Lean is hard and (generally) good for you



I see so much crap being written for and against Lean Startups that I thought it was worth setting my simple thoughts down on what lean means to me.  Concepts to be valid need to be used with some form of rigor and consistency.  I am not attempting to rewrite Eric Ries but rather to give a layman’s view of lean as an applicable set of principles.

 

Fact

In the real world, most companies do too much development and spend too much money too early (usually to hit some pre-defined plan that is nothing more than a fantasy and / or is not where they need to go to succeed) and find themselves with an impossible task of raising money at uprounds around Series B.  So founders get screwed and everyone ends up with a bad taste in their mouth.  That’s fundamentally why early stage capital efficiency should matter to you, and why you should at least understand lean concepts.


Lean is a hard and disciplined method

Lean forces you to get customer feedback early and continuously.   It pushes founders and engineers outside of their zone of comfort, and outside of the building.  It is not an intellectually lazy copout to an absence of strategy, quite the contrary.  It essentially forces you to be very intimate with your customer.

Lean posits ignorance, but that should not be confused with an absence of strategy

Lean says: I have a set of hypotheses and assumptions (that’s code name for a well defined strategy) but rather than assume I know I am right, I will test my insights against market feedback early and continuously.  I will pursue my vision with vigor, but be data informed throughout that process.

A Pivot is a well thought-out shift in strategy

When you dump your model because it did not work (say Odeo / Twitter) thats not called a pivot. that’s a “fail & restart” with the same team.  Pivots is defined as a shift in one important aspect of your business (say go to market or pricing model) based on market feedback and validated learning.

Don’t confuse pivot and iteration

Lean by nature treat most business processes as fast iteration experiments.  These are not pivots.  Or maybe they’re nano-pivots :-)

Lean Startups are fundamentally designed to be capital efficient (and hence angel friendly)

With such a strong focus on doing more with less and a strong framework for getting your team and your investors to be aligned around how you build your company, Lean can be though of as the best toolbox for the capital efficient generation.

Lean Startups make me comfortable as an investor

Rather than try to convince me that you know exactly what your business model is out of the gate, we’re entering into a partnership where we go out to market REALLY fast and usually monetize early.  You’re admitting to me what part of the business is unproven and I am welcoming that, rather than locking you into some kind of trajectory that only exists in our collective mind.  And you’re not going to scale your spend and resources until we have really strong evidence we’ve cracked some kind of code.  I love it, and so should you !

Lean Startups can/should/do scale and go big

There is a notion out there that Lean is only good for ramen entrepreneurs with a sad excuse for a business model and small problem companies.  I disagree with that.  You can raise $50M and keep operating as a lean company, meaning evidence based, aware of market needs, and driven by fast iteration processes.  As I have argued before, knowing when to scale is generally hard.  Most VC’s and entrepreneurs are schizophrenic about capital for that reason.

 

The Disclaimers

Lean Startup is not new.  Agreed and so what ?  It’s an attempt at codifying efficient startup behavior into a set of vocabulary that can be taught at university and helps entrepreneurs and investors communicate effectively around the concepts of product / market fit, MVP and so on. I have been in venture for over 10 years and I admit the concepts have helped me move my craft along.  Thank you SG Blank, thank you Eric Ries.

Lean Startup is a Cult.  Yes, can we please drop the capital L and be more humble.  If Eric Ries annoys you for making a living out of Lean (BTW he’s a very thoughtful and rigorous person with real startup experience), that’s no reason to throw the baby out with the bathwater.  Get over it: when concepts go mainstream, they get repeated ad nauseam to the point of being emptied of their substance.

Lean methods won’t deliver the next Apple.  Probably not.  If you’re Steve Jobs you can transcend data.  Lean is not for everything.

Normative Advice Sucks.  Amen to that.  I hate normative advice.  There is no right and wrong way to do much of anything in startups, it’s all about the alchemy of the people involved, luck, market timing and serendipity.  But that’s part of the point of lean thinking too: don’t assume you’re right just because you are brilliant.  Test yourself against reality every day.  Continuous innovation, baby.

 

Conclusion

Haters are gonna hate, but I have found Lean to be the single most useful advance in how to build early-stage business in a capital efficient manner.  Contrary to much of the chatter, it takes a lot more discipline, consistency and perseverance to run a lean business than to just go out there and raise cash and build what you think the market wants.  Lean is for marathon athletes and rowers.  That’s typically how I prefer my entrepreneurs to be.

 

PS before it goes behind the paywall enjoy this video interview of Eric Ries from our brilliant friend Andrew Warner at Mixergy.

