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Lean startup
Lean startup is a methodology for developing businesses and products, which aims to shorten product development
cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated
learning. The central hypothesis of the lean startup methodology is that if startup companies invest their time into
iteratively building products or services to meet the needs of early customers, they can reduce the market risks and
sidestep the need for large amounts of initial project funding and expensive product launches and failures.[1][2]

Contents
History
Precursors
Overview
Definitions
Definitions based on The Lean Startup
Minimum viable product
Continuous deployment (only for software development)
Split testing
Actionable metrics
Pivot
Innovation accounting
Build-Measure-Learn
Definitions popularized after The Lean Startup
Business Model Canvas
Lean Canvas

The movement
Lean concepts
Criticism
See also
References

History
The lean startup methodology was first proposed in 2008 by Eric Ries, using his personal experiences adapting lean
management principles to high-tech startup companies.[3][4][5] The methodology has since been expanded to apply to any
individual, team, or company looking to introduce new products or services into the market.[6] The lean startup's
reputation is due in part to the success of Ries' bestselling book, The Lean Startup, published in September 2011.[7][8][9][10]
Amazon.com listed the book as one of their Best Business Books of 2011,[11] and by June 2012 the book had sold 90,000
copies.[12]

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Ries' said that his first company, Catalyst Recruiting, failed because he and his colleagues did not understand the wants of
their target customers, and because they focused too much time and energy on the initial product launch.[4][13] Next, Ries
was a senior software engineer with There, Inc.,[4][13] which Ries described as a classic example of a Silicon Valley startup
with five years of stealth R&D, $40 million in financing, and nearly 200 employees at the time of product launch.[13] In
2003, There, Inc. launched its product, There.com, but they were unable to garner popularity beyond the initial early
adopters.[13] Ries claims that despite the many proximate causes for failure, the most important mistake was that the
company's "vision was almost too concrete", making it impossible to see that their product did not accurately represent
consumer demand.[13]

Although the lost money differed by orders of magnitude, Ries concluded that the failures of There, Inc. and Catalyst
Recruiting shared similar origins: "it was working forward from the technology instead of working backward from the
business results you're trying to achieve."[6]

Precursors
The lean startup methodology is based on lean manufacturing, the streamlined production process pioneered by Taiichi
Ohno by combining flow principles used by Henry Ford starting in 1906 and the TWI programs introduced to Japan in
1951. After more than 15 years of experiments, he had a stable and reproducible system. Use of the term lean to describe
Ohno's system was first formalized in the 1990 book The Machine That Changed the World.[14]

The lean manufacturing system considers as waste the expenditure of resources for any goal other than the creation of
value for the end customer, and continually seeks ways to eliminate such waste. In particular, the system focuses on
minimizing inventory throughout the assembly line. Kanban cards are used to signal only when the necessary inputs to
production are needed, and in so doing, reduce assembly waste (inventory) and increase productivity.[15] Additionally,
immediate quality control checkpoints can identify mistakes or imperfections during assembly as early as possible to
ensure that the least amount of time is expended developing a faulty product.[16] Another primary focus of the lean
management system is to maintain close connections with suppliers in order to understand their customers' desires.

In an article published in the Harvard Business Review in 2013, Ries' mentor Steve Blank described how the lean startup
methodology also draws its inspiration from the work of people like Ian C. MacMillan and Rita Gunther McGrath who
developed a technique called discovery-driven planning, which was an attempt to bring an entrepreneurial mindset to
planning.[17]

Overview
Similar to the precepts of lean manufacturing, the lean startup methodology seeks to eliminate wasteful practices and
increase value-producing practices during the product development phase so that startups can have a better chance of
success without requiring large amounts of outside funding, elaborate business plans, or the perfect product.[5] Customer
feedback during product development is integral to the lean startup process, and ensures that the producer does not invest
time designing features or services that consumers do not want.[18] This is done primarily through two processes, using
key performance indicators and a continuous deployment process.[2][19][20]

Because startups typically cannot afford to have their entire investment depend upon the success of one single product
launch, the lean startup methodology proposes that by releasing a minimum viable product that is not yet finalized, the
company can then make use of customer feedback to help further tailor their product to the specific needs of its
customers.[2][5]

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The lean startup methodology asserts that the "lean has nothing to do with how much money a company raises"; rather it
has everything to do with assessing the specific demands of consumers and how to meet that demand using the least
amount of resources possible.[4]

Definitions

Definitions based on The Lean Startup

In his blog and book, Ries uses specific terms to refer to the core lean startup principles.

