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What is Lean Startup? Eric Ries' Innovative Entrepreneurship Methodology

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The Lean Startup methodology followed by numerous Silicon Valley startups has completely changed the paradigm of entrepreneurship. How can you create a successful business amid uncertainty?

What is Lean Startup?​

Lean Startup is an entrepreneurial management methodology proposed by Eric Ries in 2011, which involves quickly building products with minimal resources, learning through customer feedback, and continuously improving.

Rather than the traditional "perfect plan → large investment → product launch" approach, it increases success probability through "quick experiments → learning → improvement" iterations.

Background of Lean Startup​

Problems with Traditional Approach

  • Invest months to years making perfect product
  • Discover customers don't want it after market launch
  • Already wasted enormous time and cost

Lean Startup Solution

  • Quick market testing with Minimum Viable Product (MVP)
  • Decision-making with actual customer data
  • Minimize failure cost and learn quickly

Core Principles of Lean Startup​

1. Build-Measure-Learn Loop​

The core cycle of Lean Startup:

Build

  • Develop Minimum Viable Product (MVP) to test hypothesis
  • Prioritize speed over perfection
  • Product containing only core value

Measure

  • Collect actual customer data
  • Measure quantitative indicators
  • Observe customer behavior

Learn

  • Learn through data analysis
  • Validate or reject hypothesis
  • Plan next experiment

Repeating this loop as quickly as possible is key!

2. MVP (Minimum Viable Product)​

A product that completes one Build-Measure-Learn loop with minimal effort.

Purpose of MVP

  • Validate business hypothesis
  • Collect customer feedback
  • Maximize learning
  • Save time and resources

MVP Examples

  • Dropbox: Validated demand with 3-minute demo video before actual product
  • Zappos: Received orders without inventory and bought from stores to ship
  • Buffer: Tested market response with just landing page

3. Validated Learning​

Learning through actual data, not just opinions.

Characteristics of Validated Learning

  • Experiment-based
  • Data-driven
  • Measurable
  • Actionable insights

Example

  • ❌ "Customers will probably like this feature" (assumption)
  • ✅ "A/B test results show new feature increased conversion rate by 25%" (validated learning)

4. Pivot or Persevere​

Deciding whether to change strategy or continue based on data.

Pivot

  • When current strategy isn't working
  • Fundamental direction change
  • Strategic change based on learning

Persevere

  • When current strategy is working
  • Maintain direction while optimizing
  • Continue gradual improvements

5. Innovation Accounting​

A new way to measure startup progress.

Problems with Traditional Metrics

  • Metrics like revenue, profit meaningless in early stages
  • Can be deceived by vanity metrics

Innovation Accounting Approach

  • Leading indicators: Metrics predicting future performance
  • Actionable metrics: Metrics driving action
  • Cohort analysis: Comparing customer groups over time

Example

  • Member signups (vanity metric) → Active users (actionable metric)
  • Total users (confusing) → Weekly cohort retention (clear)

Lean Startup Process​

Step 1: Establish Hypothesis​

Create hypothesis about problem to solve and solution

  • "30s office workers have difficulty finding healthy food during lunch"
  • "Salad delivered within 15 minutes will solve this problem"

Step 2: Develop MVP​

Validate hypothesis with minimum features

  • Take orders through Instagram before developing app
  • Deliver personally before building delivery infrastructure

Step 3: Design Experiment​

Clarify what to measure

  • Core metric: Repurchase rate
  • Goal: 30%+ repurchase rate in first month

Step 4: Collect Data​

Gather actual customer data

  • Order numbers, repurchase rate, customer feedback
  • Quantitative + qualitative data

Step 5: Analyze and Learn​

Learn from data

  • "45% repurchase rate → Hypothesis validated"
  • "But many complaints about delivery time → Need improvement"

Step 6: Decide​

Pivot or Persevere

  • Persevere: Direction is right, focus on improving delivery speed
  • Or Pivot: Pickup model might be more suitable than delivery

