, but it may be a lengthy read, and you can forget all the important concepts it presents. So here’s a breakdown of what I think makes up the core of lean startup techniques.
The goal of a startup is to figure out the right thing to build- the thing customers want and will pay for as quickly as possible.
A startup is a human organization created to develop a new good or service in the face of great uncertainty. The secret to succeeding in these circumstances is to assemble a team of stakeholders and financiers who can accelerate and optimize the build-measure-learn cycle.
The only way to learn is to be able to support your knowledge with facts or personal experience. Therefore, product development is not a division inside a corporation but rather a set of theories that need to be tested. The most simplified version of your product that will help you learn what you need to know is the minimum-viable product (MVP), which is the fundamental learning instrument on which you test your hypothesis. You MEASURE and LEARN from the MVP once it has been BUILT, then you make any necessary modifications.
No matter what hypothesis you test, don’t forget to test two hypothesis:
- The Value Hypothesis examines whether a good or service actually offers customers value when they start using it.
- The Growth Hypothesis investigates how potential new clients will find the product.
Asking yourself these questions before adding more features:
- Do customers understand they have the issue you’re attempting to fix?
- Would they purchase a solution if one were offered?
- Would they purchase it from us?
- Can we construct a solution to the problem?
Having a feature delivered is not success. Understanding how to address customer issues is success. Without a LOT of customer interaction, this is impossible.
MEASURE:
To begin, create a baseline of meaningful metrics using an MVP, such as conversion rates, sign-up rates, trial rates, payment rates, etc. Second, modify the product to raise these conversion rates. Third, PIVOT if the product’s functionality or marketing cannot be changed to turn these rates into a profit.
Tools to help measure: You may use cohorts to analyze the behavior of your website’s visitors. The more actionable the data is in determining what features to add or whether to pivot, the more detailed the data should be. Split testing refers to evaluating if a distinct feature has the desired effect on consumers by distributing several versions of a product to different client groups.
For organizational purposes make sure measurements are actionable, accessible and audit-able. If not there will be a gridlock, in difference or dispute.
Actionable:
It’s important that an employee understand how to reproduce the outcome in a report when they read one concerning a certain metric.
Accessible
means that everyone in the firm can easily obtain the most recent data and that everyone knows how to view them.
Auditable:
It should be easy to relate the report’s summary figures to the real clients who produced them.
PIVOT:
You built, you measured, you learned and the relevant metrics aren’t getting any better. It’s probably time to consider a pivot. Options are the following
Customer problem pivot.
This situation involves using virtually the same product to address a different issue for the same consumer group. Eric claims that Starbucks made this pivot well-known when they switched from selling coffee beans and espresso machines to producing beverages on-site.
Market segment pivot.
This implies using your current product to address a comparable issue for a different group of clients. When you discover that customers aren’t purchasing your goods but businesses are experiencing a similar issue with money to spend, this may be necessary. This can occasionally be more of a marketing adjustment than a product one.
Technology pivot.
Engineers are always battling to benefit from what they have already constructed. Therefore, when they gain knowledge from consumers, the most apparent pivot for them is to repurpose the technology platform to tackle a more pressing, more commercial, or just a more solvable problem.
Product feature pivot.
You should pay close attention to what actual consumers are doing in this situation rather than making assumptions about what they should be doing. It might indicate to zoom in and eliminate things to sharpen the focus or zoom out and include features for a more comprehensive approach.
Revenue model pivot.
Switching your attention from a high-end, personalized solution to a low-cost one is one pivot. The switch from a one-time product sale to recurring licensing or subscription payments is another frequent variation worth taking into account. The well-known razor against blade tactic is another.
Sales channel pivot.
Start-ups with innovative, sophisticated goods usually appear to begin with direct sales and brand development. They must use what they have learnt from customers to choose a distribution channel, e-commerce, white-labeling the product, and strategic partners once they realize how costly and time-consuming this is.
Product versus services pivot.
Sometimes a product is too unique or too complicated to be efficiently offered to the consumer with the issue. The time is now to bundle support services with the product, give educational opportunities, or simply make your business a service that delivers a product at its heart.
Major competitor pivot.
What do you do when a sizable new player or rival enters your market? You can forge on aimlessly or concentrate on one of the aforementioned pivots to strengthen your distinctiveness and survive.
Where does growth come from?
- By word of mouth
- As a result of using the product
- By way of advertising
- By continued usage or purchase
Three Engines Of Growth
- Sticky Engine: You grow your client base at a pace greater than the rate at which they depart. Customer additions and turnover are important metrics.
- Viral Engine: New customers bring in several other new clients. The viral coefficient is a key metric.
- Paid Engine: You may acquire clients for less money than they are worth to you per customer. So, in order to promote development, you invest money on things like advertising. Key metrics include the cost and benefit of acquiring customers. The lower number represents an accelerated growth rate.
Checkout the man himself Mr. Eric Ries speaking on the Lean Startup below.
“The company that consistently makes and implements decisions rapidly gains a tremendous, often decisive, competitive advantage.”- Steve Blank
