I have lost count of the number of startups I visited, especially in my mobile development days, where they had Lean Startup by Eric Ries on the table or bookshelf. The truth of the matter is that the book isn’t that accessible. Many people read it and don’t really know where to start. Others, who persevere, sometimes apply the techniques when they aren’t suitable.
In this article I take a look at the Lean Startup Method, give some pointers where to start and identify limitations that might help you determine if the Lean Startup Method is suitable for your new business.
The Lean Startup Method
The Lean Startup Method was devised by Steve Blank and Eric Ries as a way to create a new business by repeating build|measure|learn while identifying risks and testing assumptions. You document your plan, identify the risky areas and create lean experiments to exercise and evolve the plan.
Steve Blank provides a great introduction in his post on Why the Lean Start-Up Changes Everything. He explains how to replace elaborate planning with experimentation, intuition with customer feedback. The emphasis is on iterative design instead of large up front development.
The above post and the book provide lots of theory but unfortunately few action points. A better place is get started is the much more pragmatic and actionable Running Lean authored Ash Maurya that’s part of the Lean series by Eric Ries – author of the original book. Ash took Business Model Generation and developed a Lean Canvas.
Limitations of the Lean Startup Method
Lean, or any method for that matter, is never the best way for every project. You will regularly read that some methodology or programming language is the best and only way. The problem is that inexperienced people read this, believe it and projects end up being driven by those who can ‘talk the talk’ rather than ‘walk the talk’. Projects go astray. It’s necessary to look deeply at methodologies and your project and determine if there’s a match.
Here, I cover some limitations of Lean. This is not to attack Lean but so that you can determine if it’s suitable for your new business.
Availability of VC Funding
The origins of Lean came about after the 2000 recession when VC funding was sparse and new businesses needed to preserve what little capital they had while surviving as long as possible.
Most, but not all, VC funds don’t like the idea of Lean because it goes against their goals of scaling very quickly.
Every start-up is in a furious race against time. The start-up must find the product-market fit that leads to a great business and substantially take the market before running out of cashBen Horowitz, Co-founder and General Partner, Andreessen Horowitz
Startups purposely have a high failure rate because the ones that do succeed have spectacular success. Conversely, failure is expected if there isn’t a product/market fit. Companies are not expected to frivolously iterate early ideas because so much money and commitment is invested in the first idea. When there’s an abundance of VC capital it can make more sense to bet big, quickly and possibly fail rather than iterate for a product/market fit. It’s about becoming the best first and being biggest in the market at any cost.
However, there are some cavets. The first is that VC isn’t suitable for the majority of new business. The second, as I write this entering a Covid-induced recession, is that VC capital isn’t always abundant. The third is that it’s possible to look for VC funding after you have used Lean to validate your product/market fit.
Projects that come out of Lean might have product/market fit but can still subsequently fail. Such false positives fail for reasons other than product/market fit such as the resultant product not being as exciting to the stakeholders as the original prospect. Moving too many steps away from an original idea also tends to move you each time slightly further away from the original problem to the point where the new problem might not be worth solving. You can end up with a product/market fit for something not worth doing.
As another example of a false positive, there can be problems further down the line building and scaling the product or successfully winning against competitors. This is the situation where VC funding excels.
False negatives also occur when something is rejected, for example, due to unlucky market timing. What might not be viable today might become viable tomorrow. It’s easy to give up too early. It could be your product is one where customers don’t yet know what they want. As mentioned in What the Lean Startup Method Gets Right and Wrong, Steve Jobs once said:
It isn’t the customer’s job to know what they want
If your product anticipates what customers might want in the future then the Lean method might not be suitable.
Another example of a false negative is for the class of problems that only become solvable with a complete, full solution. These are ones where you need the whole thing before a valid assessment can be made if it’s viable.
Lean isn’t suitable for ideas that need time to take hold. Lean is quick to abandon ideas and if this velocity is greater than the time needed for end-users to accept a new way of doing things then you might end up moving on too soon and losing a valid product. As mentioned in Let’s Get Real: Why Lean Startup Is NOT Right For Everyone big, slow ecosystem type solutions in energy, healthcare, food and agriculture can take a while to play out.
Another danger with Lean is that it can encourage quick and dirty implementations that subsequently become part of the final solution. It takes insightful leadership to avoid technical debt.
Lean isn’t suitable for all new business and requires consideration of the current market conditions and analysis of the problem you are trying to solve. For example, is your new business instead more suitable for scaling quickly and needs VC capital? If so, is there an abundance of VC capital at the moment? For the problem, can you create a worthwhile prototype that’s lean? Is the solution a future play? Is it the kind of problem where the customer doesn’t know they need the solution yet? How will you deal with or prevent technical debt?