One key driver of success is to maximize customer value while minimizing waste. Lean means creating more value for customers with fewer resources. As we are fans of Agile methodology, we couldn’t miss lean startup and lean software development topics. So today is the day, let’s discuss why lean became so popular and its main benefits.
What Is Lean Startup
The key idea of a lean startup is to avoid creating a product that doesn’t work. It is about avoiding creating a product that people don’t need. Rather, find a problem worth solving first and then build a business model around it.
Lean startup is ideal for entrepreneurs and startups that are still looking for a business model or product that drives genuine value. But it can also be used by large organizations if they have the flexibility to respond quickly to new information and listen to customer needs.
In other words, lean startup is a methodology for developing businesses and products. This methodology aims to shorten product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning.
The idea of the lean startup methodology is that if startup companies invest their time in iteratively building products or services to meet the needs of early customers, they can reduce the market risks and avoid the need for large amounts of initial project funding and expensive product launches and failures. Launching a new product in a tech start-up, a small business or an initiative within a large corporation has always been a win or lose game.
The traditional method is about writing a complete business plan, pitching it to investors, creating a team, introducing a product, and starting to sell as hard as you can. But the lean startup methodology is about eliminating unnecessary practices and increasing value-added practices during the product development phase so that startups can have a better chance of success without requiring large amounts of funding, elaborate business plans, or creating a perfect product. Customer feedback during product development is integral to the lean startup process and ensures that the developer does not invest time designing features or services that consumers are not interested in. What the lean startup methodology proposes is using key performance indicators and a continuous deployment process.
Startups typically cannot afford to have their entire investment depend upon the success of one single product launch. The lean startup methodology proposes that by releasing a minimum viable product that is not yet finalized, the company can then make use of customer feedback to help further tailor their product to the specific needs of its customers and guarantee that what the company is developing will be in demand.
Although the methodology is just a few years old, its concepts such as “minimum viable product” and “pivoting” have quickly gained traction in the startup world, and business schools have already begun adapting their courses to teach students how to become successful entrepreneurs.
The lean startup method provides an approach to creating and managing startups and getting a product to customers’ hands faster. Too many startups begin with an idea for a product that they think people want. They spend months, sometimes years, perfecting that product without ever showing the product to their potential users. When they fail, it is often because they never spoke to their potential customers and never tested whether or not the product was interesting. This is the top reason why most startups fail.
It is very important to understand and let’s repeat it again. Instead of spending months in planning and research, entrepreneurs accept that all they have is untested hypotheses, basically, their guesses. So instead of writing a solid business plan, founders summarize their hypotheses in a framework called a business model canvas. Basically, this is a diagram of how a company creates value for itself and its customers.
Also, lean startups use a “get out of the building” approach. They go out and ask potential users, purchasers, and partners for feedback on all elements of the business model, including product features, pricing, distribution channels, and affordable customer acquisition strategies. Then, using the customers’ feedback, they revise their assumptions, start the cycle over again, test redesigned offerings, and make further small adjustments (iterations).
Lean startups practice Agile development, which originated in the software industry, but is now is used in other departments as well. Instead of typical yearlong product development cycles, Agile development eliminates wasted time and resources by developing the product iteratively and incrementally. It’s the process by which startups create the minimum viable products they test.
Main Concepts of Lean Startup Approach
- Test Frequently and Learn Quickly. Don’t build a product before you have undertaken numerous tests along the way. Organize focus groups and watch how real customers behave, how they use your MVP to understand what should be developed next and what should be redeveloped to meet user needs.
- Pivot based on key learnings. The word “lean” refers to speed and agility. Startups take advantage of the discovery mode to quickly learn what is not working so they can make changes immediately. You need to pivot or stop what you are doing if the initial plan is not working. There is no sense in continuing if you see that your product is not what your customers need.
- Focus on actionable metrics. Avoid vanity metrics (metrics that create a favorable impression about performance when they are illusory). For example, what’s the point of having 1 million users if none of them convert? Instead, entrepreneurs need to focus on actionable metrics.
Lean Startup Benefits
Smart Working Process
The lean startup methodology has as a premise that every startup is a grand experiment that attempts to answer a question. The question is not, “can this product be built?” Instead, the questions are: “should this product be built?”; and “can we build a sustainable business around this set of products and services?” Iterations, iterations, iterations. Feedback, feedback, feedback. Work on a product that you know will bring you money, i.e. a product that will satisfy your users. And once the MVP is established, a startup can work on tuning the engine. This will involve measurement and learning and, of course, actionable metrics that can show valuable results.
Control Your Business and Reduce Risks
Using the lean startup approach, companies can create order out of chaos by providing tools to test a vision continuously. Lean isn’t simply about spending less money. Lean isn’t just about failing fast and failing cheap. It is about putting a process, a methodology around the development of a product to develop a product you know will have success later on.
The lean startup methodology allows entrepreneurs to fully control their businesses. That’s because it teaches business managers how to create new business models and products that are demanded. The lean startup methods basically eliminate the project failure, because you go where your stakeholders show you to go. You always having a working and quality product, you just make it better and better step by step.
The lean startup makes it possible for entrepreneurs to pivot when they realize that their initial assumptions are incorrect. By applying the “release early, release often” principle, a business person can identify problems and make adjustments when needed.
Quality Product and Customer Satisfaction
The lean startup gives you a relevant product and relevant features. The lean startup is about focusing on the right feature, focusing on one aspect and doing it well, and then, and only then, switching to another feature. Once again, at the end of the day you deliver the requested features to your customers, they can’t be unsatisfied.