Minimum viable product

A minimum viable product (MVP) is the "version of a new product which allows a team to collect the maximum amount of
validated learning about customers with the least effort" (similar to a pilot experiment).[7][21] The goal of an MVP is to test
fundamental business hypotheses (or leap-of-faith assumptions) and to help entrepreneurs begin the learning process as
quickly as possible.[7] As an example, Ries notes that Zappos founder Nick Swinmurn wanted to test the hypothesis that
customers were ready and willing to buy shoes online.[7] Instead of building a website and a large database of footwear,
Swinmurn approached local shoe stores, took pictures of their inventory, posted the pictures online, bought the shoes
from the stores at full price after he'd made a sale, and then shipped them directly to customers.[7] Swinmurn deduced that
customer demand was present, and Zappos would eventually grow into a billion dollar business based on the model of
selling shoes online.[7]

Continuous deployment (only for software development)

Continuous deployment, similar to continuous delivery, is a process "whereby all code that is written for an application is
immediately deployed into production," which results in a reduction of cycle times.[22] Ries states that some of the
companies he's worked with deploy new code into production as often as 50 times a day.[22] The phrase was coined by
Timothy Fitz, one of Ries's colleagues and an early engineer at IMVU.[7][23]

Split testing
A split or A/B test is an experiment in which "different versions of a product are offered to customers at the same time."[7]
The goal of a split test is to observe differences in behavior between the two groups and to measure the impact of each
version on an actionable metric.

A/B testing is sometimes incorrectly performed in serial fashion, where a group of users one week may see one version of
the product while the next week users see another. This undermines the statistical validity of the results, since external
events may influence user behavior in one time period but not the other. For example, a split test of two ice cream flavors
performed in serial during the summer and winter would see a marked decrease in demand during the winter where that
decrease is mostly related to the weather and not to the flavor offer.

Another way to incorrectly A/B test is to assign users to one or another A/B version of the product using any non-random
method.

Actionable metrics
Actionable metrics can lead to informed business decisions and subsequent action.[7][24] These are in contrast to vanity
metrics—measurements that give "the rosiest picture possible" but do not accurately reflect the key drivers of a business.

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Vanity metrics for one company may be actionable metrics for another. For example, a company specializing in creating
web based dashboards for financial markets might view the number of web page views[20] per person as a vanity metric as
their revenue is not based on number of page views. However, an online magazine with advertising would view web page
views as a key metric as page views are directly correlated to revenue.

A typical example of a vanity metric is "the number of new users gained per day". While a high number of users gained per
day seems beneficial to any company, if the cost of acquiring each user through expensive advertising campaigns is
significantly higher than the revenue gained per user, then gaining more users could quickly lead to bankruptcy.

Pivot
A pivot is a "structured course correction designed to test a new fundamental hypothesis about the product, strategy, and
engine of growth."[7] A notable example of a company employing the pivot is Groupon; when the company first started, it
was an online activism platform called The Point.[1] After receiving almost no traction, the founders opened a WordPress
blog and launched their first coupon promotion for a pizzeria located in their building lobby.[1] Although they only
received 20 redemptions, the founders realized that their idea was significant, and had successfully empowered people to
coordinate group action.[1] Three years later, Groupon would grow into a billion dollar business.

Steve Blank defines a pivot as "changing (or even firing) the plan instead of the executive (the sales exec, marketing or
even the CEO)."[25][26]

Innovation accounting
This topic focuses on how entrepreneurs can maintain accountability and maximize outcomes by measuring progress,
planning milestones, and prioritizing.[27]

Build-Measure-Learn
The Build–Measure–Learn loop emphasizes speed as a critical ingredient to product development. A team or company's
effectiveness is determined by its ability to ideate, quickly build a minimum viable product of that idea, measure its
effectiveness in the market, and learn from that experiment. In other words, it's a learning cycle of turning ideas into
products, measuring customers' reactions and behaviors against built products, and then deciding whether to persevere or
pivot the idea; this process repeats as many times as necessary. The phases of the loop are: Ideas → Build → Product →
Measure → Data → Learn.[28]

This rapid iteration allows teams to discover a feasible path towards product/market fit, and to continue optimizing and
refining the business model after reaching product/market fit.[28][29]

Definitions popularized after The Lean Startup

Business Model Canvas

The Business Model Canvas is a strategic management template invented by Alexander Osterwalder and Yves Pigneur for
developing new business models or documenting existing ones. It is a visual chart with elements describing a firm's value
proposition, infrastructure, customers, and finances. It assists firms in aligning their activities by illustrating potential
trade-offs.[30]

Lean Canvas
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The Lean Canvas is a version of the Business Model Canvas adapted by Ash Maurya specifically for startups.[28] The Lean
Canvas focuses on addressing broad customer problems and solutions and delivering them to customer segments through
a unique value proposition.[31]

