[Term of the Day]: Lean Startup
Definition — What is Lean Startup?
A Lean Startup is an organized approach to start a business that relies on validated learning, testing, and constant product or service version releases to shorten development cycles and also gain valuable real customer feedback. A lean startup is an approach suggested by Eric Ries, an American entrepreneur back in 2008. Although the early lean movement was initiated in Japan back in the 1950s, the actual implementation started only after Eric proved the method to be best for start-ups. The main goal of the lean startup approach is not to waste any time and through the learning of the customer’s needs and expectations make changes which ultimately leads to value creation and enables to control the wastage of resources and controlling inventory. A lean startup will build a prototype quickly, get it to market to gauge the success of the product without expending unnecessary resources, and use the data generated by early marketing testing to influence the next build phase. In lean production, this approach is called kaizen. In programming, the approach is called Agile.
Before the lean startup movement, most businesses were started using a business plan approach. The founder would often spend months researching a market, refining the business model, then gather a team and go raise funds. This was a very linear approach that was based on execution. This approach has more risk embedded within it than the lean startup movement because it assumes that all business assumptions are correct in the beginning and succeeds very rarely. According to one Harvard Business School study, 75% of all new businesses fail. Only one or two startups in ten will bring a substantial return on investment. Thus the lean startup is the best and important methodology for new as well as established companies. It helps entrepreneurs, product builders, and managers to eliminate delays by making better and faster business decisions.