Understanding the lean principles is an important step toward implementing the lean methodology in your project. Before doing this, you really need to grasp the essence of lean methodology. The best way to do this is to understand why most startups fail. In our previous article we described the problem with the so-called “business plan” approach. Now it's time to get down to the product level.
From the product perspective, startups fail when they cannot deliver the product that people want. It is very common for startups to spend months or even years perfecting their products without attempting to show them to prospective customers. Then, when the product finally hits the market, customers are much less enthusiastic about its features than expected. The requirement to deliver what is needed seems to be so obvious that one can wonder why this principle is overlooked so often. However, this is how it is, and this is why the lean methodology can help. One can look at the lean approach in many ways. In essence, it consists of three principles: “business model design,” “customer development,” and “agile engineering.”
Business Model Design
The first principle says that instead of spending time on a business plan, the entrepreneur should summarize his or her hypotheses in a so-called “business model canvas.” This is a diagram describing design, challenges, and pivot of the business model. This essentially clarifies how the company is going to the create value.
The second principle is that lean startups should test their hypotheses by asking potential clients for feedback on all elements of their business models. This is where minimum viable products come into play, and this is where entrepreneurs adjust ideas that aren’t working.
The third principle is about agile development. Agile development helps to eliminate the wasting of time and resources by using iterative and incremental development.
Sounds simple, right? While advising dozens of companies on implementing the lean principles, we've learned that with all of its benefits the lean model could be challenging for many reasons. One of those reasons is that the model is still quite revolutionary, which implies the need for some courage on the part of entrepreneurs.
Here is an example. One of the most common arguments we hear from those who we consult on implementing the lean principles is that they must play by the rules in order to count on venture financing. The entrepreneurs fear that by following the lean principles, instead of implementing a traditional business plan-based approach they will reduce their chances for much-needed financing.
We're trying to explain that investors are looking for proof of the correctness of your ideas. The only real proof is sales. Implementing lean principles will result in a startup having customers before the product enters the market. This significantly increases the chances for venture financing. This is a novel idea for many, and it will take time before it becomes predominantly accepted.
Knowing the lean principles is essential, but it is only the first step you need to reap the benefits of lean methodology. This is a new world, and at some point you may need professional advice. Yarandin, Inc. is here to help. Don’t hesitate to ask questions.