Why is ‘The Lean Startup’ Approach Still Relevant for your Business?

I'm Abhi!

Host of ENTREYE podcast and Co-founder of Mish Media, a franchisor growth agency

Traditionally, a venture’s founders would write a business plan, complete with a five-year forecast, use it to raise money, and then go into ‘stealth mode’ to develop their offerings. ALL without getting much feedback from the people they intended to sell to. 👎🏽

‘The Lean Startup’ by Eric Ries is a guide for entrepreneurs cautioning against the ‘Perfect Business Plan’ fallacy.

The Lean Startup Approach

It is a methodology for developing businesses and products that aims to shorten product development cycles and rapidly discover if a proposed business model is viable.

Ries suggests that it can be achieved through a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning. These processes can in turn help measure actual progress without resorting to vanity metrics, and learn what customers really want. 

I have listed select components of this framework to help you optimize performance and speed up the achievement of your goals:

The Build-Measure-Learn Feedback Loop

Most businesses (big or small) tend to seek perfection in their product even before customer testing (and that includes seeking perfection before launch). What they follow is more of a ‘hit-or-miss proposition.’ 

This framework on the other hand suggests developing a Minimum Viable Product (MVP) and testing the idea by exposing it to the target audience. The MVP is the most basic version of a product that can be launched to test a new business idea.

This is a core component of the LS approach. Entrepreneurs are recommended to start by building an MVP, then measuring its effectiveness in the market by gauging customer response, and finally learning from this feedback. Based on what they learn, they can either pivot (make a fundamental change to the product) or persevere (continue with the current strategy).

This ultimately helps reduce time and resources on unvalued features. After all, why perfect a product with features that are not yet validated? 

Focus on Actionable Metrics

This component draws a black-and-white distinction between Action and Vanity Metrics. Ries recommends prioritizing actionable metrics that are accessible and auditable (ex. acquisition cost, retention rate).

Accessible implies that everyone in the team understands what they stand for. Auditable means they are credible and can be supported by numbers. 

Vanity metrics on the other hand are ones that don’t translate to real business value (page views, social media followers) and should be avoided at all costs. This focus can significantly help in making decisions that are based on substance rather than appearance, thereby enhancing the learning curve toward product-market fit.

Choose the Right Engine of Growth

Understanding whether the Sticky, Viral, or Paid Engine drives your business is crucial. What does this mean?

  • Sticky Engine: Focuses on keeping customers longer than it takes to replace them, prioritizing customer retention over the rate of losing them.
  • Viral Engine: Thrives on current customers referring new ones, typical of products or services that organically prompt referrals. 
  • Paid Engine: expands by reinvesting profits into acquiring more customers. 

Grasping these engines is key for shaping business strategy and allocating resources effectively. Choosing a growth engine that doesn’t align with the company’s dynamics can misdirect resources and attention, impeding scalability.

For instance, a company with low referral rates that heavily leans into viral marketing (Viral Engine) might struggle to achieve expected growth. 

Incorporate the 5 WHYS

This approach entails repeatedly asking ‘why’—typically five times or more—until the root cause of an issue is identified. It’s more about finding the root causes of issues rather than just addressing symptoms.

This method helps startups deeply understand their problems, preventing them from recurring.

For instance, if a website crashes due to server overload, the first ‘why’ might point to a specific feature causing this. Subsequent ‘whys’ could reveal issues like insufficient feature testing or poor team communication. Identifying the core problem allows for more effective and lasting solutions. Adopting the Five Whys technique encourages a culture of ongoing learning and improvement in startups, increasing their resilience and adaptability to challenges.

 

Final Thoughts

I think this approach transcends traditional business strategies and offers a blueprint for building a sustainable, customer-focused, and agile business.

The need to pivot or persevere based on real-world data makes so much sense if you really want your business to align with market demands and customer needs. It’s quite unlikely that the approach will lose its relevance in the coming decades. 

 

‘The only way to win is to learn faster than anyone else’

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