As a new research by Harvard Business School indicates, 75% of all start-ups fail. However, according to author Eric Ries, many of those failures are preventable. “The Lean Startup” a book by Eric Ries has rapidly become a bible for a growing number of entrepreneurs around the world.
It is undeniable that most start-ups fail at some point. The classic formula of writing a business plan, pitching it to investors, introducing the product and selling it as much as possible has long been revolutionized. Firstly, Ries defines a startup as an organization dedicated to creating something new under conditions of extreme uncertainty. This is just as true for one person working in his garage or a group of professionals in boardroom. The element they have in common is a mission to penetrate an area of uncertainty to hopefully discover a successful path to a sustainable business.
The “Lean Startup” offers a scientific approach to creating and managing start-ups and getting desired products to customers’ hands faster and easier.
“The Lean Startup method teaches you how to drive a startup-how to steer, when to turn, and when to persevere-and grow a business with maximum acceleration.”
This method relies on 3 basic principles:
- Favour experimentation over elaborate planning. Founders must summarize their hypotheses in a framework called Business Model Canvas, a diagram of how a company creates value for itself and its customers.
- Prioritize customer feedback over intuition to test these hypotheses. Ask potential users for feedback on all 4P’S of the business model. Use customer input to revise the hypotheses and make small adjustments to ideas that don’t seem to work.
- Use agile development instead of traditional yearlong product development cycles. This method eliminates wasted time and resources by developing the product in an incremental and iterative way. Create the minimal viable product to test.
Learn start-up techniques were initially designed for fast-growing tech ventures. However according to me, these concepts are equally valid for mainstream small businesses that constitute an important part of the economy. If every startup embraced this method, it would undeniably have impacts on growth and efficiency and possibly create value for the customer.
Do you use these three principles in your Business Model? Let us know what you think!