Lean Startup helps entrepreneurs maintain a trim and agile business model

The Lean Startup method of documenting business models encourages entrepreneurs to verify assumptions, quickly recover from false starts, and hone in on a product or service that customers want and will pay for.

 

Nathan Lillegard, head of the Lundquist Center for Entrepreneurship at the University of Oregon, presented Lean Startup as the “new way to do startups.” Lean Startup is a method startup entrepreneurs use to document—and then quickly modify and refine—their business model.

 

Using a Lean Startup template to capture a hypothesis about your business model

An empty Lean Startup template [add image] has several blanks for the two major aspects of any startup:

∙        the customer-facing aspects the business, and

∙        the “back-end” or operational aspects the business.

 

Lillegard recommends entrepreneurs begin by filling in the blanks related to the customer-facing aspects. “Early in your business,” he says “you need to focus on customers and things they want and will pay for.”

 

Refining the template based on what you learn from customers

Since the customer-facing part of the business model is only tentatively sketched in, the Lean Startup method makes it easy to refine the model based on customer research. Lillegard suggests an iterative approach to refinement:

 

∙        Build (or describe) your best guess of the simplest product your customers will like

∙        Test the product by getting feedback from real many customers

∙        Use the feedback to figure out how your product should change

∙        Repeat

 

This approach, say Lillegard, will allow entrepreneurs to “fail fast, and in small increments.” In this way, startups evolve quickly, and without taking on too much risk.

Getting useful customers feedback

Lillegard warns that people have a tendency to be overly nice when you ask them about your product or service. People don’t want to hurt your feelings, so you must encourage them to be brutally honest. Lillegard recommends asking them to put their money where their mouth is with a simple question: “But would you pay for this?”

What Lean Business modeling is NOT

Understanding what is not Lean Business modeling can help you avoid some of the pitfalls that come from the traditional approach to writing a business model.

 

Traditional “Not-Lean” Business Modeling Lean Business Modeling
Build first, then hope customers will come. Know the customers first, then build what they will pay for.
Begin by building a complex product that meets many different customer needs. Determine the simplest product you can build, then use that to get feedback on other customer needs.
Get excited about your “brilliant” product idea, before talking to customers. Mistrust your own excitement until verified by customers who will pay.

 

Best books for learning about Lean Startup

Lean Startup provides guidance on many other task facing startups: defining value propositions, customer development, configuring back-end operations, and more. Lillegard suggests interested entrepreneurs read the following books:

 

The Lean Startup

Startup Owners Manual

Business Model Generation

 

And he adds that all startup entrepreneurs should be interested in Lean Startup.