A642.8.3.RB - How dangerous are Lean Start-ups?

A642.8.3.RB - How dangerous are Lean Start-ups?

This week, create a reflection blog (RB) regarding the implications of lean startups and why they can be so disruptive to well-established, older, industry giants. Identify in detail, the elements that provide a unique competitive position and how to combat such an adversary.

This week’s blog I will be discussing the implications lean startups have and the disruptive effects on well-established, older, industry giants. First let me give the definition of a lean start up. Lean startup is an approach to business development that is based on the principles of lean production, a manufacturing methodology that values a business' ability to change quickly.

It may seem counterintuitive to think that something as disruptive, innovative, and chaotic as a startup can be managed or, to be accurate, must be managed. Most people think of process and management as boring and dull, whereas startups are dynamic and exciting. But what is exciting is to see startups succeed and change the world. The passion, energy, and vision that people bring to these new ventures are resources too precious to waste. We can— and must—do better. (Ries, 2011)

A lean startup has a flat management structure and makes use of its resources in a flexible manner. Such a startup will trade long, rigid and expensive development cycles for shorter, iterative ones that focus on three phases: build, measure and learn.

A lean startup will build a prototype quickly, get it to market to gauge success of the product without expending unnecessary resources and use the data generated by early marketing testing to influence the next build phase. In lean production, this approach is called kaizen. In programming, the approach is called Agile. (Emmrich, 2014)

This is the goal of VC’s (venture capitalist forums) like Kick Starter. Kickstarter was built to help bring creative projects to life. Projects on Kickstarter must be creating something new to share with others. Everything on Kickstarter must be a project. A project has a clear goal, like making an album, a book, or a work of art. For technology entrepreneurs, Kickstarter can be appealing as a possible source of funding for product development. But Kickstarter backers are also important for the feedback, ideas, and word of mouth they can provide.

Lean startups and VCs are changing how entrepreneurs bring new products to market. They are helping and allowing thousands of innovating entrepreneurs to raise money, build brand awareness, and join a broader conversation with large numbers of potential backers, all while still in the product development process. Examples of crowdfunded products include the Glif, whose creators raised more than $137,000 for the device, which allows smartphone users to prop their phones up at an angle or attach them to tripods, and the Oculus Rift, a virtual-reality gaming headset that raised $2.4 million via crowdfunding. Oculus VR was later acquired by Facebook Inc. for $2 billion.

Entrepreneurs are rightly wary of implementing traditional management practices early on in a startup, afraid that they will invite bureaucracy or stifle creativity. Entrepreneurs have been trying to) t the square peg of their unique problems into the round hole of general management for decades. As a result, many entrepreneurs take a “just do it” attitude, avoiding all forms of management, process, and discipline. Unfortunately, this approach leads to chaos more often than it does to success.

References

Emmrich, K. (2014, July 17). Lean Startup Meets Design Thinking. Retrieved from YouTube: https://www.youtube.com/watch?v=bvFnHzU4_W8

Ries, E. (2011, April 7). The Lean Startup. Retrieved from YouTube: https://www.youtube.com/watch?v=fEvKo90qBns&feature=youtu.be