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Many people believe that once they set up a business, it’s bound to succeed. However, in reality, that is not how to build a successful business.
The traditional “build it and they will come” mentality frequently results in wasted time and resources, which is why we are reading the Lean StartUp by Eric Ries. This book provides a tested framework for building a scalable, profitable, and sustainable venture; based on experimentation, quick iteration, and customer-centricity. Whether you’re a seasoned entrepreneur trying to fine-tune your approach or a first-time founder searching for direction, The Lean StartUp is a great resource.

We’ve already covered the first four chapters of the book and the goal is to read another four chapters in August. If you are new here, I encourage you to join our book club; and if you are ordering via Amazon, kindly use my affiliate link, thanks.

In this article, I’d be reviewing the first four chapters and expanding on key points that caught my attention while reading the book.

Introduction | Principles of The Lean Startup

The author starts by introducing the principles of the Lean StartUp which are:

1. Entrepreneurs are Everywhere

This emphasizes the fact that the entrepreneurial spirit is not restricted to a certain group of individuals or a specific set of talents. Rather, it recognizes that everybody can become an entrepreneur – even within the context of being employed in an organization.

2. Entrepreneurship is Management

The process of starting and building a business is not a haphazard or creative undertaking. Rather, it relies upon management principles which in the broader sense involve being able to set a direction for your company, allocate resources effectively, and make data-driven decisions.

3. Validated Learning

This refers to conducting real-world experiments to test your hypothesis or assumptions as a business owner. Instead of relying on guesswork or intuition, validated learning is used to obtain insights about consumer behaviour, market demand, and the overall efficacy of your strategy.

4. Build-Measure-Learn

This has three components:

“Build”, which explains what a Minimum Viable Product (MVP) is and its importance, “Measure”, which explains the process of collecting data and feedback from users of the MVP and “Understand”, which details how to analyze feedback data to unlock insights into customer preferences, pain points, and the feasibility of the product.

5. Innovation Accounting

This explains how the progress of StartUps should be assessed.

The other section of the introduction goes into detail about why most startups fail and I found the point about the “Allure of a Good Plan Vs. Just Do It” interesting because I know that while most startups are vibrant and energetic, they are often disorganized. Eric Ries calls this school of thought the “Just Do It” school of startups which believes that if management is the problem, chaos is the answer.” However, he argues that this approach is not a viable solution to the problem.

I’d also like to mention that the book is organized into 3 parts as you progress with the chapters

1. Vision

2. Steer

3. Accelerate

Now, to discuss the points that caught my attention while reading the first four chapters.

Lean manufacturing (Value Vs. Waste)

“Lean thinking defines value as providing benefit to the customer; anything else is waste – The Lean Startup. “

One of the concepts highlighted was lean manufacturing which differentiates value from waste in production. Essentially, any work output that does not contribute value to anyone is considered waste, regardless of the amount of effort invested. It is possible to have a very active company, yet the degree of growth and advancement is just negligible. There can be several reasons for this, which include the fact that you might have the wrong people on board or the wrong management style altogether. However, it can also be the result of a lack of synergy and coordination across different people working for the organization.

Working in Silos

According to Eric, “When people are used to evaluating their productivity locally, they feel that a good day is one in which they did their job well all day.” “Working in Silos” is a situation in which different departments or teams within an organization function in isolation, with little communication, cooperation, or information exchange.

Each unit is so focused on its goals and priorities and is unaware of how its actions affect the other teams. This usually leads to inefficiency. There are several ways to mitigate this problem, but perhaps the most important one is providing opportunities for cross-collaboration. Cross-functional projects bring people together and promote knowledge exchange.

Moreso, you can promote the concept of “internal customers” at your company. In most cases, people in the same business unit (working to satisfy the same external customer) are usually internal customers of one another. That is, to produce the end product, one department will need the information or output from another team, to be able to carry out their responsibilities.  Therefore, helping employees to see how their actions impact other teams, is very important.

Producing What Nobody Wants

Being able to make data-supported decisions is vital as a business owner because we move around with our assumptions and biases. How you see the world, is a question of what happened to you. So, the main job of an entrepreneur is figuring out what customers regard as valuable. Another important point mentioned in the book is, that “because start-ups often accidentally build something nobody wants, it doesn’t matter much if they do it on time and budget. The goal of the startup is to figure out the right thing to build – the thing customers want and will pay for – as quickly as possible. “

Business Development

“Every new version of a product, every new feature and every new marketing program is an attempt to improve this engine of growth. Like Henry Ford’s tinkering in his garage, not all of these changes turn out to be improvements – The Lean Startup.”

Indeed, the act of refining a product, adding new features, or establishing marketing campaigns is analogous to continually fine-tuning a business’s engine of development. Each change is a chance to improve product-market fit, customer experience, and overall business success. However, much as Henry Ford‘s garage tinkering produced both great breakthroughs and some failures, not every alteration will provide the intended results.

“Learning from mistakes” is Overrated

“If we wound up taking a wrong turn, I’d have to take comfort in the fact that at least we’d learned something important…[However] you can’t take learning to the bank, you can’t spend or invest it. You cannot give it to customers – The Lean Startup”

Learning from bad decisions is an inefficient way to run a business, eventually, you’d run yourself out of business. The alternative is to test assumptions by running low-cost experiments and scaling based on user feedback.

According to Eric, we should “identify the elements of [our] plan that are assumptions rather than facts, and figure out ways to test them.” This might sound like the author is against exploration, but I disagree. I think the emphasis is on employing a systematic approach to testing ideas.

Thanks for reading this article. If you haven’t gotten The Lean Startup,  please do. We will be reading the next four chapters in August.