The Lean Startup by Eric Ries – in a Nutshell
This article gives an overview of Eric Ries’s Lean Startup book, highlights the essential information and draws attention to why you should think different when you start a company nowadays.
Why is it crucial to know Eric Ries’s Lean Startup book for those who want to start a new business? Because it provides an efficient and easily implementable working method. By using the tactics and the workflow from the book, you can avoid wasting money and resources. Learn the user-centered mindset and apply it to your everyday mentality.
We collected some mistakes what beginners usually commit and the reasons why you can’t just rely on a good plan, strategy, and market research. Previously, these were the secrets to success. It is too tempting to base startups on these, but this doesn’t work anymore.
In the case of startups, the uncertainty factor is too high. Most startups don’t even know who their customers will be and what their final product will look like. No one can predict the future, and even the most promising startups can fail. Because of this, you need to focus on working what’s absolutely necessary and leave out everything that wastes time.
Mistakes that most startups make
- They don’t validate the business idea,
- They launch the product too late.
- They aren’t able to pivot,
- They want too many features
How does Eric Ries challenge your mindset?
The five basic principles of the lean method are the following:
- Innovative Entrepreneurs
- Entrepreneurship is a Type of Management
- Proven Experience
- Innovation Accounting
1. Innovative entrepreneurs are everywhere
Contrary to stereotypes, it’s not just a startup that starts in a garage. The concept of a creative entrepreneur embraces those who are creating new products and services in precarious conditions and within a short period. This means that there are innovative entrepreneurs everywhere, and the lean startup approach is available to companies of any size or any sector.
2. Entrepreneurship is a kind of management
Business is not just about the product, but also about the institution. It requires a new type of management, precisely because of the extremely precarious conditions. In fact, the “innovative entrepreneur” should be a part of every modern company that wants to achieve future growth based on innovation.
3. Proven experience
People not only create startups to solve problems, generate profit, or satisfy customers’ needs but also to gain experience on how to build a sustainable business. We can gain scientifically verifiable experience by carrying out frequent experiments to test all aspects of our vision.
These are the primary activities of a startup: creating of a product based on an idea, measuring customers’ reactions, and then deciding whether to change direction or persistence based on the experience. Every successful startup process should aim to speed up this feedback loop.
5. Innovation accounting
To increase the success of businesses and the accountability of innovators, you should also pay attention to the boring part: how to measure progress, how to set milestones and how to prioritize work. This requires a new accountability system invented explicitly for startups.
You need to ask yourself the proper questions:
- Does your idea solve a real problem?
- Is your business trying to disrupt the status quo?
- Is your idea profitable?
- Does your business idea have a unique selling point?
If you don’t have enough time to spend with your business (for example because you also have a full-time job), then your first aim should be to create the MVP, which means a minimum viable product. At this stage, this is a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.
Pivoting is vital: Learn to start over!
The pivot is one of the fundamental concepts of lean startup methodology. When something is not working in your strategy, you should be capable of trying again to solve the problem from a new perspective. Or if your solution happens to solve a different problem, try to figure out how to adapt to the new (and often unexpected) situation. Don’t stick to what’s not working.
There are three types of pivots:
- product pivot (when your customers help you to shape your product through the feedbacks)
- customer pivot (when you rethink your target group to develop a new segment of customers who are willing to pay for your product)
- problem pivot (when you discover that you are not solving the right problem)
Several huge enterprises have become successful with the lean method. Some of the best examples:
Dropbox is a file transfer service which started with an MVP that was a 3-minute screencast showing consumers what Dropbox will be able to do. They collected feedback from target customers that helped them to shape the product and get validation.
Wealthfront is democratizing access to outstanding investment managers. The founders continuously are developing the product and shaping the service. In that particular industry, risks and costs of failure are very high, so they need to be very careful and be able to react quickly to changes.
Uber started with MVP, which was a limited service. They just connected drivers and those who needed a drive. Nowadays, Uber not only offers a whole fleet of different cars but also experiments with self-driving vehicles.
One of the best accommodation rental services was just a thought in 2007 when the founders didn’t have enough money to pay rent. They decided to offer the flat with bed and breakfast, and it was working. What an amazing MVP!
Joel Gascoigne, a Birmingham-based developer, had an idea for an app. His first step was to create a landing page where he asked users if they have the problem which needs to be solved. Joel got his answers, and now he has over 2 million users.
Learn from your customers, build in their feedbacks to create a better product. Do fast experiments, to see what works and what does not. Always be prepared! When the business does not work for you, don’t give up; just try to find new ways to be successful.