Category Archives: The Lean Startup

Why Startups Fail

I think, to succeed, we should know what failure is and what it takes to fail.

We look at numerous startups that fail. Why?

The first problem is a weak business model, market research and strategy.

As a startup, entrepreneurs have to operate with most uncertainty, they do not yet know who their customers are and what should their products be. A strategy can be worked out by accurate forecasting and planning, startup lacks those due to insufficient or no historical data to analyze.

An extensive process and management is required to apply all the above in startups. It may sound a little weird to perform analysis and derive forecast with no historical data, but this can be done on approximation to forecast closer to accurate. Knowing what your product should be and who the target customers are will help a startup to succeed. A market research and validation of product with the target customers is required at this phase.

The second problem is that early entrepreneurs may think of the traditional approach about managing a business is old school and follow the “just do it!” approach where things become less managed and more chaotic. “Just do it!” approach is essential to get started with your idea, but the same approach don’t apply when it comes to managing a business. Even if startups are excited and enthusiastic, chaotic management approach never work, it may seem very disinteresting to make all the policies and processes to run a business in an organized manner; however, it is essential. Keeping this right will help when the business is scaling. While the business is scaling, any entrepreneur will want to focus more on operations of the business instead of making policies and processes. Policies and processes are essential to run a business and if focused at startup phase, it’s more likely for a business to succeed.

The other problems arising later in a startup are product problems and capital. The key job of the entrepreneur here is to set financial milestones for raising capital. An entrepreneur should understand how much capital is left and should be able to analyze whether the remaining capital is sufficient to reach the financial milestone and a positive cash flow. A product problem may lead to a failure, the initial product that is launched may not be required by the market and hence is discarded by its users. This problem can be overcome by the entrepreneurs by validating their ideas with the customers before and during development. Later a feedback mechanism can be implemented to know the specific customer needs and make iterations to the product when required.

I found David Skok’s article on “Why Startups Fail” very helpful and also focus deeply on some additional aspects. Check out,  Why Startups Fail by David Skok


Principles of Lean Startup

I am simply putting down the exact words as described by Eric Ries as it is the best.

Eric Ries has described the principles as below;

  1. Entrepreneurs are Everywhere.

You don’t have to work in a garage to be in a startup. The concept of entrepreneurship includes anyone who works within my definition of a startup: a human institution designed to create new products and services under conditions of extreme uncertainty. That means entrepreneurs are everywhere and the Lean Startup approach can work in any size company, even a very large enterprise, in any sector or industry.

2. Entrepreneurship is Management.

A startup is an institution, not just a product, and so it requires a new kind of management specifically geared to its context of extreme uncertainty. In fact, as I will argue later, I believe “entrepreneur” should be considered a will argue later, I believe “entrepreneur” should be considered a job title in all modern companies that depend on innovation for their future growth.

3.Validated Learning.

Startups exist not just to make stuff, make money, or even serve customers. They exist to learn how to build a sustainable business. This learning can be validated scientifically by running frequent experiments that allow entrepreneurs to test each element of their vision.

4. Build-Measure-Learn.

The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere. All successful startup processes should be geared to accelerate that feedback loop.

5. Innovation Accounting.

To improve entrepreneurial outcomes and hold innovators accountable, we need to focus on the boring stuff: how to measure progress, how to set up milestones, and how to prioritize work. This requires a new kind of accounting designed for startups—and the people who hold them accountable.

Principles of Lean Startup as developed by
Principles of Lean Startup as developed by


Benefits of a MVP

We always get to know of any startup or a product that succeeded, but we seldom find out which failed.

There are a few reasons for product failure or not succeeding as expected. In many such cases, the product managers or entrepreneurs tends to overbuild their first version of a product. There are a lot of factors which direct entrepreneurs towards the decision of overbuilding the product which majorly triggers due to certain fears; underbuilding, giving competitors a chance to develop a better product and failure of the idea.

