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The Lean Startup



Start

  • The Lean Startup measures progress with 'validated learning'

  • Think of driving your startup, with constant adjustments, using the Build-Measure-Learn feedback loop.

  • Startups have a destination in mind: the Vision.

  • To achieve that vision, startups employ a Strategy.

  • Products are the end result of this strategy.

    • Products constantly change through optimization.

    • Sometimes the strategy needs to change, called a pivot.

    • The overarching vision rarely changes.



Define

  • A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.

  • Leadership requires creating conditions that enable employees to do the kinds of experimentation that entrepreneurship requires.



Learn

  • Validated learning is the process of demonstrating empirically that a team has discovered valuable truths about a startup's present and future business prospects.

  • In a lean startup, every product, every feature, every marketing campaign - everything a startup does - is an experiment designed to achieve validated learning.



Experiment

  • The goal of every startup experiment is to discover how to build a sustainable business around the vision.

  • The two most important assumptions entrepreneurs make are called the...

    • Value Hypothesis: Tests whether a product or service really delivers the value to customers once they are using it.

    • Growth Hypothesis: Tests how new customers will discover a product or service.


4 Key Questions:

  1. Do consumers recognize that they have the problem you are trying to solve?

  2. If there was a solution, would they buy it?

  3. Would they buy it from us?

  4. Can we build a solution for that problem?



Leap

"You can't be sure you really understand any part of your business unless you go see for yourself."
  • A startup should test it's strategic assumptions as quickly as possible.

  • Startups need extensive contact with potential customers to understand them, so go find them.

    • Create a customer archetype from this early contact and ensure product development aligns with the customer archetype you aim to serve.



Test

  • A Minimum Viable Product (MVP) is the fastest way to get through the Build-Measure-Learn loop with the minimum amount of effort.

  • If we do not know who the customer is, we do not know what quality is.



Measure

  • A startup's job is to....

    • Rigorously measure where it is right now.

    • Devise experiments to learn how to move the real numbers closer to the ideal reflected in the business plan.

  • Innovation Accounting:

    • Establish the baseline.

    • Tune the engine.

    • Pivot or persevere.



Pivot (or Persevere)

  • A pivot is a structured change designed to test a new fundamental hypothesis about the product, business model, and engine of growth.


  1. Zoom-In Pivot: A single feature becomes the whole product.

  2. Zoom-Out Pivot: What was considered the whole product becomes a single feature.

  3. Customer Segment Pivot: Solving the right problem for different customers than originally planned.

  4. Customer Need Pivot: Target customer has a different problem worth solving.

  5. Platform Pivot: Change from an app to a platform or vice versa.

  6. Business Architecture Pivot: High margin, low volume / low margin, high volume.

  7. Value Capture Pivot: Different monetization or revenue models.

  8. Engine of Growth Pivot: Viral, sticky, or paid growth models.

  9. Channel Pivot: Delivering the same solution through a different channel with greater effectiveness.

  10. Technology Pivot: New technology providing superior price and/or performance.



Batch

  • Working in small batches ensures a startup can minimize the expenditure of time, money, and effort that turns out to have been wasted.



Grow

  • Sustainable growth has one rule:

    • New customers come from the actions of past customers.

  • Sustainable growth drivers:

    • Word of mouth

    • As a side effect of product usage

    • Funded advertising

    • Repeat purchase or use

Three Growth Engines:

  1. Sticky Engine of Growth

    1. If the rate of new customer acquisition exceeds the churn rate, the product will grow.

  2. Viral Engine of Growth

    1. Products that exhibit viral growth depend on person-to-person transmission as a necessary byproduct of normal product use.

  3. Paid Engine of Growth:

    1. Increase the revenue from each customer or drive down the cost of acquiring a new customer.



Adapt

  • An Adaptive Organization is one that automatically adjusts its process and performance to current conditions.

  • Asking the 'Five Whys' provides an opportunity to discover what the human problem might be when confronted with a problem.

    • Consistently make a proportional investment at each of the five levels (small issue, small investment).



Innovate

  • Structural attribute of innovative startups:

    • Scarce but secure resources

    • Independent authority to develop their business

    • Personal stake in the outcome

Create an Innovation Sandbox:

  1. Any team can create a true split-test experiment that affects only the sandbox parts of the product, service, or customer segment.

  2. One team must see the whole experiment start to finish.

  3. No experiment can run longer than a specified amount of time.

  4. No experiment can affect more than a specified number of customers.

  5. Every experiment has to be evaluated on the basis of a single standard report of five to ten actionable metrics.

  6. Every team that works inside the sandbox and every product that is built must use the same metrics to evaluate success.

  7. Any team that creates an experiment must monitor the metrics and customer reactions while the experiment is in progress and abort it if something catastrophic happens.

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