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Thinking about the lean start up

My friend Alan just published an excellent blog on “Lean start up”. http://www.smallbusinesscan.com/the-lean-startup/

That got me thinking.

Isn’t “lean start up” another term for “bootstrapping” or “market research”?

I agree with a lot Eric Ries says (how can you not), but I just find it difficult to see what is really new?

I am just jealous

I have to declare an interest. I am the co-author (with Brian O’Kane) of a number of publications on start-ups, with much more original titles than “Lean start up”, such as “TENBizplan”, “Start your own business, a workbook” and “Steps to enterprise”.  And yes, I am insanely jealous (can’t speak for Brian) and I want to be Eric Ries. Let me rephrase that; I want to sell as many copies of my books as Eric Ries.

I still wonder what the fuss is about and I am probably best described as a jealous sceptic.

Credit

Credit where credit is due. Eric took a leaf out of “What would Google do” and has given market research much more rigour. I like his focus on metrics. And love the focus on the metrics that really mean something. Which why in the olden days, we used to focus on forward orders, sales, turn over, cash flow and profits.

It resonates

In fairness, he invented a few new terms, such as MVP, pivoting, LTV and is an indication on how this resonates.

MVP

MVP (minimal viable product) is new. I am not quite sure what that really means. I am unconvinced that a sign up web page as an “MVP” is proper market research (we used to call that forward orders), but I agree it gives an indication.

And yes, the web allows for easier access to the market place and it beats handing out handing out paper questionnaires in the local shopping mall (or does it?).

But sales, and sales only remains the only metric. Eric calls it conversion and particularly online conversion is a hard, hard nut to crack. I am not sure MVP is the right indication for future success.

Only for internet companies?

Maybe lean only applies to internet companies? But soon every company is an internet company?

Pivoting

Pivoting for example (and do it hate that word). Change what you are doing or stop. We used to call it “change what you are doing” and GO/NO GO.  Can we ban that word from being used, particularly when you use it to show off that you read the book (you know who you are).

LTV

LTV (lifetime value of customer) has been around for a lifetime, but near rhymes with MVP.

Innovative accounting

I like his approach to innovative accounting and how traditional accounting needs a hard look at what they measure. With this method he suggests that progress is best tracked by observing things like user activity, engagement, retention and virality.

The new balance sheet

Which brings me to a side step about traditional accounting and how particularly a balance sheet just does not help to predict the future (and therefore useless?). The future balance sheet will contain items such as talent, brand, community, environment, culture, LTV, channel, engagement, idea pipeline, IP, investment in training and development, etc..

The soft balance sheet

Maybe that is what my next book should be about. Only need to find a catchy alternative title to “The soft balance sheet”. Preferably something that rhymes with “lean”. All suggestions welcome.

Back to Alan

 Just to get back to the lean start up. Alan’s summary I have to agree is spot on.

If you are an Internet or technology based startup the lessons will be ones that are likely to resonate. The Lean Startup approach is certainly one which will help you instill early on the need for decisions to be based on scientific facts (as much as possible) and that given the extremely difficult conditions start-ups operate in, that an ability to learn quickly and change tack are lessons you would do well to bear in mind.

Only for internet companies?

Which brings me to my earlier point; Maybe lean only applies to internet companies? But soon every company is an internet company?

Jealous

Will stick with being jealous.

 

 

 

 

 

 

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3 Responses to Thinking about the lean start up

  1. Rory August 30, 2012 at 2:48 pm #

    Hi Ron,

    I think you might be missing the whole point if you think lean startup is simply another word for “bootstrapping” or “market research”.

    Bootstrapping in business means starting a business without external help or capital, Eric specifically states that “Lean does not mean cheap” and lean startup is about applying the Lean Manufacturing principle of elimination of waste and scientific management to a Startups. I think Eric’s approach is much more focused on funded startups not bootstrapped ones. However if you want to find about using Lean if your bootstrapped you could be better checking out Ash Maurya’s running lean.

    I don’t think he claims any of this as being new, in fact he specifically states that he is taking a lot of the learning’s from Toyota and lean manufacturing and applying it in another area, specifically startups.

    We all know how difficult it is to “research” a market that perhaps does not exist. The companies who have had most success in developing disruptive technologies have built prototypes, launched, adjusted, learned, launched again (perhaps they pivoted?), and possibly had to do it all again until they hit paydirt. Can you remember a product called the Apple Newton? Its taken a long time to get that one to work! What he is talking about is not assuming what your customers will do by sitting at your desk researching and scheming, but actually getting out of the building and seeing what customers actually do.

    I don’t think there is ever a magic bullet in terms of a “system” that works for everyone. However I think a lot of people who have skimmed what Eric is writing about in the lean startup are overselling it as a magic bullet. At the end of the day what he is talking about still takes lots of hard work, focus and effort and remember the principles have been proven time and time again in manufacturing every consumer good we use today.

    I think Lean may have already caught on????

    • Ron Immink August 31, 2012 at 12:10 pm #

      Hi Rory,

      Just poking the fire….. I think you put your finger when you mentioned “magic bullet” and the need for hard work, focus and effort. I am despaired by lazy entrepreneurs quoting Ries, using ‘pivoting” in every sentence and confusing MVP with selling and getting money in to moe forward. We used to call that “forward orders” in my days 😉

      Thanks for taking the time. Feel free to submit a blog and we can continue the dicussion.

      Ron

      PS What is you view on business planning?

      • Rory September 6, 2012 at 11:52 pm #

        Yes if they really listen to him his whole idea of the MVP is to strip out all the “extra” features so that you can get out quicker to try and sell and not spend all your time getting it perfect. His reasoning, your not going to get it right the first time so don’t waste resources trying and just get out and attempt to sell it, find out why they may not buy, fix it and try again. I think somehow most miss this important bit, that your still going to have to face all those no’s before you get a yes…..in my humble opinion what he is saying is that lean startup is actually all about getting to the selling as quickly as possible. When you have worked out the detail of how you can repeat the selling of your product you are ready to scale the sales process. I think you should really despair at the misquoting of Ries by the lazy who have not taken the time to either read or understand what he is talking about.

        I will take you up on the blog.

        On the business planning, I subscribe to the lean approach too. I took down a famous business planning workbook you might be aware of from the shelf the other day………interesting!

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