Quick Summary: An eye-opening, practical approach to developing products, including determining who the target customer is, what customer problem we’re trying to solve, what type of metrics accurately measure if we’re delivering value, and how to determine when to pivot to a new product.
A Few More Words: Entrepreneurs can exist in any company or industry, as the author describes a startup as:
A human institution designed to create new products and services under conditions of extreme uncertainty.
In the course of solving a customer’s problem, the heart of lean is determining which efforts are value-creating and which are wasteful.
Building on lean and Agile software development concepts, The Lean Startup adds the following valuable concepts to an entrepreneur’s toolbox:
Validated Learning
The most vital entrepreneurial function is to learn what customers really want, not what we think they want or what we think they want.
We must discover whether we are on a path that will lead to growing a sustainable business.
A concept I’ll put into personal practice is listing a feature as “done” only when validated learning is complete. Instead of calling a feature “done” once that feature is rolled out to our users, we should go a step further to:
- confirm the feature is valuable based on user feedback and learning
- remove the feature if learning determines the feature is not valuable
While discussed in the book, Validated Learning is a concept I’ll dive deeper to learn more about, as the author claims Validated Learning is a faster, more accurate, more scientific way to ensure a startup only develops products customers really want.
Build Measure Learn
As customers interact with products, they provide feedback which startups need to quickly synthesize to determine whether to change course.
The process of gathering that feedback falls into the Build Measure Learn Feedback loop, which is at the core of the Lean Startup model.
The faster we move through the loop, the faster we can build, measure, and learn about new product features and whether they truly deliver value.
Experiment
A startup tries to figure out what to build. After creating a grand product vision, break that vision into assumptions, and then break those assumptions into a Value Hypothesis and a Growth Hypothesis.
The Value Hypothesis:
Tests whether a product or service really delivers value to customers once they are using it.
The Growth Hypothesis:
Tests how new customers will discover a product or service.
Minimal Viable Product
As many Agile software practitioners agree, MVP isn’t necessarily the smallest product possible. Instead, it’s the most basic, stripped-down product needed to get through the Build Measure Learn feedback loop to quickly learn what we want to learn.
Innovation Accounting
Another interesting concept I plan to dig into deeper is Innovation Accounting, which enables startups to objectively prove they’re learning how to grow a sustainable business.
Innovation Accounting is made up of 3 steps:
- Create a Baseline: Use an MVP to establish actual data on where the company is right now.
- Tune the Engine from Baseline towards Ideal: Update the product in attempts to move to where you want to be.
- Pivot or Persevere: If learning isn’t happening, or if that learning isn’t being used effectively, decide if a pivot in product strategy is necessary.
Cohort Analysis
A key analytic used to learn about how the product is being used is Cohort Analysis, which doesn’t look at cumulative numbers (such as total number of customers, or total sales), and instead looks at the performance of each group of customers that independently came into contact with the product.
A/B testing – where group A sees a feature and group B does not – is a critical component.
Cohort Analysis allows us to watch individual cohorts (eg, customers who saw a new marketing message) and compare that cohort against other cohorts (eg, customers who did not see a new marketing message) to learn how a product is being used and if/what factor influences customer behavior (eg, did seeing a new marketing message impact how many customers signed up for a new service).
Summary:
The Lean Startup is a relatively easy read which breaks new ground and offers practical tools and examples for startups to quickly find a successful path to a sustainable business.
Author: Eric Ries
Number of pages: 336
Find the Book: Here!