What is lean thinking and how can it help startups?

“Lean thinking” has become a bit of a buzzword in the app and software community – but what does it mean and how can it help your business?

The traditional approach to building a business always went something like this: think of an idea, write a five-year business plan, pour all your money into the product and sell it as hard as you can.

It’s no surprise that many of today’s startups have shunned this approach. It requires a lot of upfront investment in your product and leaves little room for flexibility, should the market or customer preferences change.

Startups are increasingly opting for a more iterative development process, which is based around the lean thinking methodology.

What is lean thinking?

Lean thinking favours experimentation over long-term planning. It’s essentially about keeping things simple while you test out the waters.

Rather than developing a product based on your own assumptions, you get feedback at each stage of development. This can make developing software as a startup less risky, because there’s a better chance of your end product resonating with customers.

It can be tempting to strive for perfection straight away, but you’ll need to overcome this to go down the lean thinking route. Be prepared to work with a basic version of your idea at first – the extra functionality you imagined will come later.

Start with a minimum viable product

A minimum viable product (MVP) is a key part of the lean thinking approach.

An MVP is the most basic version of your software that can be shared with your customers. It’s a low-cost way to test the viability of your idea and learn how customers might use your product.

Having a simplified version of your product gives you the freedom to test and experiment. Rather than being tied into a fixed idea in a five-year plan, you can refine your offering based on feedback from your target audience.

Remember that it’s significantly easier to make changes to your MVP’s next iteration than if it were a complex piece of established software. You don’t want to learn the hard way that customers don’t need your product after years of time, money and development.

Customer feedback is more important than secrecy

It’s normal to be concerned about sharing your startup’s idea with others. We see it every year in The Pitch; questions about protecting IP are so common that the topic is addressed in our FAQs.

However, to embrace lean thinking, it’s important for you to let your guard down. You’ll need to talk to customers openly about your product on a regular basis – feedback should inform each stage of the development cycle.

If you’re still nervous about sharing your idea, the story of the Segway makes a good cautionary tale. The idea was kept secret until launch, creating huge amounts of hype – investor John Doerr even speculated the product would be more important than the internet.

When the product was finally revealed, it was rife with problems. Customers struggled to balance on the machine and its price point ($5,000) was widely mocked. By the time it was discontinued in 2020, only 140,000 units had been sold.

The lesson? Keeping an idea shrouded in mystery is rarely the best option. If the Segway founder had brought customers in at an earlier stage, issues around price and usage – which ultimately led to the product’s downfall – would have been spotted much earlier.

Use lean analytics

Lean analytics are the set of metrics you’ll use to measure progress. These metrics will help you gauge the reaction to your software or app and quickly learn what your next steps are.

The metrics you choose to focus on will depend on the stage your product is at.

Empathy: Use interviews and surveys to get both quantitative and qualitative results
Stickiness: Measure downloads, churn and virality
Virality: Consider word of mouth, app ratings and customer acquisition cost
Revenue: Measure the customer lifetime value and average revenue per active user
Scale: Think about spinoffs

You can read more about using lean analytics here.