The Lean Startup is a 2011 book by Eric Ries, where it is introduced a new and modern entrepreneurial approach, defined in the previous years by Ries himself, and very popular today expecially amongst the Silicon Valley’s Startups.
In his work, Ries tries to renovate the Startup, making it more agile and above all making easy to track the progresses: new concepts are introduced, new metrics to evaluate the company trends, and a new cyclic methodology of production.
In this summary you will find the most important concepts introduced by the Lean methodology. If you want to learn more about the Lean Startup, you can buy the book from Amazon, at the best price available on the net:
Beware of the vanity metrics!
Eric Ries suggest, in order to evaluate the company trend, to mistrust of all those metrics that does not have three fundamental features, the so calledvanity metrics:
- should be possible to establish a cause-effect relation between my actions (cause) and how much the metrics value has changed (effect) because of my actions
- accessibility: everyone involved in the business should be able to access and understand the metric, it should not be too much technical or confused
- credible: we should be able to affirm without any doubt that the data is correct
Use customized or specific metrics
It is not true at all that the metrics should be the same for every company (the abused metrics like gross margin, net profit, ecc.). A good metric is specific and tailored for our needs or in general the for the characteristics of our business sector.
For example, a manufacturing company has a growth rate related to three factors, but those factors are not necessarily the same for other sectors. In this case the factors are:
- the cost to engage a new customer
- the return rate of customers
- the profitability of one customer
The Lean Startup’s fundamental cycle
The production inside a Lean company includes several different phases, constituting a cycle: in fact is possible (but it is not always true) that at the end of the cycle we start over from beginning. The phases are:
- MVP Creation
- Measurements and analysis of the first data
- Later measurements
- Trend evaluation: is the company going according to the plans?
- If negative, a Pivot could be necessary
MVP means Minimum Viable Product: we should realize a product having just the essentials features to start with, and enter the market as soon as possible, in order to start to measure the outcomes. There will be plenty of time to perfectionate the product/service, the most important thing is to reduce the time-to-market and start measuring to discover if the business model of the Startup could work or otherwise.
Discover the pivot and the cohort analysis reading the second and last part of this preview of the key concepts of the Lean Startup book.