Lean startup
Lean startup is a methodology for developing businesses and products that aims to shorten product development cycles and rapidly discover if a proposed business model is viable; this is achieved by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning. Lean startup emphasizes customer feedback over intuition and flexibility over planning. This methodology enables recovery from failures more often than traditional ways of product development.[1]
For the book, see The Lean Startup.Central to the lean startup methodology is the assumption that when startup companies invest their time into iteratively building products or services to meet the needs of early customers, the company can reduce market risks and sidestep the need for large amounts of initial project funding and expensive product launches and financial failures.[2][3] While the events leading up to the launch can make or break a new business, it is important to start with the end in mind, which means thinking about the direction in which you want your business to grow and how to put all the right pieces in place to make this possible.[4]
Overview[edit]
Similar to the precepts of lean manufacturing and lean software development, the lean startup methodology seeks to eliminate wasteful practices and increase value-producing practices during the earliest phases of a company so that the company can have a better chance of success without requiring large amounts of outside funding, elaborate business plans, or a perfect product.[5] Customer feedback during the development of products or services is integral to the lean startup process, and ensures that the company does not invest time designing features or services that consumers do not want.[6] This is done primarily through two processes: using key performance indicators and a continuous deployment process.[3][7][8]
When a startup company cannot afford to have its entire investment depend upon the success of a single product or service, the lean startup methodology proposes that by releasing a minimum viable product that is not yet finalized, the company can then make use of customer feedback to help further tailor the product or service to the specific needs of its customers.[3][5]
The lean startup methodology asserts that "lean has nothing to do with how much money a company raises"; rather it has everything to do with assessing the specific demands of consumers and how to meet that demand using the least amount of resources possible.[9]
Precursors[edit]
Lean manufacturing[edit]
Use of the word lean to describe the streamlined production system of lean manufacturing was popularized by the 1990 book The Machine That Changed the World.[10][11] The Toyota Production System pioneered by Taiichi Ohno combined flow principles that had been used by Henry Ford since the early 1900s with innovations such as the TWI programs introduced to Japan in 1951.[11]
Lean manufacturing systems consider the expenditure of resources for any goal other than the creation of value for the end customer as waste, and they continually seek ways to eliminate such waste. In particular, such systems focus on:
History[edit]
The lean startup methodology was first proposed in 2008 by Eric Ries, using his personal experiences adapting lean management and customer development principles to high-tech startup companies.[59][9][5][44] The methodology has since been expanded to apply to any individual, team, or company looking to develop new products, services, or systems without unlimited resources.[38] The lean startup's reputation is due in part to the success of Ries' bestselling book, The Lean Startup, published in September 2011.[16][60][61]
Ries' said that his first company, Catalyst Recruiting, failed because he and his colleagues did not understand the wants of their target customers, and because they focused too much time and energy on the initial product launch.[9][62] Next, Ries was a senior software engineer with There, Inc.,[9][62] which Ries described as a classic example of a Silicon Valley startup with five years of stealth R&D, $40 million in financing, and nearly 200 employees at the time of product launch.[62] In 2003, There, Inc. launched its product, There.com, but they were unable to garner popularity beyond the initial early adopters.[62] Ries claimed that despite the many proximate causes for failure, the most important mistake was that the company's "vision was almost too concrete", making it impossible to see that their product did not accurately represent consumer demand.[62]
Although the lost money differed by orders of magnitude, Ries concluded that the failures of There, Inc. and Catalyst Recruiting shared similar origins: "it was working forward from the technology instead of working backward from the business results you're trying to achieve."[38]
After Ries later co-founded IMVU Inc., IMVU investor Steve Blank insisted that IMVU executives audit Blank's class on entrepreneurship at UC Berkeley.[46] Ries applied Blank's customer development methodology and integrated it with ideas from lean software development and elsewhere to form the lean startup methodology.[59]
Reception[edit]
Ben Horowitz, the co-founder of venture capital firm Andreessen Horowitz, wrote an article in 2010 criticizing the lean startup method for over-emphasizing "running lean" (constantly cutting and reducing non-essential parts of the company to save time and money). He specifically disagreed with portraying "running lean" as an end rather than a means to winning the market without running out of cash. Horowitz gave as an example his startup Loudcloud, which by "running fat" was able to outperform 20 direct competitors and after 8 years reach a value of $1.6 billion.[63] However, at least since 2008, numerous advocates of lean methods have pointed out that "running lean" does not mean cost cutting.[64][65][66][67][68][69][70][71]
Trey Griffith, the VP of technology at Teleborder, stated in 2012 that the majority of backing for the lean startup methodology was anecdotal and had not been rigorously validated when first presented. However, he went on to note that better support of the method comes out of a 2011 analysis of the factors of success in growth companies as described in the 2011 book Great by Choice.[72]
Lean startup has also been the source of attention in the academic literature. For example, Stanford professor Riitta Katila finds empirical support for lean startup.[73] However, a group of prominent strategy and innovation scholars—Teppo Felin, Alfonso Gambardella, Scott Stern and Todd Zenger—argue that the application of lean manufacturing principles to startups is highly problematic and only creates incremental outcomes for startups that use the method.[74] Other scholars, including Wharton's Dan Levinthal, argue that many of the insights of lean startup have already been anticipated by the technology evolution, organizational learning and other literatures.[75] The value of lean startup continues to be debated and discussed in the academic literature.[76]