Does the lean startup method increase your odds of success?
There has been a lot of talk over the past few years on the lean startup method. Is this really the best way to build a business? Does it lead to more successful businesses?
Jen, the best answer might be...It depends on how you measure success. The process should lead to an improved start-up if applied correctly however, it may not increase the overall odds of success for the new product or service. There are too many factors outside of the lean environment that will determine the ultimate success of the venture.
Lean and mean fighting machine does bring about focus on what is important. Getting the product and or services ready for market via the "living on the fault line" method. Ugly, but good enough to garner market share early. However, the "Jedi" mind game may apply, depending upon which market segment you are targeting. Some markets may dictate the need for great resources on the front end, in order to increase the opportunity of any success in the long run. That is the start-up paradox. And the selection of the Senior Management team is paramount.
Are you lean to fat or lean to muscle and flexibility? The recipe for success in any business large or small is efficiency foremost and an ability to fund, by investment capital and sweat equity. Dollars should go where there is opportunity to create a meeting with lots more dollars so look at LEAN as a methodology to manage and invest wisely and profitability while leaving you opportunity and risk. No risk, no...well you know that one.
The Lean Start-up is just the latest methodology in starting a business. I would not say it leads to more or less success than the older business planning model. If done correctly and effectively it can enable a business to start with less resources than the traditional method of seeking out capital before getting started. However, 80% of small business still fail, lean start-up or not. Any planning, lean or otherwise, is preferable to no planning! No planning, or inability to execute a plan, are the two top reasons businesses fail.
I agree with the other answer, lean or fat doesn't matter, what matters is your properly preparing your Business Plan. Your Business Plan will make all the difference in the world as far as your future success of your business. In preparing your business plan you will be detailing all of the facts about your business, and the start-up Financial Statements will show the readers how you plan on succeeding. Remember, when you prepare your Cash Flow Statement you cannot run out of Cash in October of the first year. When you run out of cash your business fails, therefore you must make provisions to cover all of the expenses for the first year minimum. I have provided working templates for small businesses on my web site, as shown by clicking on the following link - http://budspracticalaccounting.com/resources/free-downloads/
RG Bud Phelps
I don't think there is one answer to this question. My feelings are that it depends on the type of business, the potential of the business and the goals of the person starting the business.
Most businesses fail when they run out of money because they were not able to generate sufficient profits before their start up capital ran out. The more lean you operate the better the chances are that the business will grow enough to support the business.
I think the real answer is more determined by the potential of the business. For some examples, if someone was working in IT and had a goal of having his own SEO business it might be wiser to start part time and keep his full time job until the business can support him and stand on its own.
If however someone has an idea that could grow into a multi million dollar business or more lean may not be the way to go. Sometimes opportunities have a window of success and if that window is missed someone else will fill the need. It might be far better to raise lots of capital and get the business off and running as fast as possible.
I have started a half dozen businesses. The two that have endured were both started leaner than anyone would consider lean only because I didn't have two nickles to rub together. I have always been a believer in lean and in avoiding debt. Once it is established it is nice to have a great business with no debt and if times get tough because you have no debt you can slide on through with little worry. The flip side of the coin is that I could speculate that had I not gone the route I did perhaps my business could have grown faster and bigger than it did but I don't regret the path I took. You need to find the right path for your business and either answer could be the right one.
Personally, I don't think the lean startup method increases your odds. It adds structure to a process.
I think what increases your odds are : Great team with execution capabilities, Great product market fit and adding value to the customer.
The Lean Start Up approach is systematic in its ability to drive the right decisions at the right time, based on 5 key principles. Does it work? Absolutely!! But does that increase your odds of success? It depends on how well you're able to apply the principles to your business. Not every startup that adopts the Lean Startup methodology for product development succeeds and not every startup that doesn't use it fail.
In my experience coaching Lean Startups, many fail at the Validate Learning step because they don't always know what to look for and how to measure what they've learned from their MVP and how to translate that into a business decisions. I've also come across startups that quite simply haven't done adequate demography research.
Following the different principles is one thing, but knowing the numbers tell you and then converting those to a business decision is an entirely different ball game. If you're able to marry critical thinking with the process-centric Lean Startup approach, I think you'll find yourself running a sustainable and successful business.
The answer is YES if you are inexperience and no other method. If you are experienced entrepreneur and learn about different approaches for a startup, you may decided otherwise. Because the answer lies that you are able to select the correct techniques in different situations and not just blindly stick with one method only.
