Lean Startup Is Dead — Long Live Lean Startup

30 March, 2017 / Articles
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In a previous post, I wrote about how large companies are poised to be the greatest beneficiaries of the lean startup movement. We are entering an era of technology that is well suited to the resources that large companies have (i.e. The Third Wave). This next wave of technology will involve products and services that are costly to create and industry sectors that are highly regulated by governments (e.g. healthcare and education). These factors suit large companies because they have the resources to make the needed financial investments, form partnerships with other companies and influence government policy.

In addition to all this, the lean startup movement has revealed innovation best practice to the business world. We now know that innovation involves the search for sustainably profitable business models. There are several large companies that are currently working hard to embed some of these practices into their businesses. If large companies succeed in adopting innovative startup methods, then they will be in the best position to benefit from the era of technology we are about to enter.

Lean Startup Is Dead

There are some commentators that disagree with this idea. Instead, they argue that the third wave of technology actually means that the lean startup movement is nearing its end. Their view is that the large investments and the long lead times that are needed to do innovation in, for example healthcare, mean that lean startup practices are now irrelevant. My strong view is that the commentators making these claims have taken the wrong lessons from the lean startup movement. Below are some examples of these misconceptions:

  • Lean startup is about being cheap and investing only small amounts of money into products. If this is the case, then the lean startup only applies to products that can be made with little money such as apps and websites.
  • Lean startup is only for digital products. Physical products are expensive and take longer to make. Therefore, they cannot be made iteratively.
  • Lean startup is only for small companies with a small vision. If you have a big vision of putting a dent in the universe, then you cannot possibly use lean methods to do that.
  • Lean startup is all about running experiments and building minimum viable products. Oh yes, and don’t forget to pivot while you are at it.
  • Lean startup is about failing fast. And failing fast means failing next week.

These misconceptions have been around from the beginning of the movement. However, as we move into the third wave of technology, they have taken more prominence. If what large companies learn from lean startup are these ‘myths’, then they will not benefit from the movement. In order to benefit from their resources and current advantages in this new era of technology, large companies have to draw the right lessons from the lean startup movement.

Doing The Right Things At The Right Time

The number one reason why startups fail is premature scaling. This happens when a new product is launched into the market before the team is sure that anybody wants it. So the key take away from the lean startup movement is that innovators should be doing the right things at the right time. This principle has nothing to do with the amount of investment money that is available or the resources that a company has. Regardless of the type of product we are making, it is still important to make sure that we understand our customers needs and their jobs to be done. It is also important to ensure that the product we are creating will deliver value to our customers. This is the real valuable insight from the movement: first we search, then we execute.

This insight applies to digital as well as physical products. In fact, when larger investments are at stake, ensuring that we are making stuff people want becomes more, not less, important. Many commentators forget that the lean startup movement was actually inspired by companies that make physical products, for example Toyota’s lean manufacturing or Zara’s lean management of their inventory. IDEO, the legendary pioneers of design thinking, use ‘lean principles’ to make physical products (e.g. the mouse for the first Macintosh). Design thinking puts the customer at the centre of innovation, regardless of the product that is being made.

Business Models Matter

Even with the best R&D department in your company, the business model question doesn’t go away. In fact, research shows that there is no relationship between R&D spending and revenue or profits within a company. In discussing some of the failures of Xerox PARC to commercialize their inventions, former Chief Scientist John Seely Brown, notes how it is important for innovators to find the “architecture of revenues”. So beyond making stuff people want, another key takeaway from the lean startup movement is that business models matter.

The science man and innovator, Fernando Fischmann, founder of Crystal Lagoons, recommends this article.

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