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  • http://profile.typepad.com/6p0120a55e25a7970b twitter.com/aweissman

    thanks – great write up Fred.

  • http://profile.typepad.com/saintsal twitter.com/SaintSal

    Helpful post, Fred. I’d go farther about normative advice, and explain that Lean is inherently non-normative, since it uses a learning loop. When introducing people to Lean methods, I find it helpful to start with this point so it puts what sounds like normative advice into context. With Lean, everyone learns for themselves, rather than following advice blindly because it’s part of “a methodology.”

    Thanks for the post!

  • http://profile.typepad.com/amicel Amicel

    Great post, as always.

  • http://profile.typepad.com/jseedventures JSeedVentures

    Thoughtful, accurate and well-balanced summary of lean startups. You hit the nail on the head.

  • http://www.cloudseeder.com Kevin

    Thanks for the post Fred. What has excited me most about following the lean model is that it has put the business model at the forefront of our development as a company. We have a product, yes, but that in the absence of a wholistic model is likely to fail.

    We actually just entered the Chicago Lean Startup Challenge, and the rigor that it has provided thus far is exactly what we need. A major component of this challenge is input from advisors.

    Recognizing that you are extremely busy, could I be so presumptuous as to ask you to monitor our validation process for the next few weeks?

    Our company, cloudseeder, makes web-based Point of Sale (i.e. register) software that allows independent retailers to provide offline, online, social shopping and mobile shopping experiences that are on par with large retail chains. We designed our POS software with two key concepts in mind 1) mobile shopping allows the consumer to be online and offline simultaneously 2) offline stores are just one of many ‘spaces’ that a consumer moves through while shopping.

    Designing the software from these concepts allows the offline shopping experience to more closely mirror the online shopping experience in terms of social network integration, customer trackability, daily deal support, recommendation engine integration, friend product reviews and affiliate referral commission revenue.

    cloudseeder recognizes that customers are social networks, their shopping activity is a social timeline, store inventory are Open Graph objects, end caps as mini- flash sales sites, etc.

    Perhaps this is interesting to you. Your feedback would be immensely helpful.

    Sincerely,
    Kevin
    630-222-4591

  • http://profile.typepad.com/johnprendergast Johnprendergast

    Hey Fred,

    Good stuff. The most important part of this for me is the reminder to all that taking a lean approach is very, very hard. It requires tremendous discipline and a remarkable willingness to face and acknowledge failures, small and large. What often is over looked is how hard that is on the team. It makes managing and leading a lean startup even more challenging.

    Thanks for the thoughts.

  • http://profile.typepad.com/6p0120a5faa8ff970c twitter.com/startupcfo

    We are big fans of lean at Real Ventures. We need more datapoints on this, but there is an early correlation between following lean concepts and hitting clear, value-creating milestones. It is a cult for sure. And those who are over-zealous in it’s application sometimes fail to balance it with judgment and vision. As with all things, it should be applied with some moderation.

  • http://twitter.com/chrisarsenault Chris Arsenault

    Great read for tech entrepreneurs. Lean = provides one with the ability to understand, deploy, adjust without loosing full control

  • http://www.parkparadigm.com Sean

    imo just a new more market-friendly/trendy term for the basic OODA loop (observe, orient, decide & act) http://en.wikipedia.org/wiki/OODA_loop but John Boyd didn’t have as good a pr machine as Eric. mostly common sense really. exception is probably in the few cases where you need to take a punt on something the “customer doesn’t yet know he needs” but you make that point here implicitly with your Apple disclaimer.

  • http://profile.typepad.com/ecjulie EcJulie

    Great post

  • http://www.startup-book.com Herve Lebret

    Great Post Fred! I will refer to it when I will finish reading The Lean Startup and blog about it too. The small frustration I feel is that Ries nearly claims this is a science and as you rightly explain, it is a method, an extremely good method, but maybe be not for everything or everyone. Blank in a recent interview following his trip in Finland said: “Over the last decade we assumed that once we found repeatable methodologies (Agile and Customer Development, Business Model Design) to build early stage ventures, entrepreneurship would become a “science,” and anyone could do it. I’m beginning to suspect this assumption may be wrong. [...] It’s not that the tools are wrong. Where I think we have gone wrong is the belief that anyone can use these tools equally well. Full interview on http://www.arcticstartup.com/2011/09/01/interview-with-steve-blank
    What is nearly as good is his short case study on IMVU, http://cb.hbsp.harvard.edu/cb/product/E254-PDF-ENG