How Lean Innovation Changes Everything

“Everybody has a plan until they get punched in the mouth.” – Mike Tyson

That one quote can be used to sum up the entirety of the “lean start-up” or “lean innovation” movement. As business people, we spend far too much time on our plans and not enough in front of the customer making sure our product or service is fixing their problem. The principles of lean innovation (often referred to as Agile) are all aimed at getting us and our products in front of customers as quickly as possible.

The idea is to get through the Build-Measure-Learn loop as early and often as possible. Multiple trips through the loop (meaning failures) are expected and encouraged. “Fail Fast” as early and as inexpensively as possible is the mantra. Learning this new, “agile” form of business model development will be incredibly useful to leaders of established organizations and founders of startups because it has the power to dramatically reduce the failure rate of new businesses (75% of all startups fail).

The Loop

 

Eric Reis’ book “The Lean Startup” is the most popular text on the subject and has brought the agile movement into the mainstream. Long time entrepreneur Steve Blank started the discussion back in 2003 when he went into semi-retirement as a teacher at the Haas School at the University of California-Berkeley after having been involved in more than half a dozen startups.

In 2004 Blank invested in a startup co-founded by Eric and required Eric to take his course as a condition of the investment. Since that time, three books have been written on the subject; “Business Model Generation”, “The Lean Startup” and Blank’s step-by-step handbook “The Startup Owner’s Manual.”

We’ll be looking at all three as we dive into the world of agile development and see how to use it to better our chances of launching successful startups and new initiatives inside existing organizations.

The Basics

Business Plan vs Hypothesis: The usual startup begins with a very time consuming business plan showing five year projected financials that are sure to be inaccurate. While a lot is learned during the business planning process, a lot of time, money, and effort can be wasted if the proposed product or service (we’ll use the term product to stand for either) does not effectively solve a customer’s problem and if that customer is not willing to pay a sustainable price for the product.

Agile development starts with a hypothesis. For example, “If we build drills, construction companies will pay $39.99 for each drill because it saves time spent screwing nails into walls.”

Minimal Viable Product / Measure: The next step is to create a minimal viable product that you can get in front of your planned customers to determine if it solves their problem. The MVP is the cheapest, quickest version of your planned product that can be used to gather feedback from your potential clients. The goal is to determine if your hypothesis is true or not.

Learn: Lastly, based on the measurable evidence you obtained from the Measure stage, do you stay on the current path or Pivot and make changes to the product?

Agile started in the software development world, but is an exciting concept and set of tools that can be used in creating any new product or service. Over the next few weeks, we’ll dig deeper into each aspect of agile and how you can use it to make better decisions about new products.

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Photo courtesy of http://sachachua.com/blog/2012/02/visual-book-notes-the-lean-startup-by-eric-ries/