"For those of you who haven’t read the Lean Startup by Eric Ries, the basic concept behind it is that we have been going about the startup process all wrong.
Instead of writing long business plans, raising early funding, and building initial prototypes over the course of a year, we need to foster startups that constantly learn and iterate around a minimal viable product.
By constantly tweaking, or occasionally pivoting the product, service, and business model in response to early customer feedback, startups can improve their likelihood of success or at least fail faster and cheaper.” http://www.fastcoexist.com/1680269/smart-cities-should-be-more-like-lean-startups
Lean Startup draws upon methods originally developed to minimise waste in manufacturing processes and applies a continual-learning mindset to start-ups, growing businesses, and to ‘intrapreneurship’.
It is not a prescriptive set of answers, rather a framework for thinking through how to creating “something new under conditions of extreme uncertainty”, with the primary goal being minimising ‘time to learning’. I.e. get into the marketplace as quickly as possible, and get feedback from potential customers in order to “Build—Measure—Learn" in an iterative loop. It is a way to harness the energy of young businesses into small, practical steps and create immediate feedback and momentum.
A ‘minimal viable product' is often the most basic product offering that can be put together - in order gain feedback from users and test the market. Ideas are less important than the ability to execute on them.
A ‘pivot' is what to consider when market feedback suggests there is not a sustainable business model based on the initial value proposition. In basketball, a player can change direction by keeping one foot on the ground, and moving the other; in Lean Startup parlance, a pivot means keeping in mind the vision for the business, and moving to a new way to realise that vision (“a structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth”, according to Eric Ries).
In many ways, using the Lean Startup approach is about building a ‘machine’ which continually tests the educated guesses you have about your business, in order to find a sustainable customer base, market offering, and profitable business model. This is in contrast to the “build it and they will come” model.
Customer Development and Business Model Generation
The Lean Startup is usually considered in conjunction with two other bodies of knowledge - around finding customers, and also creating the profitable business model above. Steve Blank, who invested in a business Eric Ries co-founded, is a successful tech entrepreneur who lectures about how to create successful startup businesses.
Steve’s model, commonly known as ‘Customer Development' implores business founders to regularly meet their customers in order to create a product these customers want to buy, rather than that which the founders wish to sell. Direct and regular feedback, in person, gives founders the prompts and genuine learning to create solutions which solve pressing customer needs.
Steve advocates doing this work upfront and starting small, rather than developing expensive full-service offerings, and details several very expensive failures from the dot com bust. Customer development aims to create ‘product/market fit' (a term popularised by Marc Andreesen of Netscape fame and now a VC).
Product/market fit means providing something that customers want to buy - which is ‘pulled’ by customer needs, rather than ‘pushed’ by expensive marketing. Steve is the author of two books on customer development, and a major advocate of Business Model Generation, a concept coined by Alexander Osterwalder.
Business model generation is a book and approach which divides any business into nine components, and presents a series of questions and case studies to help readers clarify their own thinking, and review and iterate a way to make money. There is also an additional ‘plug in' which helps to clarify the value proposition businesses (and other organisations) have or could offer. I have also come across a canvas for service model generation, and in a similar vein, there is a book called Business Model You to help individuals clarify their own career path. Dave McClure’s “AARRR for Pirates” sets out metrics for entrepreneurs.
Taken together, these elements provide a framework for early stage businesses, those innovating inside established organisations, and those who wish to innovate under conditions of uncertainty. It also provides a vocabulary, a body of knowledge, and a community of innovators to help test new ideas and share the practical lessons. This is, necessarily, a potted summary of the potential offered by this material. I hope the embedded links and resources below provide a prompt to help minimise waste and speed up time to learning!
Docs with questions are useful to get clearer about what you’re seeking to deliver to customer, and how you can create an effective business model as a result.