Lean Startup Methodology: From Idea to Market Success

Every startup is about creating a product that caters to a customer’s problem and makes their lives easier.

But did you know that many startups crash before they even take off?

According to research conducted by the Harvard Law School Forum on Corporate Governance, about 75% of ventures fail, and one of the prominent reasons startups fail is due to shortcomings in product development.

Now the question is how can you determine if your product resonates with your customers’ requirements? How can you know if it solves your customer’s problem and if there will be a big demand for it in the market?

Now, picture having a dependable approach or methodology that can save you time and money—one that offers insight into whether your product can thrive in a fiercely competitive market.

The lean startup methodology is one of the finest ways to win in this fast-moving world. In this article, we’ll talk about everything you need to know about the lean startup methodology and how it enables startups to succeed.

Using the lean startup approach, companies can create order not chaos by providing tools to test a vision continuously.  Eric Ries

What is the Lean Startup Methodology?

The Lean Startup methodology is a technique for developing businesses and products to achieve product-market fit with minimal time and resources.

The process is meant to shorten product development cycles and expeditiously help discover if a proposed business model is viable or not. It stresses iterative product releases and validated learning through customer feedback.

The Lean Startup methodology was first introduced by Eric Ries, an American entrepreneur and the author of The Lean Startup, in 2008.

It is a way of building and managing startups that focuses on rapid iteration, customer feedback, and a scientific approach.

“Testing the waters before diving in!”

The lean startup process recommends entrepreneurs create a Minimum Viable Product (MVP), which means a basic version of a product that allows for quick testing and learning from real users.

It focuses on validating assumptions through experimentation and learning from failures to improve products or business models iteratively.

Instead of investing heavily in a big, fancy product that may or may not succeed, it’s better to start with a simple version.

Lean startup methodology focuses on the idea that the question is not:
“Can this product be built?”
Instead, the questions should be:

• “Should this product be built?”
• “Can we build a sustainable business around this particular set of products and services?”

As per Eric Ries “The lean startup method is not about cost, it is about speed.”

Market and consumer analysis are the most crucial elements in this methodology.

The Lean Startup methodology consists of three stages:

• Build
• Measure
• Learn

Stages in Lean Startup Methodology

Build

In this stage, you will be creating a Minimum Viable Product (MVP)—a basic version of your product with only essential features which allows the product to function.

Here your goal is to quickly launch your first product into the hands of users to gather feedback and validate assumptions.

An MVP is the simplest version of a product that you can test with real users to see if they like it. It helps you learn what works and what doesn’t, so you can improve it later.

Measure

Once your MVP is out in the market, you analyze how users are interacting with it. This involves collecting data on user behavior, such as how they use the product, what features they like or dislike, and whether they are willing to pay for it.

The goal is to gather actionable insights that will help you make informed decisions about the future development of your product.

User feedback is a prerequisite for your business journey. It helps you focus on the key features of your product to test if your idea works.  By creating the simplest version of your product, you can ensure you’re building the right thing without investing too much time and money upfront.

Learn

Now in the 3rd stage called learn, you gain clarity on how to proceed with your business idea based on customers feedback—whether you should tweak some elements of your product, add/subtract some features, or pivot the existing framework altogether.

After building the MVP, obtaining customer feedback, and data, you can determine if your product has performed well in the market, or a new approach is required to make it successful.

Revamp the product by incorporating the identified changes, gauge customer response by launching it in the market, and iterate. This cycle of improvement and learning will never stop.

Let us now discuss the principles of lean startup methodology and how it helps turn your vision for business into reality.

The 5 key principles of the lean startup methodology

 

Entrepreneurs are everywhere

Silicon Valley often celebrates the stories of entrepreneurs, glorifying how they started small and achieved huge success. But according to Ries, anyone who owns a business is an entrepreneur, regardless of whether they’re in music, accounting, software, or other fields.

He also believes that ‘Entrepreneur’ should be considered a job title within all modern companies.

Entrepreneurship is management

According to the Lean Startup methodology, “entrepreneurship is management” means that businesses should be managed with a founder’s mindset. Running a startup is not about having a great idea and being amazingly creative. It is, in fact, also about managing the business perfectly, like a manager would.

