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by Felipe Arias The lean mentality has allowed startups to identify key issues and potential pitfalls at an early (and cheaper) stage in their lifecycle and has provided entrepreneurs with the data necessary to pursue ideas or pivot accordingly. Certainly, putting into place rigorous thinking that drives an entrepreneur to develop a vision, translate that vision into a set of testable hypotheses, identify what part of the vision is required to be tested through a minimum viable product, prioritize the tests, and then iterate through learning before spending on scaling and optimization makes intuitive sense. In practice, the drive to be “lean” can push entrepreneurs to miss opportunities, avoid key tests due to difficulty and cost, as well as misattribute the competitive advantage that will be developed by their business. Below, I include three pitfalls uncovered by those brave enough to go before us. In these pitfalls, entrepreneurs may feel that they are wisely conserving resource...

by Lauren Miller The lean start-up approach has the advantage of using genuine customer feedback as a means of improving the entrepreneur’s product specifically for those perceived as the niche consumer, but numerous stories from entrepreneurs and case protagonists about acting on false positives and negatives has caused me to wonder: can smoke and other lean start-up tests just end up being smoke in the entrepreneur’s face? ” I question whether an entrepreneur should take the results of his or her tests as “gospel” since pitfalls in the experiment design and interpretation of results can be numerous. I will focus on a few of these potential pitfalls. Focus groups Steven Carpenter shared in the Cake Financial case that he has “learned that focus groups… can be unreliable because people can’t always say what they want until they can actually see it and play around with it.” This highlights the fact that customers often can’t or won’t tell you what they want or need and are often li...

by Katherine Nadler For an entrepreneur, one of the most consuming decisions is determining when to launch. Arguably, a product is never complete; therefore, it is up to founders to determine what level of incomplete is acceptable. To do so they must allow their business model and market context to drive their decision making. Asking the right questions is very important. Does the business model rely on virality? When a product anticipates customer acquisition through virality it makes sense to launch early, sacrificing some of the quality that extra time would afford. As much as entrepreneurs may convince themselves that their product is perfectly positioned to generate “word-of-mouth” or network effects, the best way to know for sure is to test that hypothesis in practice (often first through a beta launch). While the world’s become inherently social as a result of game changers like Facebook, Zynga, Twitter and Foursquare, it does not mean that products will effortlessly gen...

by Anonymous I have constantly found myself thinking through the new lean startup concepts throughout this class and wondering how they could be successfully applied to large organizations. The definition of a startup and a large corporation are completely different in every critical way: access to capital, human resources, brand awareness etc. And yet, large corporations are constantly trying to find ways to “incubate”, develop, promote and support lean startup methodologies. Over the past few years, I have seen how two large companies have tried to create a “lean” environment within their companies. The common trade-offs are: Uncertainty vs. Scaling: Startups ideally try to reduce the amount of uncertainty through minimum viable products (MVPs), while corporations require accountable business plans and projections that force premature scaling and disincentives pivoting. Effectively there are rarely corporate structures or environments that even permit anything beyond setting a visio...

by Colin Barry "Startups occasionally ask me to help them evaluate whether they have achieved product/market fit. It’s easy to answer: if you are asking, you’re not there yet.” – Eric Ries, “The Lean Startup” (pg 220) The Context Hypothesis-driven entrepreneurship — epitomized by Eric Ries’ Lean Startup methodology — has become all the rage among aspiring tech founders. It’s not hard to see why. Ries’ focus on customer discovery and iterative development addresses a dangerous problem in the two established paradigms for building software. Waterfall product development presumes that the problem and the solution are known, and we just have to build the solution in an efficient, staged manner. Agile product development admits that the solution is unknown, but still presumes that the problem is known — the “voice of the customer” (usually the product manager) will recognize useful software when she sees it. But actually, Lean Startup tells us, the problem is usually unknown, too: it...

by Jonathan Lo A common theme in the Launching Technology Ventures class is how to utilize a “lean” model until one has validated the business model. Companies such as Dropbox and RentJuice are examples that did precisely that to achieve success, while a company like Cake Financial is openly criticized for not following those guidelines. While I do generally believe in the lean start-up principle, some of the most successful start-ups such as Google, Youtube, Facebook, and Twitter, blatantly ignored this principle to become the companies that they are today. These companies focused on achieving strong network effects before they had any clear plans for monetization. Is this the right approach? I am involved in a start-up called SaferTaxi, a company that is developing a smartphone application to allow for the booking, paying and rating of taxis in Latin America. While SaferTaxi plans on being one of the first movers in Latin America, this is by no means a new concept in other more ...

by Joshua Chuang Hypothesis-driven, lean entrepreneurship can be the difference between a successful venture and a failed one. This strategy requires one to propose a hypothesis, develop a test around the hypothesis, test it, and learn from it. At its core, hypothesis-driven, entrepreneurship strives to reduce the biggest risk startups face: building a product that no one wants. A powerful tool for entrepreneurs, but potentially dangerous for those who don’t fully understand it or who overlook certain dangers. The following serves as my warning label to the entrepreneurs out there following the lean startup methodology: 1. BEWARE of Assumptions People tend to presume they understand how things work, when in fact they often don’t. For example, with Cake Financial, the founder and CEO, Steve Carpenter, assumed that the user-interface wasn’t what people cared about and focused his attention on the back-end. He also assumed that Yodlee would be a bad business partner, based on his pr...

