SaintSal

The History Of #LeanStartup (and how to make sense of it all)

by Salim Virani
on

It's important for founders to understand the background of Lean Startup, since it helps evaluate the strengths and weaknesses of the various approaches around it. They often seem incompatible or counter-intuitive, so this history will help you make sense of it and hopefully make more informed decisions.

While Eric Ries, who coined the term Lean Startup, is preparing for the 3rd annual Lean Startup conference, he tweets out a link to "Standing On The Shoulders Of Giants" by Eliyahu Goldratt – a testament to the great thinkers we founders are learning from, whether we know it or not!

As the founder of Leancamp, I've been a proponent of Lean Startup and it's related approaches since 2009. I've been lucky enough to spend time and work with some of the different leaders in the Lean Startup world. Here's how I've seen things go down.

Lean Startup, Toyota and Lean Thinking

Lean Startup comes from Lean Thinking, which was a management approach famously applied in Toyota's factory production system, as they rose to prominence. The term Lean itself was coined by American management academics, themselves great thinkers, as they studied Toyota.

Since then, Lean Thinking has proven useful in a lot of different areas. The Healthcare and Construction industries have had their own Lean movements.  In the 80s and 90s, you might have heard about Supply-Chain Integration or Total Quality Management. These were corporate movements also based on Lean.  A version of Toyota's approaches  have been central to GE.  (Remember the Six Sigma jokes on 30 Rock? Jack Donoughy is Lean!) Lean has even been employed in software - for over a decade! Lean Startup is the latest addition to the family.

There are a few key principles at the core of Lean Thinking, and they manifest differently in these different contexts. Three central principles to Lean Startup are the goal of minimising waste, the culture of continuous improvement and the importance of measuring the big picture. These underpinned Toyota's innovations and echo all over the Lean Startup world in different ways.

Lean Startup and Customer Development

Before Eric Ries was a talking head, he was a startup founder in his own right. He co-founded a chat startup called IMVU in a technical role, and there he found Lean Thinking unhooked a lot of pervasive problems. (IMVU, like many Lean Startups, had a killer growth engine but was largely unknown outside of its target market.) Eric was a student of Steve Blank, who had risen to fame by seeing e.piphany to an IPO and was now an investor and teacher at Stanford.

Steve himself was also a startup iconoclast. As he was hustling for e.piphany in the 90s, he had noted that the conventional startup thinking at the time was basically, close your eyes and put the pedal to the metal. He moved towards a more customer-savvy approach, even when faced with the long cycles of enterprise sales. Customer Development was born.

This is where concepts start to overlap. Eliminating waste sounds great in principle, but how you define waste matters. Both Eric and Steve had noticed there was a lot of waste, both in product development (building stuff customers won't use/buy) and in marketing it to those customers.

In the early days, Eric had defined Lean Startup as a combination of Agile and Customer Development, and building on pre-existing systems to eliminate redundant effort, but as he and the community evolved, it became clear that there were a range of approaches, both nuanced and radically different, that were also useful in pursuing these Lean principles in startups. As Lean Startup gained popularity and broadened conceptually, these concepts started to be repurposed to a wider range of startups and businesses. From there, Eric wrote The Lean Startup.

Lean Startup and Agile

Agile was a pre-existing movement in the software world that focused on continuous or fast-cycle releases of code to users, working together face-to-face and other principles. Agile is where the idea of iterative development comes from.

It's worth noting that quite of few of these fundamental principles are different from Lean. There is often a tension between Agile and Lean, and unless you're dealing with an old expert who's sick of the holy wars and understands it's all about context, you'll often see a bias.

Lean Startup and Business Models

Meanwhile, in a far off land called Europe, well beyond the borders of Silicon Valley, Alex Osterwalder was tackling the non-sensical aspects of "business models." At the time, it was a buzzword that had no common definiton, and at best stood for complicated financial spreadsheets that MBAs and analysts would produce.

Alex had started this a decade earlier, with his PhD focusing on finding a common framework for understanding and communicating business models. He then started to create the discipline of business model design - bringing know-how from the design world to the grey boardrooms of all kinds of companies, from startups to multi-billion dollar corporates.

One of the biggest outputs of this work, polished from a decade of inputs from many directions and a purposefully diverse community, was the Business Model Canvas. It was the first big picture tool for businesses that allowed easy understanding and communication of business models. It became a common language between different business communities and disciplines. (And completely independently of Toyota, Alex arrived at business model design approaches that most closely resemble Toyota's design process - wide, lo-fi prototyping to explore the option space, followed by convergence.)

By 2010, there were only a few people deeply connected to both Lean Startup and Alex's work with Business Model Generation, and Leancamp in London was the first time the communities came together. From that, there were a slew of canvas variants, first The Startup Toolkit by Rob Fitzpatrick, then HackFWD's application system created by Tom Hulme of IDEO, and then the Lean Canvas created by Ash Maurya. Each was focused on a more specific context for the canvas, but the trade-off is the well-rounded, big picture perspective and a large chunk of the canvas-based techniques that have emerged from the community over the decade.

Customer Development and Business Models

In Steve Blank's first book, Four Steps To The Epiphany, the business model section was a vague single page, but purposefully so. I'll paraphase - once you know you're solving a real customer pain, make sure your business model will make you money!

