flevyblog

Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.
MANAGEMENT & LEADERSHIP STRATEGY, MARKETING, SALES OPERATIONS & SUPPLY CHAIN ORGANIZATION & CHANGE IT/MIS Other

Lean Startup Methodology

Editor's Note: Take a look at our featured best practice, Lean Startup Canvas: Guide, Process and Tools (56-slide PowerPoint presentation). The Lean Canvas is an adaptation by Ash Maurya of the Business Model Canvas. Four building blocks were replaced with new ones with the aim of making the canvas more startup-oriented. The adaptation emphasizes importance of clearly understanding the problem the customer faces. Beyond the canvas [read more]

Also, if you are interested in becoming an expert on Process Improvement, take a look at Flevy's Process Improvement Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.

* * * *

Traditional Startups demand that the entrepreneurs formulate a comprehensive 5-year Business Plan.

The approach that traditional startups typically adopt is a linear, effort-intensive, and costly process that necessitates in-depth reflection, planning, and execution with minimal customer interaction and feedback. The approach requires careful deliberation over detailed financial projections during the planning phase to make potential investors believe that it’s a viable investment.

Once funding from the venture capital firms is secured, the traditional startups begin developing products in an insular fashion, spending countless man hours while maintaining confidentiality to avert the rivals from imitating the offering.

Their traditional product development stages occur in linear order, and each stage continues for months.  They rely more on intuition than customer feedback and realize it too late that the proposition they launched a long time ago isn’t getting traction from customers.

The Lean Startup methodology, in contrast, spares startups from wasting valuable resources and man hours on flawed ideas or prototypes that are unappealing to customers.  The term “Lean Startup” methodology was first put forth by Eric Ries in his book “The Lean Startup.”  The approach takes its roots from Toyota’s Lean Manufacturing concept, emphasizing optimum resource allocation and minimization of waste.

The central premise of the Lean Startup methodology is that when startups devote their efforts to continuously developing products to meet the needs of early customers, they minimize market risks, evade substantial initial financing of projects, costly new product releases, and insolvency.

Lean Startups avoid complex Business Plans and laborious planning as conventional businesses do.  They try out untested hypotheses, iterate, and improve using customers’ feedback.

The goals of using the Lean Startup methodology are to get rid of wasteful practices and extraneous expenditures, obtain continuous customer feedback, iterate the product based on feedback, and dump a flawed idea soon enough without spending a fortune on it.

The implementation of the Lean Startup methodology involves a 4-stage iterative cycle called the Lean Startup Cycle.  The 4 stages are:

  1. Map Ideas Using the Business Model Canvas
  2. Develop and Test Your Hypotheses
  3. Create a Minimum Viable Product (MVP)
  4. Learn, Validate, and Improve

Let’s delve deeper into the first two stages of the Lean Startup Cycle.

Stage 1. Map Ideas Using the Business Model Canvas

The first stage of the cycle requires startups to innovate new and existing Business Models using the Business Model Canvas.  The Business Model Canvas renders a graphical depiction of the 9 key building blocks or elements of Innovation on a single page that have to be critically analyzed by every startup.

The 9 building blocks include:  customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partners, and cost.  Executives need to make assumptions, ask questions, and find answers regarding each of the building blocks.

Stage 2. Develop and Test Your Hypotheses

The second stage demands sketching out, testing, revising, or discarding the hypotheses based on the insights generated by an in-depth evaluation of the Business Model Canvas.  Founders decode company ideas into Business Model hypotheses and test their assumptions regarding customers’ needs.

The hypotheses are categorized into 3 risk categories: Desirability, Viability, and Feasibility.

  • Desirability: The goal is to determine whether or not the customer desires the product.  A sample hypothesis to be tested could be, “Kids aged 9—15 will be interested in this product.”
  • Viability: This hypothesis category evaluates the Business Model viability risks.  The aim is to make certain that the product solves customers’ problems and finding a solution is worth it.
  • Feasibility: This category evaluates risks related to the startup’s ability to develop and deliver products, critical capabilities, and skills required.  A sample hypothesis to be tested could be, “We can develop X number of products within 2 months.”

