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Lean Start-up – What’s It all About?

Today we’re going to look at the lean start-up business model which is all about finding a gap in the market in the most efficient manner in terms of the time and money spent on doing so.  It’s a way of getting your product or service to market quickly but avoiding the development of a product that nobody wants or will buy.  When setting up a new business, it often feels like a hit and miss affair so we’re going to focus on the key principles of the lean business model that will enable an entrepreneur to start a business on a limited budget and still enjoy a good chance at long term success.

When considering a lean start-up you will need to deploy your resources in the most efficient manner possible.  As a start-up, you’re unlikely to have access to a large amount of capital to get you started so a lean start-up means controlling the deployment of the resources that are available to you.  You will encounter many occasions when you will need to evaluate how best to use the money you do have to connect with your target customers so that you can test, evaluate and refine your product or service while keeping your costs to the absolute minimum.  This is what will enable you to maximise your profits when it comes to income from sales. 

Because a lean start-up has a minimal investment of capital, it will very reliant on organic growth and the profits in the early stages will need to be ploughed back into the business in order to scale up operations without forfeiting quality.

The lean start-up model relies heavily on validated learning which involves testing each iteration of a concept, then measuring its success and potential at every step of the way.  The first task is to develop a minimum viable product (MVP) which is the most basic form of your concept or idea which will allow you to obtain the maximum amount of validated learning from your customers and clients (as well as the rest of the industry in which you work).  The MVP is an initial prototype product or service that enables you to test the waters with a view to refining the product or service into a better version later on.  This is a sensible and measured way for you to gain the understanding of whether or not your product or service will be in demand within your target market.  The usual six step framework for validated learning is to:

1.      Specify an objective

2.      Choose a metric that represents your objective

3.      Try to achieve your objective

4.      Analyse the metric that you’ve chosen (did you meet your objective?)

5.      If you did not meet your objective, why was this?

6.      Learn from Step 3, improve your product or service then try again.

 

This is a “Build, Measure, Learn” cycle that will allow you to develop a prototype, bring it into the real world, measure reactions from customers and learn through incremental, iterative engineering to continuously improve your products/services.