It's a fact that the vast majority of startups fail. But according to Eric Ries, author of The Lean Startup, those failures can be prevented if you take a structured and scientific approach. "Startup success can be engineered by following a process," he says. And if there's a process, that means it can be learned. Ries's goal is to teach that process to entrepreneurs everywhere.
"Lean" is the term James P. Womack and Daniel T. Jones popularized in their 1996 book, Lean Thinking. Lean was their expression for what they observed by studying Toyota’s manufacturing processes: an absence of waste. Meant to convey the essence of the Toyota Production System, the lean concept has moved beyond the factory floor to become an organizing principle and practice that seeks to fully engage everyone in an organization in creating and delivering the highest possible customer value through relentless innovation. Processes are streamlined and problems are solved, with the goal of flowing benefit to the customer in the most optimal way possible.
The Lean Startup, which is based on the principles of lean, provides a scientific approach to creating and managing startups, developing a new product, getting that product into customers' hands faster, steering the startup more effectively, and driving growth with maximum acceleration.
"Too many startups begin with an idea for a product that they think people want," say Ries. "They then spend months, sometimes years, perfecting that product without ever showing the product, even in a very rudimentary form, to the prospective customer. When they fail to reach broad uptake from customers, it is often because they never spoke to prospective customers and determined whether or not the product was interesting. When customers ultimately communicate, through their indifference, that they don't care about the idea, the startup fails."
Ries begins by redefining what a startup is: an organization dedicated to creating something new under conditions of extreme uncertainty. "This is just as true for one person in a garage or a group of seasoned professionals in a Fortune 500 boardroom. What they have in common is a mission to penetrate that fog of uncertainty to discover a successful path to a sustainable business."
That definition allows Ries to deliver The Lean Startup methodology, which is essentially a learning strategy based on the big idea that startups exist not to make stuff, make money, or serve customers, but rather to learn how to build a sustainable business—and this learning can be validated scientifically, by running experiments that allow the entrepreneur to test the viability of their vision.
There are four key elements to that learning:
1. Learn process
The lack of a tailored management process has led many a startup to abandon all process in favor of a "just do it" approach that avoids all forms of management. A successful startup must create order, not just chaos, and put a rigorous process around the development of a product.
2. Learn to experiment
Every startup is a grand experiment that attempts to answer a question, but the question isn't "Can this product be built?" It's "Should this product be built?" and "Can we build a sustainable business around this set of products and services?" This experiment is more than just theoretical inquiry; it's a first product, which, if successful, allows a startup to begin enlisting early adopters, adding employees to the next experiment or iteration, and eventually building a product. Ries maintains that, "By the time that product is ready to be distributed widely, it will already have established customers. It will have solved real problems and offer detailed specifications for what needs to be built."
3. Learn to pivot
Once a startup has figured out the problem that needs to be solved, it develops a minimum viable product, or MVP, to begin the process of learning as quickly as possible. "Once the MVP is established," says Ries, "a startup can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect question."
Ries stays true to some age-old old quality continuous innovation techniques such as "5 Whys"—asking the simple question of "why?" to study and solve problems along the way. Done correctly, it will be clear whether or not a company is truly moving the drivers of the business model. If not, it's a clear signal to make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth. Ries terms this a "pivot." To my mind, this is by far and away the single most important principle to take away from The Lean Startup. Learn to pivot, and you learn to master uncertainty.
4. Learn to validate
In the manufacturing world, progress is measured by the production of high quality goods; but in the startup world, progress is measured in terms of validated learning. Validated learning "is a rigorous method for demonstrating progress when one is embedded in the soil of extreme uncertainty," writes Ries. "Once entrepreneurs embrace validated learning, the development process can shrink substantially. When you focus on figuring the right thing to build—the thing customers want and will pay for—you need not spend months waiting for a product beta launch to change the company's direction. Instead, entrepreneurs can adapt their plans incrementally, inch by inch, minute by minute."
I congratulate Eric Ries for taking lean concepts and applying them in the entrepreneurial context, and for teaching me something new. I was a full-time strategic advisor to Toyota from 1998-2006, and designed and delivered the University of Toyota's Lean course for knowledge workers to internal teams as well outside companies. Yet it never occurred to me that lean thinking had a place in the world of startups. But by redefining the purpose and role of a startup, he has taught me the real secret of successful entrepreneurship in any endeavor: learning whether to pivot or persevere.