Eric Ries, an entrepreneur and business blogger enlightens entrepreneurs looking for an edge in their business, by revealing his method for creating a business that will stand the test of time. His method, of staying small enables businesses to be more agile, ultimately making them more adaptable to change. He reveals how startups can make products customers want, sell them faster and cheaper than their competitors.
My key Takeaways from “The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses" by Eric Ries
Takeaway #1 Finding a Sustainable Business Model
No matter how good your plans or how much free marketing you get, without a profitable and sustainable business model, your start-up won't succeed.
Answer these questions by doing real research (talking with people!) rather than a mix of guessing/hoping.
Does anyone want what I can provide?
Can I make money from it?
Is it sustainable – Will it work in the future as well?
Everything that your business does, including day-to-day operations, should be focused on your sustainable business model; finding the right products for the right people with a way to sell it to them because the faster you do this, the more likely your business is to succeed.
Takeaway #2 Bridging The Leap Of Faith
There will always be a moment when you have to do the leap of faith to see if what you envision can work as a viable business but you can bridge that gap by testing 2 fundamental assumptions early on.
The value hypothesis assumes that early adopters will embrace the item and that they will find value in the product. The growth hypothesis presumes that the product will only appeal to a certain type and number of people to start with, but that over time, a larger market will open up – If you need an example, just look at Facebook.
If these 2 points cannot be validated you should walk away and come up with another business idea but presuming you've passed the test, you can move on to testing.
You can test your product by creating a minimal version of it whilst getting real customer feedback. Leave off the bells and whistles, your MVP (minimal viable product) should have just enough to give customers a realistic idea of what they can expect. A dummy website that has the information, images, and price even though there's not an actual product to be shipped out but that has people signing up for a waiting list can also work if you're not creating a physical product – This is exactly what Dropbox did.
From here you can enter the build, measure, learn phase in which you take on board all of the customer feedback, measure interest in the product, and talk to the people who tried the product/website so that you can then develop an even better product – Repeat the MVP and feedback loop until you have found your sustainable business model.
At this point you can start split-testing to work out which features are of most value to your customers, you should only include the most valuable ones as these will bring you money, ditch any 'extras' that you 'thought' would work but actually don't! This applies for the product itself as well as website features.
Keep asking how your product can be improved to help it find its market – What you think the public need and what the public actually need can be two entirely different things, don't get stuck in thinking your way is the right way and remember that pivoting is normal, the faster you resist the change the faster you succeed!
Takeaway #3 The Growth Period
To make sure your business doesn't become stagnant, it should have 3 different kinds of growth engines; a sticky engine, a viral engine, and a paid engine, these can run all at once but it's best to focus on one at a time.
The sticky engine works to retain existing customers, this can be done by providing great service and/or updating with new features so that they want to use your product more. The viral engine gets your existing customers to market your product for you, you make it easy for them to tell friends and family about your service/product, last but not least the paid engine is your paid marketing which is only possible if you have enough existing customers bringing in the revenue to ensure your costs per acquisition are less than your user lifetime value.
Takeaway #4 Stop and Reflect
As you develop, test, and grow your business you need to pause and see how much progress you've made towards your long-term goals. Don't caught up in the vanity of receiving a ton of social media followers if they haven't resulted in paying customers!
Define the correct metrics for your business and evaluate them often – When the metrics improve, you know you're proceeding towards your goal but if the numbers stay the same you know you need to try a new way.