The LEAN Startup, explained by Alvinesh Jugun

12th Nov 2018 Technology

At the turn of the 20th century, Toyota revolutionized the whole concept of efficiency and process optimization through a method which they termed as LEAN manufacturing. Inspired by this concept, Eric Ries proposed, through his book the “LEAN STARTUP”, to apply the same adapted tactics for startups allowing them to cut through the complexity of building and launching new innovative products. In today’s business environment, this approach is closely linked to other concepts such as Design Thinking and AGILE.

I am specifically going to elaborate today on the five core principles of LEAN Startup to provide a simple yet comprehensive understanding of this methodology.

  1. Leap of Faith Assumptions (LOFA)

A Leap of Faith Assumption is a common situation every entrepreneur faces when he comes to the point when he has to take the crucial decision of a GO or NO GO for taking his idea to market. The 2 elements which determines his decision are the Value Hypothesis and the Growth Hypothesis. By Value Hypothesis, we mean that an idea must satisfy an actual customer need else even if it is the best of ideas it has little chance of being successful. By Growth Hypothesis, we are referring to the financial viability of going to market with respect to a big enough demand for our product. Whichever scenario, the best way to ascertain customer needs is through customer-centricity. This is where Design Thinking comes into play.

  1. Minimum Viable Product (MVP)

A minimum viable product is the best way to experiment quickly and inexpensively a product. There are multiple MVPs methods depending on the context. The Fast Cycle Sketch Test, for example, is just a rough prototype of an idea or product. We can also have the Dry Wallet method, testing the payment functionalities of the prototype or the Judo method, testing a comparable product from a competitor.

Having said that, the reason behind developing MVPs is to actually test for the customer feedback with a series of prototypes which the startup will have evolved iteratively. This should be done without heavy initial investment hence contributing to a startup’s agility and resilience.

  1. The 3 A’s of Validated Learning

Here a startup must treat each experiment as an opportunity to learn. We already mentioned the advantages of prototyping and incremental enhancement based on what was learned from the previous testing phases. The 3 A’s are a set of metrics to support this learning process:

  • Actionable: The ability to use facts and data to demonstrate direct cause and effect resulting from changes brought to the product. For example: did the addition of a particular feature show an improvement in the customer satisfaction?
  • Accessible: Are the results of tests and the product performance visible to all stakeholders? Transparency ensures that there is a common understanding of the project status and associated processes.
  • Auditable: Data is the new oil. At this stage, data collected are facts which support the learning points and ensure the credibility of the project team with respect to their future decisions. 
  1. Build-Measure-Learn feedback loop

The guiding principle of continuous measurement and analysis of products through successive MVPs takes us logically towards the model of the Build-Measure-Learn loop. This feedback loop continues until customers are clearly happy with the latest proposed version of the MVP.

  1. Pivot or Preserve

This is the last principle. It is now clear that the objective of each product prototype is to gather feedback and depending on whether the reaction is negative or positive, decide on the way forward. If positive, the next step will be to “Preserve” the current MVP and improve it through the Build-Measure-Lean cycle. If negative, it is then time to “Pivot”. i.e. to take it from a typical Lean jargon: “to do a change in strategy without a change in vision.”

This concludes our brief of the Lean approach. For further reading, in his latest book, “The Startup Way”, Eric Ries takes his idea further by applying it to larger organisations and in the process, help those modern companies use the entrepreneurial mindset to transform their culture and drive long-term growth.