The lean startup is one of those newfangled terms that everyone is talking about. But what is the reason behind the popularity of the lean startup methodology? Is it just another way of separating entrepreneurs from their limited budgets, or is this the real deal? Is there something else rather than fashion that explains the extraordinary popularity of the lean startup? In this article we will try to explain why the lean startup methodology has gained such attention as well as how you can use the lean startup methodology to increase your chances for success in your next business endeavor. And while you’re reading, do not forget that Yarandin, Inc., is here to help, so don’t hesitate to ask questions.
It’s no secret that nearly 75 percent of all startups fail. This is as true for small businesses as it is for business initiatives within Fortune 500 companies. If you think about it, the situation is quite dramatic. Literally, hundreds of billions of dollars are being spent every single year on projects that will never be realized, and yet no acceptable solution has been discovered so far. Despite being proven ineffective a hundred years ago, contemporary entrepreneurs—especially those who rely on venture financing—begin by creating some sort of a business plan. And yes, at first glance, this approach is intuitively correct. After all, the business plan is essentially research that results in a complete description of the problems that need to be solved and the size of an opportunity that can be obtained. In addition, it seems only logical to go even further and try to figure out most of the unknowns and obtain a forecast for income, profits, and cash.
The only problem with a business plan approach for startups is that it is not realizable in practice. When creating a new venture, an entrepreneur is dealing with uncertainty, and conducting research at the table is not an effective way to solve this problem. Just ask any successful entrepreneur the extent to which his or her business corresponds to the original business plan, and you’ll see that a business plan is nothing more than an artifact to satisfy potential investors. The business plan approach is not only unable to deal with uncertainty but also significantly reduces the chances for success because the new venture is created not on the basis of experiments and feedback from customers but on the basis of attempts to predict the future..
The deficiencies of the traditional approaches to project development and the need for a new methodology became evident in the software development world almost twenty years ago. Starting with the so-called waterfall model, the software development industry has gradually realized the need for new, agile methods that are based on interaction with project stakeholders and that allow for producing what is really needed in the market, eliminating in the process the waste of time and resources by developing products iteratively and incrementally.
Today, the agile methodology is making its way into the business world.
This is what the lean startup methodology essentially is: the agile method for building startups. Instead of writing business plans that rarely survive their first interaction with clients, as well as financial projections that have nothing to do with reality, the lean startup methodology encourages the rapid development of what is really needed on the market today while also gaining experience and improving the quality of business processes and services.
This is the real reason the lean startup methodology is becoming so popular among entrepreneurs around the world. The lean startup is truly the first methodology that provides the framework for how successful startups should be built. For the first time, it helps entrepreneurs to enter the market almost immediately and to build their businesses in a more natural way—that is, by doing rather than by wasting time on business plans, projections, and market analyses that become obsolete the moment they are written.