The “lean start up” model was coined by Eric Ries with his book “The lean Start Up” in 2011. The essence of the model is to be customer centric and to develop products and services based on what customers needs and wants. Rather than developing great products based on excellent engineering, start out with finding out what customers really wants first. Then, iterate and test continuously how your product or service is perceived by your audience and keep developing features based on insights from users. This model is more lean indeed as it won’t waste resources on developing products or services nobody actually wants. The model can be described with 5 basic principles:
BML
Build, Measure and Learn. The BML concept creates as continuous loop that helps you find your sweet spot. Actually, if you are really in the start-up phase you need to start with “Learn”. Learning starts by creating and hypothesis on what problem you want to solve and how you want to solve it. Once you have a hypothesis ready you need to “Build” something to test your hypothesis on potential users. Once you have build something and exposed it to your audience you need to be great at “Learn” through measuring and gathering insights on how your product or service is perceived. From these insights you continue the loop by readjusting your hypothesis, rebuilding your product or service and testing it again on your audience. A keyword here is “speed”. The idea of this loop is to increase the speed of your development. This loop will help you kill of the ideas and features that aren’t really wanted on the market and instead help you focus on developing winning ideas.
Experiment
In order to enable the BML loop you should see your product or service development as a grand experiment. In this way you will be able to gather the data needed to make decisions and the necessary prioritisation. The keyword here is that you need to “observe” rather than asking what potential customers want. In fact many times customers don’t know what they want. By setting up experiments where you gather empirical data on the behaviour of your customers (you observe them) you will learn and understand where to put your focus.
MVP
In order to easily set up your experiment you should aim to create an MVP, i.e. Minimum Viable Product. The idea is to set up an experiment with as little resources required as possible. The experiment should test your hypothesis as quickly and easily as possible. Hence, the minimum viable product. Eric Ries mentions three types of MVP’s to set up your experiment.
1) Video - Create a video of the solution you intend to create and test the acceptance and engagement from potential customers. If they seem to watch it all the way and also share it - it probably means you are on to something good.
2) Concierge - Test the idea on a singel or a couple of potential clients and deep-dive into what they experience. Find your early adopter(s) and collaborate with her/him to find out the details of the value you can create for her/him.
3) The wizard of Oz - Fake it until you make it. This MVP encourages you to pretend you have a fancy new technical solution behind the scenes that you actually don’t have yet. Instead you would need to have real people solving technical problems on the fly behind the scenes.
The lean start up model recognises three types of growth engines. Normally you should focus on primarily one of the three engines and reiterate the engine until perfection.
1) Sticky engine - Never let go (churn) of a customer. Make sure you offer a gamification in your product or service which makes customers “stick” to using you in long term. In fact, most gaming companies uses this type of engine, hence they actually coined the wording “gamification”.
2) Viral engine - This growth engine allows each new user to bring in an X factor of more new users. Of course, for this to work you will need a product or service that is highly appreciated. However, smart features which encourages existing users to share and invite their friends and contacts, will drive a viral spreading.
3) Paid engine - generate growth through paid advertising channels like e.g. google Adwords or facebook ads. The speed at which this engine can run is defined by the cost of acquiring a new customers (CPA) and the life time value (LTV). If LTV is much higher than CPA growth is possible through investing more in advertising.
Growth
To pivot or perservere, that is the question. Most companies have a moment when they need to decide if they need to pivot into a new strategy or just perservere. The lean model is keen on lifting up that pivoting into a new strategy is not a failure, rather it should be seen as something opportunistic. The experimentation should generate insights and data points that will allow you to set a baseline as to what you deem successful or not. If you find that the growth is not satisfactory, the model should help you find ways to pivot into a new approach and to change the strategy, whether it is a new engine model, new features or a new customer segment.