What Does Having a Lean Business Model Mean?

Running a lean business has been a rallying cry for many entrepreneurs and business owners. But what does a lean business model look like in practice?
February 06, 2018

The days of spending months strategizing the best path forward are over for most businesses. Imagine proudly presenting a 100-page business plan to your stakeholders only to realize that half of your material was already outdated and your customers had moved on? Considering the current pace of change in today's marketplace, a lean business model has become more and more attractive.

Traditionally, being “lean" has meant doing more with less, but the concept has expanded.

Today, a lean business model is a strategy that streamlines processes to rapidly address customer requirements. It involves fast cycles of surveying customers about their needs, developing and prototyping new products and services accordingly and adapting to shifts in demand.

A Lean Business Model Focuses on What Works

Many business owners would like to embrace a lean business model, but aren't sure how to do it. Having an agile mindset is a key component.

Lloyed Lobo's company Boast Capital helps North American businesses recover research and development costs from the government, and automates the R&D tax claim process.

The secret to lean business model success involves business professionals leveraging the right software in daily business processes, perfecting business process flows, creating market pull and scaling to grow the business.

—Deep Chakraborty, CEO, Enact Systems

“To be lean, you need to make it a part of your company's DNA to prioritize ideas based on ROI as well as continuously test your assumptions and make adjustments based on the results," Lobo says.

“For example, when we started out, we used several marketing channels," he continues, "but eventually zeroed in on direct sales and in-house events based on our hypothesis of the potential ROI. Hosting large events has not only allowed us to generate new clients, it has also generated revenue via ticket sales and sponsors and helped us barter for business services with several vendors."

A lean business model often rewards experimentation and can be more cost-effective because they avoid lengthy implementations of unproven strategies and investments.

“Although the road to success with a lean business model might take longer, it beats spending on growth frivolously while you lose time and money planning. As the saying goes, 'nail it before you scale it,'" says Lobo.

A Lean Business Model Puts Value at the Center

Another advantage of the lean business model is its emphasis on delivering customer value.

Deep Chakraborty is CEO of Enact Systems, a San Ramon, California-based company that hosts a software platform for solar project management. Due to complex sales and delivery processes in the solar industry, a lean business model has been critical in effectively addressing operating challenges that could diminish value.

“A typical solar transaction requires multiple stakeholders to dance together: customer, installer, financier and the local utility, with multiple steps, dozens of information exchanges and lots of documents," says Chakraborty. “A lean business model lets us develop a seamless flow for these interactions so we don't waste time and the customer doesn't either."

Technology is often at the heart of a lean business model, facilitating complicated processes and automating more tedious, manual ones; measuring what's working; and adopting new and more sophisticated applications as they become available.

But Chakraborty is quick to point out that software alone can't drive a lean approach.

“The secret to lean business model success involves business professionals leveraging the right software in daily business processes, perfecting business process flows, creating market pull and scaling to grow the business."

A lean business model can help streamline processes so businesses can address market changes quickly. Incorporating such a model into your business may help you start addressing your customer's needs in real time.

Read more articles on organizational productivity.

Photo: Getty Images