I am a college student at the UCF and my minor is Entrepreneurship. Recently I read a book for one of my classes called,
"The Lean Startup" by Eric Ries. I thought I would do a little blurb on what it's about.
So the Lean Start-up methodology is a new way of approaching start-up management and of teaching entrepreneurial management to students. Many universities across the nation have adopted the lean start-up principles. So what are those principles. The standard concept is that instead of developing a detailed business plan, develop a small business model and create an MVP, or minimum viable product (more on that later), and talk to and test it with potential customers, then use the feedback they give you to improve the product and then do it all over again.
According to Ries, professors and entrepreneurs have subscribed to two entrepreneurial mindsets: The Just Do It method coined by Nike and the traditional planning method of developing a well thought out business plan, then using practical and refined management techniques perfected in big businesses. Each method has it's Achilles's heal . "Just doing it" often leads to chaos and while many great entrepreneurs have taken to this school of thought and been great successes, many more startups have resulted in a chaotic mess doomed to failure because they lacked the infrastructure to sustain any traction they may have developed. The opposing method of developing a well thought out business plan can also lead to failure. Ries compares this method to planning for a special shuttle launch. If you spend a great deal of time planning and then launch, you better hope all of your calculations are correct because one small miscalculation will result in catastrophe. The business plan method can also lead entrepreneurs to simply do nothing, forever planning with no action. This is what inevitably leads startups to abandon planning and "just do it." However, if the business plan or the "just do it" approaches do appear to be successful and the startup gains some traction the application of traditional management techniques is sure to doom the fragile firm's future (say that 5 times fast.) This approach Ries likens to trying to fit a square peg into a round hole. Start-ups are very different from an established business because they, "operate under conditions of extreme uncertainty," and thus require specific management processes. The Lean Startup is a hybrid form of startup methodology and entrepreneurial management.
The Lean Start-up operates on the concept known as the
Feedback loop, which is a method of learning from customers and incorporating what they want into your product or service.
The Build, Measure, Learn process is the road map of the feedback loop. First you build the
MVP, which is the simplest version of your product/service that can get you through the feedback loop. The MVP is not a finished product, but rather a prototype of the product in laymen's terms. After you
build it you show it to potential customers and
measure their responses and data collected from the interactions with the product/service. Finally, you
learn from the feedback you receive and apply that knowledge to the next iteration of the product/service. This method allows entrepreneurs to build a product from the ground up that is tailored to the customer's wants and needs.
The Lean Startup provides a new method of accounting for start-ups, that Ries calls
Innovation Accounting. The purpose is to track a startup's progress so you know when to
pivot or persevere.
Pivoting is when the start-up makes a change in their strategy, such as changing from a direct sales to a subscription based revenue model. The product/service is continuously optimized based on customer feedback to create new iterations, the strategy is occasionally subject to a pivot moment, but the vision of the start-up does not change. The vision is the end goal, which for any start-up should be to create a sustainable business that can be scaled.
I certainly recommend this book to entrepreneurs, both current and aspiring, if anything just to learn what innovation accounting is because it would take too long for me to explain it here. Innovation accounting is a valuable tool in measuring the performance of a startup with useful metrics so you know when it is time to pivot. If you are interested, please check out
The Lean Startup on Amazon!
