“The big question of our time is not ‘can it be built?’ but ‘should it be built?’” Eric Ries.
Innovate or Fade Away
In his book “The Lean Startup” Eric Ries explains where the traditional methods of building a business have gone wrong and why they no longer work for the modern entrepreneur. Ries defines entrepreneurs as more than the accepted idea of a startup, entrepreneurship can also mean a traditional corporation starting a new branch. After all, in today’s world a business that isn’t investing in new technologies, is a business that won’t last long term.
Ries uses Toyota’s lean manufacturing concept and earlier work by Steve Blank to expand his idea. Blank defines a startup as *”an organization formed to search for a repeatable and scalable business model.”*
What might this look like visualized?
Let’s keep it simple and visualize a scalable business as a target, and the people in an organization as arrows moving toward the target. The angle of the arrows indicates where the person’s efforts are directing the search, and their length indicates the amount of momentum the person adds to the overall search effort.
Is your business model scalable?
The first assumption here is that the nature of the business model is known ahead of time. In reality, the business model is rarely known ahead of time, so even if a CEO has a perfectly functioning search team they can still miss their mark. And often what appears to be a scalable business is not.
Choosing Team Direction
Another assumption is that everyone is looking in the same direction. Rarely is the search team perfectly functioning, and in reality a person’s title does not translate into how much they help find a scalable business. There could be a VP who is disengaged, or on the flip side, an engineer who is extremely efficient at helping the startup move toward a scalable business. Also, as conflicts in direction occur, the search is taken off track and the efforts of otherwise efficient people are hindered.
The next assumption is that there is just one scalable business model, or even one out there at all… There are a wide variety of business models a startup can pursue at any given moment, and not all of them are created equal.
When to Get Customer Feedback
A key insight behind the Lean Startup movement is that there are clues to help a startup search for a scalable business model, but they are outside the confines of a startups office. Clues are best found by talking to customers and shipping product. Determining what these clues mean is not easy, nor obvious, but they help the startup refine its search .
Customer feedback has always been an important part of any business model. However what distinguishes the lean startup movement is that, much like a software development project, is that customer feedback needs to come into play right at the beginning and throughout the whole process.
If the clues are not pointing in the right direction then the startup needs to decide if it wants to seek out a different target, meaning it pivot, or if it wants to change how it searching, meaning a change in personnel and/or product. Feedback without resulting action is meaningless.
Notice the word feedback appears often. The faster the actions, the more frequent the feedback. The more frequent the feedback, the more clues on how to find a scalable business.
However, there is one implicit point that gets missed in the ‘lean startup’ movement. You MUST know your target before you begin to search. Often people use staying ‘lean’ as an excuse to launch and iterate without having a clue where they want to go. This is lazy, not lean.
Defining Startups in 2020
Startups are more than beanbags, office dogs, and twenty-something CEOs. A startup is an organization searching for a scalable business model.
Searching is not a straightforward activity. The search involves customer feedback — and then taking that feedback into account when optimizing the product or service. The lean startup movement is about refining faster actions into a faster search.