Lean Start-up – An Emerging Paradigm In A Challenging Economy

The ongoing economic turbulence should be considered a blessing in disguise. The challenging economy has compelled entrepreneurs and start-ups to innovate and strategise in a way that will quicken time-to-market, reduce risks and help them grow even in a tough business environment without requiring huge investments. That’s what the lean concept is all about, but we believe it has greater relevance for all businesses – both big and small.

In his book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, Eric Ries has defined a start-up as a “human institution designed to create new products and services under conditions of extreme uncertainty.”

So the fundamentals of a lean start-up include the launch a Minimum Viable Product and working on continuous improvement, based on the input from early adopters. It also involves generating market demand, readiness to release product at short intervals and nurturing a growing clientele. Ries further adds that early adopters are the initially paying customers who are ready to accept shortcomings and ready give an opportunity to the start-up to measure its product performance. As for start-ups, that eventually leads to learning from one’s mistakes, coming up with an enhanced version of product/service and growing the customer base.

Lean start-ups not only iterate, learn and innovate, but also ensure cost control – a key factor that boosts any early-stage business. This approach helps scale up product/service in a phase-wise manner and does not demand a huge investment at a single go. In fact, the lean approach has turned out to be extremely beneficial for start-ups into IT/software development. The iterative approach helps manage scope, time and costs even better than the traditional model.

This iterative and incremental approach is best suited for software development projects where probability of change in scope is high and constant feedback from users facilitate delivering quality product on schedule. It also provides an opportunity to effectively manage the client’s expectations and improve satisfaction. In contrast, the traditional approach lacks constant customer interaction and there is always a risk of going off the track in one way or the other. Since efforts are already put into it, change management turns out to be a big challenge in such a case.

When one plans to start a technology venture, the biggest challenge is to choose the right kind of development platform. Getting the required expertise is the next big task while capital remains another crucial factor for acquiring licences (for development tools) and ramping up other resources like hardware and human capital. Since funds are mostly limited at this stage, entrepreneurs often look for free or the least expensive tools for product development and deployment.

To overcome these concerns, organisations like Microsoft and IBM are encouraging entrepreneurs to minimise the initial set-up costs for building product/service. Microsoft’s BizSpark provides free access to its development tools for a period of 3 years and helps promote the products. IBM’s global entrepreneur programme called Smarter Planet also provides software licences for free and enables entrepreneurs to launch and market their products. Most start-ups also use open source technologies like the LAMP platform, thus cutting down on product development costs.

While start-ups benefit a lot from the lean concept, it can also be the most viable option for established companies – especially when they are upgrading or launching any new product/service to stay relevant and competitive in the market. Simply put, being lean is all about being asset-light, collaborative and innovative, while fast-evolving strategies keep a business future-aligned. It essentially means an efficient business model and a senior management readiness to take out-of-the-box initiatives to stay viable. And there can be no better recipe for success in this challenging economy.