The 12 Steps of The Lean StartUp Business Plan
[toc]One of the biggest problems that business owners and entrepreneurs often face is creating a successful business plan that suits your project. Today I want to talk about The Lean StartUp. For those of you who aren’t familiar with this and are thinking “what the heck is this nut job talking about?” let me introduce you to Eric Ries, the author of this entrepreneurial innovative business plan methodology. Eric is one of the founders of IMVU, a chat software with game characteristic 3d features. The project that gave birth to the Lean StartUp plan.
After facing a lot of “failures” and obstacles when developing IMVU, Eric started to give from and birth to the Lean Startup.
You often here me talk about “continuous innovation” or “validated learning”, well, these are terms that I starting applying to my own start-ups and businesses. I eat and sleep with this business plan; simply because
it has gave me such a clear view of everything that I was doing wrong, and that I was wrong to think that some ideas were just “to big” for my budget. Let me tell you something, NO IDEA IS TO BIG FOR YOU, after you read and understand what The Lean Startup provides you with.
The main idea (dangerous affirmation I’m about to make to resume such a big methodology) is that any business idea or entrepreneurial project (start-up) can be achieve by launching a “seed” project an M.V.P. (Minimum Viable Product) and start testing, learning, improving, pivoting, scaling, testing again, so on and so forth. It seams pretty straight forward right? the main concept is (but there’s much more to it than just that).
Most people think “oh, I couldn’t possibly create that idea” Well, actually you could,It all depends on how basic you launch your M.V.P. and start scaling. Don’t wait until your whole idea is fulfill for launching day; What if you were wrong and people don’t like your product? You would have spent thousands of dollars on development only to find out that your final product is not well received by your audience. The way to go is “you launch first you create later”.
Up next I want to share with you a resume of the basic 12 steps that contemplate The Lean Startup. Obviously I couldn’t write the whole detailed idea because it would take me as long as it took Eric Ries to create it and I would infringe copyrights.
The 12 Steps:
1. Starting Your Business Idea
Startups face a great deal of uncertainty; the long-established principles of management are not suited for dealing with that or for fostering innovation. Starting a business in the current economic climate requires a lean startup business plan that addresses the uncertainties that you will face as an entrepreneur. This plan will prepare you to manage the unexpected via a process of building, measuring and learning. Having such a process will help you avoid the perils that most startups face. Advances in technology have provided us with improved capabilities for production; however, many startups have doomed themselves to failure because they lack a disciplined and scientific approach to early-stage venture management. The failures result in jobs being lost and the rapid fall from grace of hopeful, widely publicized ventures. A lean startup business plan should address all areas of a business that is still in its early stages. The areas include the conception and development of a product as well as the measurement of progress and the structure of the organization. As an entrepreneur, you will have to determine if the market wants what you are selling.
2. Defining Your Vision
The cultivation of entrepreneurship is one of the duties of an organization’s senior management. The management needs to be geared towards the uncertain environment in which the business is being developed; the management must be able to guide a product from the idea stage to the production stage in light of the uncertainty that enshrouds their venture. The “define” stage in the lean startup business plan is the one in which you develop your vision. The strategy you implement will be a result of this vision, as a means of furthering it. Your business strategy will itself involve numerous elements including research on the marketplace you intend to serve, in addition to assessments of the competition you will face. The building, measuring and learning will come after you develop your vision and your strategy. The strategy that is implemented will most likely be altered as a result of your measurements and what you learn from them, but the vision will always remain the same.
The learning does not stop at the point that you develop your business idea. You will also need to learn how to make it work in the real world, how to get it to move from the conceptual stage to where it is a working product. It will be necessary to understand which parts of your lean startup business plan are actually beneficial to your goals and which are not. This is essential to determining whether your company succeeds or fails. Both those who have invested money in your operation and the employees who are trusting you to lead them to success are depending on you for this. This learning means that you have to face facts about your organization’s prospects and honestly assess the results of your business strategy. All startups have their origins in an environment of uncertainty, that is just the nature of the game; your goal should be to find demonstrable, empirical truths about your business to reduce that uncertainty. These truths will govern the way your business is as well as the way it should move forward into the future.
4. Experimenting With Your Business Idea
You cannot learn anything if you do not experiment; everything a startup does amounts an experiment. Experimentation in this context is more than just blindly tossing out ideas to see what works. As in science, experimenting in business involves testing theories in the real world. The theories you test are those that come from your vision and what you have learned. You test various elements of your lean startup business plan with real customers in the marketplace to see if they can work. This kind of testing gives you real information that you can use to make concrete business decisions. That real information could not be acquired without practical experimentation. Your experiments may confirm all of your beliefs and allow you to move forward with certainty, knowing that you have a good handle on the way the market functions and what it demands. On the other hand, it may shock you to the point where you completely change your business model based on the new data. The key is to be open to both things and be ready to incorporate all new findings into the way you operate.
