Historically, businesses all started the same way. Someone had an idea, and they wrote up a business plan. In that plan, start-ups would detail what their idea was, how they were going to reach their goal and what they would need to get started. They would project and anticipate problems and issues, while studying the potential for success. Once their business plan was finished, start-ups would secure funding through a variety of venture capitalists, and then begin to put their plan into place. Periodically, they would evaluate their business to see if it was meeting the goals set forth in the business plan, and then report back to their investors on the success or failure of the company.
In 2011, Eric Ries suggested a new method of starting a company, based on his own experiences in two failed start-up tech firms. In Ries’ proposal, he promotes an idea that suggests companies are more apt to be successful if they focus on customer feedback from the onset – eliminating wasted time, effort and resources. The “lean” methodology assesses customer demands, and then works to meet those demands with the least amount of resources.
Patterned after the streamlined processes of Japanese auto makers in the ‘80s, Ries suggests within Lean Startup that:
- Companies work quickly to deliver a product
- Then establish the customer demand and /or criteria
- Make the necessary adjustments immediately.
By working quickly to put a product (or service) in the hands of customers, start-ups would need less investment capital and could be profitable faster.
Instead of laboring over developing a single product that could make or break the start-up, the Lean Startup method would develop a ‘minimum viable product’ which gives business owners immediate feedback about the product, allowing for correction and change as needed. With startups often focusing on a single product, this quick response system allows them a better chance at success by offering a product that customers want and need.
Initially developed for the tech world, Ries created a methodology that quickly caught on and has spread to other industries and organizations. Touted by many business experts as the newest movement in tech firms and investment funds, the lean startup process has made its way into both business and government usage.
Some critics are skeptical of the success of this relatively new process – claiming that it is too soon to start declaring it as the new world order of business. It is hard to argue with the success of companies who have used the lean startup philosophy successfully – generating millions of dollars in revenue without what many would consider a real business plan.