by Douglas Romanoff My final semester at HBS was a unique experience studying the business models of technology‐based  ventures from two different perspectives. From late March to May, Competing Through Business Models (CTBM) class with Professor Hanna Halaburda equipped me with frameworks for how firms create and sustain competitive advantage through their business model designs. From January to early March, Launching Tech Ventures (LTV) class with Professor Tom Eisenmann exposed me to the approaches entrepreneurs use to erect attractive and scalable business models from scratch.  Despite the clear interrelatedness of the two topics, the content of the courses could not have been more different. CTBM defines a business model as the logic of a firm, the way it operates to create and capture value for its stakeholders. Expressed as a set of policy, asset, and governance choices (and the consequences derived from those choices), business models are most effective when they suppo...

by Douglas Romanoff Eric Ries champions the Lean Start Up Methodology as a means for entrepreneurs to more efficiently manage financial and human resources while increasing their odds of success. At the root of his approach is the idea that entrepreneurs should measure progress in units of validated learning, rapidly iterating through build‐measure‐learn cycles designed to test hypotheses and refine business model elements. By avoiding excessive subjectivity, and instead gathering empirical and measurable evidence, the entrepreneur operates with less risk and more cost effectiveness. Although Toyota’s management philosophy is credited as the inspiration for lean concepts, the true origins of the approach lie in a discipline outside the realm of business. The Scientific Method has served as the gold standard of systematic inquiry for chemists, biologists, and physicists over many centuries. According to its tenets, researchers should gradually refine elements of a scientific model thr...

by Lorin Pace & Iris Guerra In the new era of all things lean, fat gets a bad rap. Even the terminology is loaded; in the U.S. we are facing an obesity health crisis like nothing we have faced in our nation’s history. Of course no-one would want to be ‘fat’ when the term has such a negative connotation. But when did ‘fat’ become the only alternative to lean? What about medium or athletic builds? Painting a picture of two polarized options and demonizing the other is a storied psychological tactic for building momentum around your own philosophy. For better or for worse, Eric Ries has done a great job of depicting epic failure as the product of the ‘other’ approach. And he has a point. It IS senseless to build a product no one wants, and no one is a better example of that than Ries himself (he did it!) and he knows how painful it is to pour your heart and soul into something that ends up being discarded. Ries would have you believe that not only can you apply the lean start...

by Whitney Baxter ( @whitneybaxter ) & Dave Krasik ( @davekrasik ) Our project focused on building out the sales and marketing strategy for a growing tech‐focused service firm. We attempted to apply many of the LTV principles to this service model and found them quite useful. Some we found could be applied interchangeably with between product and service based firms, while other required modification or adjustment. We’ve focused on the later for our post, but in both instances the principals were useful lenses through which to examine the business.   We’ve observed that services firms can successfully apply some of the most important concepts of lean startup methodology, including minimizing startup costs and iterative hypothesis testing. Resource Constraints Launching a service firm can require significantly less capital than launching a product firm but may be much harder to scale at the high rates achievable by product firms. The costs of resources to create lean product‐ba...

by Arun Agarwal (Twitter: @arun_agarwal ) Recently I had the opportunity to take Launching Technology Ventures with Tom Eisenmann at the Harvard Business School, and learn the latest and greatest about the process for building capital efficient startups using the “lean methodology.” Lean is a movement started by Eric Ries that encourages entrepreneurs to design cheap experiments to test their products and positioning in the marketplace and get real data, rather than relying on the founder’s grand vision which can often lead to building a business that is 10, 90, or 180 degrees off from actual market needs. My project for the course involved a “science-based” hardware business. I worked with a university professor in Switzerland to spin a fundamental technology out if his lab that we believe could revolutionize on-chip and off-chip digital communications. Tools and techniques that lean methodology suggests using include highly agile product development cycles, launching early, build...

by Christophe Mandy Class cases on Aquion Energy and Predictive Biosciences were chosen specifically to illustrate that the lean concepts don’t just apply to the web-based consumer facing startups that the paradigm is usually associated with. In both cases, running lean involved the same kind of hypothesis testing, pivoting and search for product-market fit, just on a different timescale and with a different context. But if the lean principles aren’t enabled by the sort of economics that underlie internet companies, why did the concept only arise now? The “eliminating waste” Toyota-Production-System-like ideas in manufacturing are more than 40 years old and were all the rage almost 20 years ago. One possible answer would be to suggest that ideas in management theory for startups hadn’t evolved enough until the last ten years, and that nobody had thought of generalizing success stories into the key lean principles. This implies that applying lean principles would have always led to high...

by Christophe Mandy The first half hour of every LTV class follows a similar pattern. We invariably spend some time discussing whether the company under scrutiny truly is lean startup and evaluating where on the LEAN-NOT LEAN scale we should place it, and right around that time we implicitly (and in one case explicitly) assume that although the lean framework is elegant and concise, it should be taken with a grain of salt, and the success or failure of a company does not depend on its dogmatic application, nor do all companies apply each principle consistently. Invariably, somebody compares the company under scrutiny to a highly successful enterprise that was manifestly not a lean startup (traditionally Google, Zynga or Facebook).That DropBox ignores some of the customer feedback it gets, or that IMVU waits until it gets no traction or income before actually paying attention to customer feedback makes neither more or less of a lean startup than the other. So this simple evaluation begs...