The Future Of Startups – Going ‘Lean’
It really doesn’t matter whether your new venture is a tech start-up, small enterprise, online store or bakery, the traditional process for beginning your business has remained pretty much the same for decades. The generally adhered to process was: create a business plan, get investment, develop your product and then promote profusely and aggressively. The trouble with this approach has been that quite often, it just doesn’t work.
In fact, it has a 75% fail rate – bleak odds indeed for anyone hoping to start a new business.
So the question inevitably asked is, how can we ensure a higher success rate? One recent methodology creating great interest, is known as the ‘Lean Start-Up’. The principle favours quick action and reaction as opposed to long-drawn out plans that are doggedly adhered to whether they work or not. The conventional wisdom of cautious, conservative strategy are being rewritten to incorporate ongoing learning and fast-paced change.
The pioneer of this movement, Eric Ries, says that if we want to be successful entrepreneurs we are going to have to get good at making key assumptions and testing these assumptions in the field. Ries gives the example of Scott Cook, the founder of ‘Intuit’. Cook began Intuit with the assumption that people were frustrated by having to pay their bills with paper and pen. So he started calling random people in the phone book to see if he understood their problems and to make sure he wasn’t extrapolating from the wrong data – what Ries calls a ‘microscale experiment.’
“A mistake that founders of newly created companies often make is, ‘the big launch.” says Ries. “A big launch may bring a great deal of traffic and attention but it doesn’t give you the opportunity to learn and adjust your offering.” His advice? “Get the product in use and tested by customers, responsively redesign using this information, then do the big launch.”
Customers are the crucial element according to Ries. Customers serve as a sounding board and analytical tool, giving insight and determining the trajectory your venture should follow. Intuitive listening and responsiveness are what is required for these entrepreneurial methods to work.
Steve Blank, another supporter of the movement says “business plans rarely survive first contact with the customer. As Mike Tyson famously said, ‘Everyone has a plan, till they get punched in the mouth.’”
One of the major differences according to Blank is that while existing companies execute a business model, start-ups are in the process of looking for one. This distinction is what he believes is at the heart of the lean start-up approach.
The pressure of rapid change is being felt by everyone, not just traditional entrepreneurs. With tools like those offered by the lean start-up enthusiasts, we may have the means of meeting these challenges head on and using them to our advantage to create successful and innovative new businesses.