I've been thinking for some time about a term that could encapsulate trends that are changing the startup landscape. After some trial and error, I've settled on the Lean Startup. I like the term because of two connotations:
- Lean in the sense of low-burn. Of course, many startups are capital efficient and generally frugal. But by taking advantage of open source, agile software, and iterative development, lean startups can operate with much less waste.
- The lean startup is an application of Lean Thinking. I am heavily indebted to earlier theorists, and highly recommend the books Lean Thinking and Lean Software Development. I also owe a great debt to Kent Beck, whose Extreme Programming Explained: Embrace Change was my first introduction to this kind of thinking. (So far, I have found "lean startup" works better with the entrepreneurs I've talked to than "agile startup" or even "extreme startup.")
- The use of platforms enabled by open source and free software. At the application-stack layer, I see LAMP + Danga as the most common combination. In recent years, we've also got great new options all up and down the stack, in particular things like Amazon EC2 and RightScale (none of which would be possible without the free software movement).
- The application of agile development methodologies which dramatically reduce waste and unlock creativity in product development. (See Customer Development Engineering for my first stab at articulating the theory involved)
- Ferocious customer-centric rapid iteration, as exemplified by the Customer Development process.
Very useful perspective - as a first-time CEO managing a small startup, these ideas are timely and thought-provoking.
ReplyDeleteLess is more. This is a philosophy that governs my daily life as well as my entrepreneurial activities.
ReplyDeleteLeonardo Da Vinci noted that: "Simplicity is the ultimate in sophistication". The wise entrepreneur will take this advice seriously in order to distill his ideas down to their essence. No more, no less.
I would add -- think of your development and running your business like a PM/Developer uses Agile or Scrum in software development.
ReplyDeleteYou need an overarching vision and goal but just try to get to the next level, one iteration or sprint at a time.
First timers have insecurities and fears that prevent them from Focusing. What they don't realize is that doing too much dramatically reduces your chances of getting out of the gate. Paring down products, target customers, business models etc takes courage, but it must be done to have any chance of success..
ReplyDeleteEric,
ReplyDeleteAs you touch on, the lean venture has been the basic model employed by entrepreneurs throughout history until the past 12 years or so when venturing became institutionalized. Since that time we've seen a massive change from product engineering to financial engineering.
There is no question that organic business development is better for customers, the economy, and businesses that are attempting to create real long-term value rather than the flip -- aka corp outsourcing of R&D, which has essentially been the primary exit the past few years.
That being said, I do see problems with the conventional wisdom especially in the valley with your technical vision, which then creates economic problems.
For example, one angel investor reportedly invested in several hundred social networking ventures employing this philosophy. This slinging of whatever against the wall to see what sticks does not a market make, is to me a sign of too much capital in the wrong hands, and it's already the most over invested area in recent years- in both human and financial capital- particularly relative to revenue.
While it's fine for start-ups to make use of low cost and/or open source consumer tools, let's be clear that enabling much higher volume of new ventures employing the same tools at a lower cost causes a much higher percentage of failures, unless of course they are employing those tools to build their own proprietary technologies, service model, or some other recurring revenue model that is sustainable. That requires deep value creation that is difficult to do when everyone is using the same tools, even in different ways -- value requires differentiality which requires protection as soon as someone spots the value creation, for it will be copied soon thereafter.
I am somewhat of an expert in this having created one of the first pioneering labs and incubators in the Internet era, from N AZ where the normal course of action was to prove lean ventures with our retirement only to see them copied by deeper pockets on the coasts when we went searching for capital.
So if entrepreneurs want to pioneer new ideas with a lean model, my advice is to use low cost alternatives to build differentiality that can be protected from institutions with far more money than ethics, creativity, or innovation-- other than skirting the loopholes in our justice system regarding protection of IP, and honing predatory tactics.
Otherwise it's a great idea.
Mark Montgomery
Founder
Kyield
Initium VC
Eric -- I was very impressed by your two part video series, which rarely occurs these days.
ReplyDeleteYou've done an excellent job refining the process and message.
I have shared with multiple groups
Part 2
http://www.youtube.com/scobleizer
Very good work -- MM
Ideas about the Lean Startup have really made me think about the larger than life projects I sometimes try to undertake. Good stuff.
ReplyDeleteGreat blog!
ReplyDeleteGreat perspective, Eric! We are also trying to adopt the Lean Startup at Gleeditions. Thank you!
ReplyDeleteI just discovered this term "Lean Startup" for the first time. I don't know how I missed it! I wish I had known about it and the resources that appear to be available to people utilising this philosophy whilst I was getting my business up and going. The good news though is, I have built a couple of startups based on exactly these principles, and "touch wood" it looks like we are about to shift out of startup mode very soon.
ReplyDelete