Lean Startup Methodology: What It Is and How to Implement It

Do you follow the mantra "move fast and break things" to build your startup? If so, you're not alone — this way of thinking has driven startup culture for the past decade. However, what worked to build new companies in the 2010’s isn’t necessarily the best course of action in 2020 and beyond.

Scaling a company doesn’t have to be a destructive process. According to Harvard Business Review, the next generation of startups have a responsibility to consider the moral implications of optimizing the growth of their companies, maintaining a commitment to reduce environmental, economic, and societal harm while building diverse innovative teams.

Although it sounds like a daunting task, there are resources available to help startup founders scale their businesses in a mindful way. Enter: the Lean startup methodology.

Essentially, Lean startup methodology teaches founders how to create sustainable businesses without wasting time and money. The concept was introduced in The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Business by Eric Ries. Let’s discuss how to put Lean startup methodology into action.

Lean Startup Process

Lean startup methodology focuses on three main pillars to create viable business models. Read on to break down this process further.

1. Draft a business model canvas.

During the initial stage of the Lean startup methodology, startup founders are encouraged to start with a business hypothesis or educated guess outlining how their products can create value for their customers. This hypothesis is designed to take the place of upfront research which can often take months, marking the first time-savings opportunity.

Then, instead of drafting a standard business plan, the Lean startup methodology calls for a business model canvas. This document should summarize your hypothesis, and outline your plan-of-action. A well thought-out business model canvas should include the following elements:

• Value proposition — The main concept or objective of your business. Your value proposition should explain how your business provides value to your customers, and what key problem your product sets out to solve.
• Key partners — To craft your list of key partners, begin by identifying areas of your value proposition your business cannot achieve on its own. Once you identify those areas, name potential partners such as suppliers that you can work with to provide value to your customers.
• Key activities — The key activities section of your business channel strategy should define all of the steps your business takes to make your value proposition a reality.
• Key resources — What resources do you need to have to implement your strategy and achieve your value proposition for your customers? List them all in your key resources section.
• Customer relationships — Explain how your business plans to interact with its customers to demonstrate value. In this section, you want to define all of the engagement touch points your company will have with its customer base.
• Channels — Your business channels include all of the ways your customer can be exposed to your business. This can include but isn’t limited to your content strategy, ad placements, PR, or event presence.
• Customer segments — Identifying who your ideal customers are, and grouping them into like segments based off of characteristics such as interests and spending power. Make sure you define who your company is solving a problem for.
• Cost structure — How much will it cost for you to fulfill your key activities and deliver your value proposition? Identify all the costs you plan to incur running your business. Don’t forget to include the costs of your key partnerships and resources, as well as how much your time as a business owner is valued for.
• Revenue streams — This section should detail how your company plans to bring in money related to delivering your value proposition. Specify how you will price your product and make sure you account for your company’s cost structure.

Ready to create your own business model canvas? Check out this template to get started.

2. Leverage customer development to gain feedback.

Have you ever heard the phrase, "if you build it, they will come"? While that may work for some businesses, the Lean startup methodology empowers companies to build what their customers truly want in the first place, creating immediate demand and eliminating waste.

Customer development helps you understand your market to determine if your product or idea will truly solve your customer’s problem. The goal of the customer development stage is to either validate your initial hypothesis, or to provide valuable insight you can use to modify your hypothesis. The four steps of the customer development process include:

1. Customer discovery — Develop a series of hypothetical questions to test the validity of your business model with potential customers. Based on the answers to these questions, you should have an idea whether you can proceed with your current value proposition, or have an understanding of what elements need to be modified. The goal of this step is to understand what your customers truly need.
2. Customer validation — Once you have determined the needs of your customer, and confirmed your product fulfills that need, the validation step gets an early version of your product that meets your value proposition in the hands of your early adopters. The feedback from early adopters should solidify the scalability of your offering.
3. Customer creation — The next step of customer development is customer creation. This is where your company begins creating demand for your product, and implementing sales processes to sell and deliver the product on a wider scale.
4. Company building — Lastly, company building entails facilitating company growth to achieve a sustainable user base and transition from startup to established company focused on execution.

3. Carry out agile development.

The goal of running a Lean startup (in addition to growth) is to minimize waste. Though the term "agile development" was originally coined for cross-functional software development teams, the concept can apply to other industries.

Agile development focuses on shortening product development cycles, encouraging an iterative, collaborative process for creating new products. As your company grows and you begin to introduce more offerings, taking an agile approach implementing customer feedback, making incremental changes, and striving for continuous improvement can help your Lean startup thrive.

By following these principles, you can scale your business in a way that minimizes waste and creates value for your customers. Looking for more resources to help launch your startup? Check out this post.