Among today’s buzzwords such as disruptive innovation, digital transformation and corporate synergy, there is one term to be found which seems to fascinate many entrepreneurial spirits. Indeed, we are talking about the lean startup. Although most people vaguely nod when their peers enthusiastically use the term in every other sentence, it could be extremely useful to understand what the concept of the lean startup comprises. Here is how we are going to get you back on top of your game.
A Brief History
And a rather recent one. In the early 2000’s, cracks were beginning to show in the conventional way of starting a business. Traditionally, founders were expected to establish a solid business plan, outlining a seizable problem to be solved, in order to provide proper financial forecasts. In addition, the business plan was a tool to convince investors of the idea’s potential; a long and tiring process. Once the money was in, developers would spend long nights in their garages to make the concept ready for launch. Essentially, it was believed that, before even executing the business idea, having a business plan would be a means for the company to be prepared for any hurdle that would present itself along way. However, note that in this rather slow and long process, there had not been any interaction with the customer yet. So, more often than not, after huge amounts of money and time were invested, entrepreneurs would find out that the market was, in fact, not interested in the company’s product. So, the traditional way of starting a business often resulted in a mismatch between the product and the market needs.
Naturally, this called for a change in approach and the lean startup provided exactly that. Around 2010, it had become a serious methodology which (small) companies rapidly and eagerly started to adopt. Basically, the big difference with traditional ways of starting a business, is that previously a company would start with following a proposed business model.
The lean approach, however, suggests that the business model is not the starting point.
Instead, the business model is looked for and established along the way. As Harvard Business Review puts it, “a lean start up is a temporary organization designed to search for a repeatable and scalable business model.”
How Does It Work?
The lean startup methodology is based on three key principles.
Firstly, the elaborate business plan is being ditched and replaced by the Business Model Canvas. Introduced by Alexander Osterwalder, this visual and strategic tool summarizes the founders’ hypotheses, by defining nine essential building blocks which together shape the firm.
Secondly, to test the hypotheses mentioned above, the company depends on customer development, also referred to as the get out of the building approach. It implies that potential customers and partners are being consulted for feedback about various aspects of the business model. Think of pricing, the product’s features or distribution channels. This process should be quick in order to create minimum viable products based on immediate consumer feedback. Based on this input, the products are being redesigned after which the cycle starts all over again. As such, the product is continuously being revised and adjusted based on critical customer insights.
The third principle is based on a magical thing called agile development, which is closely connected to customer development. Agile development aims to eliminate wasted resources and time as the product is being established incrementally. So, agile development essentially describes the process which allows companies to get to the minimum viable products being tested.
Although the lean method sounds quite logical now, it has been changing the business landscape significantly. In fact, unlike its name suggests, it is not only startups that benefit from its approach. More and more large firms start to adopt the methodology as they start to understand that it is a successful tool to keep up with the pace of innovation.
Zooming in to the Netherlands, there is no denying that the lean startup is immensely popular. Some even claim that us Dutchies have more lean startup consultants than startups itself. Companies such as ING, Rockstart and various startups as well as universities are convinced that the lean startup is more than a buzzword. Rather, it is at the heart of innovation. In a way, it even provides the basis for disruptive innovation, digital transformation and corporate synergy. We will leave that for later.
About Amstel Lab
Amstel Lab partners with startups and scaleups to commercialize your business. On the back of our experience, we have developed the unique Amstel Lab method: a tailor-made approach to maximize success. We test your markets, refine your product, innovate your commercial approach and execute your strategies. Any good idea is worth seeing through.
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