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The importance of Lean Startup during Covid-19

 

Lean Startup is well known within the startup community but has taken on new significance in the rapidly changing economic environment.

What is Lean Startup?

Lean Startup methodology is an approach to creating businesses and products based on what customers want and getting it to them quickly and efficiently. It espouses agility, streamlining, iterative product testing and validated learning. Its aim is to reduce the amount of time and resource it takes to create a successful product and bring it to market.

Steve Blank, Silicon Valley entrepreneur, best-selling author and one of the founders of Lean Startup, recently explained to MIT Sloan Management Review that the methodology was developed in response to his view that startups “weren’t just smaller versions of large companies.” His experience at the time was that a lot founders received advice that they should use the strategies and processes as though they were larger companies with established products and customers.

Blank says that it became clear that these assumptions were incorrect and small companies needed different tools and business models to achieve different aims.

Eric Ries, fellow entrepreneur, author of bestselling book The Lean Startup and the man who coined the phrase, says the fundamental question for businesses is not whether a product can be built, but rather whether it should be built.

Lean Startup focusses on Minimal Viable Products (MVPs), which are designed to test ideas and assumptions in the quickest and least expensive way possible. The MVP is then exposed to its target audience and data about engagement and use is captured. This is the measure phase, next comes the learn phase, which is analysis of the hard data the MVP is producing.

You can read in more detail about the methodology here, in an article Eagle Labs published earlier this year.

Why has Lean Startup taken on greater significance since Covid-19?

The current pandemic has created demand for the products and services of some startups but has impacted cashflow and created uncertainty for many more. Saving costs, and so extending runway (how long it can survive with the cash it has), as a natural result of using Lean Startup techniques and has never been more important for all sorts of early stage businesses.

But Lean Startup can be more than a defensive tactic. Indeed Ries believes that right now, in the midst of the Covid-19 crisis, is the best time to embark on a new business stating that opportunities arise for entrepreneurs when people are running for the exits.

His argument is that during a downtown, costs - such as labour, overheads and borrowing - are lower. In addition, there are government stimulus packages aimed at supporting businesses.

Ries’ argument holds weight as several startups founded during the 2008/9 economic crisis are now giants in their respective industries, such as WhatsApp, Uber, Airbnb, Slack and Venmo, to name a few.

More time on design

Social distancing and lockdown measures have meant that a central tenet of Lean Startup has been hampered - the “get out of the building” approach to customer development. The aim is to get in front of customers and partners and other stakeholders to test your hypotheses. That can be done remotely, of course, but perhaps not so successfully, especially with a physical product.

This means that startups can spend more time on design in this period. Imperial College London’s Business School suggests that this should lead to a more efficient and effective “build-measure-learn” process. If this is successful it could lead to a change in startup behaviour more widely from “build-measure-learn” to “design-build-measure-learn”.

A time to pivot?

The ability and willingness to pivot, to varying degrees, is also a key part of the Lean Startup idea. In his founding book Ries describes a pivot as a planned course correction that tests a new hypothesis about the product or strategy.

Covid-19 has forced many startups to rapidly change course. While some are pivoting to help out the health crisis, others are doing so out of economic necessity. In these difficult times, many startups and their founders are being forced to re-examine their short- and long-term strategies. Pressing concerns include crisis management, workforce welfare, business continuity and cash preservation. Making decisions on how to reposition during or beyond the pandemic is critical.

To understand what it takes to pivot, be it significantly or partially, we spoke with three startups in the Eagle Labs and Rise networks about how they have adapted since the crisis began. Read their experiences here.

Learning from Lean Startup

Lean Startup was developed to help businesses limit expenditure, be as agile as possible and respond quickly to changing customer needs. Startups may not follow each element of the methodology but by understanding its techniques and objectives they will be better equipped to seize the opportunities and tackle the challenges that lie ahead.

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