I finally carved out some time to read The Lean Startup by Eric Ries. The Lean Startup is a methodology rooted from the product development world of manufacturing and applied to new and existing businesses in the startup value chain.
A system developed by Eric Ries in an attempt to add more scientific method and structure to the startup process. Through his own trial and error of failing startups he was able to extrapolate a lean startup model. Here are some of the more interesting concepts out of the book.
Leap of faith assumptions
If you think you a have a solution to a customer(s) problem that will revolutionize the world you may want to pick up a copy of this book first. One of the most critical concepts the lean startup model dictates is proving out your “leap-of-faith” assumption. Every entrepreneur is making a certain set of assumptions about what consumers really may want or what problem you think you are solving. The only way to know for sure of your assumption is by validated learning. Successful existing businesses derive a formula for acquiring, qualifying, and selling customers in a targeted market segment. Moreover, costs to bring in and retain a new customer is known based on lifetime revenue of each customer. Unfortunatley a startup does not have the luxury of already making “traction” in a market. Validated learning will help answer the following questions
- How do existing customers respond to our product over time?
- How profitable is it on a per-customer basis?
- What’s the ROI on acquiring new customers?
- What’s the total available market
Minimum Viable Product (MVP)
In order to gain insight from your customers through validated learning a product or service needs to be presented. Once the MVP or minimum viable product is established, a startup can work on tuning the product. This book provides great advice on how to work faster, waste less and fail fast. MVP is all about transforming you startup idea into a a product with the minimal effort and cost in order to measure and learn. Get a prototype into the market place to see if there is a real market fit or if you need to go back to the drawing board.
The first step is figuring out the problem that needs to be solved and then developing a minimum viable product (MVP) to begin the process of learning as quickly as possible. One of the more interesting concepts pointed out by this book is build-measure-learn. Optimization methods and increased conversation rates through A/B testing is important but the real power is testing your idea against the harsh reality for adoption and acceptance. This resonated with me as being a simple but extremely powerful concept. For instance, if I’m selling widgets does it really matter if I sell another 10 widgets per day because of my highly optimized landing page? or does it matter that I am selling 1000 widgets a day through an non-optimized landing page because my idea solves a problem and is accepted in the marketplace. – Great stuff!
Startup Addict Summary
The book could come off as gimmicky or just another startup self help book. However, within the first few chapters you will quickly realize what an essential read it is for all entrepreneurs and managers. The Lean Startup should be a tool in every entrepreneurs toolkit. The book transcends rudimentary startup books and puts real world concepts and documented systems in place to help you develop your next startup successfully.