Business strategy

Lean startup

Lean canvas

Lean Startup is one of the methodologies for increasing the success rate of entrepreneurship and new business development. As a specific example, we emphasize repeating business hypothesis testing quickly without spending a lot of money , and business ideas and product planning while grasping customer reactions in a short period of time. It means to correct the trajectory many times .
Even in the United States, which has a positive awareness of entrepreneurship, it is said that only 3 out of 1,000 companies can survive the start-up period after the company was founded.
Against this background, “Lean Startup” was developed and advocated by entrepreneur Eric Ries, who was aware of the problem of “how to increase the success rate of new businesses.”
Lean Startup is a coined word consisting of two terms, “ lean ” and “ startup “. Normally, when starting a business or developing a new business within a company, careful preparation and considerable costs are required before the product is provided, such as (1) planning / planning, (2) product development, (3) marketing, and (4) sales. .. Nevertheless, if the resulting product is not accepted by the customer, the cost of preparation and manufacturing cannot be recovered.
Therefore, Lean Startup is conscious of “ quick hypothesis testing at low cost “.

 

 

Lean Startup Advocate

Lean Startup is a concept proposed by American entrepreneur Eric Ries, who was born in 1979, based on his experience of starting a venture to operate an Internet communication site after many twists and turns.
Lean Startup is a concept that has had a huge impact in the business scene and is now practiced by companies and individuals around the world.
Eric Ries also runs a blog called Startup Lessons Learned, which provides product strategy advice to a variety of large corporations and venture businesses.

 

 

Three Key Terms for Lean Startup

Pivot

Sometimes the initial ideas and hypotheses of a business, or the customer image itself, are wrong. Lean Startup is also willing to turn around in such cases. This turn is called a “pivot”, likened to the movement of a basketball player. Pivot has various patterns of turning such as narrowing down and expanding product functions, responding to different customer needs, changing target markets, and changing distribution channels.
You can increase your chances of success by turning around when there is a big gap in your hypothesis or when MVPs are unacceptable, and reorienting to meet the needs of your market and customers.

 

 

MVP

MVP (Minimum Viable Product) is prototypes and prototype products.
Startup companies develop MVPs as a tool to see customer reaction, and Lean Startup develops this MVP first, aiming for rapid commercialization.
In Lean Startup, how accurately you can develop MVPs is very important, and to do so, the MVPs who have created enough information to be confident about the true value that users want. Success or failure depends on whether or not you are getting it.

 

 

Agile

Agile is an adjective that means “quick”, and in the IT field, implementation and testing are carried out in small work units in order to carry out system development quickly and agilely. So, it refers to a development method that shortens the time required for overall system development.
This development method is called “ Agile development ” and is pervading companies as a method to promote development speedily. Lean Startup often uses this agile development method in system development, and agile development is one of the most suitable methods for creating products efficiently in a short time, which is indispensable for lean startup.

 

 

Lean Startup Success Conditions

Have a climate that allows failure

Lean Startup is a “ how to make small mistakes and gradually improve the maturity of your business “. Therefore, first of all, it is necessary for the organization to have a culture that allows business failures. If you are starting a business as an individual, you also need to be prepared as a manager who can take a positive view of failure.
 

 

MVP creation and marketing research know-how

Lean Startup requires MVP creation and customer hypothesis testing . It is also necessary to have the technical ability to create MVPs sufficient for “verification” and the know-how of customer research and marketing research. However, even if you blindly repeat trial and error, the success rate of the business will not increase. Lean Startup is only possible if you have a solid knowledge of your business and technology.

 

 

Four Phases of Lean Startup

1. Build phase

First of all, we will formulate business ideas and hypotheses to identify the needs of the expected customer image. At that time, we will create a “Minimum Viable Product” (MVP) that costs as little as possible, that is, something like a simple prototype.
 

 

2. Measure phase

Next, provide the created MVP to a small number of early adopters (ear adopters) and explore the reaction. It is assumed that the reaction from customers is not only positive, but also negative, such as requests for improvement or getting bored quickly. Lean Startup watches this reaction.
 

 

3. Learning Phase

Finally, we will analyze the reaction obtained from the customer and modify the MVP.
If the early adopter’s reaction determines that the initial hypothesis is incorrect, review the hypothesis itself and change the direction significantly. If you do not get the results you want, we will immediately work on improving our products and services, correct the course, and renew our business.
Even if the measurement fails, you can use your experience next time by learning. That is the key to improving the success rate of your business.
Another benefit of learning is that you can withdraw early if it is determined that you will not succeed if you continue.