This includes making smart decisions based on the data and feedback, setting clear goals, and constantly adapting to changes in the market. So, as an entrepreneur, you must be both innovative and a good manager, leading to the success of the business.

As a manager, this calls for flexibility, creativity, and an outlook on progress.

Validated Learning

As an aspiring entrepreneur, you can use the lean startup process to identify risks. It involves quickly testing a small part of your product to see if it has potential. This helps you decide if you’re heading in the right direction with your idea.

Innovation Accounting

This principle is for quantifying progress, learning, and innovation within a startup. It focuses on measuring how much you are learning and improving with your product development, rather than traditional financial metrics like revenue or profit. It helps you track whether your idea is gaining any traction with customers and if you are close to achieving your goal or not.

Build-Measure-Learn

Lean startup starts with creating the simplest version of your product, called Minimum Viable Product (MVP). The product is then tested with a sample of targeted customers to gather feedback. The feedback is then used to make incremental improvements to the product.
Imagine having a powerful tool that formulates a structured framework by properly visualizing and analyzing key aspects of your business. This tool is called a business model canvas; it helps in implementing the core principles of the lean startup methodology into an actionable business plan.

Imagine having a powerful tool that formulates a structured framework by properly visualizing and analyzing key aspects of your business. This tool is called a business model canvas; it helps in implementing the core principles of the lean startup methodology into an actionable business plan.

What is a Business Model Canvas? The business model canvas is a tool that helps you plan your business. It is like mapping out your business and conjuring all the factors that affect the proper functioning of your business. The canvas is divided into sections that cover things like Who are your customers? What do you offer to your customers? How do you make money? What makes your business different from others? And much more..

Lean Startup Methodology Vs. Traditional Approach

The traditional approach is based on hit-or-miss, unlike lean startup methodology. There is no concept of first testing the hypothesis and then working on improvements based on the feedback to launch the product in full swing.

Many startups and established companies have tried the lean startup approach and found more success than with traditional methods.

Case studies

1. Dropbox

Dropbox is the one of the best examples for using lean startup methodology and reaping the benefits out of it.

Motive: The motive of dropbox was crystal clear: Easy File Sharing.

How they implemented lean startup:

Before building a full featured product, Dropbox released a simple 3 minute video showing consumers what Dropbox could do. The video went viral, which served as validation for Dropbox. They then used this validation to proceed with building the actual software.

Result:

When Dropbox used the lean startup principles in just 15 months he went from 1,00,000 registered users to 40,00,000.

2. Zappos

Another notable example is Zappos, an American online shoe and clothing retailer. It is one of the first online shoe retailers that now sells everything from boots to bags.

Motive: The founder of Zappos, Nick Swinmurn, wanted to test whether customers were willing to buy shoes online.

How he implemented lean startup:

Nick Swinmurn decided to test the hypothesis by creating an MVP—a basic website. He then approached local shoe stores, took a picture of their inventory, and posted it online on their basic website.

If he received an order, he then used to buy the shoes from the stores at full price and send them directly to their customers, thus proving that customer willingness to avail of Zappo’s service.

Result:

Today, Zappo has grown into a billion-dollar business and has expanded from selling shoes to selling clothing, accessories, and much more.
Now, as an aspiring entrepreneur, how can you implement the lean startup methodology to test your business’s viability?

How can you implement the lean startup methodology?

We know that starting a business is all about taking a risk and dealing with uncertainty. But instead of failing big, how about failing fast and bouncing back with all the improvements by following a lean startup approach?

Sounds better, right?

“Startup success can be engineered by following the process, which means it can be learned, which means it can be taught.”  -Eric Ries

Lean Startup Process:

1. Create a business model canvas

In the initial stage, you start with a business hypothesis outlining how your product can create value. It replaces upfront research that often takes months, thus saving time. So instead of making a standard business plan, a business model canvas is drafted to summarize the hypothesis and provide a plan of action.

It includes:

Value proposition:

It is about how your business provides value and solves the key problems for customers.

Key partners:

Once you are done creating MVP, you look for suppliers or collaborators, as they are essential to achieving the value proposition.

Key activities:

This section defines all the key activities that you shall be taking to realize the value proposition.

Key resources:

Here you will find a list of all the key resources that will be required to implement the strategy and deliver the value proposition.

