The Lean Startup is a new business method, which is being adopted all over the world. This is the process of continuously testing the business vision, adjusting and adapting before it is too late.
Who should read this book:
- Anyone interested in entrepreneurship and entrepreneurship
- Anyone interested in products with fast development lifecycle
- Founders, managers and employees of technology companies
About the author
Eric Ries is a successful businessman. He is the co-founder of IMVU, a social network that uses 3D avatars. He is currently a sought-after consultant and speaker.
Build a vision
Building a start-up company is a job related to institutions and administration. We are squandering excess capacity so there are too many failures. The Lean Startup gets its name from the Lean Manufacturing innovation at Toyota. Its tenet is to promote the knowledge, creativity of workers, reduce the size of the team, produce at the right time, control inventory, speed up the production cycle.
The Lean Startup guides you through the Build – Measure – Learn cycle, with feedback as the strategic vision to lead to the product in the optimization process.
A startup is a human institution set up to create a new product or service under extremely uncertain conditions.
There is no convention on economic size, sector or sector. Anyone who is creating a new product or company under conditions of extreme uncertainty is an entrepreneur.
A startup is not only a product, technology, and idea, but also a very profound human institution.
Entrepreneurs under pressure to succeed, are extremely creative when describing what they have learned. The company's vital function is to learn. The Lean Startup Model is verified learning. Learning to see waste and eliminate it systematically has allowed lean companies like Toyota to dominate the market.
Lean thinking defines value as delivering benefits to customers. Unnecessary efforts to find out what the customer needs can be eliminated, that is, verified learning. We can do experiments, giving customers a chance to try and see their behavior.
Lean Startup is not a set of small tactics, it is a method and principle for developing something new. Look for a synergy between your vision and what the customer will accept, not reluctantly accepting what the customer thinks they want or telling the customer what they should want. The effectiveness of a startup is not how many things you make, but how much proven knowledge you reap.
We often have a management mindset that places our trust in the project, the plan has been researched thoroughly. But the market is always changing, the world around us is always unstable.
The Lean Startup method is about testing tactics to see what's great and what's crazy.
An authentic experiment must follow the scientific method: Start with a hypothesis, then predict what will happen, then test the predictions with experiment.
Experiment with a startup driven by a vision to discover how to build a strong company on the foundation of that vision.
The first step is to break down the great idea into small pieces, then conjecture the value hypothesis and grow whether the product or service will provide value to the customer when they use it. The feedback and lessons learned from the experiment are invaluable, the experiment is more than an investigation.
In 2004, three young students launched the Facebook social network for the university environment. What impresses investors is the amount of time users stay on the site, and the coverage rate even at a handful of universities, even though Facebook doesn't pay to attract customers. where Facebook follows a different growth engine. This is a testing phase that helps them define their own technique.
Every business venture starts with a series of guesses. A conventional guess-based strategy is full of bugs, so the startup's initial effort is to test them as quickly as possible. If the guess is correct, we will succeed. If they are false, the startup will fail. It was a breakthrough in faith. Of course, breaking that belief must become reality, must come from the foresight, in the right place, at the right time.
There are businesses that revel in the success story, using superficial growth to make themselves appear successful. Don't let the initial strategy bend or go with intuition. Implement innovative accounting to maintain a quantitative financial model to rigorously measure progress.
Decide on strategies based on first-hand experience, at Toyota it is called Genchi Gembutsu, which means “Go and see it with your own eyes”. Since then, business decisions are based on insight that is directly observed. With that understanding, we can sketch a customer persona, which is an essential guide for product development. However, the customer model is an assumption, not a fact, because customers sometimes really don't know what they want. So analysis is necessary, but too much analysis is dangerous, without reanalyzing leads to failure. So, the important thing is in the concept of the minimum viable product, MVP (minimum viable product).
MVP requires the courage to put your conjecture to the test. MVP helps entrepreneurs start the learning process as quickly as possible. The only way to go through the Build-Measure-Learn cycle.
Most entrepreneurs and product developers put a lot of features beyond what MVP needs, which is a waste. When building an MVP, remove features that don't directly contribute to learning. Having to identify the customer is the most important part of the production process. If we don't know who the customer is, we don't know what makes quality. The company knows which product attributes customers value, focusing its energies on creating products that customers consider valuable. Each is designed to test a solution for the customer. If the MVP is sometimes viewed by our customers as shoddy, then we see it as an opportunity to learn and capture more attributes that are of interest to our customers.
Initial results are extremely important in predicting the future path. The only way to know is to systematically test the growth model with real customers. Avoid the temptation of building too much and over-promising, and indulge in market research. When you're ready to scale, you'll have a map in place detailing what to build.
