Not every successful company started with a 6-figure funding. In fact, investors don’t invest until you show them statistical success.
For example, Dropbox started off as an Minimal Viable Product (MVP) where it showed people what Dropbox can do. And today, the leading cloud storage platform has over 700 million users.
But could you tell that the company used a set of rules to scale? Maybe not.
The set of rules, when combined, turns out to be a lean startup. Well, what is a lean start-up? Why even build one? What are its ‘set of rules’?
Let’s find out all the answers in this blog, by NxtDecade.
Why Build A Lean Start-up?
People in business often forget the difference between traditional business and start-up. Let me take you through an example:
Consider the shops selling smartphones. It’s a business model that has been around for years and has worked. On the other hand, think of MySpace — the first social media platform.
Startups work on new ideas that have no certainty of success. Thus, you can’t invest all your efforts, money, and time into building one.
Here comes the idea of a Lean Start-up that relies less on investment and more on feedback.
Didn’t understand? Let’s dive more into it.
Learn more: Difference between startup & Business.
What Is A Lean Start-up?
A lean start-up works similarly to how scientists do.
In simple words, the idea starts with experiments to verify if it’s logical to invest.
The success of these experiments relies heavily on customer feedback. If your audience considers your product, go ahead with your idea. Otherwise, pivot your idea.
Recommended article: Bootstrapping – Zero Investment Model
Let’s consider an example:
Big MNCs such as Google, Sony, Samsung, etc. created VR models but failed to onboard many users. So, Apple announced its first AR headset.
Although the product is yet to come out and see its success or failure. We can say that the company has pivoted the idea from VR to AR.
Read more: Product development model
4 Stages Of Lean Start-up
We’ve gained a rough insight into how the lean start-up model works. However, there are 4 stages one goes through to turn an idea into a start-up.
1. Ideation
With your idea, a lot of questions follow the lead. Revolving around 3 aspects: customers, resources, and finances, look at these questions:
Customers
- Who are your customers?
- What are their pain points? How can you solve those problems?
- How do your customers prefer to be reached out to? Is it cost-efficient?
- How will you continue to maintain your customer relationships?
Resources
- What key assets will you need?
- Will there be any large capital involved?
- How good does the software need to be?
Finances
- How much will all of these expenses come down to?
- What revenue streams will your UVP have?
- Will you add a freemium version to convert potential leads?
- What pricing tactics will you consider?
All these questions and you’ve got a rough idea of how the model might look. Now, let’s formulate the hypothesis.
2. Hypothesis
In creating a hypothesis, there are 3 major risk factors involved: Desirability, viability, and feasibility.
Desirability
Is your product something customers will desire?
Apart from problem-solving, is the solution worth enough to invest in?
Start to question them with your business canvas. Note that this is the most important aspect that must have a ‘yes’.
Viability
Is your business model sustainable?
Will people continue to find value in your product?
Viability is the second most important factor when it comes to start-up success. If not, then 90% of startups wouldn’t fail.
Feasibility
Do you have all the necessary resources and skills to deliver the Unique Value Proposition (UVP)?
Note that if your UVP sets miles apart from your skill set and industry, then the model will be riskier.
So, ensure to choose what you can deliver with your available resources.
3. Minimal Viable Product
The third step is to build an MVP with the core product value. In simple words, create the most basic version of your product with the core solution.
Since it won’t have many features, it’ll be cost-friendly as well. Then, start to collect feedback from your ideal customers. Improve your MVP as they suggest.
Take feedback. Improve. Repeat.
Do the same until you either get your final product or want to revise the idea.
4. Revise
If your MVP received bad reviews, it’s time to revise where you went wrong. Ask yourself three questions:
- Should I change or go ahead with the same idea?
- Can I add a better feature and remove the extras?
- Will offering a freemium version work better?
If your initial hypotheses turned out to be wrong, then the best idea is to pivot.
Pivoting: When Things Don't Go As Planned
Pivoting means changing the initial Idea according to the feedback and creating a new hypothesis. Then again, you repeat the process.
However, you consider the past mistakes this time and avoid them. As a result, you might get soaring results this way.
Final Words
The lean startup method works with the minimum risks possible. If the idea doesn’t work out, you can always step back without losing much.
But what if you can save your experimenting time too? It’s possible when learning from others’ experiences.
Save your months of work with the insights of founders we’ve interviewed. Click here to read.
