Pros and Cons of a Lean Startup

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Lean startup is one of the popular business concepts based on lean manufacturing, customer interaction, and agile development methodology. The term lean startup was first coined by Eric Ries in the book “The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses”. 

Lean startups are defined as those based on a scientific approach to management, evidence-based learning, experimentation, iterative product releases,  performance metrics tracking, and customer feedback.


- Eric Ries

As a result of this approach, companies get the opportunity not to spend huge finances at the initial stages of developing their services or products. And, at the same time, receive ideas confirmed by customer feedback for further optimization of these services or products.

Below, we take a closer look at the concept of lean startups and learn how this concept is viable in the IT business.

Lean Approach: Main Principles

The term lean startup didn't come out of anywhere; it was preceded by the erratic success of startups driven by traditional approaches. In particular, the author of this concept identified two main reasons for startup failures:

  •  traditionalism and conservatism in strategies, planning, and market research: since a startup implies the launch of something  fundamentally new, these approaches don’t work as expected;
  •  lack of any strategies, methods, approaches, and research: knowing that traditional methods don’t work, some entrepreneurs decide to move in exactly the opposite way and completely refuse to adhere to any rules and standards, letting their business idea “ride the flow”; as a result, this too often results in the collapse of the business idea.

To avoid falling victim to one of these scenarios, Eric Ries recommends considering the lean startup method, which involves the continuous creation of innovations. It’s based on the principles discussed below.

Hypothesis-based experimentation

You must understand that your business idea is just a hypothesis that needs to be confirmed by facts, and the sooner the better. Therefore, experimentation should be performed regularly, even before your product is released. 

You can test your ideas both at the marketing research stage and at the development stage by collecting feedback from representatives of the focus groups. In practice, this experimentation occurs in conjunction with the Discovery phase of the project.

Iterative product releases

When developing a lean startup, you need to follow the build-measure-learn cycle. That is, you will first need to create a minimum viable version of the product, evaluate the reaction of customers, and then decide whether to continue on the chosen course or change direction. 

Note that it’s very important not to forget about management when performing this cycle. As we note above, traditional ways of managing startups are not well suited, so you need new ones that are adapted to the conditions of constant uncertainty. In practice, this correlates with the Agile approach to software development.

Hypothesis validation and learning from mistakes

After each new experimentation and testing of your hypotheses on real representatives of the target audience, you will receive data on what you did (or are going to do) right, and what needs to be fixed. 

In doing so, you will have to use a pre-prepared list of metrics to evaluate the effectiveness of your product. This approach is necessary to improve the results of your work on a startup and helps to get an objective forecast on how to move forward with its development.

Lean Startups: Myths and Misconceptions

Now let's figure out what myths and misunderstandings accompany the concept of a lean startup.

Lean startup means a small budget

Even though the concept of a lean startup is to save you money, that doesn't mean you won't need nearly as much money to implement it. In fact, a lean startup is more about how quickly your product or service is launched than how cheap it is.

In particular, through disciplined planning of the development and testing process, as well as the introduction of innovations, you get the opportunity to accelerate the launch date, and therefore reduce the costs associated with the implementation of your solution. In addition, you will have to reduce the time for testing and validating hypotheses, and analyzing your target audience and market.

In general, if you just want to save money, this approach is unlikely to suit you. Because lean has, above all, other purposes.

Lean startup is the prerogative of small businesses with small goals

Despite the presence of the word “startup” in the concept, this does not mean that it cannot be used by companies with an established market position.

As we have pointed out earlier, the concept of a lean start-up proposes to introduce innovations and a scientific approach to the formation of a product or service development cycle everywhere. Thanks to this, workflows within the team are optimized, its members stop doing redundant actions, thus bringing the release date closer, and providing a more accurate understanding of the needs of the target audience. 

So why can't all of this be applied to products launched by a company with a long history to ensure its viability in the new market realities? 

Lean startup is an experimental MVP development

The concept of a lean startup is very closely intertwined with the creation of an MVP. However, we would prefer to focus more on an innovative approach to implementing the workflows accepted by your team, rather than creating something experimental.

That is, your product or service does not have to be like a reinvented wheel: you can create a completely “mundane” solution for the daily needs of your target audience. But as for the stages of its implementation, they definitely need to be reviewed so that testing and applying your hypotheses takes place in a non-stop mode. 

Lean startup usually leads to quick failures

Some entrepreneurs mistakenly think that a lean startup is a guarantee that a product or service will fail quickly. However, this does not mean that you should be ready to it and accept it as something inevitable.

