The Lean Startup in bullet points

  • Product Development:
    • Build-Measure-Learn Loop
      • Form a hypothesis on customer reaction to a new feature or product
      • Build that feature and only what is necessary to implement that feature
      • Scientifically measure customer reaction to that new feature
        • Control vs experimental, i.e. A/B testing
        • Since products are in early development and we are testing a new feature on an old feature, measure performance vs control based on growth variables rather than gross variables i.e. focus on activation %, conversion %, referrals per customer instead of # of activations, # of conversions, total customers
      • Learn
        • Learning is the most important. Learning helps guide next steps and helps eliminate waste
        • Understand the empirical/quantitative results and the qualitative feedback
          • Be scientific and unbiased about feedback
          • Don’t forget “Genchi Gembutsu”, which is a Japanese term used at Toyota meaning that you must see customer reaction and understand him firsthand
        • Choose how to proceed – whether to change direction based on feedback or try something related
    • Advice on optimizing the Build-Measure-Learn Loop
      • Apply the principles of Lean Manufacturing to the Build-Measure-Learn Loop
        • Kanban
          • Reduce inventory and make sure to not begin production until space opens in the next step of the product life-cycle
            • Sometimes referred to as Just in Time inventory management
            • For start-ups, the product/hypothesis/feature production line or life-cycle is:
              • Backlog
              • In Progress
              • Built
              • Validated
            • No progress until more space is opened up in the ensuing step
        • Quality control
          • If any defects are discovered, immediately stop production
            • Ask 5 Why’s
            • If you ask why enough, you can get pasto the root cause of the problem and the procedures that allowed it to happen
        • Use small batch sizes. In any process, there are steps. If one step is prone to error or cumbersome, then it can create a bottleneck for the entire production process. As they say, a chain is only as strong as it’s weakest link.
          • Defects in process can be discovered quickly
          • Lower inventory required
          • Greater ability to create diverse products
  • Company Growth:
    • 4 major ways to generate revenue growth
      • Word of mouth
      • As a side effect of usage
      • Through funded advertising
      • Through repeat purchase or usage
    • Identifying the company’s engine of growth can help guide the company’s focus and prioritize its energies
      • Engines of growth i.e. the main driver of growth
        • Sticky engine of growth
          • Businesses that rely on having a high retention rate or repeat business should focus on lowering churn
        • Viral Engine of growth
          • Focus on new customers/transactions generated per customer/transaction
        • Paid Engine of Growth (paying for new customers)
          • Focus on increasing life time value (“LTV” which is revenue less variable costs) and lowering cost of acquisition
  • Building a Culture with the Lean Startup Principles:
    • Use the 5 Why’s (see above) whenever a problem arises
      • Answer each Why? in an objective manner, not assigning blame to people but to procedures or objects
      • Make a proportional investment at each answer to help fix the problem at hand
    • Give startup or product development group security and a personal stake in its success. Make that group accountable for success, but give them room to innovate
    • Involve everyone up, down, and across the Company’s functions so as to:
      • Get comprehensive input
      • Get buy-in across groups and eliminate an aura of secrecy or threatening/disruptive innovation from the startup group
      • Make your company learn the most it can from each other, the lean startup way of thinking, product development and performance, and feedback from customers
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