It’s not that building a minimum viable product (MVP) will always lead to success; however, it increases the chances of success. Similarly overbuilding also does not guarantee a great product that the customers want.

Starting with a MVP will help with the below described benefits:

  • Bring more value to the product’s market value proposition

Starting with a MVP will help you define your value proposition in a precise manner and gives you a platform to test your vision for the market product. You will be able to define goals, decide what exactly needs to be developed to test your value proposition and also spend money and time efficiently.

  • Reduce rework

If you define your goals right and decide the exact requirement of the MVP, it help building a product enough to validate the hypothesis, if a rework is needed later, it’s minimal. The early customers are not looking for what you offer in your core product, they don’t buy your product for the core features you offer, instead, they are looking to solve their specific problems by using your product. Give exactly the same to them, a minimal product researched and designed to solve their problems.

  • Create customer relations at an early stage

Starting with a MVP will you get a chance to start building customer relations sooner, though the product can be adopted by only a fewer segments of customers. Early adopters are more likely to provide feedback and suggest what the faults in the product are and what other features are required to be built. This helps you validate your value proposition at an early stage. The constant feedback mechanism will help you know the customers’ needs and to create a well laid product development roadmap.

  • Bring focus to critical business functions (Sales and Marketing)

Sales and Marketing are the key functions of any business. A great product will not sell if these two functions do not perform. By starting with a MVP, you can shift more focus on sales and marketing. Doing so will help you test all functions of your business are performing well and in a collaborated manner before you start scaling up. The best way I could find is to scale sales and marketing to a level you see a conversion drop and then return focus to the product.

A MVP can simply be described pictorially as:

Minimum Viable product
Minimum Viable product

More insights can be obtained by understanding the principles of lean startup; they are:

  1. Entrepreneurs are Everywhere
  2. Entrepreneurship is Management
  3. Validated Learning
  4. Innovation Accounting
  5. Build-Measure-Learn

In my next article, we will discuss the principles of lean startup.

Minimum Viable Product (MVP)

A minimum viable product (MVP) is a way to design and develop your product with sufficient features so that the product can be launched or sold to early customers. Once the product is launched and we have early beta customers, a constant feedback is taken from the beta customers and the future design and development is done on the product and this development is continuous.

A MVP has only those features that allow the product to be launched and sold.

An MVP is a strategy and process directed toward making and selling a product to customers. It is an iterative process of idea generation, prototyping, presentation, data collection, analysis and learning. One seeks to minimize the total time spent on an iteration. The process is iterated until a desirable product/market fit is obtained, or until the product is deemed to be non-viable.

The purposes of a MVP are, to:

  • be able to test a product hypothesis with minimal resources
  • accelerate learning
  • reduce wasted engineering hours
  • get the product to early customers as soon as possible
  • base for other products

The benefits of testing with a MVP are that, it:

  • brings more value to the product’s market value proposition
  • reduces rework
  • creates customer relations at an early stage
  • brings focus to critical business functions (Sales and Marketing)

In the future articles, I will focus on describing the benefits of a MVP and discuss the principles of the lean startup methodology.

Creating a Business Model

In my last article, we discussed the 3 key principles of a Lean startup. Now let’s focus on creating a business model.

I prefer the business model over the business plan because, business plans are about writing a book on your business which includes executive summary, revenue forecast for 3-5 years and many other things which are not a priority for now. Instead a business model is just 1 page and is more than enough and effective. The think part of this is that both the ways are based on assumptions. So why do you want to invest a lot of time creating a lengthy business plan. Create a business model instead.

I think the Alex Osterwalder business model canvas is the best way to create your business model, but as the market changes, there are a few changes of my own which I made to it which can be implemented once you have your MVP already in with the beta customers.

See below:

Business Model Canvas
Business Model Canvas


Now, let’s discuss each aspect of the model assuming that you already have your MVP (Minimum Viable Product) in the market with your beta customers.

