Lean startup model energizes entrepreneurs
Most failed startups run out of money trying to fix mistakes in their assumptions about what customers want. By the time they find the mistakes, they’ve already built the factory, written the code or invested in the wrong relationships and they’re overcommitted to their plan.
Survival depends on making substantial changes to the product or service, but they’re out of money.
“Lean startup” is all about preventing that failure cycle by testing the fundamental assumptions about a startup’s business early and often to prevent building an untested solution to a problem customers don’t encounter.
Lean startup puts customers squarely at the center of the process, and requires that entrepreneurs listen to product feedback and then continuously refine their business model. This tight feedback loop is designed to uncover flaws in the startup’s assumptions and reveal the fundamental economic logic necessary for success.
Lean startup is unique because it requires early and continuous customer input, which ultimately drives the development of a successful product or service that users will pay for and recommend to others.
Business plans give a false sense of security. Spending months predicting demand using elaborate spreadsheets, constructing meticulous five-year sales forecasts and building multi-variant revenue models won’t negate the fact that every business plan rests on a bed of untested, unproven assumptions that likely won’t survive their first contact with customers.
Rather than executing a business plan, new startups must spend their time in search of the right business model. Over the past decade, “The Lean Startup” by Eric Ries, “The Four Steps to the Epiphany” by Steve Blank and “Business Model Generation” by Alexander Osterwalder have transformed the way startups approach product development in favor of lean startup practices by forcing them to test those assumptions on real customers before overcommitting or overspending on a plan that has not yet been validated.
The lean startup process does not solve the startup challenge by avoiding mistakes: On the contrary, it encourages startups to make them sooner. Similar to the scientific method, lean startup demands that startups test their assumptions at an early stage and gather information frequently so mistakes are identified early, cost less to fix and allow the startup to adjust or “iterate” on the fly.
The nimbleness and speed of the process gives startups enough information to assemble a minimal viable product quickly and then use those early products to gather more refined customer feedback. Lean startup is a practical pathway to building profitable products and companies more quickly, and with
smaller risks.
A critical tool for users of the lean startup methodology is Alexander Osterwalder’s business-model canvas. It is a visual template that allows founders to outline each component of their business model and identify the key assumptions about how their business will create value in the real world.
The goal is for startups to develop products and services that users ultimately love. Entrepreneurs use the business model canvas as a simple visual guide to identify hypothesizes that must be tested for the venture to succeed. The initial minimum viable product that results can be used to gauge a potential customer’s interest and then revised quickly. Once the minimum viable product has been validated and is ready to sell, then the startup spends money on sales and marketing.
The lean startup methodology never guarantees success, but it allows anyone to test a business idea quickly and cheaply, creating the possibility for more of us to participate in entrepreneurship in New Mexico. Our startup community is growing and the spirit of entrepreneurship is present in our community, but our entrepreneurs need help. They need mentors, business introductions, facilities, resources and the candid feedback from prospective customers that lean startup offers.