The basis of the Lean Startup; Engine of growth.
Forget the fantastic stories that show entrepreneurs working in the garage of their home, designing perfect products that will change the world and become millionaires overnight. That romantic entrepreneurial ideal is very far from reality because it omits an essential fact: a startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.
It is precisely that extreme uncertainty that makes a startup (with or without profit) not managed with the same methods and standards used by consolidated companies. Nor are the notions of success or failure the same in both areas, because a startup needs continuous failure and learning as mechanisms to evaluate its starting hypotheses.
The Lean Startup method is a set of practices designed to help entrepreneurs increase the chances of creating a successful startup. It is not an infallible mathematical formula, but an innovative business philosophy that helps entrepreneurs escape the traps of traditional business thinking.
The basis of the Lean Startup method.
Think of a car as a metaphor for a startup: an internal combustion car is driven by two important feedback circuits. The first is inside the engine. Each tiny explosion inside the cylinder provides the driving force necessary to turn the wheels, but also drives the ignition for the next explosion. Unless the timing of this feedback circuit is managed accurately, the engine will flutter and break.
Startups have a similar engine, which we will call the engine of growth. Each new version of a product, each new feature and each new marketing program is an attempt to improve this growth engine. But not all of these changes will end up being improvements. The development of new products is in the midst of great difficulties. Much of the time in the life of a startup is spent tuning the engine through improvements in products, marketing or operations.
The second important feedback circuit in a car is the one between the driver and the steering wheel. This circuit is so immediate and automatic that we often don't think about it. If you travel every day to go to work, you will probably know the route so well that it will seem that your hands are driving alone there.
Instead, a rocket must be launched with very precise instructions on what each propulsion does, each replacement shot and each change of direction.
The slightest mistake at launch could lead to catastrophic results. Unfortunately, too many businesses seem designed to plan how to launch a rocket instead of driving a car. They prescribe the steps to be taken and the expected results with an atrocious level of detail, as if they were planning to launch a rocket.
Most traditional management tools are not designed to thrive in the harsh ground of extreme uncertainty in which startups grow.
The future is unpredictable, consumers have a growing range of alternatives and the pace of change is constantly accelerating. Even so, most startups, whether in garages or emerging in consolidated companies, are still managed using standard forecasts, product milestones, detailed business plans or strategic planning.
A company where I worked had the misfortune of anticipating a massive acceptance of one of its new products. Driven by a large-scale launch, the company executed its plan. Unfortunately, the company had invested in massive infrastructure, contracting and support to deal with the influx of expected consumers.
When sales did not materialize, the company had committed so much that it could not be adapted in time. They had "achieved failure," rigorously executing, with faith and success, a plan that turned out to be a monumental waste.