Lean startup
What is Lean startup?
Lean startup is an approach to building new businesses based on the belief that entrepreneurs must investigate, experiment, test and iterate as they develop products.
The concept of Lean startup originated in the early 2000s and evolved into a methodology around 2010. It was developed by Silicon Valley entrepreneurs Steve Blank and Eric Ries and promoted by early adopters, such as Sharethrough co-founder and CTO Rob Fan.
Lean startup vs. traditional startup approaches
The ideas contained within Lean startup contradict long-held principles about how entrepreneurs should approach launching a new business.
Traditional approaches entail that entrepreneurs should develop a multiyear business plan and then use that plan to raise money to fund product development activities. Moreover, traditional principles advise entrepreneurs to develop their product in "stealth mode," keeping their product ideas unknown to anyone beyond the startup workers and their investors.
The Lean startup methodology calls for entrepreneurs to start their business ventures by searching for a business model and then testing their ideas. Feedback from potential customers is then used to adjust their ideas as they move forward.
Characteristics and philosophies of a Lean startup
The Lean startup methodology also advocates for entrepreneurs to continually engage in this activity loop, exploring and developing hypotheses that they then test among customers to elicit feedback -- a process known as validated learning. Entrepreneurs use that customer feedback to re-engineer their products.
Lean startup also advocates for iterative, or agile, development, which is adapted from software development. A Lean startup will build a prototype quickly, get it to market to gauge success of the product without expending unnecessary resources and use the data generated by early marketing tests to influence the next build phase. In Lean production, this approach is called Kaizen. In programming, the approach is called Agile.
Additionally, the Lean startup methodology calls for entrepreneurs to develop a minimum viable product, or MVP, that they can test. This advocates for entrepreneurs to adjust their products based on customer feedback -- another key concept of the methodology called pivoting.
What it means to be a Lean startup
Proponents of the methodology say Lean startup principles ensure that entrepreneurs develop products that customers want rather than attempting to build businesses based upon untested ideas.
Proponents also describe this mentality as "fail fast, fail cheap" because the Lean startup process is designed to limit the time and money invested in product ideas before entrepreneurs have to test and prove their potential value.
History of the methodology
Several publications helped popularize Lean startup concepts. The most recognized is Ries' 2011 book The Lean Startup. Ries studied a customer development course taught by Blank in the early 2000s after Blank invested in his startup. Ries then drew inspiration from Toyota's agile approach to manufacturing known as Lean manufacturing. Lean manufacturing, or Lean production, is a methodology that values the ability to change quickly.
Ries called his approach Lean startup. Blank and Bob Dorf published their 2012 handbook The Startup Owner's Manual.
Rise as a trend
The principles of Lean startup are now found in business schools that teach the methodology as well as established companies and large corporations that apply Lean startup ideas to their own innovation initiatives.
Blank wrote in a May 2013 Harvard Business Review piece titled "Why the Lean Start-Up Changes Everything" that as Lean startup methodology practices spread, "they're turning the conventional wisdom about entrepreneurship on its head. New ventures of all kinds are attempting to improve their chances of success by following its principles of failing fast and continually learning. And despite the methodology's name, in the long term some of its biggest payoffs may be gained by the large companies that embrace it."
