KEY PRINCIPLES OF LEAN STARTUP
In today’s time where a lot of start-ups are being launched as people want to start on their own and don’t want to work for others. By coming up with your own start-up, you are going against all the odds because most of the start-ups fail due to various factors like not knowing their customers, improper planning, etc.
The traditional way of a start-up is to come up with an idea, write a business plan, form your team, create your product, and launch it into the market. The companies used to depend on their intuitions about the customers’ preferences without actually knowing it from them.
This used to work for years but this method can’t be relied upon in the present time because of the increased competition and change in preference of the customers. Customers are becoming more and more important for start-ups.
Data is easily available and the competitors work every day to be better than others and to serve their customers really well and thus you can no longer create any product and sell it to the customers.
Recently, the term “Lean Start-up” has been used widely in the business field due to the huge advantages offered. Lean start-up is simply aiming to shorten the product development cycle and rapidly making mistakes and learning from it so that your most valuable asset is not wasted-Time.
The main principles to learn from the Lean Start-up method are:
1) Don’t Over plan
Yes, it is quite important to plan but many of the entrepreneurs waste much of their time only in planning only to realize after months or years too that their plan failed.
This results in huge disappointment and loss of time and resources. Entrepreneurs should plan but not utilize much of their time in it.
Instead, they should focus on forming a hypothesis; which is the best guess that can be made.
2) Test the Hypothesis ASAP
Once you have formed the hypothesis, it is very important that you start as soon as possible. You have to go out in the market and talk to the customers that you want to target and also the experts in the field so that you get an idea of how to start.
Once you know the customers’ preferences, you are good to start.
Now, the important thing is that you don’t waste your time creating the whole product which can take months. Focus on creating a Minimum Viable Product (MVP). MVP means that introducing a product with only the basic features that are essential to introduce it to the customers.
Once you have created this product, launch it immediately among the interested crowd, and capture their responses and work on improving the product based on their feedback. Your hypothesis will either be true or false.
Either way, you won’t waste your time and can quickly focus on your hypothesis if it’s true or forming a new hypothesis if it turns out to be true.
Using this approach makes sure that your learning cycle is reduced and that you don’t waste your time on the features that the customers are not really interested in.
Receiving feedbacks allow you to make iterations in your products as soon as possible. MVP in short helps you to learn in the fastest way possible with the least amount of effort.
3) Vanity Metrics vs Actionable Metrics
Vanity metrics are the metrics which can seem to be attractive but don’t always give you a clearer picture. After you are done testing your product, maybe you will come up with some impressive numbers but they don’t give you a clear picture or maybe they might not be helpful for your hypothesis. Some examples of vanity metrics include:
- Number of hits on a song
- A number of downloads of an app.
Let me explain how these metrics are not really helpful.
The number of hits on a song doesn’t give you a clear picture. How do you define hit?
Where are those hits coming from?
Are they generating revenue? How much cost you had to incur to generate these hits?
Thus don’t get trapped by seeing 1 million hits or 1 million downloads. Always dive deeper and generate insights that will help you improve. These metrics can only be helpful from a marketing point of view to attract more customers.
Actionable Metrics are the metrics that provide the data which is genuinely useful. It is very specific and tells us how we can improve further. Some of the important features of the actionable metrics include:
- Accessible: The data should be easily available in addition to being easily understood.
- Auditable: The data or report can be generated from the source data by any member of the team.
- Finite: Don’t get attached as these metrics are only used to test the hypothesis and after being successful, you will move on to the nest hypothesis.
Example of actionable metric:
Let’s consider the example of the number of downloads of an app (which was a vanity metric). The actionable metric can be:
- The customers that downloaded the app are from which part of the world?
- How many of the customers were willing to pay for the premium service?
- What were the common bugs faced by users?
As you can observe, the actionable metrics are very specific and these metrics provide very useful insights for the entrepreneur to carry out any further improvements in the product.
The principles of the Lean Start-up are widely used these days and have become more of a necessity. Using these principles will give you an edge and will give you many benefits like reducing waste, saving your resources, receiving instant feedback, and shorter learning cycles.
At the same time, it is necessary to understand who your target market is and then understanding whether they really need your product/ service or not.
Make sure to keep a note of these principles if you want to start on your own as these will help you a long way.