book.chapter The lean methodology - purpose

The conventional approach to launching a startup typically begins with someone envisioning a successful business that creates products consumers love. To achieve that vision, they develop a strategy: defining the business model, product lineup, partners, competitors, and target customers. Then they build and sell the product per that strategy. With this model, entrepreneurs are seen as determined, focused people who guide startups to market and drive adoption. Setbacks are mere learning opportunities on the path to success. In reality, entrepreneurship demands general management skills more than anything. Startups juggle multiple concurrent activities: acquiring new customers, supporting existing ones, innovating, tuning marketing, reevaluating strategy, and optimizing the product. Most emphasize immediate results over learning. They aim simply to build and launch products, considering it successful if they hit targets and come in under budget. Thus, many accidentally build something no one wants. Their financial performance matters little if the product doesn’t meet customer needs. A startup’s primary job is to quickly and cost-effectively identify what customers will pay for. Defining startups may be helpful here. A reasonable definition is: a human institution designed to create a new product or service under conditions of extreme uncertainty. Some key implications: Startups are institutions with processes for hiring, coordination, product development, and more. Successful ones master these processes. Startups focus on creating innovations, whether via new technology, repurposing existing technology, or developing new business models that unlock value. Uncertainty is guaranteed, rendering most traditional management tools ineffective. Startups instead need tools suited to operating amidst uncertainty. Startups are often assumed to exist outside established companies, but they can occur internally too. Consider Intuit, a leading producer of financial software. Despite its success, Intuit realized incremental product changes were more likely than radical innovations. So it prioritized enabling risk-taking and innovation. In 2009, an Intuit team had the bold idea of mobile phone tax filing. They created a way for customers to photograph W-2 forms and file simple returns automatically. They called it SnapTax. To test consumer demand, they initially launched only in California for straightforward returns. After perfecting SnapTax there, they expanded nationally the next year. It has been a major success, with hundreds of thousands of early downloads. For startups, learning matters more than anything. Their core aim should be using scientific experiments to discover how to build sustainable businesses; other accomplishments are secondary. The Lean Startup methodology encapsulates this approach of rapidly testing ideas to truly learn customers’ needs. Intuit continues aggressively testing SnapTax and its flagship TurboTax. Each tax season it runs some five hundred variations. Dozens of website changes go live each Thursday, get evaluated over the weekend, and drive subsequent tests. This constant experimentation yields major learning and new revenue streams. However, this conflicts with traditional models that emphasize analysis and planning. While startup teams love quickly soliciting customer feedback, leaders and middle managers often struggle. They consider themselves analysts who must produce comprehensive plans. But for startups, the priority is to experiment and learn what customers want without over-committing to any plan or vision. The Lean Startup’s core Build-Measure-Learn loop enables this. Get minimum viable products to customers, collect feedback, make suggested tweaks, and repeat. This prevents successfully executing perfectly on a plan no one wants. Unlike just releasing something without learning, it stresses validating learning through iterative experiments. Startups should simply focus on discovering what will constitute a sustainable business. Zappos exemplifies this technique. Its founder Nick Swinmurn avoided the pitfalls of overbuilding infrastructure before proving demand. Instead of warehouses, he first asked shoe stores if he could photograph their inventory and post it online. He would buy the shoes only once customers purchased them. This validated the viability of selling shoes online, informing Zappos’ strategy. In the end, startup success results from methodical processes that can be learned and taught, not innate qualities or luck. It stems from testing ideas and assumptions early, failing fast, and using the lessons to improve - not analysis and planning. Entrepreneurship is its own management discipline.