So what is a lean start-up?

05
Jul

So what is a lean start-up?

JonasProject

The Jonas Project’s Senior Capacity Builder, David Hincapie, has written a three-part series on one of the topics he gets the most questions about. This is the second of the three blogs. David is the first point of contact for Veterans who inquire about The Jonas Project, and the one who coordinates all of the resources for their business. He’s on the front lines every day steering our Veteran entrepreneurs in the right direction.

(The ideas here are re-statements of the ideas presented in Chapter 2 of Four Steps To The Epiphany, 2003, by Steve Blank. He was the teacher of the guy who wrote The Lean Startup, 2011.)

A lean startup is not so much a thing as it is a process, or a way of doing a startup. When people talk about “lean” they sometimes contrast it with the “traditional” model. The truth is the “lean” way has always been around but no one gave it a name until 2011. Here’s a succinct explanation of the “lean” method.

In the lean method, you don’t do product development to figure out exactly what you’re going to sell. Instead you do customer development to figure out what customers want to buy. In fact, the lean method is the customer development model. Some people just call it test marketing.  It doesn’t matter what you label it as long as you understand what it is. We’ll continue to call it customer development.

It’s all about finding an inexpensive way to start selling your product or service as soon as possible. By selling as soon as possible you begin collecting information directly from your target market, your potential customers. Concrete examples are useful. Here is an old one.

From caterer to restaurant owner

This is one of the oldest examples of the model.

You have a person who likes to cook and their friends tell them “You could make a fortune! Your food is better than most restaurants!”

Of course the anonymous food genius doesn’t believe it, until one day, after a year or two of hearing it, she believes it.

So she starts making food for small office parties or birthday parties or the like. After a year or two she has regular customers, she has a reputation, she has modified and improved her offerings based on feedback from customers, and now she thinks she’s ready to open a little café or bistro.

She scrapes together some cash- maybe savings from the catering business- and maybe gets a $1000 here and $500 there from friends and family and this is enough collateral to go out and get a small business loan.

That two-year process of doing the catering, talking to her customers, changing or improving her recipes, is the customer development phase. That’s the lean part of the startup. It’s lean because it doesn’t cost a lot of money to use her own kitchen and her own labor to make food for small parties.

During that customer development phase, she validated her product and proved to herself that customers for her food really do exist and she has discovered what they are willing to pay. And she did it without going into debt and without committing to a multi-year lease and without spending too much money on equipment.

Can every business use the customer development model?

The truth is we don’t know. It’s hard to say.  Let yourself think about this for a few minutes. Can you think of a business that can’t use the customer development model?

I can think of a few but I’ll leave it as a very useful exercise for you to think about. Can your business idea use the customer development model?

If you can’t think of a way to use the customer development model, maybe you have to use the “traditional” model.

You must remember the examples given are ideal examples. It’s unlikely any business will match the model exactly. These business models are like battle drills in the army.

  1. There’s the way the battle drill looks in the field manual.
  2. Then there’s the way it actually looks when you practice in the field.
  3. And then there’s the way it actually looks when someone is shooting at you.

Nevertheless, you learn them and practice them. Likewise, it’s good to understand these business models so you know what to use and when to use it. Stay tuned for the next post “Traditional small business entrepreneurship?”

 

Read Part 3

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