  1. Customer Feedback: Your beta customers are the ones who are using your product and their feedback is the most worthy in knowing what the problems in your product are. A constant customer feedback is required to find out problems in your product and then you can analyze what are the key or priority problems you need to focus on.
  2. Resolution: Once you have determined the key problems, you have to find a resolution to fix them. Majorly the problems will be solved by adding some features to the product which are the requirement by the market. Remember, even after resolving problems and adding features, a constant customer feedback is always required to constantly find problems and resolve.
  3. Constant Innovation: The changes you make to your product by adding new features is a part of constant innovation. This is a progressive and constant phase running into the same cycle: Feedback -> Resolve -> Innovate -> Feedback -> Resolve -> Innovate and so on.
  4. Value Proposition: By constant innovation, the value of your product becomes unique in all its senses. By this time, you will not have to tell to the market how strong or unique your product is.
  5. Customer Relationship: By taking constant feedback and making constant innovation, you have already started building customer relationship with your beta customers. Now it’s the time to build new customers.
  6. Channels: These are the ways to find your customers and acquire them. Find which channels you can get your customers from.
  7. Customer Segment: Once you have the channels, you need to target your potential customers. Targeting all the customers is not an option as if you focus and identify only the customers who needs your product, that will help you grow with your product.
  8. Cost Structure: Now that you have entered the market and acquired customers, you need to restructure your costs and create a model for your costs. The costs may include; human resource, distribution, payroll, other administrative costs, acquisitions etc.
  9. Revenue Streams: Include your revenue model here, put down all about your financials here. I prefer to measure financial performance on gross margin instead of operating profit. Measuring Gross Margin and then comparing it with operating profit will give you a scope where you can save costs to add up to the net profits.

Steve Blank has a vast library which may interest you to get all your help on start-up. Here’s a link to his site: Startup Tools by Steve Blank

The Lean startup

Now that you have an insanely great idea, you have a definition and a great team to build a great product; I will discuss about the latest and the most effective methodology: “The Lean Start-up”

“The Lean Startup method teaches you how to drive a startup-how to steer, when to turn, and when to persevere-and grow a business with maximum acceleration”

The Lean Startup Process
The Lean Startup Process

Many startups begin with an idea and start building a product they think the people want. Without even showing the initial product to the probable customers the startup keeps on perfecting the product for a long time and never try to show it to the customer. It is most likely that the product is not required by your customers. Later when customers come back and show indifference in the product, the startup fails.

To counter all the challenges by following the conventional way and putting everything at risk, a new way has emerged that can make the startup less risky. Yes, it’s the Lean Startup method. What Lean startup counters against the conventional way is its experimentation over elaborate planning, customer feedbacks over assumptions and iterative design over the conventional up front design in line with the Bplan.

The Lean method have 3 important principles:

1. Instead of getting into a chaotic transactions of business planning, putting tremendous efforts in research and at the same time investing a considerable amount of money, entrepreneurs accept that they have a bunch of untested hypothesis which they consider good guesses, this hypothesis is put down together and we call it a Business model.

Continuous Innovation
Continuous Innovation

2. The customer development approach is implemented to validate the hypothesis or the business model. The entrepreneurs go out in the market to the probable customers and partners for a feedback on every segment of the business model. Once this is in place, a minimum viable product is introduced to the customers and looks for customer feedback. Then, using the customers inputs, the assumptions are revised and the product undergoes small iterations and pivots to the things that are not working.

Learn when its time to Pivot
Learn when its time to Pivot

3. Lean start-ups practice agile development. Agile development works hand-in-hand with customer development. Unlike traditional lengthy product development cycles that assumes customers’ needs and problems, agile development eliminates wastage of time and money by developing the product using the iterative and incremental method. Following this process, a minimum viable product is created and put to test.

In the future posts, we will discuss more about the Lean Startup methodology.