Steve had yet to find a robust way to describe how to do this. As the momentum followed from the Lean Startup and Business Model Generation communities  coming together, Steve and Alex were drawn together as collaborators - turning into an eye-opening duo. Their work led to Steve's updated book The Startup Owners' Manual, Stanford curriculum, the reworked Startup Weekend Next, and more.

Lean Startup and User Experience

The User Experience (UX) Design community had also been growing in it's own right, independently of startups in general. UX is a natural evolution of product management, ethnography, industrial design and software usability, and has a massive arsenal of tools and techniques for understanding customer needs and designing solutions for them.

There were two catalysts of this connection - Leancamp in London, and LUXr in San Francisco.  Leancamp was actively connecting the UX scene to the Lean Startup world, and was steamrolling onto a colossal community mashup. Leancamp co-founder Nicky Smyth from BBC R&D, was inviting many people from the local design community to join the conversation.

This was no easy feat, as the feeling at the time was that Customer Development and UX were competitive. UXDs would claim that they were already doing Customer Developent, and startup founders were still skeptical that anyone who called themselves a designer could be of strategic value. The inclusive attitude of Leancamp prevailed! This lead to our invitation to share with the first European Agile UX retreat by Johanna Kollmann and Anders Ramsay. (I've personally found Johanna's work has since proved to be one of the most practical bridges between UX and Customer Development.)

Meanwhile in San Francisco, Janice Fraser, an Adaptive Path founder, got a call from an investor friend who had a few startups that "need UX help and love this Lean Startup thing."  Janice designed a short program for those few founders, which was the precursor to LUXr.  LUXr now runs regular Lean UX intensive program for startups in SF and New York.

The Leancamp and LUXr crowds were quickly connected through Agile UX community, but we've still barely tapped the potential of repurposing UX techniques for startups, and bringing startup know-how to other areas of UX.  Most of what we see today is the Agile UX world becoming more Lean - moving towards techniques that are lighter, more accessible, and help with bigger issues than those related to the product.

There are also different versions of Lean UX, some which have very little to do with Agile. Ian Collingwood in Barcelona has a Lean Usability method, for example, that always keeps the team on the biggest problem.

This is a big space - there's more to come.

Lean Startup and Innovation Accounting

In the early days of Lean Startup, Eric and Dave McClure were a hilarious duo.  I met Dave McClure at the first Lean Startup Smackdown in a basement bar at SXSW, where a foul--mouthed Dave would play bad cop to Eric's good cop – dishing out rapid-fire abuse at startup founders who were wasting their time by building stuff without input from their customers. (Dave picked on me first, dragging me on stage and asking me the definition of Lean Startup, but not realising I was the guy who had written the wikipedia page on it. When he couldn't fault my answer, he promptly told me to fuck off and forgot me!)

At the time, Dave was fast-becoming the most prolific angel investor out of the Paypal Mafia, largely because he had identified 5 simple, big picture measurements that startups could use know if they were on the right track, which he called Pirate Metrics. Like many of us, he discovered Eric's Lean Startup view and saw that it put Pirate Metrics in a robust and easily understood framing.  Pirate Metrics was a natural fit with the Lean Startup ideals of measured improvement, and big picture understanding.

But Eric realised we were scratching at the surface of something far broader, a more practical way to look at startup numbers in general. He expanded the scope, defining Growth Engines and Innovation Accounting.

Dave went on to create the 500 Startups accelerator.

Making the pieces work for you

Eric has been a great convenor of the Lean Startup movement, building bridges and being very inclusive, even in circumstances where he was challenged. (You'll notice, for example, that his book The Lean Startup is very high-level and communicates concepts and principles over process, while Ash Maurya's Running Lean is criticised for being dangerously prescriptive. Yet, they still collaborate.) I think this inclusive attitude has largely allowed us to draw from the best of many worlds, and I expect the future of Lean Startup will continue with connections into many other spaces.

I have had the luxury and honour of meeting and working with many of these leaders through Leancamp. Everyone who I've engaged with is someone who is actively trying to improve entrepreneurship for everyone and they've made huge personal contributions.

They don't all agree with each other. That leaves us with the responsibility of understanding their priorities and the weight they place on various concepts. Otherwise, we run the risk of misunderstanding and misusing their approaches, or using the wrong tool for the job.

I'll leave you with 3 thoughts:

1) As you pick up tools to get your startup to traction and beyond, it's worth taking a little extra time to understand your options, when they're best used, and the trade-offs between them.  First, seek to understand.

2) This stuff has been super-useful for many founders but the most useful way I've seen to take it onboard has been to understand the big principles, and make it your own in a realistic way. (I think Giff Constable and Rob Fitzpatrick are the best exemplars for not over-engineering things, keeping it simple and actionable.)

3) The Lean Startup journey doesn't stop here! With Leancamp we're reaching out to new communities so we can learn more from each other. I'm looking at these 9 areas for the future  of Lean Startup - ranging from Disruptive Innovation to psychology - to bring us the next evolution of entrepreneurship.

 

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I help startup founders keep it real, focusing on practical education and peer-support approaches.