5. Take a Leap of Faith
This leap is an essential step if you wish to move forward with your lean startup business plan. The point of the experiment stage is to ensure that you do not take your leap of faith blindly. There are two major unknowns in the world of innovation: whether you can actually build the product in the first place and then whether the market wants it. For your startup to be successful, the answers to both of those questions must be “yes.” For you to discover the answers, you must make the assumption that the answers will be in the affirmative based on the results of your experiments. All successful startups could be seen as the products of similar leaps of faith. Failing to take the required leaps of faith can be prudent in some instances but in others it can result in missed opportunities for success. For you to discover to answers to both leap of faith questions, you will need to test.
6. Testing Your Startup Idea
This is the point where you begin to act on the second leap of faith: the assumption that you will be able to find customers. You will want to start trying to find them now. What will you offer them? You will need a minimal version of your product that will allow you to gauge their reactions to it. You will also need a limited number of people to serve as your test market. If the product is unsuccessful, then there is no need to waste resources going ahead with full-scale production. To get even more feedback from this test, you may want to try split testing by offering multiple versions of the product to early adopters. You can then assess the value of certain features based on the differences in the test groups. By meeting the demands of this small section of the market, you get an idea of what the larger marketplace will demand; it prepares you for a successful launch. One of the popular ways to test the waters is to offer your early adopters a free trial. If the product in its minimal form is altogether unsuccessful, then you can go back to the drawing board and rework it to avert a wholesale failure.
7. Measuring Your Results
In other words, what does your testing tell you? You will need effective ways of analyzing the data gathered by testing your product. You will need to implement means of discovering what your customers like about their experience and what they do not. The method of measurement and what you measure will differ according to your business-type, but you will have to first learn which metrics you need and to have the appropriate methods in place to get them. If the metrics indicate a negative response from the market, then the goal will be to find out from your customers what they really want.
8. How and When to Pivot
This involves changing your strategy, but without changing the vision you have for your company. What happens if the measurements are negative? What if your testing tells you that no one wants to buy the product? You will have to adapt your vision to meet the needs of the market. You will take the measurements given to you by your testing and formulate a new approach. Your business will have to be agile enough to handle a dramatic shift in your method if the metrics dictate that one is necessary.
9. Working with Small Batches
For a small startup, speed of production is an extremely important factor. While it may seem counterintuitive, producing in small batches is a more efficient method than producing in large ones. Think of a batch as one step in production that must be completed before moving forward. The larger the batch, the greater the risks of delays and the more difficult it is to execute revisions. Small batches allow for the whole process of building, testing and measurement to be completed more quickly. The faster the production, the more quickly you will be able to discover any problems and remedy them while efficiently using your resources. Small batches can allow your startup to handle all of these issues more quickly than your competitors.
10. Sustaining Growth
Obviously, you want your business to grow. There are three ways for your startup to see sustained growth: having it occur via the continual return of satisfied customers, word of mouth from customers using the product and by the use of advertising and/or sales. With the first type of growth, the return of satisfied customers will have to be exceeded by your new-customer acquisition. The second type of growth could be considered “viral” growth and the key measurement there is the number of new customers that each user of your product generates. With the third type of growth, the important question is whether the cost of your promotional efforts exceeds the benefit that you are getting. The measurements you get from these will help you to make the decisions needed to generate sustainable growth.
11. Adapting to New Circumstances
The fact is that things change, real life constantly throws you curveballs. Having a mechanism for adapting as you gain knowledge is essential. Successful entrepreneurs have this built in to their business plans. Yes, as a startup you will be faced with a fog of uncertainty as you experiment, learn and recognize the need for change; you will need a way to execute that change easily and quickly. The ability to adapt is not about foresight, you cannot see into the future; however, it is about flexibility and being willing to abandon what does not work and replace it with what does. Not only must you be willing to institute fundamental change, you must be able to do it quickly. Adapting to altered circumstances is an essential factor that can determine whether a startup succeeds or fails.
12. A Culture of Innovation
The importance of innovation is not limited to startups; it is beneficial to companies that are large and established as well. It is possible to create a culture of innovation in any organization, regardless of size. The nurturing and encouragement of an entrepreneurial attitude in management can help to create that innovative culture. For this culture to be sustained, methodology contained in a lean startup business plan must be adopted as the long-term norm and not abandoned after short-term successes.
After reading these steps I highly recommend that you grab the complete copy of The Lean Startup book which explains the whole methodology in detailed by Eric Ries. You see that smart business planning is about starting small and scaling fast, using validated learning.
I want to hear what you think so please share your thought below.