What can established companies learn from startups? Many associate the term startup with a new spirit of innovation, primarily fueled by successful founding stories from Silicon Valley. In the course of digitalization, many see the opportunity to develop novel products. Startups have been springing up like mushrooms for some time, even though statistically 80 percent of all new ventures fail. The competition for new markets is fierce. It is no longer enough to have a good idea. Only those who systematically work to develop products that customers truly want will survive.
Efficiency as a Survival Strategy
In his book “The Lean Startup,” author and entrepreneur Eric Ries described a method whose systematic approach is intended to increase the likelihood of rapid and healthy growth. Fundamental to this is the concept of efficiency from lean production, exemplified by the Japanese automotive industry in the 1980s. Instead of hoping for customer demand for a product by chance, the goal is to produce only when demand is assured. Ries applies this principle to the challenging initial conditions of a startup. According to this, a new product is initially nothing more than a fixed idea that should be immediately tested.
With regard to the overarching goal of efficiently developing new products, a Lean Startup goes through three phases:
Problem-Solution Fit
In this first phase, Lean Startups identify the problem or needs of their target group. Is the problem recognized as such by potential customers at all? Is the “pain” great enough to warrant further exploration of possible solutions? Intensive research is conducted. User interest is measured through interviews, landing pages, digital advertising campaigns with calls-to-action, and much more.
Product-Market Fit
Thanks to the first phase, the startup already knows that customers have a problem that demands a solution. Instead of philosophizing for a long time, product-market fit is about bringing a viable product to market as quickly as possible. Early market entry and a short product development time enable continuous product improvement with customers. The startup may also find that the market offering provides no benefit to a specific target group. In the early stages of the company, this is an important insight to initiate a radical shift (“pivot”) without immediate failure.
Scaling
The greatest advantage of the Lean Startup method is that customers are not acquired only when the product is fully developed and integrated into the sales structure. Instead, a Lean Startup has already gathered enough feedback and data in the previous phases to truly know its customers. When it comes to finding investors for their innovative product, they can already impress with reliable data and facts. They know how much capital they need to tap into the full customer potential in their market and can predict how much money they will earn from customers.
A brief summary from our Agile expert Alexander Schaaf.
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“We haven’t been a startup for 100 years!”
Unlike startups, established companies can look back on a wealth of experience. If they develop a product that is not marketable, their existence is not immediately threatened. The initial situation therefore seems much more comfortable.
However, in the face of increased innovation pressure due to digitalization, more and more traditional companies also want to become “leaner.” Translated, this means that the initial conditions of a startup should be simulated. The goal is the efficient development of innovative products that customers demonstrably truly want.
At a Glance
Lean means: Rapid business development through validated learning. Hypotheses about individual components of a business model are repeatedly tested using systematic tests. A Lean Startup goes through three phases:
- In the Problem-Solution Fit (Customer Discovery), solutions are only developed once the potential user group has been sufficiently narrowed down and their problem adequately surveyed and analyzed.
- The Product-Market Fit (Customer Validation) is about the fastest possible market entry. For this, a Minimum Viable Product (MVP) is developed, which offers the smallest possible set of core elements satisfying customer benefits.
- Finally, it’s about scaling (Customer Creation) the business model that has already been tested on a small scale.
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