The fact that lean startup and Agile development processes are iterative means that the features are delivered incrementally, therefore benefits are realized early while the product is still in the development process. You get first mover advantage, you already have something to show to your investors and you have something to work on to start generating money. Don’t wary about what your users think about the 100 functionalities you have in mind, they don’t know about them, but they already have something they can use and pay for. Other functionalities can be added value, but don’t give your users everything at once, they will be bored very soon.
The lean startup focuses on business value. By allowing the client to determine the priority of features, you understands what’s most important to the client’s business, and can deliver features in the most valuable, and fastest, way.
Lean thinking has been associated with the slogan: “think big, act small, fail fast, learn rapidly.” Lean comes from Lean Manufacturing and is a set of principles for achieving quality, speed, and customer alignment. The lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste. And the idea behind lean is to achieve continuous improvement.
To accomplish this, lean thinking changes the focus of management, so that, in a nutshell, you should eliminate anything that isn’t adding value, and leave only what you absolutely need to be doing at this moment in time. Eliminating waste means eliminating useless meetings, tasks, and documentation. But it also means eliminating time spent building what “we know” we’ll need in the future. Also, we know that things are constantly changing so we often end up not needing them, so don’t take it into account if you can't work on it right now. Otherwise, you will waste your resources to rework them because the conditions have changed. It also means eliminating inefficient ways of working, for example, multitasking, so that you can deliver fast.
So thanks to the lean approach, Dropbox went from 100,000 registered users to over 4,000,000 in 15 months. Wealthfront company now manages over $200M and processes over $2M a day. IMVU has reached 50 million registered users and a $40+ million annualized revenue run rate.
7 Principles of Lean Software Development
The first principle in lean software development is eliminating waste. Lean philosophy says that everything that doesn’t add value to the customer is a waste. Such waste may include: partially complete work, extra processes, extra features, task switching, waiting, motion, defects, etc.
In order to eliminate waste, one should be able to recognize it. If some activity could be bypassed or the result could be achieved without it, it is a waste. Partially done coding eventually abandoned during the development process is a waste. Extra processes like paperwork and features not often used by customers are a waste. Switching people between tasks is a waste. Waiting for other activities, teams, and processes is a waste. Defects and lower quality are a waste. Managerial overhead not producing real value is a waste.
A value stream mapping technique is used to identify waste. The second step is to point out sources of waste and to eliminate them. Waste-removal should take place iteratively until even seemingly essential processes and procedures are liquidated.
The second principle of lean software development is amplifying learning. Lean software development is a continuous learning process based on iterations. Instead of adding more documentation or detailed planning, different ideas could be tried by writing code and building. The process of gathering user requirements could be simplified by presenting screens to the end-users and getting their input. The learning process is sped up by usage of short iteration cycles, each one coupled with refactoring and integration testing. Feedback determines the current phase of development and adjusts efforts for future improvements. During those short sessions, both customers and the development team learn more about the problem and figure out possible solutions for further development.
Decide as Late as Possible
The third principle of lean software development is deciding as late as possible. As software development is always associated with uncertainty, better results should be achieved with an options-based approach, delaying decisions as much as possible until they can be made based on facts and not on uncertain assumptions and predictions. The iterative approach promotes the ability to adapt to changes and correct mistakes, which might be very costly if discovered after the release of the whole platform. The lean software development approach can move the building of options earlier for customers, thus delaying certain crucial decisions until customers have realized their needs better. This prevents costly earlier technology-bounded decisions when they are not really necessary. This does not mean that no planning should be involved, planning activities should be concentrated on the different options and adapting to the current situation, as well as clarifying confusing situations by establishing patterns for rapid action. It helps to move in the right direction with minimum losses.
Deliver as Fast as Possible
The fourth principle of lean software development is to deliver as fast as possible. In the era of rapid technology evolution, it is not the biggest that survives, but the fastest. The sooner the product is delivered without major defects, the sooner feedback can be received, and the company has a higher chance of success. The shorter the iterations, the better the learning and communication within the team. Again, speed assures the fulfilling of the customer’s present needs as they value rapid delivery of a quality product.
Empower the Team
The fifth principle of lean software development is empowering the team. The managers listen to the developers, so they can better explain what actions might be taken, as well as provide suggestions for improvements. The lean software development approach follows the Agile principles: “find good people and let them do their own job,” encouraging progress, finding and fixing, etc.
People are not resources. People need motivation and a higher purpose to work for, something reachable, with the assurance that the team might choose its own commitments. The developers should be given access to the customer; the team leader should provide support and help in difficult situations, as well as ensure that there is a positive team spirit.
The sixth principle of lean software development is building integrity.
Conceptual integrity means that the platform’s separate components work well together as a whole with a balance between flexibility, maintainability, efficiency, and responsiveness. One of the healthy ways towards integral architecture is refactoring. As more features are added to the original code base, the harder it becomes to add further improvements. Refactoring is about keeping simplicity, clarity, and a minimum number of features in the code. Repetitions in the code are signs of bad code designs and should be avoided. The complete and automated building process should be accompanied by a complete and automated suite of tests.
See the Bigger Picture
And the last principle of lean software development is seeing the bigger picture. Software platforms nowadays are not simply the sum of their parts, but also the product of short and frequent interactions. Defects in software are usually found and fixed during the development process. Big tasks are turned into smaller tasks. The larger the platform, the more organizations or people are involved in its development. And the more parts that are developed by different teams, the greater the importance of having well-defined relationships between different stakeholders and teams to produce a scalable platform becomes.