Lean Startup

Applying the Lean Startup Philosophy to Your Business

What is the Lean Startup Philosophy?

Do you remember learning about the scientific method in high school?

It was a way of taking a scientific question, coming up with an answer, and running experiments to see if you were right.

The lean startup philosophy is like taking the scientific method and applying it to launching and running a business.

While this philosophy was built to deal with the challenges of founding a startup, the core tenets can be applied to any business.

First Steps

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Just like when you begin planning an experiment, you have to establish a goal. What do you hope to accomplish with your business? Do you have a problem you are solving with your product or service?

Take a look at your overarching goal and separate it into two parts. First, the “value hypothesis” and then the “growth hypothesis.”

The value hypothesis is your prediction of how much value your product is going to bring your customers. What kind of feedback do you expect to get?

The growth hypothesis is an educated guess regarding whether or not you will be able to gain new customers and how that would happen. Sometimes growth can be expected through word-of-mouth; other times traditional advertising might be involved.

Build-measure-learn

After you release a new product, customers are going to provide you with data that is both qualitative and quantitative in nature. This data will help you gauge whether or not your original two hypotheses were accurate.

The qualitative data will tell you about the features that customers did and didn’t like. The quantitative data will tell you about the hard numbers—how many people are using your product, how many people are recommending it to others, and so on.

This information is invaluable, because it will help you decide the next steps you can take in developing your products and your business.

Build

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The building stage comes after you have established your hypotheses that you’re looking to test with a new product.

During the building stage of the lean startup philosophy, you aim to deliver the minimum viable product. The minimum viable product is the most basic version of a product that delivers value to customers.

Producing a minimum viable product ensures that the build-measure-learn cycle can move as quickly as possible. This means you can gather more information in a shorter amount of time.

You must be able to clearly assess the minimum viable product’s impact with customers. Customer feedback is key so that you aren’t just testing the product against internal standards. Your first minimum viable product might meet just one of your customers’ needs. But as you repeatedly progress through the build-measure-learn cycle, you’ll continue to expand and improve.

To apply this concept to a service-based business, try to discover the minimum viable service. This may seem counterintuitive because people think they provide more value by providing more services. But in reality, specializing is where your true value is likely to be revealed.

Measure

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In the measuring stage of the cycle, you will get to see the real results of your work. As Eric Reis writes in his bestseller, The Lean Startup, “If we’re building something that nobody wants, it doesn’t much matter if we’re doing it on time and on budget.”

That’s what the measuring stage is all about: gathering the data that let’s you know if what you’re doing is worth continuing. The lean startup philosophy suggests a few different ways to gather and assess data.

Split testing

Split testing is one way that lean startups can streamline the measuring portion of the cycle.

In split testing, you launch two different versions of your product to two different groups of customers. This way, you can draw conclusions based on the ways each group reacts to their version of the product.

The variations between the products will likely have different impacts. This will allow you to fine-tune your product much more quickly. Split testing essentially yields double the amount of useful information of traditional single-product testing.

Actionable Metrics

Actionable metrics help make the measuring step of the lean startup cycle efficient and accurate. These metrics show a clear and proven relationship between repeatable action and results. An example of actionable metrics would be the data you collect through split testing. These metrics are actionable because you know the exact decision that made the difference (or lack thereof) in your customers’ responses.

This is the opposite of vanity metrics. Vanity metrics tell you about what is going on with your product in the moment, but don’t tell you what got you there. An example of vanity metrics would be hits on your website. Web traffic can come from a number of different places, and you will not be able to totally determine the source of your site’s spike in popularity.

Your goal during the measuring stage is to see a distinct cause-and-effect relationship between the choices your team makes and the impact they have on the value and reception of your product. This leads to the learning stage, where you will have to make difficult decisions about the future of your product.

Learn

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The final stage of the cycle is the learning portion. This is when you take a step back after looking at the data you gathered during the first two steps of the cycle.

Here you decide whether you need to push forward with this version of your vision or if you need to “pivot.” Pivoting means making a substantial change to your concept in response to the feedback you are receiving.

Because of the pace of this cycle, startups can learn much more quickly whether or not what they are producing is sustainable, valuable, and profitable. As you move forward, the build-measure-learn process can go beyond the big picture to help you with the nitty-gritty details of your product development.

With all of the valuable and accurate data you gather, you will be able to make the small changes to your product that could make a big difference.

How Does This Apply to Your Business?

While it may seem like the lean startup philosophy only applies to tech startups with big dreams and small budgets. However, these principles and strategies can be applied to almost any business.

The lean startup philosophy is really about being willing to experiment. You have to be ready to test your product early and often, and to go where the data leads. If you are flexible and responsive, you can make a stellar product that meets your customer needs, whatever your industry.

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    JACOB TINGEN

    LAWYER & ONLINE ENTREPRENEUR

    After graduating from law school and passing the bar, I struggled to find work, pay my bills, and make ends meet. That's when I decided to take control of my future and start working for myself. Now, three years and several companies later, I'm sharing how I launched a successful business, and how you can do it too.

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