Start-ups are exciting. When you kick off a brand new business, whatever the sector or subject, you’re often on a rollercoaster ride. You need to move quickly and confidently but you also need to remain sure-footed and grounded, blending fresh ideas with tried and trusted business wisdom to create a sturdy, workable whole. It’s an exercise in uncertainty, an opportunity for creativity, a blank canvas. At the end of the day every start-up needs to be built carefully so it’s solid and sustainable.

It’s good to know there’s a process to follow to ensure you hit the ground running in the right direction, at the correct speed, supported by the relevant resources. Here’s what you need to know about Lean Start-Up.

Lean Start-up was developed by an American business-coach, Eric Ries. In 2008 he was working in Silicon Valley developing his ideas. Building on concepts derived from Japanese Car manufacturers – lean manufacturing – Ries tested his ideas and refined them. In 2011 he published his book, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Ries defines a start-up like this:

‘A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. Nothing to do with size of company, sector of the economy, or industry.’

He elaborates, saying a start-up is also a: ‘temporary organization designed to search for a repeatable and scalable business model.’ Indeed: ‘Startups exist in order to learn how to build a sustainable business’. This is a great definition for anyone to use. ’The fundamental activity of a startup is to turn ideas into products [and services], measure how customers respond, and then learn whether to pivot or persevere’.

To learn more, see Eric Ries talking at Google.

Ries says: ‘Startup success can be engineered by following the process, which means it can be learned, which means it can be taught.’ Steve Blank, writing in the Harvard Business Review in 2013 in an article entitled ‘Why the lean start-up changes everything’, agrees. He says:

‘Now, we have the first set of tools for searching for new business models as we launch start-up ventures. It also happens to have arrived just in time to help existing companies deal with the forces of continual disruption. In the 21st century those forces will make people in every kind of organization—start-ups, small businesses, corporations, and government—feel the pressure of rapid change. The lean start-up approach will help them meet it head-on, innovate rapidly, and transform business as we know it.’

For more interesting ideas and information on start-ups you can also watch Steve Blank: The Principles of Lean

Ries’s whole approach to start-up is about learning (as quickly as you can) whether anyone wants what you are offering. Central to his approach is the idea that founders need to – Build–Measure–Learn. He sees this as a cycle.

Of course, someone has to ideate (come up with the insight or the idea), but then smart founders start testing, testing with the intention of quickly building a minimum viable product (Ries’ MVP) of that idea. Testing means seeking feedback from people ‘outside the organisation to gauge responses, measuring (real) customers’ reactions and behaviours around what is on offer. At that point, there is a crucial ‘Go/No-go’ moment – do you push on and persevere or do you listen to the feedback and pivot the idea? Smart founders do this as many times as they need to, to be sure that what they are offering is viable (hence MVP).

The crucial phases of the loop are: Ideas → Build → Product or service → Measure → Data → Learn.

If that sounds a lot like marketing, you’re right. It is. Every good marketer tests their output carefully and uses the resulting insight to improve future response and conversion rates. Every good start-up tests ideas and uses the data they’ve collected to learn and grow.

Ries builds his model on a set of assumptions that he calls the five core principles of ‘lean’:

1. Entrepreneurs are everywhere – People want to develop ideas and make money from them.
2. Entrepreneurship is both leadership and management – A startup is often the idea of someone with insight and courage (showing leadership) but it is also an entity of people, and people need managing.
3. Validated learning – Startups are about making stuff, making money, and serving customers, but most fundamentally they are in the ‘learning business’ – they are learning what it takes to build a sustainable business.
4. Reinforce the Cycle Build-Measure-Learn – seeking feedback and measuring response needs to be at the heart of their culture.
5. Innovation accounting – we need to change the way we fund start-ups, finding more dynamic models of investment to encourage more people to build the great companies of the future.

Lean thinking suggests getting things ‘out’, testing them, and in the light of customer feedback, adapting. Lean start-ups may point towards adopting a “Freemium” model. This a model where everyone gets the basic free, but those who want better features have to pay a subscription – like LinkedIn and Skype.

Here is a short annimated introduction about the book Eric Ries that summaries his ideas clearly and quickly.

Ries believes there are three important learning milestones. He wants entrepreneurs to:

1. Establish the baseline – Build a Minimum Viable Product (MVP) and measure how customers behave right now
2. Tune the engine – Experiment to see if we can improve metrics from the baseline towards the ideal
3. Pivot or persevere – When experiments reach diminishing returns, it’s time to pivot.

Have you got an idea you want to create a business with? Are you running a start-up and struggling? Are you a founder looking for a place to talk through your thinking and explore your ideas? We coach many start-ups and founders, so give us a call. We’ll be pleased to talk things through.