Turning a Perfect Formula on its Head: The Lean Start-Up

Turning a Perfect Formula on its Head: The Lean Start-Up

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Start-ups are either a hit or a miss

Statistics will tell you that launching a new business is going to be a hit and miss affair. The formula goes: Write a business plan, pitch to investors, introduce a product, build a team then sell and market like hell.

That’s all good and well but there a myriad of potential setbacks on the road that you could never predict – the fatal ones would mean the end of the road for the business. This concern is no different for larger organisations.

In attempts to drive innovation how often have innovation teams’ timeous and expensive work come unstuck the moment the concept attempts to leave the paper it has been designed on?

The lean start-up: Experimentation over planning

A countervailing movement has emerged that turns this supposed perfect formula on its head, and it is called the lean start. Its methodology favours experimentation over planning, customer feedback over the founding teams’ intuition and iterative design versus large send on development before launch.

The lean start-up concept was developed by Eric Reis, a Silicon Valley veteran, who realised that start-ups can shorten their product cycles by using a series of business-hypothesis-driven experimentation; iterative product releases and what he calls validated learning.

Ries’ overall claim is that a large amount of overall risks associated with bringing a product to market can be avoided or realised quicker and the initial large amount of funding previously required would now be avoided.

 

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Why the original formula doesn’t work.

A supposed time tested formula has been taught to us at schools and universities across the world. But, after watching decades of startups following this regimen, three things have become plain to see:

1. Business plans more than likely change after first customer contact. Like Mike Tyson said “Everybody has a plan until they get punched in the mouth.”

2. The 3 year forecast investors and stakeholders ask for isn’t worth the paper it’s written on. They are more than likely dreamed up because of the plethora of unknowns.

3. Startups and innovation teams within a business are not smaller versions of a large company. They don’t unfold in accordance with a master plan. They fail, learn to adapt or die.

The revised formula

While existing companies execute on a business model, start-ups and innovation teams are searching for one. This key distinction is at the heart of the lean method and shapes its definition: a temporary organisation designed to search for a repeatable and scalable business model.

Why move to lean

At its essence, the lean method seeks to build on a concept quickly, learn whether the concept is commercially sound then leaving the business owner to decide whether to pivot to a new set of hypotheses or persevere with the current ones.

Wayne Gosling
Wayne Gosling is the joint CEO (with Daniel Guasco) of Groupon South Africa – a multibillion-dollar global operation and currently the fastest growing company in history.