What is a Lean Startup?

 The term lean startup refers to a specific a methodology for entrepreneurial innovation developed and trademarked by IMVU co-founder and well-known tech blogger Eric Ries. Contrary to how it may sound, "lean" doesn't refer to bootstrapping or doing things on the cheap. Instead, the lean startup method is a disciplined approach for testing new products and ideas, that is said to save companies money in the long run.

The Lean Startup Movement and Its Roots in Lean Manufacturing

The lean startup movement is growing as more lean companies, such as Dropbox and PB Works, become successful. The methodology however, isn't just for consumer Internet companies. It can also be applied to any company that faces uncertainty about the wants and needs of its customers.

Lean startup methodology is based on the Japanese concept of lean manufacturing, where the use of company resources for anything other than the end product is considered a wasteful practice. Lean startup methodology is similar to lean manufacturing in that it emphasizes efficient resource allocation as one of its main principles.

Part of this efficiency is a disciplined approach to spending money through customer interaction and testing hypotheses. The fundamental elements of the business model must be tested before money is spent in those areas.  Lean startups engage in frequent customer interaction in order to avoid investing in products that don't provide value to customers. That means that lean startups are designed to be driven by facts and data instead of opinion.

The Build-Measure-Learn Feedback Loop

The method for validating customer hypotheses in the lean startup model is called the build-measure-learn feedback loop. The first step of the build-measure-learn feedback loop is to develop a vision and then test it with customers. Customer feedback will tell you whether to pivot (lean startup speak for changing your company's direction) or persevere.

The Minimum Viable Product

A big part of taking this first step is developing a minimum viable product (MVP). A minimum viable product is one that is "good enough" to be tested in the marketplace, as opposed to a fine-tuned product that isn't what the customer wants. The idea behind the MVP concept is that companies can learn from the feedback given by customers and use it to improve the product.

There are some critics of the MVP approach, however, including Scott Anthony of the Harvard Business Review. In a recent Harvard Business Review article, Anthony said that in some cases a Minimum Viable Product can become a Mediocre Value Proposition. He goes on to say that an MVP could steer a company in the wrong direction if they use it to develop a product that's barely adequate for the marketplace. That's why you should make sure that your startup is equipped with the right experts, and think about your entire business model instead of just one product. In addition, MVPs work best if companies act immediately on customer data instead of taking a long time to release new versions of their products.

Just like bootstrapping, lean startup methodology has its critics and isn't for every startup. At the same time, the lean startup movement is worth following as it continues to grow, if only so you know what people are talking about when you attend startup and tech related events.

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