The movement
Ries and others created an annual technology conference called Startup Lessons Learned which has subsequently changed
its name to the Lean Startup Conference.[32] Lean startup meetups in cities around the world have garnered 20,000
regular participants.[6] The first lean startup meetup named Lean Startup Circle was created by Rich Collins on June 26,
2009[33] hosting speaking events, workshops, and roundtable discussions. As of 2012, there are lean startup meetups in
over 100 cities and 17 countries as well as an online discussion forum with over 5500 members.[34] Third-party organizers
have led lean startup meetups in San Francisco, Chicago, Boston, Austin, Beijing, Dublin, and Rio de Janeiro, among
others—many of which are personally attended by Ries—with the Chicago and New York City Lean Startup Meetups
attracting over 4,000 members each.[35] The Lean Startup Machine created a new spin on the lean startup meetups by
having attendees start a new company in three days.[36] As of 2012, the Lean Startup Machine claimed to have created over
600 new startups this way.[37]

Several prominent high-tech companies have begun to publicly employ the lean startup methodology, including Intuit,
Dropbox, Wealthfront, Votizen, Aardvark, and Grockit.[38][18][39] The lean startup principles are also taught in classes at
Harvard Business School and UC Berkeley and are implemented in municipal governments through Code for America.[12]

In addition, the United States Government has recently begun to employ lean startup ideas. The Federal Chief Information
Officer of the United States, Steven VanRoekel noted that he is taking a "lean-startup approach to government."[40] Ries
has also worked with the former and current Chief Technology Officers of the United States—Aneesh Chopra and Todd
Park respectively—to implement aspects of the lean startup model into the United States Government.[41][42] In particular,
Park noted that in order to understand customer demand, the Department of Health and Human Services, recognized "the
need to rapidly prototype solutions, engage customers in those solutions as soon as possible, and then quickly and
repeatedly iterate those solutions based on working with customers."[43][44] In May 2012, Ries and The White House
announced the Presidential Innovation Fellows program, which brings together top citizen innovators and government
officials to work on high-level projects and deliver measurable results in six months.[45]

Lean concepts
Lean startup principles have been applied to specific competencies within typical startups and larger organizations:[17]

Lean analytics Lean marketing

Lean brand management Lean product management
Lean hardware Lean sales
Lean events Lean software development
Lean manufacturing Lean UX

Criticism
Ben Horowitz, the co-founder of venture capital firm Andreessen Horowitz, wrote an article in 2010 criticizing the lean
startup method for over-emphasizing "running lean" (constantly cutting and reducing non-essential parts of the company
to save time and money). He specifically disagreed with portraying "running lean" as an end rather than a means to
winning the market without running out of cash. Horowitz gave as an example his startup Loudcloud, which by "running

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fat" was able to outperform 20 direct competitors and after 8 years reach a value of $1.6 billion.[46] However, at least since
2008, numerous advocates of lean methods have pointed out that "running lean" does not mean cost
cutting.[47][48][49][50][51][52][53][54]

Trey Griffith, the VP of technology at Teleborder, stated in 2012 that the majority of backing for the lean startup
methodology was anecdotal and had not been rigorously validated when first presented. However, he goes on to note that
better support of the method comes out of a 2011 analysis of the factors of success in growth companies as described in the
2011 book Great by Choice.[55]

John Finneran, a business writer and former user of the lean startup method, described in 2013 a number of the method's
assumptions that he did not recognize during his use of the method. In particular, he observed that his clients were often
not motivated to invest time and effort into helping iterate a minimal viable product; instead they wanted a more polished
product to begin with. Second, he found virtually no early adopters who were willing to try to give feedback on unpolished
software simply to be the first to get a chance at it. Third, he argued that lean startup can distract from essential
traditional management practices like development discipline and budget protection. In general, he stated that it is
important to be critical and skeptical of lean startup methods rather than pre-supposing that they will be effective.[56] Ries
had already anticipated this criticism in his book when he wrote, on page 279: "We cannot afford to have our success breed
a new pseudoscience around pivots, MVPs, and the like. This was the fate of scientific management, and in the end, I
believe, that set back its cause by decades."[7] This implies that the concept of validated learning applies to the lean startup
methods themselves, and not just to products.[57]