The job of a startup is to rigorously measure its current position, face the hard truth, realized from the reviews. Then devise a way to experiment to learn how to move the real numbers closer to the ideal of the business project.
Accounting becomes an essential part of the method of enforcement, centralizing control and assigning responsibility to departments and individuals to achieve specific goals. Startups need to equip themselves with a new form of accounting specifically structured for breakthroughs. It is innovative accounting.
Innovative accounting works in three steps:
Use the MVP product to establish real data on the company's current position. Among the many conjectures in a business plan, you should test the one with the most risk. If we don't find a way to reduce the risks on the way to the ideal point needed to create a sustainable business, then there's no point in testing anything else.
Adjust the engine to run from the starting line to the ideal point. Every product development, marketing or other activity is aimed at influencing its development model. Note that the growth rate depends mainly on: profitability of a single customer, the cost of acquiring new customers and repurchase rates of existing customers, and the level of new customer development.
Proposing the decision to adjust or stick, the most important and prominent decision in the decisions, the most difficult and time consuming is to adjust or stick to the original direction.
Adjust or follow?
Many businesses achieve a little bit of success – just enough to survive – but fail to live up to the expectations of founders and investors, but because of loyalty, employees and founders do not want to give up. They argue that, due to the underlying science of Lean Startup, there is a cure-all for making adjustments or sticking. Incorrect! Because there is no way to remove the human element from the art of entrepreneurship.
We can learn, we are innately creative, we have the ability to see distractions, but humans can still make mistakes. At the heart of the scientific method is being able to improve that judgment by putting your hypotheses to the test over and over again.
Once you have invested money, time, and creative energy into the idea, the more difficult it is to adjust. The wisdom is to take product development resources and apply it to a new, different product. Adjust and test a new hypothesis in search of greater verified knowledge.
Adjustment is a fact of life in every growing company. Even after the company had initial success, it continued to adjust.
The decision to adjust is emotionally draining. To mitigate this, the startup should regularly hold “adjust or stick” meetings with the participation of all departments; plus outside consultants' perspectives and insights into conversations with current and potential clients.
An adjustment is not just a call for change. Remember, it's a form of structured change, designed to test a radical new hypothesis about the product, the business model, the growth engine. It is the heart of the Lean Startup approach.
Law of production series is very important in the operation of the company. The small series solution produces a finished product every few seconds; while the large batch solution will output the entire product at once.
Mass production factories have assembled cars by spending huge sums of money to buy huge machines and equipment, meeting the mass production of car parts in large quantities by allowing the machines to operate at maximum capacity. multi. A series of similar cars were born at low prices.
In mass production, the way to avoid running out of stock, in stocking a large number of spare parts for use when needed. This entails the cost of storing, transporting, and tracking them. If a part suddenly fails, all those parts in the warehouse become worthless.
Toyota leads to success by using small batch production, it buys versatile machines that can produce a wide variety of parts in small batches at the right time. The biggest advantage of small batch production is that quality problems are detected early by the andon cord system called the product's immune system. Solving the problem of out-of-stock by a technique called pull, just-in-time and minimizing inventory.
Thanks to the success of lean manufacturing, multiple assembly lines are arranged so that each new product, when finished and off the line, will be exactly to order without sacrificing quality. quantity.
Toyota went from serving smaller, more segmented markets and still competing with mass manufacturers to becoming the world's largest car manufacturer in 2008.
Sustainable growth is described by a rule: "New customers are acquired by the actions of old customers". These actions manifest themselves in four ways:
Rumors stem from the enthusiasm of satisfied customers with a product. Viral growth products depend on transmission from person to person. The higher the product spread, the faster the growth. Viral coefficients greater than 1 (one old customer acquires a new one) will grow exponentially. If the coefficient of transmission is less than 1, then unsustainable growth will even become extinct.
The side effect of using the product also creates growth. When a person sees someone using a product, they are influenced to buy that product.
Through advertising, businesses entice customers to use their products. But how must the cost of finding a new customer be lower than the revenue from that customer - this balance is called profit margin. The larger the profit margin, the stronger the growth.
Through resale or reuse, the product is designed to be bought and re-purchased rather than a one-time event.
Each source of growth is like an internal combustion engine, constantly spinning, the faster the company grows. Therefore, it is necessary to improve the ability to retain customers. The source to find customers is the company's competitive goal.
Startups only need to focus on one engine at a time. When pursuing a particular motivation in a new and comprehensive way, consideration should be given to switching to a different engine.