 

 

4. Rebuild phase

The point of the above three phases is “ Repeat hypothesis testing quickly with as little cost and time as possible”. Sometimes the initial ideas and hypotheses of the business, or the customer image itself, are wrong. Lean Startup is willing to turn the business around in such cases. This turn is called a “pivot”, likened to the movement of a basketball player. Pivots come in a variety of patterns, including narrowing down and expanding product functionality, responding to different needs, changing target markets, and changing distribution channels.
The cycle of “building-> measurement-> learning” is incorporated not only in ventures but also in launching new businesses of large companies, and one of the conditions for a good organization is whether or not there is a spirit of challenge to constantly introduce new things. You will be asked.

 

 

Customer development model

One of the major risks of Lean Startup is developing products and services that do not meet customer needs.
There are four steps in the customer development model that are implemented in the lean startup process to avoid such risks.
In the customer development model step, we discover and verify the customer and business model in parallel with the development of products and services.

Customer discovery

In customer discovery, we thoroughly consider whether the target customer group really needs lean startup products and services, and discover the so-called “persona” such as what kind of person the target customer group is. To go.
The Lean Startup process involves discovering personas, primarily at the hypothesis-building stage.

 

Customer verification

Customer verification is an action taken during the “measurement” stage of the Lean Startup process, and is an attempt to demonstrate whether a lean startup product or service is actually purchased by a customer and the business succeeds.

 

Customer development

In customer development, we will verify what kind of business model should be built in order for lean startup products and services confirmed by customer verification to succeed as a business.
We also consider how to approach customers and sales processes, and examine what kind of organization is needed and which department is best to invest in.

 

Organizational construction

Organization building is the process of building an organization to operate products and services completed in the final stage of lean startup as a business.

 

 

A useful framework for lean startup

1. Lean Canvas

Lean canvas
A brief description of each element is as follows.

Problem: Refers to the problem you are having.
Customer Segment: Clarify who your target is.
Unique Value Proposition: Clarify what is unique about a conflict.
Solution: A method of solving a problem.
Channel: Refers to how you approach your customers.
Revenue Streams: Refers to what your revenue model is.
Cost Structure: Refers to how much cost is incurred.
Key Metrics: These are the metrics that are important in assessing this business model.
Unfair Advantage: A barrier to entry against competition.

Before you start a business, you need to make a hypothesis, such as “who is your target,” “where is the market,” “how much is the cost,” and “how much is the profit?” Therefore, what you should create is a business model, and what you should use is a business model canvas.
Lean Canvas is, so to speak, a “ business model canvas startup version “, which is like a business plan. A bird’s-eye view of your company’s business model from nine factors will clarify what you need to do and make it easier for stakeholders to understand.

 

 

2. MVP Canvas

It is risky to spend a lot of resources to create a product without testing the hypothesis. Launching a product without a plan can result in wasted costs because it doesn’t meet the needs of the customer.
MVP solves such problems. MVP is an abbreviation of “Minimum Viable product” and means “minimum viable product”. Typical examples of MVPs are “ prototypes ” and “ demo videos “, which are tools for testing hypotheses made with lean canvas. And the MVP canvas makes it easy to create MVPs. By simply filling in each item, the optimal MVP shape and what you can learn are verified.

 

MVP is not just a demo version / beta version

MVP is similar to a prototype or demo version just to verify the design and technical aspects of the product, but the details are different. MVP does not mean releasing a poorly made product.

 

MVP is a “tool for learning”

It should be remembered that what is important in the production of MVP is a “ learning tool ” created by hypothesis testing. Whether it’s an application or video, it doesn’t have to be a tangible product as long as you can test your hypothesis of purpose. Conversely, even a well-crafted application is not of high quality as an MVP unless it is designed to test the objective hypothesis.
 

 

Benefits of Lean Startup

You can measure the effect without spending cost and time

In general, it takes a lot of time and money to continue developing until it is a complete product. Therefore, the minimum required is desirable when creating an MVP. As a result, measurement can be performed at no cost or time.
In addition, by repeatedly providing MVPs, accurate customer needs can be grasped quickly, and by repeating improvements, it is possible to develop products and services that satisfy more customers . There is a merit.
An approach that includes a variety of features limits time and effort, and if the customer’s response is unsatisfactory, it can be difficult to identify what is causing it.
MVP makes it easier to identify improvements due to customer reaction, which enables us to accelerate the delivery of genuine products and services.

