9 Core Concepts from The Lean Startup book

As I wrote in 5 Frameworks for Founders - "The Lean Startup" by Eric Ries presents a simple methodology for developing businesses and products. The core idea is to treat a startup as an experiment to find the right way to build a sustainable business with the least amount of effort.

Let's look at the main concepts here so you don't have to read the whole book, even though I wholeheartedly recommend it!

In essence, "The Lean Startup" methodology emphasizes the importance of adapting and adjusting before any large sums of money or time are invested.

It is a systematic, almost scientific approach (let's call it rather data driven approach) for creating and managing successful startups/businesses in an age when companies have to innovate more than ever.

The ultimate goal is to learn fast and cheaply what customers really want and will pay for, rather than what you think they should want. That will enable you to build a sustainable business with paying customers.

Main Concepts:

Start Small:

• Begin with a "minimum viable product" (MVP). This is the simplest version of your product that allows you to start the learning process as quickly as possible.
• MVP is less than you think it is. The rule of thumb from my 15 years of practicing it - do 50% of what you initially planned, and it will be too much anyway!

Build-Measure-Learn:

• This feedback loop is the core of the Lean Startup methodology. The idea is to turn ideas into minimal viable products, measure and observe how customers respond, and then learn whether to pivot or persevere.
• That's why minimal is such an important part of MVP concept. If you don't get MVP out to your potential customers, you won't have any feedback loop!

Validated Learning:

• Startups exist to figure out how to build a sustainable business. However, this idea is lost on many aspiring founders these days.
• The idea is that hypotheses underlying a startup's vision can be validated and tested scientifically by running and m experiments.

Innovative Accounting (aka learn to measure progress):

• To improve entrepreneurial outcomes and hold innovators accountable, we need to focus on the boring stuff:
• how to measure progress - the real progress, not some vanity matric!
• how to set up sensible milestones - challenging but doable progress.
• and how to prioritize work - aka work on things that move the needle and really ignore the rest. No extra features, no side projects.

Sustainable Growth:

• Sustainable growth is characterized by one simple rule: Don't burn more money than you earn. New customers come from the actions of past customers.
• Sustainable growth is a topic of its own, and I will return to it often.

Pivot or Persevere:

• Based on the feedback from the Build - Measure - Learn cycle, a founder must decide whether to pivot = make a fundamental change to the product, or persevere = keep improving on the current course.
• This is often one of the most challenging decisions for many reasons, one being that it's not always a clear cut on matric, and you may have raving fan early customers but slow growth metrics.

Lean Thinking:

• Lean thinking influences the whole Lean Startup methodology and can be summarized in two sentences - it values customer feedback over intuition and flexible product development over traditional planning.
• Always think about the minimal-viable anything. Don't overcomplicate things.
• The only actions that count are - talking to potential customers, launching a minimal product to the market, and collecting users' feedback.

Continuous Deployment:

• Employ a consistent, rapid cycle of releasing products to get quicker feedback and to adapt products faster.
• We're talking about releases up to multiple times per day with the goal of shrinking the build-measure-learn feedback loops. You can release updated MVP in the afternoon, after morning feedback sessions with your pilot customers.

Actionable Metrics vs Vanity Metrics:

• Focus on metrics that can guide decision rather than those that look good on paper.

Vanity metrics make you feel good but don't give you useful insights. They don't directly help you iterate and improve your product. Examples of vanity metrics include:

• Number of signups or total users - Doesn't tell you about engagement
• Gross merchandise volume (GMV) - Doesn't account for costs and margins
• Social media followers or likes - Doesn't reflect product usage or loyalty
• Awards and press mentions - External validation but not core metrics

Actionable metrics directly influence and inform your product decisions. They measure key drivers of your business model. Examples include:

• Activation rate - % of new users who meaningfully engage with core product features
• Retention/churn rate - % of customers retained or lost per period
• Net Promoter Score - Quantifies customer satisfaction and loyalty
• Customer lifetime value - Revenue earned per customer over lifetime

There's a whole book about it, but I want to save you time and highlight the main points to get your brain moving in the right direction when you consider building your product and approach to your new business idea.

I will follow-up on this article with my own lessons and examples of how I successfully used Lean Startup concepts to build several of my businesses and what happened when I didn't (spoiler: nothing good).