The Lean Reality Check

This isn’t a critique of the Lean Startup. I don’t have the guts to do that. No, this is just an attempt to put the Lean Startup back in its box, from which it is has been inadvertently liberated. Don’t get me wrong – I believe that Eric Ries and friends have given entrepreneurialism a great gift, by codifying best practices and defining a common language that has made it possible for us to talk about our process. I’ve found the Lean Startup movement very useful in terms of refining my own thinking, but have encountered some who have adopted it too religiously, and are in danger of grossly misapplying its teachings. In response I’ve compiled my top 5 Lean Startup reality checks. Read on if you dare, and comment if you can.

Merman on Lean

It's alright, Merman. Lean is still great.

#1 The Lean Startup isn’t Revolutionary

I’ve been thinking for some time about a term that could encapsulate trends that are changing the startup landscape. After some trial and error, I’ve settled on the Lean Startup. – Eric Ries, 1st blog post on the Lean Startup

The Lean Startup movement described what was happening anyway, it didn’t invent it. In fact, the startup industry didn’t invent it either. The analytics-driven approach of the Lean Startup is an established aspiration of traditional business (in fact it’s a hallmark of the Lean Startup’s grand daddy, Lean Manufacturing). What’s remarkable about Lean Startups is that they have replaced quarterly analytics with real-time analytics, and have reduced product iterations to mere days. They are like traditional businesses in fast-forward. The Lean Startup isn’t a revolution, but it marks the point at which the feedback cycle got so fast it changed our daily behavior.

#2 Lean isn’t “Mean”

The reality is the Lean Startup method is not about cost, it is about speed. – Eric Ries

There’s something about the word "Lean" that makes everyone feel they immediately understand it. In manufacturing, CEOs skipped reading the book (the excellent Lean Thinking) and used "Lean" as an excuse to fire people (a fact the authors lament). In the startup world, Lean is becoming an excuse to not fund ambitious companies. The VC phrase "capital efficiency" refers not just to the ratio of investor returns to investment, but to the cheapness of validating the startup, which decreases the overall risk of investing over time. This logic is driving the tide of investment towards ultra-low cost startups, leaving many high-quality enterprise software startups beached. If I had very deep pockets, I would rather have my pick of the latter, than join the herd grazing for the next Twitter in the former.

#3 Lean isn’t a Perfect Fit for Most Businesses

Before people get mad, I’m willing to accept that the lessons of Lean are important for all businesses. However, I think most companies can’t adopt the whole methodology, and are being made feel guilty for it. Here’ s a few reasons:

  • They may have long sales cycles, perhaps because they’re selling to enterprise or government. In this environment, development iterates much faster than customer feedback.
  • They may have a very niche product and a small target audience, e.g., specialist prosumer software. Focusing on split testing will yield either statistically insignificant results, or a very long feedback cycle.
  • They may actually be solving a hard problem. This may mean extensive upfront R&D in the absence of paying customers.
  • They may be a professional services company, not developing a product (making MVP irrelevant).

I’ve met a few people in the above situations, all of whom seem to have a kind of suppressed rage at being invalidated by Lean. Part of our portfolio also falls into some of these categories, but I’m not worried. The world would be a poorer place if no one sold to big companies, sold to small companies, invented anything or provided services.

#4 People Can Smell Smoke Tests

The popular strategy of launching a mock website has a few goals:

  1. It forces you to articulate your value proposition to your audience.
  2. It allows you to point Google Adwords at something while you experiment with market segmentation.
  3. It’s touted to give you early feedback about future popularity by tricking people into registering their interest.

I’m a bit dubious about whether you need a mock website to do (1) and (2), and in terms of (3) I think that people are learning to spot these websites a mile away. As a result, it’s hard to read anything into the statistics from anything but the most successful examples.

#5 Smoke Testing Obscures Customer Needs

Lean zealotry may prevent people from proceeding into any market without having conducted a successful smoke test to establish potential interest. The problem is the assumption that the startup already understands the final value proposition that they want to test. No company in my personal experience has ever got the value proposition right with the first product. In all instances, the first product helped establish relationships with early customers, who then led us towards their bigger needs, and more relevant second products.

I believe that founders who insist on validating their markets with mock websites miss out on meaningful conversations with potential customer segments, and may end up walking away from projects that would have ended up somewhere very profitable. Therefore, our current strategy is to launch meaningful versions of every product we add to our portfolio. We emphasise the viable in MVP, because the point is to create customer relationships into different market segments. Over time, we will follow those relationships towards more significant customer needs, which we hope to very profitably solve.

Have it Your Way

Merman Relieved

The Lean Startup is a star for us to steer by, so we solve real problems for actual people in lucrative markets. It’s a method we can learn from, but shouldn’t blindly adopt. If you can use all of it, you’re lucky. If you can’t, and people think you’re old fashioned, just remember that at least you’re not part of the herd.

Do you have any more reality checks to add to the list, or perhaps a rebuttal? Have your say in the comments.

Posted in Enterprise, Tech
3 comments on “The Lean Reality Check
  1. Dan Callahan says:

    Great comments Sean. I experienced your third reality check myself as we were iterating every few weeks when sales cycles were in months.

    Dan

  2. Great points. I think the most serious is #4-5. Most people claiming to be lean who throw up a crappy landing page as a smoke test aren’t testing anything. They are just harvesting emails.

    There are too many people out there optimizing the click through rate on these landing pages by making the value proposition as vague as possible and putting a pretty picture up. This tests nothing and has nothing to do with lean startup.

    The challenge for the lean startup movement is to have an impact without being diluted to a series of meaningless buzzwords and misapplied tactics.

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