(continued from Process Types Part 1)
In the past decade, the Lean movement made an impact on the way businesses bring new products to market. The term was first introduced by John Krafcik (Krafcik, 1988) when referring to the manufacturing approaches in the Japanese market in the eighties. Lean manufacturing is an approach that in its core is made to avoid waste in every aspect of the process. The approach takes many of its ideas from the Toyota Production System, as introduced by Taiichi Ono.
Among its tenets are drawing on the knowledge and creativity of individual workers, the shrinking of batch sizes, just-in-time production and inventory control, and an acceleration of cycle times. It taught the world the difference between value-creating activities and waste and showed how to build quality into products from the inside out. (Ries, The Lean Startup, 2011)
In more recent years, these “Lean” principles have been applied to other parts of industry and business outside of the production settings. A prime example is the “Lean Startup” movement pioneered by Eric Ries. The basic idea in the Lean Startup approach, as in the Lean Manufacturing approach, is that waste has to be minimized in the startup phase of new endeavours. This approach can be valuable to innovation in the wide sense as well, not just for startups. As stated by Ries, a startup can be very broadly defined as:
“A human institution designed to create a new product or service under conditions of extreme uncertainty” (Ries, The Lean Startup, 2011)
This definition mentions nothing about the size of the institution. Sometimes a startup is the classic example of the new, young organization with a clear entrepreneurial spirit, and sometimes a startup is a new or existing division in a large enterprise creating a new product or service. What they all have in common are the uncertain conditions. To deal with this uncertainty, Ries postulates that progress of a startup should be measured in terms of validated learning. The sooner the startup learns, and subsequently acts on that knowledge, the smaller the “waste” the organisation will produce. Learning, in the mind of the author, should happen primarily through the use of experiments. These are the principles that are at the core of the Lean Startup movement (Ries, THE LEAN STARTUP METHODOLOGY):
- Enterpreneurs are everywhere: you do not have to identify with the prototypical young startup enterprise to be an entrepreneur.
- Entrepreneurship is management: being an entrepreneur is not something that happens haphazard. A real management approach is required, albeit maybe different from the approaches that you find in classic management literature.
- Validated Learning: the goal of the early stages of a startup is to learn how to build a sustainable business. The way to do this is through experiments that enable validated learning.
- Innovation Accounting: startups require their own measurement system, called innovation accounting, describing how progress should be measured, and how work can be prioritized.
- Build-Measure-Learn: there is a clear feedback loop to make validated learning possible, called the build-measure-learn cycle.
The Build-Measure-Learn feedback loop forms the process that Ries envisions for a lean startup. In order to get to “Validated Learning” as quickly as possible, one must build a prototype (which can range from a pen and paper prototype to a working prototype), measure the response through qualitative or quantitative research methods such as experiments, and learn from the results. The result of a learning phase should be either to fine-tune the approach, or to “pivot” to a radically different approach.
Figure 8: the Build-Measure-Learn Cycle (Ries, THE LEAN STARTUP METHODOLOGY)
While Ries describes many of the important principles and corroborates them with examples, In (Maurya, Running Lean: Iterate from Plan A to a Plan That Works, 2012), the author of “Running Lean” (Maurya, Running Lean: Iterate from Plan A to a Plan That Works, 2012) gives a more practical approach to the “Lean Startup” process. There are three steps in the “Running Lean” process:
- Document your plan A.
- Identify the riskiest parts of your plan.
- Systematically test your plan.
For documenting the plan, Maurya advises to use the “Lean Canvas”. The Lean Canvas, which is based on the Business Model Canvas by Alex Osterwalder (Osterwalder A. , 2010), is a one page overview of the business plan. Figure 9 provides an overview of the Lean Canvas.
Figure 9: the Lean Canvas :
Once the lean canvas has been drafted (which Maurya advises to not do this by oneself, and preferably through interations), the riskiest parts must be identified. The biggest risk of most startups is not the technical feasibility, but rather building a product that nobody wants. Therefore Maurya stipulates that a startup goes through three phases:
- Problem/Solution Fit: find out if we have a problem worth solving.
- Product/Market Fit: find out if we have built something people want.
- Scale: find out how we can accelerate growth.
Once the riskiest parts have been defined, it is time to systematically test the plan using the Build-Measure-Learn loop described earlier.
While the “Lean” processes definitely have their worth in the innovation space, we must be careful to generalize their applicability. First of all, even though many of the techniques have a common sense aura surrounding them, they have not been scientifically proven yet as being better than other models. Second, the lean approaches seem best suited to business where iterating through the loop multiple times in order to get client feedback is not a costly affair in itself, such as is the case for purely software based startups. Businesses where costly manufacturing is involved might not be so keen on a process that relies very heavily on iterative design and testing. Other critiques that have been posited can be found in (Kern, 2012), (Burgstone, 2012) and (Pelling, 2011).
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