The Lean Startup: How today’s Entrepreneurs Use Continuous Innovation by Innovify

Starting a business is one of the most exciting things you can do legally. The statistics of success are humbling. 80% of startup businesses fail in the first 5 years. Having a system in place to craft your business is required for success. The building blocks of a business are customers and positive profitable cash flow. Without those two things then there is no business and no wealth creation.

Why is this important to me?

I always want to ask this question as if I am sitting in your shoes. I don't want to waste your time. There are different types of businesses. If you are looking to start a coffee shop or some service based business that has an existing model then you should read the E-Myth by Michael Gerber. Innovify is very functional and will help you systematize your business like a successful franchise.

The Lean Startup is different. Innovify is profiling organizations that are trying to create new ideas and bring them to the market place.

There are two reasons why startups fail?

One they do not know who their customers are and they don't know what the product serves. When Facebook was getting off the ground, Mark Zuckerberg was not sure what the company was or how they would make money. What he was well aware of was the network effect known as Metcalf's law. This simply states that the value of the network grows exponentially as the number of users grows.

The Lean Startup consists of three main sections which are all very important. For the sake of time, I will cover a topic under each section.

1. Vision - Vision is the premise of why the organization exists. Validated learning is the name of the game. In the old days, companies had to spend a bunch of capital and resources on prototypes, engineering and products. They would invest most of their capital on these endeavors and not know if people would actually buy the product. Business people and technical gurus think that the product has to exist first. This is a fundamental flaw in today's fast paced economy.

2. Validated Learning - This is the most powerful concept in the in Innovify in my humble opinion. Examples of these would be a hockey shaped curve over time that shows the number of registrations on a website or the amount of mentions in PR. All of these things are good but not to base decisions on for your startup. Basically instead of looking at cumulative totals or gross numbers such as total revenue and total number of customers, one looks at performance of each group of customers that comes into contact with the product independently.

3. Disciplined Action / Disciplined Thought - The LeanStartup dives pretty deep into the manufacturing world. Being from Detroit, I have an affinity for large scale automotive manufacturing. Studying Toyota and Ed Deming's principles yields a host of learning that can help the startup. Manufacturing and incremental innovation are disciplined processes. If you commit to cohort analytic then split testing everything becomes the norm.

The Lean Startups principles can be used by any entrepreneur to create a business and validate it before you invest your life savings. 

Principle of the Lean Startup Methodology

A startup is a temporary organization meant to implement a new and repeatable business model in conditions of extreme uncertainty. A lean startup efficiently searches for a valuable business model by iteratively validating hypotheses against real users, while committing the least amount of resources at all stages.

 The Lean Startup Methodology was conceived by Eric Ries and is defined as:

Lean StartUp

(1) Entrepreneurs are everywhere

(2) Entrepreneurship is management

(3) Validated learning

(4) Innovation accounting

(5) Build-measure-learn

The first two points show the growing understanding that entrepreneurs can exist everywhere and that it is possible to train people/organizations how to take advantage of this fact. This is imperative to understand for the enterprise. If this is accepted, there needs to be a complement to the classic R&D process, and good companies will have internal forces that can be utilized in the search for innovation.

The third point indicates that the startup should be in search mode instead of execution mode. The search may be for the product, the channel, or the customer. At each cycle of validated learning, the startup should “pivot or persevere” to minimize time wasted on a faulty approach.

A key idea of this third point is the minimum viable product (MVP). This is the minimal feature set necessary to validate an assumption about the product, market, or customer. The MVP can be used in A/B split testing to make path finding decisions.

Even though leanstartup is fairly new, especially within the enterprise sector, there are some use cases that can be valuable in creating context to the method. Each case is different in its execution and also point to different parts of lean startup.