 

 

Take advantage of the market

There is an advantage that you can get upfront profit by adjusting the MVP to the minimum and measuring it quickly. This makes it easier for you to gain an edge in the market and make a profit.
The MVP approach allows you to bring your products and services to market relatively quickly, which can also accelerate your monetization.
Another appealing point is that we can quickly respond to improvements in products and services, giving us an edge in industries where the market is growing rapidly.
By repeating the cycle of “improving prototypes and services and providing them to customers again”, the success rate of entrepreneurship and new businesses will increase dramatically.
From the above effects, even if competitors enter the market later, it will be possible to make a difference in market awareness and development speed.

 

 

Get the customer’s opinion quickly

By following Lean Startup, you can quickly bring products and services to the market, so you can get the most important customer specific feedback quickly . This allows you to quickly find areas for improvement or improvement.
When a product is completed, it is put on the market, but the issue is whether or not the product is accepted by the market. It’s important that customers like the product or service and meet their needs, so getting feedback from the customer can improve the product or service and bring it to market in a way that the customer wants. It will be like.
It also has the advantage of increasing customer satisfaction and increasing the credibility of the company because feedback enables them to provide what they really need.

 

 

Disadvantages of Lean Startup

It doesn’t always work

Lean Startup and MVPs can be quickly tried on the market, but they may not work as described below.
・ Although I spent a lot of money and time entering the market, the prototype was not accepted by the users.
・ If it is difficult to correct the trajectory, a lot of cost will be required, and it will fail because it cannot be improved.
In addition to the above, lean startups and MVPs have plans, but there are also concerns that the future is uncertain and there are many uncertainties, and if trajectory correction and customer feedback are not successful, you may lose track of your goals. I have.
 

 

The purpose shifts while trying

As you progress through Lean Startup, you run the risk of losing track of what you’re doing for. The original purpose and goals may change during trial and error, such as “creating an MVP” and “trying an MVP”.
Also, as you try out MVPs, you may end up with the goal of repeating MVPs, deviating from the original goal of “satisfying customer needs.”
 

 

Lean Startup Misunderstanding

The idea of ​​lean startup is an attractive plan for entrepreneurs who are thinking about starting a business or business owners who are looking to enter a new market, but on the other hand, there are often two for lean startup. Misunderstandings can occur.
 

Not A method of thinking about ideas

Innovation is the first catalyst for lean startup.
Many of the giant companies that have succeeded in Lean Startup have succeeded in doing business based on ideas that did not exist in the world until now, but there is a misunderstanding that Lean Startup will naturally bring up ideas for innovation. To do.
Lean Startup is a startup theory for commercializing ideas, it is a development method of products and services, not a means to generate ideas, but a concept that will be utilized after ideas and innovations already exist. Lean Startup .

 

 

Not Let’s make it for the time being

Lean startups tend to have the image of using MVP and agile development to focus on speed and develop products quickly. Also, at Lean Startup, there is a misunderstanding that even if you do not plan, you will understand that it is the idea of ​​”let’s try it for the time being”.
There is a lot of uncertainty in modern society, so it is undeniable that you may lose an opportunity if you start a business with strict planning and preparations as in the past. At Lean Startup, it’s important to have a process-based, lean-minded approach .
 

 

Lean Startup Example

Toyota

It is said that Toyota’s “Kanban” method was the origin of the idea of ​​Lean Startup. This is a waste-free method of “creating what you need, when you need it, and in the amount you need,” and is also called a “just-in-time system.”
The “project management method” is a work instruction sheet that describes the time and quantity of parts to be delivered. It is a mechanism that keeps as little inventory as possible attached to each parts box, and was born in the manufacturing industry. Currently, it is also used as a project management method. One of the features is that it is easy to grasp the information of the entire team and manage it centrally.
However, by introducing a method of delivering products when and only as much as needed, it is also a cause of traffic congestion and environmental destruction, and from such a background, “It is better to review frequent small-lot deliveries.” There is also an opinion.
It also has the disadvantage that it is difficult to cut costs significantly because it is not suitable for mass production.

