To maximize the chances of success for your start-up, go ‘lean’
Different sources ranging from Harvard Business School professors to various Forbes articles cite the failure rate of start-ups at an astounding 75% – 90%. Why does this happen? Why do ventures led by brilliant strategists and highly experienced professionals fail?
While inadequate or improperly managed funding is known to be a common reason for the failure of new businesses, as per a study by Fortune, 42% of failed startups also cite a ‘lack of a market need’ as the single biggest factor for the failing of their venture. From a bird’s eye view, doesn’t it seem strange for founders to take their eyes off the cashflow they need to manage? What could be causing entrepreneurs to get caught up in other business activities when it isn’t clear if their product works in the market? For several decades, new businesses have been following the same rigid path of first developing a detailed business plan, complete with financial forecasts, pitching to investors, recruiting extensively, and then starting to sell. While this certainly works in some cases, the probability that something goes wrong is much higher.
Fortunately, with widespread literature on entrepreneurship, innovation and strategy now available, and an increasingly transparent work culture, founders seem to be learning from their own as well as others’ mistakes. Founders and investors alike have begun to re-think the set-in-stone path in favor of more adaptive and responsive ways to build businesses.
Here’s where the lean start-up methodology comes in. It promotes observation and innovation, quick market testing, formation and discarding of hypotheses, and continuous iteration – all without losing focus.
As a founder, here’s how you can implement four key ‘lean start-up’ practices to maximize your chances for business success.
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1 – TESTING before you launch
In several cases, entrepreneurs build elaborate models, teams, and sales plans all without first checking for customer feedback on their offering. You may have heard of the terms ‘minimum viable product (MVP)’ or ‘proof of concept’. These are built around the same idea – have you confirmed whether or not your product or service is needed or wanted by consumers and matches demand? Have you attempted a pilot? Do you have proof of viability?
2 – Using MONEY conservatively and creatively
As a founder, you need to be mindful that you’re still searching for a viable business model; at this early stage of your venture, you’ve got to test your hypothesis in the market, confirm that your offering works, and that you will be able to successfully repeat and scale the process in a manner that makes you a profit. You might not hit the nail on the head the very first time. The essence of the lean methodology is continuous iteration, so you want to conserve your funds and use them creatively and wisely!
Lean start-ups focus on speed and agility. You want to get your product or service out there, to real customers, and get real inputs. Ask all stakeholders involved in your journey for honest feedback. You want to refine not only your offering and its benefits vis-à-vis its pricing but also its positioning, distribution channels, customer acquisition and customer loyalty. Move quick and inculcate a culture of responsiveness and agility but remember to keep your eyes on your strategy and don’t lose your focus.
4 – EXPERIMENTING and ITERATING till you get it right
Entrepreneurs that want to make the most of the opportunity at hand often embrace an experimental approach. They ask for and apply feedback to update their assumptions, redesign their product or service, test it again, and keep making further iterations till they have something that absolutely delights their customers. Embrace this approach of constant improvement and innovation, and before long you’ll have an irresistible offering.
Companies around the world ranging from one-person run start-ups to incubators within multinational corporations are adapting to the lean methodology! So, go on and incorporate whichever practices you feel will help take your business to the next level, you have no time to lose!