Steve Blank’s Why the Lean Start-up Changes Everything is essential reading for any modern entrepreneur. It summarizes Blank’s definition of the lean startup as presented in his and Bob Dorf’s Startup Owner’s Manual provides a profound understanding of the ideas and processes that have revolutionized the approach of successful startups. But what exactly is a lean startup?
Professor Blank defines a lean startup as: a temporary organization designed to search for a repeatable and scalable business model. In other words, the lean start-up is constantly evolving to the place where they finally figure it out. The lean startup has three key principles:
A business Canvas, not a Business Plan
A focus on customer development
The Business Canvas
A business plan is, at its heart, presumptous. It relies upon several unpredictable potentialities and projects things like sales and profit over long stretches of time, typically five years, in a very unpredictable world. The Business Canvas is a diagram that portrays how the startup creates value for its customers and itself. It is much more “now” focused and changing. The business canvas contains a group of hypotheses about all nine aspects of the business. These hypotheses are constantly tested and tweaked.
Hypotheses are tested by “getting out of the building”. Instead of best guesses about what a customer will like, lean startups are constantly getting feedback from users and others. The focus is not on producing the perfect product but on producing the minimum viable product which is then tested and tweaked, making small adjustments (iterations) or substantive ones (pivots). This approach is used not just for the product but for all aspects of the business including delivery, pricing, etc.
Agile development is the ability to change incrementally and quickly. It is a necessity for customer development. Instead of focusing on significant product overhauls which make assumptions about customer needs, it makes smaller, faster changes to the product and then re-tests. This allows for better responsiveness to customer needs and saves time and money wasted on large scale changes that turned out to be bad guesses.
Becoming a lean startup is not a guarranty of success. However, by incorporating these three core principles, lean startups more quickly understand whether their products are meeting market needs and make the changes necessary to correct misfires.