Online Business Guide: Lean Startup Method
Discussion about a startup is endless. Various topics related to startups are being discussed. This phenomenon develops along with the increasing interest of business people or potential business people who want to develop a pilot business not only abroad but also domestically.
Are you one of the entrepreneurs who are building a startup? If yes, you need to know one method in business development called Lean Startup Methodology. What is Lean Startup and how can the method be applied for the sake of your business success? Read more of our article this one!
Definition of Lean Startup.
Lean Startup is a stub company that focuses on the rapid process of creating a prototype so that it can be immediately tested directly to the user or representative of the target market. The feedback that will be delivered by the user or tester can be used to change every aspect that is less profitable or functioning.
So the point is, the company’s assumption or developer is tested by relieving prototypes directly to market realities to minimize or even negate the waste that is in vain in the form of time, energy, and material.
The method used for business development was popularized by Eric Ries, a Yale University graduate who wrote a book with the title “The Lean Startup”. The book was published in September 2011. Since the issuance of the book, the more companies and business circles that discuss it and practice them.
Lean Startup Methodology has now been taught in more than 25 universities. In addition, it is also taught through popular online courses in Udacity.com. Then, in almost every big city around the world, you can find organizations or events such as startup weekends.
This startup weekend introduces the Lean method to hundreds of prospective employers at the same time with a relaxed meeting. At such meetings, many startup teams can produce half a dozen potential product ideas in just a few hours.
A short history of lean startup
The Lean Startup methodology is inspired by Lean Manufacturing that has been applied, the efficient production process pioneered by Taiichi Ohno. The production process combines the principles used by Henry Ford since 1906 and the TWI program introduced to Japan in 1951.
After more than 15 years of experimenting, this production process runs stable and can be reproduced. The use of the term “lean” to describe the Ohno system was first recorded in 1990 with the title “The Machine That Changed The World”.
The Lean Manufacturing system considers waste as a resource that can be reprocessed so that it can be utilized again. Then if there is still waste produced, it will continue to search for ways so that the waste can be removed.
In particular, this system focuses on how to minimize inventory throughout the production process or manufacture. Manufacturers will be signaled only if inputs are needed related to production, so thus reduce the waste assembly (inventory) and increase productivity.
In addition, direct quality checkpoints can identify errors or imperfections during assembly as early as possible to ensure that the time spent less in developing the wrong product. Another major focus of the Lean management system is to maintain close relationships with suppliers to understand the wishes of their customers.
In an article published in Harvard Business Review in 2013, Mentor Ries, Steve Blank, explained how the Lean Startup methodology was also an inspiration for the work of others such as Ian C. Macmillan and Rita Gunther McGrath.
The two men developed a technique called invention-based planning. This technique is an effort to bring an entrepreneurial mindset to effective planning.
5 Basic Principles of Lean Startup
The main principle of the Lean Startup Methodology is to carry out a scientific approach to the manufacture and management of startups that want to deliver products faster in the hands of the customer without large waste.
This method teaches you to find out when you need to continue the production process, when you have to improve the product prototype and when you can grow your business with high acceleration. Such product development can benefit your business without wasting energy, material, and time.
If described, there are 5 basic principles of Lean Startup, namely:
1. “Entrepreneurs are everywhere”
Try observing, entrepreneurs are everywhere. Then you who have a startup must open yourself to this other flexible methodology. You need to observe a lot of market developments or businesses around you and develop your startup not in a conventional way.
2. “Entrepreneurship is Management”
A startup is an institution, not just a product. Although a startup does produce products, the startup is not the same as the product. So the development of a startup itself requires management, a management that is following its context.
3. “Validated Learning”
The startup is not to produce something, make money, or serve the customer. The startup is there to learn how to make a solid and sustainable business. This learning process can be validated scientifically, by running experiments that you can test every element to be tailored to your company’s vision.
4. “Innovation Accounting”
To increase income while carrying out responsible entrepreneurship, you need to focus on the following: How to measure progress, how to manage your next efforts, how to prioritize certain jobs. So related to accounting, not only looking at the number of numbers on the bookkeeping, you need to see the resulting progress.
The most basic activity of a startup is to change the idea of being a product, measure how the response or customer response will later, and then learn how to move the bow or continue according to the right time.
When summarized, Lean Startup Methodology is a framework for finding and validating that you have identified the market for your product, build the right product features that solve customer requirements, test the correct method to obtain and convert customers, and use the right resources to enlarge the scale of your business business.
Benefits of Lean Startup.
Lean Startup Methodology is a new strategy that is accurate for 21st-century companies! Over the past 20 years, many corporate or companies spend a lot of time reduce costs and increase their work efficiency. They tried to improve the business model that had previously been practiced for years.
