Of the hundreds of thousands of new companies that start a new business every year around the world, four out of five don’t reach second year of doing business. If you were to ask the owners of these start-up companies their chances of experiencing two years of business, they would surely tell you that this is at least 90% and the reality is diametrically different. What is the difference between personal perception and reality? Why do so many companies fail to survive? And why do those who survive manage to prosper?
The book that should be on the top of your list is “The Lean Startup - How Do Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses?” By Eric Ries. By the way, Eric was a true entrepreneur, developer-businessman from Silicon Valley, California. In the last ten years, thanks to the fertile soil of Silicon Valley, he has had the opportunity to start several venture capital (special type of greenfield investments) business ventures with which he has convincingly failed, and in his last online venture, IMVU (www. imvu.com) made a boom and became a millionaire. IMVU is a new social network that uses a special type of 3D avatar (virtual mediator) for socializing. The book itself was created as a result of his personal experiences during that relatively short but very rich entrepreneurial journey. If you are planning or just pursuing an entrepreneurial venture, you need to read this book.
Run like a cheetah
What is Lean? Lean is a term that describes a holistic, sustainable approach to a business (organization) that uses less of everything (resources, investments, costs), to deliver more (quality, profit, customer satisfaction). Lean is a business strategy based on customer satisfaction by delivering quality products and services that are exactly what the customer wants, when they want it, at the right amount, at the right price, using a minimum of materials, equipment, space, labor and time. The word lean in English has the connotation of the perfect sport form, top athlete or wild animal such as a cheetah (maximum speed by consuming a minimum of calories). Lean startup means a company that is maximally effective and efficient in everything it does, it is an entrepreneurial project where you do the right things the right way. In short, it is a recipe, but also a mindset that leads to success in any endeavor.
A product no one needs
The point of Lean startups is to show entrepreneurs how to measure their productivity in a different way. Business surveys of thousands of start-ups have shown that most failed not because they were not efficient at doing things (that they did not make good quality products), but because they most often made products that no one needed. The main task of every startup is to do what the customers want and are ready to pay immediately. "Lean startup" is a new way of looking at developing innovative products with a focus on rapid change and the experienced customer experience, with tremendous vision and great ambition. Instead of making complex long-term action plans based on a multitude of assumptions, Lean Startup tells you how to manage an entrepreneurial venture using a steering wheel called the Build-Measure-Learn triangle. While managing a startup, is it necessary to learn when to stay on track, when and where to make important turns, or even when to quit?
Build - measure - learn
The essence of this triangle is to constantly measure the effects that the products we develop have on the customer and to learn the lessons that come from the experiences and experiences of customers while using those products. This is especially important for products or services that are constantly undergoing improvements, as in the software industry (applies to most other products). Automobiles, electronics, cosmetics and even the food industry today require continuous adaptation to the wishes and needs of customers. This practically means that a huge million series of completely identical products are passing. In the global market for overly spoiled consumer audiences, you have to offer the customer a product that is tailored to their personal preferences. The car he buys must have the extra options he wants. The website that offers him an online service must be tailored to what he needs. How do you create a product if you don't have the right feedback on what it really wants? And what does real feedback mean?
What do customers really want?
The point is not what your customers say they want, but how to determine with certainty what they really want (without even realizing it). Most of the large products in the last few decades have not been the result of the explicit needs and desires of the customers, because for most of these products the customers did not even know that they needed it (because it did not exist until then). How can a customer discover that they want an Apple iPod or iPhone or iPad? How can a customer say I need this and that when he was not even aware of that need? How could you wish for a tablet computer (with all its functionality) in the 1990s when such a device did not even exist in the imagination of science fiction writers at that time? Many of today's most innovative products (especially in the IT sphere) are not the result of customers' current wishes and needs, but they stimulate new wants and needs that they are not aware of. In this regard, do we have one new value to keep in mind when developing startups, which is "validated learning"?
It is not so important for startups to generate large profits at the outset (and unlikely). What matters is that it generates what Eric Ries calls "validated learning." What it means? "Validated learning" is the process of discovering valuable truths (facts) about present and future business opportunities. It must be much more precise, much more concrete and faster than market forecasts or classic business planning. It is at the heart of Lean's philosophy, which requires that very quickly identify which business activities create value for the customer and which do not? This kind of thinking requires a radically different approach to learning in an organization. Not only does it very quickly seek and receive timely information from the customer, but also how it is requested (what to ask the customer) and what are the parameters by which conclusions can be drawn about what constitutes value to the customer and what does not? The essence of such learning (usually on mistakes) is not to determine "Can and how a product be made?" (Because everything can be made today), but "Does it make sense to make it?" And "Can we create sustainable the business model around that product? ”Basically, the following questions should be answered:
1. Are customers aware of the problem we want to solve?
2. If there is a solution to this problem, would you buy one?
3. Would you buy it from us?
4. Can we build a solution to this problem?
The catalyst for transformation
Startup is a catalyst for transforming new ideas into successful products (innovations). Using these innovative products, customers generate feedback that is both qualitative (what they like and what they dislike) and quantitative (how many people use and find it valuable). Basically, the main products that startups create are experiments, and learning how to build a sustainable business is the result of those experiments. For them, that information and the knowledge they acquire are far more valuable than money, profits and rewards, because they influence and change incoming new ideas and innovations. This "validated learning" is the most valuable product of an entrepreneurial company because it shows them whether they are on the right track, whether to accelerate, slow down, or stop completely? It is the only way to do the right thing in the pre-competitive global market in the right way and at the right time, which is the essence of any successful business.