Quite the contrary: understanding the factors that can cause your solution to fail will save you from actually burning it out. Moreover, the concept of a lean startup means that even if this happens in reality, you can easily go back, fix errors, and run the updated solution again after a short period of time. 

In particular, a lean startup implies a scientific approach, in which the generation and testing of new hypotheses occur immediately after the old ones have been turned down by the target audience.

In general, a lean startup is an opportunity to “hit a lot of bumps” but remain the winner in this battle with market realities. If you are ready for this, this concept is definitely worth your attention.

Who Needs This Methodology?

To summarize all of the above, we can conclude that a lean startup allows you to:

  • reduce economic risks;
  • accelerate the development and launch of the product to the market;
  • quickly understand what doesn’t work for the target audience, make changes, and change the concept.

Considering that all these advantages are attractive for absolutely all types of business in practice, it is much easier to conclude who this concept is not suitable for. In particular, here are the restrictions for implementing Lean startup:

  • it’s difficult to use when the design and product are confusing, and there is no understanding of the target audience;
  • you don’t understand which features of the product are of primary value to end users and which MVP should be focused on.

How to Implement a Lean Approach in Your Project?

Formally, the five main stages are not presented in chronological order but must be implemented in parallel by your team.

Thanks to them, you will be able to detect gaps in the efficiency of your team promptly and provide more value for your product or service to customers. You will also ensure your business with increased competitiveness, regardless of the strengths of other market players.

Identify values

To figure out how to define customer value, you must first understand what value is. In fact, this is what your target audience will be ready to bring their money to you for.

How can you determine this value? First of all, you will need to create a detailed portrait of the client (usually, there are several of them), indicating their age, social status, gender, interests, geographic location, and other factors that determine the average consumer. 

After that, you will be able to understand what desires and pain points are inherent in them. Now you can clearly define the connection of your future product or service with these desires and pain points.

This can be difficult when your product is some kind of innovation, and there are no analogs on the market yet. In this case, questionnaires, focus group testing, and web analytics will help you. Thanks to them, you will be able to set a reasonable cost for your future solution.

Provide value stream mapping

Another attribute of the lean startup concept is to define and map the value stream.

This means that you will need to establish customer value as the starting point in forming the value of your product or service. At the same time, everything that has nothing to do with providing value to your customer is defined as waste.

This waste comes in two types: necessary (which must be present in your development process and cannot be excluded) and useless. The second type of waste needs to be eliminated from your workflows to provide maximum value for your product or service to your target audience. In addition, with this approach, you can speed up the launch time of your solution and reduce the associated costs of its implementation.

Ensure process optimization

Once you've removed all useless waste, you must ensure that all remaining development steps are completed in an efficient, timely manner and that there is no downtime.

In particular, this is where the agile software development methodology comes in handy, which involves breaking the development process into successive stages, optimizing them, leveling the workload, forming multifunctional departments, and expanding the expertise of your team members.

Establish pull

As for pull, this approach will help you ensure that the resources that are needed at a particular stage of the market life are delivered on time.

In particular, you need to conduct a detailed market analysis to understand how your product or service will meet the current needs and expectations of users. The fact is that some products are literally ahead of their time, and turn out to be uninteresting for the vast majority of the target audience.

Therefore, you will have to think about whether your project will be too innovative for the present (or vice versa, outdated), and everything that does not correspond to this time, “push out” from the list of features that you are going to implement.

Improve the product continuously 

Finally, make sure that all members of your startup team share your business goals and values based on the needs of the end-users of your product or service. This means that your team members must constantly improve their skills and expand their expertise in the context of increasing the value of your solution.

Conclusion

To sum up: there is no universal strategy under which the lean startup strategy is guaranteed to work. On the other hand, a lean startup can make your product or service sustainable. And that already means a lot. And finally, some useful recommendations that will help you in the implementation of your business idea:

  • empathize, identify, and generate ideas with the awareness that each product or service should represent a solution to one or more problems and needs of your target audience;
  • experiment, learn, create, test, and change your approaches to provide users with the most effective solution to their problems;
  • apply Agile using product backlog, planning sprints, testing your product, etc.

If you have an idea for your startup and look for dedicated specialists that will use all the practices mentioned above to implement it, ask us! Our team with 16+ years of experience will share your business goals and provide a perfect solution to meet your requirements on design, performance, flexibility, cost, quality standards, and ongoing support.

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Table of contents:

Lean Approach: Main Principles

Lean Startups: Myths and Misconceptions

Who Needs This Methodology?

How to Implement a Lean Approach in Your Project?

Conclusion

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