But this alone is not enough and of course, the results are not too good as expected. This is why Lean Startup Methodology is needed.
However, in this fast and easy all-around era, your business needs to be developed immediately and efficiently. From year to year, since Lean Startup was introduced to the public, not only startups that apply this method and eventually succeed but also large companies. Large companies include General Electric, Qualcomm, and Intuit.
General Electric, for example, uses the Lean Startup approach to innovate. The Special Division of General Electric was led by Prescott Logan in 2010 realized that what had been done by the company so far. Development of new factories, an increase in production, and product launch officially, all of these activities must be abandoned.
Finally, the team decided to use the Lean Startup technique where they began to look for business models and engage with customers. Then do face dozens of global prospects to explore the market and search for potential new application ideas.
The difference in Traditional Startup and Lean Startup
According to conventional customs or ordinances, the first thing to do for the founder of a startup or the company is to make a business plan in the form of static documents. This document illustrates how their business opportunities, what problems must be solved, and what solutions can be given to the new business.
Usually, the method is also an estimated income in the next five years, how much profit, and how the cash flow is.
A business plan is research written separately by an entrepreneur when you want to start creating a product. So the assumption is, maybe you know most of the business trips that haven’t been run? You won’t know how your business is before you run the idea of your business, right?
This is why it is important to make a clear prototype. It is also usually done by Startup-Startup now where a business planner tries to convince investors or investors to provide a sum of money for the implementation of the advanced production process.
Developers or developers from your company will spend hours building and launching products then testing their picks directly on the user to get input or feedback. Then, improvements and products were immediately implemented readily to have campaigned in the presence of potential investors.
So, it doesn’t need planning that is made up or too doubt even until the 5-year planning period! What happens if business planning that has been difficult to make for a long time turns out it is not following the business reality later? You need good adaptability or flexibility to develop your business faster and more efficiently. Use this Lean Startup method.
Application of the method where you get fast, step from the idea to execution. Then, you also quickly move from your failure and while adjusting to continue to fix your initial idea.
This is very possible if you want to continue to learn from your failure, especially listening to real input from customers or prospective customers. Customers or prospective customers that represent your market reality and have the right to test the assumptions of your business before.
Lean Startup Methodology also distinguishes itself from traditional business models in terms of employing people or prospective employees. Lean startup hires people who can learn, adapt and work quickly.
Meanwhile, the traditional business employs people based on the experience and abilities listed on their formal certificates. Lean Startup also uses different financial reporting metrics where the company does not focus on income statements, balance sheets, and cash flow statements.
Lean Startup focuses on customer acquisition costs, the value of a lifetime customer, customer’s churn level, and how strong their products are.
Lean Startup Success Story
Many startups have implemented the Lean Startup Methodology and managed to develop their business faster and better. Here are the five lean startups:
Drew Houston, CEO, and Founder of Dropbox found the Lean Startup blog and then apply it to the startup he was managing. The results are very good, where the product creation process is faster to fulfill the customer’s desire exactly as expected by the customer itself. By using the Lean Startup Methodology, only within 15 months of Dropbox, which initially only has some users of 100,000 to 4000,000 users who are registered.
Since 2009, WealthFront was made to present a more transparent process regarding mutual funds, and ease of access, and added value for small investors. Wealthfront was just an online game named Kaching, a kind of fantasy league for amateur investors.
Whoever time can open a virtual trading account and compile a portfolio based on real market data without real investing. By practicing Continuous Development, WealthFront is now managing more than $ 200m and processing funds of $ 2m every day.
Grockit was founded in 2007, Grockit is a social networking site that can be used as an interactive learning media. This company uses the Agile Development method to produce products quickly. On weekdays, this online Grockit learning hosts 1,000 interactions between national borders by supporting the user in 150 countries.
Founded in 2004, IMVU is the largest 3D chat and dress-up community in the world. In IMVU, members can meet new people, chat, make, while playing games with friends. IMVU uses the experimental method to develop features and process new products. Now IMVU has reached 50 million registered users and the rate of increase in income is $ 40 + million per year
Aardvark is a company that is then acquired by Google. This startup develops a search engine that has a social character. This product allows users to ask questions, especially things that tend to be subjective.
Then then the question is distributed through social graphics for users to get the answers needed. Aardvark tested the concept by building a series of minimum decent products (MVPs), each designed to test how to solve customer problems.
Through our article one, you already know the definition of Lean Startup Methodology, why is it important for startup developers, and how to apply it. In addition, you can also read our other informative articles related to startups that can help you develop your business.
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