The 6 Key Principles of the Lean Startup Approach

Team collaborating in a lean startup Adobe

Business owners that adhere to the lean startup principles live by their wits. They understand that they have an untested hypothesis and can only judge its efficacy through customer development. To come up with a concept and to reach your intended users, you need agile development that eliminates waste.

But before we get too carried away, it is crucial first to become familiar with the concept of the lean startup. What exactly is it? How do you incorporate it into your business strategy? And why should you bother flirting with the philosophy? To answer these questions – and more – we have compiled a comprehensive breakdown of the principles of lean startup, and what it can do for your company.

The Principles of Lean Startup

Lean startup is a business model that aims to create and sell goods and services in as short a development cycle as possible. The purpose is to learn if your proposed strategy is viable, which is achieved by following several fundamental principles.

They are as follows:

An Entrepreneurial Culture

Many people believe that, since somebody employs them, they are only an employee. However, in today's global economy and modern-day labour market, everybody is – or should be – an entrepreneur with their own personal brand.

Whether your staff consists of software engineers or financial analysts, their brand of being reliable, smart and hardworking is integral to the success of your company. This mindset can make employees feel valued since workers are treated as business partners rather than cogs on a wheel.

The advantage that startups have over larger companies is that this corporate culture can be implemented from the beginning of the working relationship. As soon as you open your doors, you should be hiring passionate professionals, retaining a stellar team of contributors and generating buzz as being one of the best workplaces in your industry.

When employees are treated as entrepreneurs, you will benefit from their innovation, drive and creativity, which is crucial to the success of the lean approach.

Useful KPIs

People often have an incorrect perception of what a startup is all about. They believe that successful companies attract tens of millions of dollars because of their name, product, service or idea. They think that every promising tech player must be the next big thing; that the startup can do anything it wants to, because venture capitalists and angel investors are waiting to give any promising young company bagfuls of cash.

This, of course, simply isn't true. Every business – large or small – is privy to the laws of business, economics and finance.

To truly survive and thrive in the entrepreneurial world, you need to be accountable, which means giving focus to the more technical and tedious elements of building a startup. A key part of this is instituting and monitoring key performance indicators (KPIs) that identify and subsequently target milestones. To ensure that you accomplish these goals, there are various processes you will need to implement.

A lean startup knows how to shift attention from hot metrics to actionable insights, remedy problems with realistic solutions and use basic accounting principles to put together a respectable balance sheet.

A central tenet of the lean startup philosophy is that owners invest their time and resources into constructing goods or coming up with services to identify and meet the needs of early clients. Rather than piling up vast amounts of funding and launching expensive products – which can lead to monumental failure - you should concentrate on using tiny amounts of snow to create an eventual avalanche.

A Modern Management Approach

Young professionals are adept at neoteric challenges in the workplace, and you should understand that managing the next generation requires a different approach to the traditional status quo. With this in mind, there are several dynamics that are crucial to the lean approach:

  • Everyone needs to be held accountable, including the founders, the team and the investors.
  • You must prevent the project from pivoting to something that is not in line with the firm's mission and vision.
  • Communication between leadership and VCs should be fluid; neither side should dictate purges and substitutions.
  • You should refrain from utilising vanity metrics, product milestones and success theatre demonstrations.
  • Honesty is the best policy and allocating blame to any available party is not.

Millennial workers will not respond to outdated management techniques. The innovative approach of the entrepreneurship ecosystem can – and should – be brought into the environment of a lean startup.

Build-Measure-Learn

There is no such thing as a startup that immediately generates billions of dollars in revenue and becomes an industrial juggernaut overnight. Instead, the fundamental purpose of a startup is to transform a concept into something the public wants. The core function of the free-enterprise system is participating in a voluntary economic transaction that either creates or destroys value. Therefore, your startup should measure success by learning how customers respond – and then either staying the course or revising accordingly.

A lean startup never masks its failures by accentuating its successes and suppressing its setback. Indeed, Eric Ries, an entrepreneur and author of The Lean Startup, calls this "success theatre", and claims that definitions of success can vary for different companies. Some will home in on annual revenues, while others will look to certain other metrics, such as growth or engagement. It is hard to find a balance between shipping something as soon as possible and perfecting your product or service, which is why one of the key lean principles is to build, measure and learn.

The Five S's

In the world of lean startups, companies generally adhere to the five S's:

  • Sort
  • Set in order
  • Shine
  • Standardise
  • Sustain

These principles are instrumental to productivity. Many companies may think they are productive, but this is often an illusion. To be genuinely effective, you should:

  • Gut your company of any items, protocols or even employees that you do not need.
  • Perform an inventory of what is remaining and look at all possible means of optimising.
  • Ensure that your office is clean, tidy and organised.
  • Make your startup consistent across the board, from how the office is decorated to how files are stored.
  • Implement a culture where doing one thing at a time is more valued than multitasking and potentially creating mistakes.

Excitement rues the day when you believe that the sky is the limit. Therefore, it is vital to get your head out of the clouds and focus on the day-to-day realities.

Working Smart, Not Hard

Of course, every founder, entrepreneur and business owner works hard. All of your employees work hard; even your investors work hard. But does this necessarily equate to efficiency? Often, there is no evidence to suggest that it does. Instead, it is time to work smart: the innovation accounting that experts often pontificate.

A lean startup understands how to squeeze every benefit from each task without requiring blood, sweat and tears from team members. Besides, the more we do something, the more mundane and routine it becomes. This results in complacency and boredom: the bane of a startup's existence.

So, how can your company work smarter, rather than harder? Here are a few pointers:

Measure the Right Metrics: It can be easy to deduce that an employee was productive because they clocked in ten hours. But this is the wrong way to measure productivity, contribution and success. Instead, focus on what they achieved during this time. If employee A has found a quicker way to do something that doesn't compromise on quality, this is preferable to employee B, who stays an extra two hours every day to get their work done.

Communication: While this is a soft skill that is often sorely lacking in the workplace, communication is critical to working smarter. Rather than exchanging back-and-forth emails about an assignment, everyone needs to be on the same page and communications need to be straight to the point without filler and unnecessary details.

Automation: The key to productivity is making as few decisions as possible. By automating the basics, you can instead concentrate on the more complex and significant problems at hand.

Ditching Multitasking: As already mentioned, there is a misconception that doing ten different things at once makes you successful. Many studies have found that multitasking can be detrimental to productivity due to mistakes made. Put simply, encourage yourself and your team to do one thing at a time.

---

Ultimately, no business plan is perfect. It is, of course, an important process, because it serves as a blueprint for your startup. However, as Steve Blank opined in the Harvard Business Review in 2013, it is "essentially a research exercise written in isolation at a desk before an entrepreneur has even begun to build a product". You are essentially trying to forecast cash flows and income streams for the next five years, and come up with solutions to problems that have not happened yet.

Is this a waste of time? Arguably. But it is a crucial point to mention, as concepts either date badly or require a different approach. This is why a lean startup methodology can generate success for your organisation, and why it is an approach that you should seriously consider.

Was this article helpful? Let us know your thoughts and opinions on the principles of lean startup in the comment section below!