‘Lean Startup’ definition of value

In the book “The Lean Startup Method”, Eric Ries, as CTO/co-founder of IMVU, describes an early experience with the startup.  After months of product development they realized that their customers weren’t interested in their product.  He realized that while he could console himself with the benefit of learning from the failure, such learning was little consolation to employees and investors.

The key concept for startups is what Ries defines as “validated learning”.

How do you validate learning?
You create increments of your software which you release to customers.  You track the response of specific groups of customers.  For example, you should be able to generate data which shows that after introducing the feature ‘simple login’ in February, the adoption of customers who used that feature has greatly increased compared to customers who don’t have that feature (as opposed to showing a general graph of customer adoption.)

Ries also introduces the concept of the scientific method and ‘experiments’.  This is how he describes an ‘experiment’.

“It begins with a clear hypothesis that makes predictions about what is supposed to   happen.  It then tests those predictions empirically. “

He gives the example of Zappos, the world’s largest online shoe store:

When starting the store, the founder, took pictures of shoes from stores and posted them online.  The question he was trying to answer was: “Is there already sufficient demand for a superior online shopping experience for shoes?”  The important takeaway from the example is that you should build a “minimalistic” product to conduct your experiment (as opposed to early e-commerce startups which invested in warehouses, inventory and a final product).

Definition of value

In the Lean Startup, anything which doesn’t result in validated learning is waste.  Instead of creating product features, you can create a ‘facade’ (see MVP below).  This is then used to get feedback from customers.  The feedback is in the form of actual customer adoption, not as a survey or a focus group.

While soliciting customer feedback is an important part of agile, sometimes teams may be a bit forgiving about the feedback they get.  Internal stakeholders may be used as proxies for customers (in agile).  The Lean Startup is unambiguous in the feedback (validated learning).  Teams must be able to check each user story with ‘validated learning’.  Without that the story is incomplete.

This is enough to understand the concept of ‘value’ in the Lean Startup.  I will write more about the ‘Lean Startup’ later.  There are a few additional concepts which are relevant to this post which are explained in the following paragraphs.

Additional concepts

Minimum Viable Product (MVP) : A Minimum Viable Product (MVP) is the smallest needed to sell to potential customers.  A good example of this is the start of Groupon.  Groupon started by rapidly assembling a set of deals without a lot of focus on the presentation.  The idea is to get rapid feedback on the concept which can be refined based on customer feedback. (The definition of MVP used in the book is from Frank Robinson of PMDI ).

Startup: What is a startup?  The book cover includes a definition of a startup, “an organization dedicated to creating something new under conditions of extreme uncertainty.  This is just as true for one person in a garage as it is in a group of seasoned professionals in a Fortune 500 boardroom.  What they all have in common is a mission to penetrate the fog of uncertainty to discover a successful path to a sustainable business.”  Although this may be partly marketing, the definition includes any type of software project/product.  In the book Ries gives an example of Intuit using his concepts.  He gives many other example of large companies.

Agile vs. Lean Startup: It might seem that the Lean Startup doesn’t really add anything new to agile.  One major difference is that the Lean Startup is insistent on ‘validated learning’.  In the case of agile, customer feedback is critical.  However, in smaller organizations or for products which are not web based, there may be limited customer feedback.  The product owner and the team can also be used as proxies for the customer.  Not so in the Lean Startup.  The other important difference is Lean Startup’s focus on business returns/value.  A key question that Lean Startup teams need to answer is to show growth in existing customers or growth in adoption by new customers – without smoke and mirrors presentations.  Similarly the Lean Startup also encourages teams to validate their business model by creating MVPs which are focused on the business and business processes, not necessarily the technology.

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