{"id":13030,"date":"2023-10-02T08:17:42","date_gmt":"2023-10-02T13:17:42","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=13030"},"modified":"2023-10-02T09:31:19","modified_gmt":"2023-10-02T14:31:19","slug":"lean-startup-methodology","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/lean-startup-methodology\/","title":{"rendered":"Lean Startup Methodology"},"content":{"rendered":"

\"\"<\/p>\n

Traditional Startups demand that the entrepreneurs formulate a comprehensive 5-year Business Plan<\/a>.<\/p>\n

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\u2019s a viable investment.<\/p>\n

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.<\/p>\n

Their traditional product development<\/a> stages occur in linear order, and each stage continues for months.\u00a0 They rely more on intuition than customer feedback and realize it too late that the proposition they launched a long time ago isn\u2019t getting traction from customers.<\/p>\n

The Lean Startup methodology<\/a>, in contrast, spares startups from wasting valuable resources and man hours on flawed ideas or prototypes that are unappealing to customers.\u00a0 The term \u201cLean Startup\u201d methodology was first put forth by Eric Ries in his book \u201cThe Lean Startup.\u201d\u00a0 The approach takes its roots from Toyota\u2019s Lean Manufacturing<\/a> concept, emphasizing optimum resource allocation and minimization of waste.<\/p>\n

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.<\/p>\n

Lean Startups avoid complex Business Plans and laborious planning as conventional businesses do.\u00a0 They try out untested hypotheses, iterate, and improve using customers\u2019 feedback.<\/p>\n

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.<\/p>\n

The implementation of the Lean Startup methodology involves a 4-stage iterative cycle called the Lean Startup Cycle.\u00a0 The 4 stages are:<\/p>\n

    \n
  1. Map Ideas Using the Business Model Canvas<\/a><\/strong><\/li>\n
  2. Develop and Test Your Hypotheses <\/strong><\/a><\/li>\n
  3. Create a Minimum Viable Product (MVP)<\/strong><\/li>\n
  4. Learn, Validate, and Improve<\/strong><\/li>\n<\/ol>\n

    \"\"<\/a><\/p>\n

    Let\u2019s delve deeper into the first two stages of the Lean Startup Cycle.<\/p>\n

    Stage 1. Map Ideas Using the Business Model Canvas<\/strong><\/h2>\n

    The first stage of the cycle requires startups to innovate new and existing Business Models using the Business Model Canvas. \u00a0The 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.<\/p>\n

    The 9 building blocks include: \u00a0customer segments<\/a>, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partners, and cost. \u00a0Executives need to make assumptions, ask questions, and find answers regarding each of the building blocks.<\/p>\n

    Stage 2. Develop and Test Your Hypotheses<\/strong><\/h2>\n

    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.\u00a0 Founders decode company ideas into Business Model hypotheses and test their assumptions regarding customers\u2019 needs.<\/p>\n

    The hypotheses are categorized into 3 risk categories: Desirability, Viability, and Feasibility.<\/p>\n