Customer relationship:

Building customer relationships is really important.

You must plan how you will interact with your customers to demonstrate the value of your product.

Channels:

Determine how you will introduce your business to customers and how they can access your products or services.

Customer Segment:

To understand how your company solves problems for specific customer segments, it’s essential to segment your customers based on their interest and spending power.

Cost Structure:

It is good to consider all expenses. It will help you make informed decisions about the resource allocation for a sustainable business model.

Revenue Stream:

This section focuses on strategizing how your company can generate revenue by delivering on its value proposition.

2. Craft an MVP using MVP canvas

Based on your research and the information in the business model canvas, develop a minimum viable product (MVP) with essential features to test in the market.

Utilize the MVP Canvas for a structured approach.

What is an MVP Canvas? The MVP Canvas is a practical framework that provides a structured approach for designing and launching Minimum Viable Products (MVPs) to validate your business ideas.

How can you use MVP canvas to build your MVP

The Minimum Viable Product (MVP) Canvas is a tool that helps you plan and build your MVP (minimum viable product) effectively. It’s like a roadmap that guides you through the key steps of developing your product, which has all the vital features to cater to the needs of your customers.

First, define your target audience and their needs. Then, outline your unique value proposition, which is what makes your product special and attractive to customers.

Next, list the features of your MVP by focusing on the most essential ones that address your customers’ main pain points. You can also draft a plan to reach your target customers.

Based on the customer’s feedback, you make the required changes to your product.

Lastly, you think about the resources and partners you’ll need to bring your MVP to life.

The MVP canvas helps you stay focused on what’s important and avoid wasting time and resources on unnecessary features or strategies.

3. Leverage customer development to seek customer feedback

Customer development helps understand the market and validate if the product solves customers’ problems.

This process includes:

Customer discovery:

Customer discovery means testing the validity of the business model with potential customers.

Hence, develop a series of imaginary questions to validate your business model with your potential customers.

Customer validation:

Following customer discovery, it’s crucial to begin developing an initial product version and engaging with early adopters to gather valuable feedback.
Customer creation:

With customer creation you work on creating the demand for the product and implementing sales processes to sell and deliver the product on a greater scale.

Company building:

In the end, you will work on company building to foster company growth to achieve a sustainable user base.

4. Carry out Agile Development

Agile development focuses on minimizing waste by shortening the product development cycle and ensuring an iterative and collaborative process.

You will have to implement customer feedback, make incremental changes and have to strive for continuous improvement in order to achieve growth and win customer loyalty.

During the early 2000s, a small group of software industry leaders met in Snowbird, Utah, to discuss new methodologies for software development. The term “agile software development” was coined to describe the flexible and iterative nature of software development that was emerging as a departure from traditional, rigid methodologies. Today, agile development is used to emphasize adaptability, collaboration, and responsiveness to change, aiming to deliver high-quality products and services in shorter time frames and being based on a company’s set of goals and principles.

Is it only for startups?

The simple answer to this question is “no.”

It is true that it gained popularity for use by startups to help them innovate effectively and efficiently. But with time, it turns out that it can be used by any business of any type and size.

This methodology mainly focuses on continual development, customer feedback, and validated learning to benefit every organization.

Now your next question could be: What about tech startups?

Does it also apply to tech startups?

Yes!

And guess what?

It is mainly used by tech startups compared to non-tech startups. Its emphasis on rapid iteration, customer feedback, and validated learning, it is thus well-suited for the fast-paced and dynamic tech industry.

With lean startup principles, they can develop their products and services more efficiently, reduce the risk of failure, and meet the requirements and evolving needs of their target market.

How and why does a lean start-up change everything?

A customer-centric, agile, and feedback-oriented approach to innovation and product development is what keeps a lean startup efficient and can result in more profitable, long-lasting businesses.

In a nutshell,

The lean startup methodology acts as your guide to running a startup, teaching you when to pivot, how to steer, and how to grow rapidly. Businesses are now finding success by embracing their core principles. So, do you want to thrive in this competitive market and don’t want to miss your chance to make your dream of building a startup a reality?

Beyond Grades has got your back!

Join us for a 2-hour intensive workshop and master the art of startup building, where we will teach you how to build a startup based on the principles of Lean Startup.