Summary: "Why the Lean Start-Up Changes Everything"

The HBR article by Steve Blank - 2013

Ever heard of the terms "Minimum Viable Product(MVP)" and "Pivot"? These are a few of the most trendy terms in the world of start-ups. In addition to this trend, we are now familiar with the terms "BMC" model and "lean start-up". This lean start-up movement is a paradigm shift in business development, popular among today's entrepreneurs who now use continuous innovation to create successful businesses.

Published in 2013, the article presents the lean start-up methodology as a game-changer for fostering innovation and maximizing the chances of entrepreneurial success in an increasingly uncertain and fast-paced business environment. The article begins with the drawbacks of the traditional business model and how lean start-up comes to the rescue with its key principles.

Problem 1: A well-researched business plan rarely survives the first contact with customers. After investing a decent amount of money in building the first product and the long technology development cycles, the start-up may get negative feedback from the targeted customer base. That's one of the reasons, start-ups are considered risky.

Solution: According to the author, "the lean definition of a start-up: a temporary organization designed to search for a repeatable and scalable business model." Instead of focusing on a detailed business plan, one can summarize the hypothesis in a Business Model Canvas framework to identify the value proposition and customer needs.

This business model can be adjusted according to customer feedback which not only reduces the time and cost of product development but also mitigates the risks associated with launching new ventures or products.

Problem 2: A Five-year Financial Forecast is a myth. Besides Venture Capitalists, no one is interested in the future forecast considering the number of unknown variables and dependencies that come along in the initial stages of the start-up. To earn a big early-stage investment from the venture capital industry, founders get a lot of start-up advice which they try to fit into their single business model before the launch, hence another waste of time and resources.

Solution: Central to the lean start-up philosophy is the "build-measure-learn" feedback loop. This iterative process emphasizes speed and flexibility, allowing entrepreneurs to validate assumptions, refine their product offerings, and adjust their business models based on real-world data rather than speculation. This iterative process involves quickly building a minimum viable product (MVP), measuring its performance in the market through customer feedback and data analysis, and learning from these insights to refine the product or pivot the business model.

As for investment funds, there is an ongoing trend of decentralization of access to financing: super angel funding companies, start-up accelerators, crowdsourcing sites, etc which are smaller than traditional million-dollar investments but enough as in seed investment to launch the product.

Problem 3: Start-ups are not smaller versions of large companies. Being a flexible version, they do not have a constraint of master plans. The ones that ultimately succeed undergo multiple failures, all the while adapting, iterating on, and revamping their initial ideas as they continually learn from customers.

Solution: Start-ups earlier often operated in “stealth mode” (to avoid alerting potential competitors to a market opportunity), exposing prototypes to customers only during highly orchestrated “beta” tests. Instead of unfolding master plans, start-ups should work in agile development, which means short repeated cycles of developing products iteratively and incrementally that is:

Made MVP having critical features -> Got customer feedback -> Started over again

This will allow the refinement of products catering to customer needs after the end of every cycle.

The author summarizes the difference between Lean and Traditional Start-up with noticeable distinctions.

Later, the author mentions the growing popularity of lean start-up techniques in universities and corporations. MBA programs in the top universities are adopting new courses about the lean approach and dynamic management tools in their entrepreneurial education. The corporations who spent time improvising the current business model changed their strategy to search for new business models. He cites an example of GE's Energy Store Division- how Prescott Logan followed lean methods for the new product offering, Durathon. To discover a new business model, he and his team talked directly to the customers to get their feedback, narrowed down customer segments, found a common solution, and then developed their product.

Indian Case Study: Razorpay

Razorpay is an online payment gateway that allows Indian companies to collect payments through credit and debit cards, net banking, and digital wallets. Razorpay, an Indian fintech company, appears to have used elements of the lean start-up approach in its development. They started with a core payment gateway, rapidly iterated based on customer feedback, and thus expanded their offerings. Their approach includes elements like MVP, customer-centric development, and adaptability. Despite getting funded by the top world start-up incubator, Y Combinator, they strictly stuck to lean start-up principles.

Implementation on Personal Level: Hansei

We covered the summary of the the article, how it has influenced multiple companies, even in India. But can it be implemented on an individual level or in another words, can this 'lean method' be useful in our daily lives? In my personal opinion, lean management can be practised daily around the concept of 'Hansei'. Hansei is a Japanese word that means "self-reflection" or "introspection". It's a cultural practice that involves acknowledging mistakes and committing to improvement. Similar to 'lean start up' methodology, it looks upon the feedback in form of failures and successes, learn from the mistakes, do it better next time. One example could be writing articles. When the first draft is written, it is reviewed and then re-written it and we come back to same cycle. It often results to procrastination as well. Then people like me, look back over the mistake I delayed , completes it and then finally publish it after reflecting up past mistakes. Self-reflection is preached in multiple languages all over the world but why can't we also convert this into a lean start-up cycle where we are constantly thriving to improve ourselves till we get that satisfactory feedback from the world and mainly 'us'.

In all, the article makes a compelling case for why Lean Start-up methodology represents a significant shift in how businesses approach product development and market entry. The emphasis on rapid experimentation and customer feedback aligns well with the needs of modern entrepreneurs who often operate in fast-moving and uncertain environments. But why lean start-ups are still failing out? The author provided a generic approach to the solution of product development but it is the creativity of start-up founders that will excel this template. Differentiation can come in many different ways, shapes and forms. Now it is upto the founders, how can they build a meaningful product which could differentiate from the rest, with the ability to build demand for it. There are other alternatives to lean start-up like Billable Viable Product Model, Deliberate Startup, Blue Ocean Strategy etc. However, Lean Start-up’s approach can be particularly advantageous in dynamic industries where customer preferences and market conditions change rapidly. However, some critics argue that the methodology might be less applicable to industries that require more extensive upfront development or regulatory compliance.