 

 

Instagram

Instagram, a photo sharing app, was originally an SNS that shares location information called “Burbn”. However, the app was not very responsive to users, so we repeated hypothesis testing through user surveys and prototype creation, and decided that the “ photo sharing function ” would meet the needs of users. Discover
It is said that it took only about 8 weeks from Burbn to pivot and re-release as Instagram. Even after the release, we have continued to develop the app by being aware of lean startup, and added popular functions such as hashtags and stories.

 

 

Is Lean Startup Obsolete?

Lean Startup is a method that has become very popular in the 2000s as the number of startups and ventures increased, but as of 2020, it is said that it is “outdated.” I will also explain the reason.
 

Negative information spreads quickly on SNS with MVP

SNS such as Twitter, Instagram, and Facebook have been steadily increasing the number of users in the 10 years since Lean Startup was advocated. Against this background, the reputation of services and products spread with a single SNS post, and in a blink of an eye. The value of the company has come to decline.
As mentioned earlier, the point of lean startup is to create an MVP in a short period of time and at low cost to test the hypothesis.
In the past, it was possible to issue MVPs only to some customers for hypothesis testing, but now it is not possible to easily provide MVPs because they are shared on SNS. If you release a half-finished product, negative opinions will quickly spread on SNS. This is one of the reasons why lean startups are said to be unmatched in this era.
However, in the first place, MVP does not mean that incomplete products will be released to the world for the time being. The position is to provide the minimum necessary items. There is also a hypothesis verification pattern that uses explanatory videos, etc., instead of the product itself like Dropbox. Therefore, it does not mean that the MVP itself is not suitable for the present era. However, there is a possibility that what you publish as an MVP will walk on your own, so you need to think about how to create and publish an MVP that is conscious of SNS.
 

 

Pivot loses trust

Pivots are a necessity for lean startups, and they must continually change their products and services while incorporating the opinions of their customers. However, on the other hand, if products and services are changed too much, customers may think that the foundation is not fixed or that the service is not on the ground. As a result, there is a risk that the product or service will be unreliable.

 

 

“Technology” has become the key to innovation

In recent years, technological capabilities have become the key to innovation, and we are now in an era where all companies can innovate with technological capabilities as long as they can afford development costs. However, there is an opinion that it is better to spend money at the start stage to develop the technology rather than minimizing the financial cost like lean startup because it costs money to adopt technology.
When developing products such as mobile apps, it is easy to work on lean startup because there is no cost from the beginning, but on the other hand, development using the latest technology requires cost . Therefore, there is an opinion that it is not suitable for lean startup because it costs a certain amount even if waste is eliminated.
However, it is also a fact that the number of start-up companies that make full use of the latest technology is increasing. For example, in the field of electric vehicles (EV), many start-up companies are appearing, and EV has about 60% of parts compared to ordinary automobiles. Start-ups also have a chance because they can reduce it.
In fact, some EV start-up companies have started new businesses overseas such as Bangladesh and Thailand, and as the number of start-up companies in a wide range of fields increases, the number of cases of lean startup will increase.
It is a lean startup to start a business or start a new business efficiently while keeping costs and time as low as possible, but services such as YouTube, Instagram, Dropbox also have a track record of successfully using lean startup to grow the business. I have. However, it’s been about 10 years since entrepreneur Eric Ries advocated Lean Startup, and some say that Lean Startup is obsolete these days.
 

 

Lean Startup in the Future

Lean Startup is still a well-valued technique, if you keep the points in mind. Even now, there are many companies that actually employ lean startups to lead to innovation, and in addition to business development and entrepreneurship, they are often used to solve management issues such as personnel and organizational reforms.
First of all, the view that “lean startup is outdated” depends on the difference in the perspective of whether the business to enter is a business that can be started openly or a business that can be closed or partially started.
Lean Startup is a clear separation between what it’s looking for and what has become “obsolete,” especially in these days when it’s very difficult to identify the core needs of consumers. However, in other words, it is necessary to capture the “ center pin ” of the business while proposing services to customers.
Lean Startup is a very effective way to find this “center pin” at no cost.
In addition to the research of “searching for a center pin”, you can also utilize crowdfunding by incorporating early adopters (purchasing groups who have been interested from the beginning of product release).
Of course, if you adopt Lean Startup, not all will work, but it is important to think about it as one of the methods and apply it well according to the situation.
 

 

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