Step 7: Iterate​

Return to beginning and repeat loop

Real Lean Startup Cases​

Dropbox​

Problem: Uncertain demand for file synchronization product

Lean Startup Approach

  • Created 3-minute demo video before product development
  • Shared on Hacker News
  • Waiting list grew from 5,000 to 75,000 overnight

Result: Developed in earnest after validating demand, now worth trillions

Groupon​

Initially: The Point (social movement platform)

Pivot

  • Users only interested in group discounts
  • Manually issued coupons via WordPress blog (MVP)
  • Pivoted to Groupon after validating demand

Result: One of fastest growing companies in history

Instagram​

Initially: Burbn (location-based check-in app)

Learning and Pivot

  • Users only used photo sharing
  • Focused on photo filter feature
  • Removed all unnecessary features

Result: 1 million users in 2 months after launch, acquired by Facebook for $1 billion

Zappos​

Problem: Need to confirm online shoe sales demand

MVP

  • Started without inventory
  • When orders came in, bought from stores and shipped
  • Manual but validated hypothesis

Result: Validated demand then started full business, acquired by Amazon for $1.2 billion

Advantages and Disadvantages of Lean Startup​

Advantages​

  • Minimize failure cost: Start small to reduce risk
  • Quick learning: Learn quickly with actual data
  • Resource efficiency: Prevent unnecessary feature development
  • Customer-centric: Make what customers want
  • Flexibility: Can pivot quickly
  • Investment attraction: Persuade investors with validated data

Disadvantages​

  • Initial product quality: MVP may be too crude
  • Brand risk: Image damage from incomplete product
  • Application limits: Difficult for hardware, regulated industries
  • Short-term focus: May miss long-term vision
  • Measurement difficulty: Some values hard to quantify
  • Risk of misunderstanding: "Quick = sloppy" misunderstanding

Lean Startup vs Traditional Business Plan​

CategoryTraditional ApproachLean Startup
PlanningPerfect business planHypothesis and experiments
ProductLaunch complete productQuick launch with MVP
Development period6 months-2 yearsFew weeks-few months
FeedbackAfter launchContinuous from before launch
FailureLarge lossQuick small failures
Decision-makingPlan-basedData-driven
ChangeDifficult to change planFlexible pivot

Cases Where Lean Startup is Difficult to Apply​

Hardware Products​

  • Physical products difficult and expensive to iterate
  • However: Becoming possible with 3D printing, crowdfunding

Highly Regulated Industries​

  • Medical, financial, aviation require minimum standards
  • However: Can apply through simulation, pilot programs

Innovative Technology​

  • Fundamentally new technology difficult for customers to understand
  • However: Can validate use cases instead of technology

Frequently Asked Questions​

Q: Does Lean Startup only apply to startups?

A: No! Can apply to new businesses, new product development in large corporations. Companies like GE, Toyota, Procter & Gamble use Lean Startup methodology.

Q: Won't too crude MVP lose customers?

A: MVP isn't "non-working product." Core value must be properly delivered. Goal is minimum but viable product. Early adopters understand incompleteness and provide feedback.

Q: Is data always right?

A: Data is important but context and insights are needed. Sometimes customers don't know what they want. Balance between data and vision is important.

Q: What's the difference between Lean Startup and Agile?

A: Agile is development methodology, Lean Startup is business methodology. Agile focuses on "how to build right", Lean Startup on "building right thing". Powerful when used together.

Q: How many times should you pivot?

A: No set number. Some companies never pivot, others pivot multiple times. Important thing is data-based decision-making. But pivoting too often prevents validating anything.

Q: Does Lean Startup always guarantee success?

A: No. Lean Startup doesn't guarantee success but reduces failure probability. Helps find right direction faster and waste less on wrong path.

Conclusion​

Lean Startup is a scientific approach to increase success probability in high-uncertainty environments. Emphasizes quick experiments instead of perfect plans, MVP instead of large-scale launches, data instead of intuition. Countless success stories like Dropbox, Airbnb, Instagram prove this methodology's effectiveness. If starting a startup or developing new product, spin the Build-Measure-Learn loop as fast as possible!