Interested in learning more about the steps of the approach to Financial Forecasting? You can download an editable PowerPoint presentation on Lean Startup Methodology here on the Flevy documents marketplace.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro LibraryFlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.

For even more best practices available on Flevy, have a look at our top 100 lists:

136-slide PowerPoint presentation
In this Lean Startup presentation, we address the high failure rates among startups and how the Lean Startup approach is transforming the way companies are built and new products are launched globally. Initially rooted in Lean manufacturing practices, the Lean Startup methodology is not limited [read more]

Want to Achieve Excellence in Process Improvement?

Gain the knowledge and develop the expertise to become an expert in Process Improvement. Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.

Process Improvement involves analyzing and improving existing business processes in the pursuit of optimized performance. The goals are typically to continuously reduce costs, minimize errors, eliminate waste, improve productivity, and streamline activities.

As we continue to deal with COVID-19 and its economic aftermath, most organizations will prioritize Business Process Improvement initiatives. This is true for a few reasons. First, Process Improvement is one of the most common and effective ways of reducing costs. As the global economy slows down, Cost Management will jump to the forefront of most corporate agendas.

Secondly, a downturn typically unveils ineffective and broken business processes. Organizations that once seemed agile and focused during periods of growth may become sluggish and inefficient when demand drops off.

Lastly, COVID-19 has expedited Digital Transformation for most organizations. One of the quickest and most impactful forms of Digital Transformation is Robotic Process Automation (RPA). Thus, we have included numerous RPA frameworks within this Stream.

Learn about our Process Improvement Best Practice Frameworks here.

Readers of This Article Are Interested in These Resources


3-page PDF document
A Lean Startup is a methodology for developing and managing early-stage ventures that emphasizes rapid experimentation, iterative product development, and continuous validation of hypotheses. Coined by Eric Ries, this approach encourages entrepreneurs to build a Minimum Viable Product (MVP) [read more]


 
230-slide PowerPoint presentation
 
 
27-slide PowerPoint presentation

About Mark Bridges

Mark Bridges is a Senior Director of Strategy at Flevy. Flevy is your go-to resource for best practices in business management, covering management topics from Strategic Planning to Operational Excellence to Digital Transformation (view full list here). Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.

, , , , , , , , ,





Complimentary Business Training Guides


Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]

  This 48-page whitepaper, authored by consultancy Envisioning, provides the frameworks, tools, and insights needed to manage serious Change—under the backdrop of the business lifecycle. These lifecycle stages are each marked by distinct attributes, challenges, and behaviors. [Learn more]

We've developed a very comprehensive collection of Strategy & Transformation PowerPoint templates for you to use in your own business presentations, spanning topics from Growth Strategy to Brand Development to Innovation to Customer Experience to Strategic Management. [Learn more]

  We have compiled a collection of 10 Lean Six Sigma templates (Excel) and Operational Excellence guides (PowerPoint) by a multitude of LSS experts. These tools cover topics including 8 Disciplines (8D), 5 Why's, 7 Wastes, Value Stream Mapping (VSM), and DMAIC. [Learn more]
Recent Articles by Corporate Function

  

  

  

  

  


The Flevy Business Blog (https://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most of our articles are authored by management consultants and industry executives with over 20 years of experience.

Flevy (https://flevy.com) is the marketplace for business best practices, such as management frameworks, presentation templates, and financial models. Our best practice documents are of the same caliber as those produced by top-tier consulting firms (like McKinsey, Bain, Accenture, BCG, and Deloitte) and used by Fortune 100 organizations. Learn more about Flevy here.


Connect with Flevy:

     
  


About Flevy.com   /   Terms   /   Privacy Policy
© . Flevy LLC. All Rights Reserved.