The lean management concept was the brainchild of Toyota with their Kanban and Just In Time manufacturing processes.
But, for our purposes, we need to start with Eric Ries’ 2011 book, ‘The Lean Start-Up.’ Despite its title, it is not just for new businesses! It is of interest to any organisation dealing with conditions of ‘extreme uncertainty.’ Entrepreneurial start-ups clearly fall into this category but so, too, does any organisation developing a new product or moving into a new market. In fact, it applies to anybody faced with the question, “will people buy this?”
In a world of extreme uncertainty, the classic approaches to business planning or new product development don’t work. The usual linear ‘research, develop, launch’ approach is much too risky to be taken seriously and explains why the vast majority of new business ideas fail.
Instead, Ries advocates an iterative ‘build, measure, learn’ loop. He argues that an initial business idea can never be more than an untested hypothesis, no matter how much effort goes into research. The only effective way to validate such a hypothesis is to test it in a live setting.
This involves building a ‘minimum viable product’ (MVP) and getting it to market quickly so you can observe, measure and learn from the reaction. The hypothesis is then refined and the MVP is modified and re-tested.
The key point here is that the MVP is a prototype, not a fully developed product. It must work well enough to test your hypotheses and be sufficiently adaptable to respond quickly to what the market tells you. Sometimes the feedback will encourage you to ‘persevere’ by evolving your product. In others you'll need to face up to a fundamental flaw in your thinking and make a radical ‘pivot.’
But, either way, you are reacting to how the market actually behaves, rather than how you think it should behave!
But how does it work in practice?
Well, my first suggestion is to read the book! In my opinion it's one of the very few business books that should be a ‘must read’ for all business owners and managers concerned with bringing new products to market (or existing products to new markets come to that.)
The key points of the 'Lean Approach'
For us, here at Priszm, it's the only approach to developing new business ideas that makes empirical sense. Speaking personally, it has informed my mentoring activities over many years and was developed in response to how I observed markets actually behaving. That's why it's the cornerstone of our approach.