The economic environment in the United States is currently quite favorable for innovative startups. However, there is little consensus as to the best way for these fledgling companies to achieve sustainable growth. Some entrepreneurs throw mud at a wall to see what sticks, randomly trying out a thousand methods to see what will work. Their chances of finding success would be significantly increased by taking a rational, systematic approach to honing their business strategy.

The Lean Startup by Eric Ries provides a systematic, repeatable way for entrepreneurs to make the right decisions about how they grow their businesses. The name of the book was inspired by the lean manufacturing process that was developed at Toyota. This process has made the company one of the largest automobile companies in the world. While it would be impractical to follow the Lean Startup method to the letter in every situation, entrepreneurs should come away from reading the book with a fresh mental model for tackling problems and making decisions in their business.

Why Most Startups Fail

We all know that most startups fail. Much of that failure, however, could be avoided. One of the main reasons startups fail is because its founders are operating under a conventional management approach: They conduct market research, generate a robust strategy and attempt to deliver a great product that just works.

But the standard business practices that inexperienced entrepreneurs often try applying to startups don’t work, and they can actually be harmful. That method assumes an innate knowledge of what the market is looking for. Making that assumption automatically dooms a company to failure. It will pour time and money down the drain creating the perfect product – a product that precisely no one wants.

 

The lean startup learning cycle as described by Boomtown Accelerator

 

The Three-step Cycle

Instead, new companies require special policies and procedures in order to grow fast. The policies and procedures contained in the Lean Startup method were not created randomly – they are the result of years of scientific research. Instead of jumping into development, the Lean Startup method espouses a three-step cycle: build, measure, and learn.

The entrepreneur builds a product, gauges the customer’s reaction to it, then learns whether the idea has a market or if it needs to be adapted. The cycle is repeated until customers send an unmistakable signal that the new product fits a specific need (that’s called “product-market fit”).

Build

Before beginning the cycle, consider the two or three key assumptions that you are currently making that will largely determine your startup’s success. Then, find the cheapest and fastest way to test them. Once you have designed that test, build out a minimum viable product (MVP). It does not have to be a fully fleshed out product; it only needs to meet the critical parameters of your test in order to give you meaningful results.

Measure

Once you have created an MVP, devise a way to measure potential customers’ reactions. Deciding on metrics after the data has been collected is a good way to introduce biases, so come up with a baseline beforehand. For example, if you are measuring sales, or email sign-ups, or click-through rate, how many of each do you need for the test to be considered successful?

Learn

Be hard on your product. Based on the results of your MVP test, should you pivot to a new product, or should you persevere with your current one? If the MVP confirmed your initial assumptions, you are free to start refining the product. But if it failed one of your tests, you might have to pivot – to a new idea or a different demographic – or start the cycle from scratch. Be prepared to experiment more than you would expect in order to discover what your customers actually want from you.

In Summary

As an entrepreneur, diving head-first into an idea that you are passionate about can be tempting. But the Lean Startup presents a more scientific approach you can use to build your startup. When you feel like you are swimming in the deep end, having a process to manage the chaos and uncertainties surrounding you can be a lifesaver. Eric Ries goes into much more details in the book on how you can apply the Lean Startup principles in real life. I would definitely recommend this book to anyone who is thinking of or already in the process of starting a business.

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