The Lean Start-up Methodology

The lean start-up methodology is a business and product development idea with the approach of shortening the product development cycles and quickly discovering whether the expected business model is a feasible one. This phenomenon is achieved by adopting various combinations of business-hypothesis-driven experimentation, product release with iterative approach, and validated experiments. With the implementation of Lean startup methodology a big focus is kept on customer feedback rather than instinct and adjustability over earlier planning. It has brought a huge change which is allowing early recovery from failures.

The basic outcome behind the start of a new business or start-up has two dimensions of either success or failure. As per the old idea behind starting a business plan the common approach was to write a business plan, pitch it to the investors, assemble a team, introduce a product and start selling it. The arising concern in this approach was that there was a severe probability of suffering a fatal setback. This newly emerging methodology called the “lean start-up”, is making the process of starting a business less risky. This methodology is just a few years old but its key concepts like “minimum viable product” and “pivoting” have been included in the curriculum of various business schools.

The lean start-up methodology followed is different in every case but all of them obviously goes through the three stages.

The three main stages of the Lean Start-up are:-

1.     Problem/solution fit,

2.     Product/market fit,

3.     Growth stage

In the first stage it is being validated that the problem we are solving is genuine and the customer will be satisfied with the solution and will pay for it.  After the validation process we move to the next stage which is related to finding whether the product is market fit for the lean start-up. In this stage we assure that our product is actually solving the customer problem and we are making some revenue for it.  Till this stage we confirm that our start-up is operational and that our product will sustain its credibility in the market by assuring the customer needs and then we start to scale and grow.

The main methods in the Lean Start-up methodology include:-

1.     Minimum Viable Product(MVP):- The MVP represents a prototype of a future service or product with a minimum amount of effort and time and is an essential component in the Lean Start-up methodology. MVP has various characteristics of a future product since it is developed on the concept of receiving feedback on the implemented idea, as well as to make quick relevant adjustments. The lean approach is a customer-oriented one since it focuses on the client needs and requirements.

2.     Pivot:- The Lean method implies that every single idea is tested and improved, so often start-ups need to change the direction in favour of a new hypothesis, which is then again tested for market success. Such change is called pivot, and the start-up’s success to a large extent depends on the promptness and accurateness of its implementation. Many start-uppers are reluctant to make pivots since it is always a disappointment to abandon the idea, which seemed to be perfect.

The Basic Principles of the Lean Start-up methodology include:-

1. Validated Learning:- The Lean methodology works on the principle of validated learning since it considers every start-up as an experiment so all the hypotheses should be empirically proved. Validated learning includes three stages: (a) creating MVP and receiving feedback to understand the actual state of things; (b) trying to put the baseline closer to ideal rates; this may require multiple attempts; (c) deciding whether to move in this direction, or admitting that a start-up requires a pivot.
2. Build-Measure-Learn loop:- This lean start-up principle has a basic idea that the product or service should be designed and presented to the market as soon as possible. The principle followed behind this concept is Ideas → Build → Product → Measure → Data → Learn. Hypothesis determination is followed after seeing what is happening and acting accordingly.
3. Innovation Accounting:- An entrepreneur should understand how the progress is measured and how the milestones are set to achieve the targets. Every start-up should check its current position and then start experimenting on improvement to see whether a pivot is required or not.

 A lean methodology entrepreneur also faces a lot of uncertainty as he always tries to decrease the risk during the decision making process of the start-up. The Lean start-up has a deep relation with science since in the process of lean start-up various scientific approaches are also being followed. The Scientific dimensions which are being followed in the lean start-up methodology include systemic description of the business phenomena using classifications, typologies and taxonomies. Along with this the scientifically developed theories and their explaining and predicting power are also used in the science of lean start-up methodology. Predictions that are generated through statistical methods like correlations and regression analysis plays the main role in the lean start-up methodology. The risk of wrong statements while planning the business models are eliminated in lean methodology through scientific approach.

There has been a constant problem inherent in talking to customers that people don’t disclose what they require in future but only react to what is shown to them. Thus Lean start-up methodology is the future aspect of the business models. We at the Himalayan Company follow the main concepts of the lean start-up methodology as our developing team remains in constant touch with the clients while the development process is going on so that the early extraction of the desired target product is achieved.