But really, every engine will eventually go to the point of "running out of fuel," which happens over the long or short term depending on the industry. If the engine just runs its course and comes to an end, growth will slow down or stop. The company will have new start-ups from within, adjusting its growth and development engine to provide new sources of energy.
We don't need to build a great training program, we can build a very high quality training program that makes new hires highly productive right from the start. That is, a new engineer will be assigned a tutor to guide them. The work results of teachers and students are linked together, so the teacher is very serious in this guidance.
To work, startups must have a built-in “speed regulator” that can help teams and teams find their optimal pace of work.
Toyota has a paradoxical aphorism: "Stop production so that production never stops". Work had to be stopped as soon as some unresolved quality problems appeared. Because, if you don't, you will slow down later on because you have to do a lot of work again, your morale is low, and your customers are distracted.
When you have a problem, use the Five Whys system. This technique is the problem-solving tool of Toyota's production system, it is also a training program alternative.
For example, when a machine stops working
Why did the machine stop? (Overloaded and blown fuse)
Why overload? (The bearings are not lubricated enough)
Why isn't it lubricated enough? (Oil pump pipe, pump not enough level)
Why is the pump hose not pumping enough? (The pump shaft was worn out and it kept rattling)
Why is the pump shaft worn? (There is no filter pad attached to it, so metal dust gets in.)
Asking why five times helps you get to the root of the problem and fix it. From engineering mistakes (fuse burned) to human mistakes (someone forgot to install a filter).
The Five Whys solution acts as a natural speed regulator, as there is a risk that teams and teams work too quickly, trading quality for time.
The Five Whys solution links growth with learning. You will get all the other Lean Startup techniques from this solution.
If not using this solution, some people criticize each other, determine whose fault it is, because it is human nature.
In any situation, it is necessary to have the presence of an authorized person and convene a meeting of all relevant people. The leader spells out the mantra: “We'd be ashamed if we let this mistake happen again”; "If our manufacturing process is so fragile that you can break it, that's embarrassing for us."
The work of a startup is never finished, and even sustainable companies struggle to find new sources of growth through disruptive innovation.
Whether large companies or startups, they learn to balance existing customer needs with the challenge of finding new customers. They manage multiple business areas, discovering new business models that require change implementation. In order to build internal improvement teams, the following attributes should be noticed: Resources are scarce but guaranteed; have the independent right to develop work and have a personal interest in the work results.
Too much budgeting for startup teams is sometimes as harmful as in the case of small budgets. It is important that the resource is completely free from interference. Startup teams need complete autonomy to develop and bring to market new products within their assigned jurisdiction. Entrepreneurs need to have a personal interest in the fruits of innovation through choosing stocks or corporate bonds.
Hiding the parent company from innovation can lead to negative long-term consequences. Because when managers are protected, they feel betrayed. If the innovation is successful, it is not an excuse for this dishonest behavior.
It is important to focus on forming the ground rules on which autonomous groups can operate. At the outset, it is necessary to create a structure that empowers the innovation team, with the solution being to create an “innovation sandframe”: only part of the product or service or part of the customer. Set up a group to observe the test, with a limited time, a specified target audience. The test must be reported, using a measure of success and customer response. Had to cancel the test if there was any disaster.
When tested successfully, the product becomes part of the face of the company, related to PR, marketing, sales and business development.
The “innovative sandframe” evolves over time, which can expand its scope.
Summary – Don't waste
Since 1911, Taylor wrote:
“We have wasted a lot in forests, hydroelectricity, land, minerals… But the greatest wastes are human efforts through wrong, silly actions, misleading or ineffective directions. fruit."
The unreasonable use of time is a criminally negligent waste of human creativity and potential. The demands of an increasingly fast-moving world have rendered the ancient solutions null and void.
The Lean Startup stands in contrast to this anxiety-ridden situation. The Lean Startup represents the principle of “using the scientific method” to provide answers to the most pressing questions about innovation.
Our society needs the creativity and vision of entrepreneurs more than ever. These are resources so precious that we cannot waste them. All innovation begins with a vision, what happens next is the key.
I suggest creating startup labs that can test any type of product development methodology. I believe our goal is to change the entire ecosystem of entrepreneurship.
I also suggest creating a long-term stock market to trade institutional stocks in a “long-term thinking” fashion. Accordingly, in addition to regular reporting on profits and margins, these companies will use innovative accounting methods to report on start-up efforts and internal innovation.
I believe that applying science to entrepreneurship will unleash the vast storehouse of human potential, we will get up to speed by skipping the redundant work that doesn't lead to learning. We will dedicate ourselves to the creation of new institutions. The long-term mission is to build sustainable value and change to make the world better.