Starting a small business or creating a new product requires lots of capital and investment, right?
That is, not if you follow the lean start up methodology.
The methodology, which is fast turning into a movement, is a set of practices to help entrepreneurs increase their odds of building a successful business. It has already spawned numerous start ups, local groups, and a book.
While reading the book recently, I was struck at the similarities between start ups and small businesses. Both work with minimal resources to achieve maximum efficiency. And, unlike big businesses, both are intently focused on customer service.
Let’s how the lean methodology can adapt to all small businesses.
At the core of the lean start up movement is the Build-Measure-Learn principle. In simple words, the principle enables you to build prototypes at low costs, test new products or concepts for your small business, and innovate based on customer responses.
That may sound like a tall order, considering constraints that most small businesses work with. This is where Software-as-a-Service applications come in. SaaS applications enable you to test drive new ideas at cheap costs. In addition, they are scalable. This means that you can ramp up efficiencies based on successful test drives.
But, to get back to making your business lean. The book contains several interesting ideas. Here are three of them:
Idea #1: Build Minimum Viable Products
A minimum viable product is a bare bones product or service. In other words, it is a test run for your product or service. The idea is to strip your product or business down to its essential service and put it out on the market.
The dual benefits of this approach are that it saves you money and enables you to innovate based on customer responses.
Need examples? Coupon behemoth Groupon started off as a simple newsletter with deals from neighborhood restaurants in Chicago.
Specifically, cloud-based agile project management apps can help you manage projects and iterate rapidly based on customer feedback.
Idea #2: Ensure Validated Learning
Validated learning places customers ahead of revenue for small businesses. Logically, this is the next step for small businesses after building a minimum viable product. It changes the focus of your company from generating revenues off your customers to learning more about them to provide better services. The end result is known as traction. Besides gaining customer loyalty, it also opens up new marketing channels for your small business.
Need examples? Social media behemoth Facebook started life as an advertisement-free network to engage and excite its initial customer base- college students. Its growth was rapid and massive, once it earned customer loyalty from university students.
Specifically, cloud-based CRM apps can help you listen to customer responses through multiple channels, including social media networks.
Idea #3: Measure Metrics Differently
Lean start ups use an accounting framework known as innovation accounting. It works by measuring your business metrics against validated learning action points. Unlike dry and rigid accounting practices, innovation accounting is flexible and measures metrics in terms of validated learning action points for your business.
For example, typical accounting metrics for a new product website would measure new customers, repeat customers, and conversion rates. However, innovation accounting correlates this metric with product innovation. Thus, each product enhancement is tied to customer engagements. What’s more, you can also slice and dice customer segments and create customer cohorts to measure engagement styles.
Specifically, cloud-based BI and analytics apps can help you make sense of reams of data and convert them into positive and actionable project tasks.