The ultimate success approach is when you understand that there is no "best" in this world. Knowing every limitations allow you to adjust where necessary to grow company in the smoothest manner.
There are very few if any "one size fits all" methods to business success. Situations vary in so many ways...But I will say, if it's a new business with very little competition, the answer is often yes, but certainly not always. If you are entering a mature and competitive market, most likely not. There is a greater chance going lean will decrease your odds. With stiff competition, where do you start being lean? You can't succeed cutting back on quality, product selection, marketing and it's unlikely you can under cut them on price. Stiff competition will kill you.
Under spending on marketing and advertising is one of the leading, but often unrecognized causes of businesses not making it - even in failure hindsight. It's sad to see a great product or service fail simply because they neglected to spend money to spread an effective message of their existence. I have seen several tech sector start-ups with outstanding products spend millions in R&D, but fail as a business because their lean marketing budget was one tenth of what they needed to spend. The product development spending becomes a huge risk when it's not accompanied by a strong awareness campaign to support and drive sales.
And more often than not, the mistake was made way back in the business plan stage when the completely underestimated what kind of budget they needed to get the word out.
It helps to reduce market risk but you must be aware that success is made by so many things that Lean is probably a necessary condition, not a sufficient one.
Yes. Given that lean start up or lean manufacturing follows the agile methodologies it does increase the odds of success compared to the other methods.
In development context this is called responsive development
Lean or otherwise, if key homework was not done before starting, the startup will fail anyway.
Why do so many startups shut down instead of selling? Here's what is often missing:
A) Unfortunately, The startup forgets from the day of their idea that there is quite a difference between what you see as a great idea and a "needed something or other" that folks or businesses would actually spend money for. This unfounded "belief" in a market for their products is why a startup cannot sell and frankly why they do not succeed in the first place.
B) Many startups don't have the inbuilt team sales person who love to and can actually find real markets and, for the reasons of the target audiences, not the startups pitch, know how to acquire paying customers. Instead, the startup goes around pitching to everyone as a "we have this, it does this, isn't that great,buy it" and usually the answer is No. Its not a product Pitch that sells nor can it connect with what may actually be someone who, for their reason's not yours actually need the product or solution but many think that’s what works.
C) Nothing in their pre business launce exploratory other than checking with friends and colleagues most of whom have no buying power is present or was done that actually deeply and honestly analyzed
--who were the natural target markets
--what really are the markets issues that if solved were truly natural prospects for their "product"
--revealed an understanding of the issues each natural target audience faced and its resulting adverse "cost"
--understood if their idea had a real market and one that was on a large enough scale and if properly approached would say "Hey that’s me! I need that product, service, software, solution to solve my x issues so I can gain a better roi, faster production, competitive edge, leaner operating, etc. I need to call these guys now"
D) They said in justifying their reason for starting up that
--"there are x gazillion global prospects who because of their industry they were in and or the way they do business could use the solution."
--"If we get just 3%, we are golden" and the dove right in with development, maybe even production for that "giant" market opportunity to get their 3% share
E) they forgot to dig deeper, reveal what actual portion of that giant number they actually might logically fit into and then how exactly to ID the people to contact, how to approach them, what to say that could get powerful receptivity and how to define/implement a great acquiring paying customers approach to get those real opportunities as customers.
Thats why they cannot sell enough of what their startups are trying to offer nor make decent profits fast enough to stay alive..
The startup, lean or otherwise was based on a "great idea or tech idea" that everyone told them was great but they never really veted the idea beyond their own thinking v a real application in real markets that real people would spend real money for nor how much of them there actually are.
Remember, there is quite a difference between a great idea and being making money from that idea
Neil Licht Founder And Chief Client Advisor, Hereweare
- How To Acquire Customers Online Without Facing Competition
a: 57 West Main Street, Marlborough, Ma 01752
General answer is Yes however there are products or market segments where lean startup may not be suitable. Simply when volume drives the value chain and profits. There are different ways of understanding lean and often entrepreneurs misunderstand that lean does not mean zero investment. Lean is all about objectivity, applicability where cost base always maintains a relationship with business growth. Means you never (or rarely) apply big bang approach to launch a business. Another advantage is that entrepreneurs see small profits which can be morale boosting, which is a great motivational factor. And, on top of this, if your customers start talking about you, your journey ahead is lot more exciting.
the simple answer is yes, the longer you can run lean the more valuable your company will be when yo are seeking ot sell the business or get an investor