‘The Lean Startup by Eric Ries’ Book Review
How do Startups become Successful?
What do the successful Startups do differently that make them successful?
In today’s fast paced world, Young Brilliant college students are inventing the future by creating new products, working with their friends and taking on the World.
However, more often than not – they are failing.
In spite of creating Amazing Products and having Rock star team entering the market, they are not able to create Successful companies.
So how come, even with having all the correct Ingredients- Determination & Brilliance + Great Timing + Great Product & Team, they are not having the fame & fortune like the stories in the Magazines & Movies?
There’s a difference in the Reality. The Boring stuff like Management & Accounting really matter a lot, which is quietly ignored in the Movies as it doesn’t make for great movie time.
What is the Lean Startup methodology?
Instead of creating great & perfect products, create extremely basic versions of them (lets call them Minimum Viable Product)
Selling these products to early adopters and measuring the response – getting feedback, listening to their complaints, trying various experiments, analyzing the User behavior to understand and learn what the product really should be
And then incorporating that into the product, continuously improving and validating the assumptions about the product, making changes as required to grow and repeating the process is what gives much higher probability of making a company successful.
It follows the circle-
Create – a Minimum Viable Product (basic Product with only most necessary features)
Measure – the Response (Listen to Customer Feedback + trying new experiments)
Learn (understand what needs to be done for Future – persevere/ Pivot)
Defining certain process, it is:
- Start: The goal of the Startup is to figure out what Customers want & will pay for- as soon as possible.
- Define: Anything that Customer’s receive from their interaction with company is included in scope of Product. This can be great Innovations from Scientific discoveries, repurposing existing Technology, devising new models to as simple as serving new locations and Customers.
- Learn: Validating the Product by learnings in different forms such as-Talking to Customers/ Users of Product & gathering feedback.
- Defining Critical metrics – no. of users, time spent etc. & then comparing Benchmarks with Actual figures.
- Experiment: identifying elements of a plan that are assumptions rather than facts and figuring out ways to test them.
- Leap: Most important assumptions that make the leap are:Value Hypothesis – Is the product valuable or not?b. Growth Hypothesis – Whether it is growing or not?
- Test: MVPs need to be test to validate the assumptions about them before building complete full features product. Lean Startup is not opposed to building high quality products, but towards building useful/ valuable products which customers would actually use.
- Measure: Metrics that are most important/ critical eg. Subscribers for a Youtube Channel should be measured rigorously. Believing in or Highlighting the good looking ones is sure shot way to illusions and Failure.
- Pivot: Special changes designed to test the fundamental assumption about Product, Business model, engine of growth etc.A startup runway is the no. of Pivots it can make to be able to become something valuable.
There are different types of Growth such as-
A. Sticky engine of Growth – it happens from Repeat usage.
This succeeds when New Customers come at a faster rate than Churn rate.
B.Viral Engine of growth – rapid product awareness
Viral Growth is achieved when every new Customer/ user brings more than 1 user as a referral. This leads to compounding effect with every cycle and gets viral growth.
C. Paid Engine of growth – this is effective when the value from every Customer exceeds Cost of its Acquisition.
The Lean Startup works towards improving odds on Startups and developed business to succeed with Products by validating the learnings and pivoting as necessary to ensure they are valuable to the Customers & users.
We definitely recommend the book for every Entrepreneurs as well as aspiring Entrepreneurs and especially for anyone who plans to have their own Start-up.