Lean Startup: Strategies for Funding Innovations and Reducing Business Risks
Its leading advocate, Eric Ries, defined it in five steps: innovate, build, measure, learn, and repeat. This innovative process, focused on consumer needs, was used in the early stages by companies such as Facebook and Netflix.
Understanding the risks of a new business and knowing how to avoid them is one of the greatest challenges for any entrepreneur. Until a few years ago, planning a project was based exclusively on projected data and hypothetical information, a situation that could lead to unnecessary expenses and become a major setback if there was not a significant initial investment. But the Lean Startup method came to change all of that: its objective is to launch new ventures based on small initial experiments, eliminating from the process any element that does not add value, while focusing on the needs of the consumer.
What is it about? Lean Startup puts an idea into practice on a small scale and, from that, generates information about how the product is consumed. In this way, it eliminates any unnecessary link in the project and uses the experience itself, or validated learning, as the basis for growth.
"Startup" refers to the launch stage of a business, that initial phase that many successful entrepreneurs remember having started in a small room, a warehouse, or the family garage with very little money. And "lean," which literally means "thin" or "slim" in English, is understood in this context as the idea of eliminating any step that does not generate value in the production process.
Step by step: invest little but learn a lot
The method became popular among entrepreneurs seeking innovation without access to large funding. It was what enabled the creation of companies such as Facebook and Netflix, and it is also the methodology adopted by Toyota to test new technologies. It consists of five suggested steps: innovate, build, measure, learn, and repeat.
Once a market opportunity has been identified, the next step is to turn the idea into reality on a small scale, something that the method's leading advocate, Eric Ries, calls the Minimum Viable Product. This generates information about the product's performance, usage dynamics, and value. From this small-scale experience, real measurements and data are obtained from actual implementation rather than theoretical estimates. The final step is to repeat the experience while taking this information into account, creating small cycles that increasingly adapt to consumer needs and help the product grow. "Startup success is not a consequence of good genes or being in the right place at the right time. Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught," says Ries.
Throughout this process, iteration is key—that is, repeating the process while using the results obtained as the starting point and applying what has been learned. This makes it possible to adapt the product to what the market truly needs and demands, rather than to the vision of its creators. In this way, the challenge can finally be overcome: risks can be identified, avoided, and more successful products can be launched.