See also
Design thinking

References
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06/eric-ries-lean-startup-machine). Fast Company. Retrieved 4 June 2015.
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that lean methods and concepts have come to be seen primarily as cost-cutting tools. But this is wrong. An emphasis
on cost reduction risks the success of the lean initiative."
49. Waddell, Bill (11 July 2011). "Why lean is not a good cost reduction strategy" (http://kevinmeyer.com/blog/2011/07/why
-lean-is-not-a-cost-reduction-strategy.html). Retrieved 4 June 2015. "The problem is that lean is not a cost reduction
strategy. Properly applied, lean principles will not reduce spending much at all. Lean is aimed at enhancing the top
line – sales – not the total spending line."
50. Graban, Mark (2012) [2009]. Lean hospitals: improving quality, patient safety, and employee engagement (2nd ed.).
New York: Productivity Press/Taylor & Francis. p. 31 (https://books.google.com/books?id=m_vRBQAAQBAJ&pg=PA3
1). ISBN 9781439870433. OCLC 726074707 (https://www.worldcat.org/oclc/726074707). "Lean thinkers see cost as
the end result of all our systems and processes. As an end result, cost is not something that can be directly impacted.
Or at least we do not have an impact on it in the traditional "cost-cutting" ways, which typically have meant layoffs and
possibly the scaling back of services provided to our community. Lean hospitals focus on reducing waste, not cutting
costs. Lean organizations also focus on the customers (the patients) and the value that is being delivered to them. In
this way, Lean is not focused on doing less but rather on delivering the right amount of value. If we are reducing
waste, we can often provide more value while expending less effort and less cost."
51. Sarkar, Debashis (2012). Lessons in lean management: 53 ideas to transform services. Chennai: Westland. p. 4 (http
s://books.google.com/books?id=dEieGznWd0EC&pg=PA4). ISBN 9789381626801. OCLC 821263409 (https://www.w
orldcat.org/oclc/821263409). "Organizations often view Lean as purely a cost-cutting tool. This is a parochial view
from individuals or organizations that do not entirely comprehend what Lean thinking is and what it can do to a
business. Lean is not a cost-cutting tool but a method that drives cost-efficiency."
52. Grady, Kenneth (25 February 2015). "Lean is not about cost cutting" (http://www.seytlines.com/2015/02/lean-is-not-ab
out-cost-cutting/). seytlines.com. Retrieved 4 June 2015. "If we go back to the central premise of this post – lean is
not about cost cutting – then I need to address what lean "is" about. Lean is a philosophy through which we look at
value from the client's perspective and focus what we do on delivering that value while respecting people."
53. Markovitz, Daniel (30 March 2015). "For the last time: cost cutting isn't 'lean' " (http://markovitzconsulting.com/blog/for
-the-last-time-cost-cutting-isnt-lean/). markovitzconsulting.com. Retrieved 4 June 2015. "There's plenty of research
proving that cost reduction isn't sustained in the long run. Just like weight always comes back after drastic dieting,
costs always creep back two to three years after drastic cuts, because the underlying processes and capabilities
haven't been improved."
54. Paterson, James C. (2015). Lean auditing: driving added value and efficiency in internal audit (1st ed.). Chichester,
UK; Hoboken, NJ: John Wiley & Sons. p. 9 (https://books.google.com/books?id=WoGbBQAAQBAJ&pg=PA9).
doi:10.1002/9781119017066 (https://doi.org/10.1002%2F9781119017066). ISBN 9781118896884. OCLC 890127776
(https://www.worldcat.org/oclc/890127776). "Lean ways of working should not simply be equated with cost cutting."
55. Griffith, Trey (17 January 2012). "Empirically validating the lean startup: making a startup great by choice" (http://tgriff
3.com/post/16007830705/empirically-validating-the-lean-startup-making-a&bwsCriterion=anecdo&bwsMatch=1).
tgriff3.com. Retrieved 4 June 2015.
56. Finneran, John (1 April 2013). "The Fat Startup: lessons from my failed Lean Startup" (http://www.johnffinneran.com/b
log/fat-startup-learn-the-lessons). johnffinneran.com. Retrieved 4 June 2015.

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57. Maurya, Ash (2012) [2010]. Running lean: iterate from plan A to a plan that works (https://books.google.com/books?id
=j4hXPn233UYC). The lean series (2nd ed.). Sebastopol, CA: O'Reilly. p. xxviii (https://books.google.com/books?id=j
4hXPn233UYC&pg=PR28). ISBN 9781449305178. OCLC 759911462 (https://www.worldcat.org/oclc/759911462).
"One of the things that particularly drew me to the Lean Startup methodology is that it is a metaprocess from which
more specific processes and practices can be formulated. The same principles used to test your product can and
should be applied to test your tactics when taking these principles to practice. There is no room for faith in a Lean
Startup.... There are no silver bullets. No methodology can guarantee success. But a good methodology can provide
a feedback loop for continuous improvement and learning."

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