Chapter 1: Lean Business and Lean Startups

Lean manufacturing, Lean Enterprise, or lean production, often simply, “lean,” is a production philosophy that considers the expenditure of resources in any aspect other than the direct creation of value for the end customer to be wasteful, and thus a target for elimination.

– Wikipedia

In general, lean means strong with muscle but no fat. Lean means useful. No frills.  It’s not thin, not skinny, just lean.

Lean Manufacturing

PDCA cycle

The classic PDCA cycle

The concept lean manufacturing started with the Japanese automaker Toyota more than 70 years ago and was adopted by manufacturers worldwide. It focuses only on what adds value. And that avoids waste.

Early on, the lean manufacturing people adopted a four-step process called PDCA, for plan-do-check-adjust. PDCA came from quality control expert Dr. Edwards Deming. PDCA itself (the idea of the cycle, although the acronym PDCA has various versions) became the gold standard for manufacturing efficiency.

The essential idea is to take small steps, analyze often, and keep watching results and correcting. That’s instead of developing big elaborate plans first, then executing in big steps. There’s more review, more revision. That’s what they call lean.

The benefits are obvious. Consider how the pace of change is constantly increasing. Technology advances faster every year. Adopting a lean process seems like common sense to me.

My business experience has been mainly computers and software, but my formal education was literature first, then journalism, and then business. I learned software by doing. And, I confess, I never had the patience for the big software development plan that some of the larger companies and more schooled developers did. I was the kind of entrepreneur who built the product in a way that got it to market as quickly as possible. There were always new versions to come. I never thought it was finished, and I worked with the next steps and a broad larger vision. I moved in the right direction without taking a long time trying to imagine, in detail, the final product. That was right for me. And it was lean by instinct, before I knew anybody called that lean.

 

 Lean Startups

Eric Ries’ book The Lean Startup first appeared in 2011 and became the biggest thing in startups in this century.

What is it? It’s what the book says, but that’s a different book. For the purposes of definition in this book, here’s the Wikipedia definition:

Similar to the precepts of lean management, Ries’ lean startup philosophy seeks to eliminate wasteful practices and increase value producing practices during the product development phase so that startups can have a better chance of success without requiring large amounts of outside funding, elaborate business plans, or the perfect product.

− Wikipedia

The emphasis there is mine. Keep this phrase “elaborate business plans” in mind when we move to the next section, on the lean business plan.

First, however, more about lean startups (continuing the Wikipedia text above):

This is done primarily through two processes, using key performance indicators and a continuous deployment process. Because startups typically cannot afford to have their entire investment depend upon the success of one single product launch, Ries maintains that by releasing a minimum viable product that is not yet finalized, the company can then make use of customer feedback to help further tailor its product to the specific needs of its customers.

­– Wikipedia

So the lean startup applies the idea of continuous improvement in steps, or cycles, to starting a new business. The lean startup begins with what they call a minimum viable product, then improves in repetitive cycles, each one involving plan, action, checking results, and revising the plan to start again.

The lean startup idea took off. Experts loved it. Both the lean startup and its suggestion of the minimum viable product now appear nearly everywhere that startups are discussed. There are steadily growing numbers of companion books, follow-up books, conferences, blogs, and lean startup experts and consultants. Few serious attempts at getting new startups funded fail to pay homage to the lean startup and minimum viable product.

Is this a fad? No. I don’t think so. This is evolution related to real changes in the business landscape, accelerating technology, and world economies splitting into ever smaller and potentially more efficient pieces. And the fundamental idea is sound: plan more fluidly, take shorter steps, analyze results, and then take more shorter steps. Change is constant, and the pace of change is increasing, so change the way you do business. Make it lean. And that is as true for established businesses as it is for startups.

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