Eric Ries explains the methodology in his book, The Lean Startup. He argues that in order to build a great company, one must begin with the customers in the form of interviews and research discovery. After building a Minimum Viable Product (MVP) and then testing and iterating quickly, the product or service results in less waste and a better product market fit. Ries also recommends using a process called the 5 Why’s, a technique designed to reach the core of an issue.
Key concepts of the approach include:
- Minimum viable product (MVP) – the version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort (similar to a pilot experiment).
- Continuous deployment – a process where all code that is written for an application is immediately deployed into production (software only).
- Split testing – The goal is to observe differences in behavior between the two groups (A/B) and to measure the impact of each version on an actionable metric.
- Actionable metrics – In contrast to vanity metrics, these are measurements that accurately reflect the key drivers of business success based on customer engagement.
- Pivot – a structured course correction designed to test a new fundamental hypothesis about a product, strategy, or engine of growth in a business.
- Innovation accounting – a way to track performance of a new product or service that differs from traditional accounting methods that are too focused on ROI and revenue.
- Build-Measure-Learn – an improvement cycle that drives the quick creation of a minimum viable product of on idea, measures its effectiveness in the market, and learns from that experiment to create a new MVP
- Business Model Canvas – a visual chart with elements describing a firm’s value proposition, infrastructure, customers, and finances, to help assist firms in aligning their activities by illustrating potential trade-offs.
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