In the ‘new venture development’ class we spoke about start-ups. What is a start-up? Eric Ries (2011) defines a start-up as ‘an organisation dedicated to creating something new under conditions of extreme uncertainty’. Our course director Janja Song explained:
Any person can transform an idea into a business. It’s easy to say, however it’s hard to put into practise. When I think about a business, the first thing I can associate it with is: investment, money and risk. How can I make sure that my idea is valid and my investment is worth a while? In a traditional way, running a business is to prepare a business plan and ‘hope’ that it will work. Janja Song explained during the class that in a traditional ‘linear’ way of developing a product the market testing takes place last, right before the commercialisation. There is a lot of risk in that approach! Firstly, preparing a business plan takes a lot of time and by the time it’s finished, our product or service might not be relevant anymore. Secondly, testing our market when the product is ready comprehends a big risk. Making sure that, what we are offering is what the general public needs, requires fresher and more innovative approach.
Lean start-up approach presented by Eric Ries (2011), it’s a technique that teaches totally new approach to managing the business and argues that anyone is capable of running a start- up, as long as they follow the right process. Lean start-up approach ‘reverses’ the procedure and investigate the needs of the customers at the begging of the process.
Build – measure – learn approach.
As a start- up, our main goal is to turn our idea into product that we can sell to our target audience. Build – measure – learn checks the validation of our idea and helps create the best product for our customers, using their feedback. The feedback gives two possible scenarios to follow: pivot or preserve. If the feedback is negative, we have a chance to improve it at the beginning of the process, way before we invest the money in something our customers don’t need.
Creating a product that people don’t need, sounds like something only a madman would do. However, according to CBinsights’ report the most common reason why start-ups fail is ‘no market need’.
Following the lean start-up method, you can save not only a lot of money, but also a lot of trouble. I’m excited to learn and understand this innovative approach when creating our start-up! ‘The lean start-up’ by Eric Ries is a pleasurable read, backed up with many examples that helped me understand the key steps of lean start -up. Build – measure – learn is only one of the methods presented in the book. There is more information about making a start-up a success. I definitely agree with Randy Komisar’s words cited in the
“If you are an entrepreneur, read this book. If you are thinking about becoming an entrepreneur, read this book. If you are just curious about entrepreneurship, read this book. Starting Lean is today’s best practice for innovators. Do yourself a favour and read this book.”
CBinsights(2018) ‘The top 20 reasons start-ups fail’[online] Available at: https://www.cbinsights.com/research/startup-failure-reasons-top/%5Baccessed:30/11/2018%5D
Ries, E (2011). The lean start-up: How constant innovation creates radically successful business. London: Portfolio Penguin.
Song. J (2018) Managing a Creative Business New Venture Development. Available at: https://canvas.kingston.ac.uk/courses/9278/pages/week-2-new-venture-development