Most Technology Start-ups take the following conventional approach in their endeavour to start a successful business :
- prepare an elaborate business plan
- pitch it to investors
- build a team
- develop and introduce a product
- sell the product
Research shows that 3 out of 4 start-ups end up failing in their endeavour somewhere along this path. In most cases, further the stage of the failure from the point of inception, higher is the cost of failure.
The alternative Lean approach for Product Development by Start-ups is essentially based on the following philosophy :
- build a 'minimum viable product' based on continuous 'customer development'
In the Lean Start-up model the founders do not begin with a business plan, instead they begin with the search for a business model. In this approach, multiple quick iterations of experimentation and feedback are conducted which result in a business model that is executable.
This will typically follow the following sequence :
- Translate idea into business model hypothesis.
- interact with one or more customers to test the hypothesis and validate the assumptions about the customer needs.
- create a 'minimum viable product' to fulfill a customer need
- let your customers try out the product and get feedback
- based on the customer feedback develop the next iteration of the 'minimum viable product'
Business Model Hypothesis :
Founders are expected to briefly describe the hypothesis in a framework called Business Model Canvas. This involves listing out how the company will create value for itself and for its customers in the Business Model Canvas (shown below) provided by Business Model Generation. This is a template in which you need to answer a set of questions under 9 key areas resulting in the business model hypothesis.
Business Model Canvas
Customer Development :
Lean Start-up approach requires the founders to test their hypothesis with the potential customers. The founders reach out to the potential users, purchasers, and partners for feedback on all aspects of the business model including product features, pricing, affordable customer acquisition strategies and distribution channels. The feedback can result in the business model hypothesis being improved upon or an coming up with a new business model hypothesis by dumping the existing idea.
Agile Product development :
Lean start-ups practice something called Agile Development for product development. Agile development works hand-in-hand with customer development.
This approach does not involve the typical long product development cycles which run for several months and is based on assumptions of knowledge of customers’ problems and product needs. Agile product development aims to develop the 'minimum viable product' which include the minimum features for solving the specific customer problem. This minimum viable product is then tested with the potential users and customers to confirm that the objectives are achieved. This approach eliminates wasted time and resources by developing the product iteratively and incrementally and testing the 'minimum viable product' at the end of each iteration.
In conclusion, the Lean Start-up approach has the emphasis on nimbleness and speed and aims at reducing the cost of failure by the inbuilt mechanism of feedback and course correction at each stage.
New ventures can follow this approach to rapidly assemble minimum viable products and elicit customer feedback. This customers input is continuously used to revise their assumptions and then go through another development cycle, testing redesigned offerings and making further small adjustments (iterations) or more substantive ones (pivots) in case of ideas that are not working.
We at Evon Technologies have gained extensive experience in the above approach over the past eight years by working with many Start-ups. We can be a partner and service provider for Start-ups in their execution of the Lean Start-Up Model, by providing services in the following areas :
- Market Research
- Optimizing your Business Model
- Developing Market Requirements into Product Road-map
- Software Product Development and Quality Assurance
- Internet Marketing.
Learn More about Lean Startup Methodology : http://theleanstartup.com/#principles