The lean start-up method is now being taught
at more than 25 universities and through a popular
online course at Udacity.com. In addition, in almost
every city around world, you’ll find organizations
like Startup Weekend introducing the lean method
to hundreds of prospective entrepreneurs at a time.
At such gatherings a roomful of start-up teams can
cycle through half a dozen potential product ideas
in a matter of hours. Although it sounds incredible
to people who haven’t been to one, at these events
some businesses are formed on a Friday evening and
are generating actual revenue by Sunday afternoon.
Creating an Entrepreneurial,
While some adherents claim that the lean process
can make individual start-ups more successful, I
believe that claim is too grandiose. Success is predicated on too many factors for one methodology to
guarantee that any single start-up will be a winner.
But on the basis of what I’ve seen at hundreds of
start-ups, at programs that teach lean principles, and
at established companies that practice them, I can
make a more important claim: Using lean methods
across a portfolio of start-ups will result in fewer failures than using traditional methods.
A lower start-up failure rate could have profound
economic consequences. Today the forces of disruption, globalization, and regulation are buffeting the
economies of every country. Established industries
are rapidly shedding jobs, many of which will never
return. Employment growth in the 21st century will
have to come from new ventures, so we all have a
vested interest in fostering an environment that
helps them succeed, grow, and hire more workers.
The creation of an innovation economy that’s driven
by the rapid expansion of start-ups has never been
In the past, growth in the number of start-ups
was constrained by five factors in addition to the
1. The high cost of getting the first customer and
the even higher cost of getting the product wrong.
2. Long technology development cycles.
3. The limited number of people with an appetite for the risks inherent in founding or working at
4. The structure of the venture capital industry, in
which a small number of firms each needed to invest
big sums in a handful of start-ups to have a chance at
HBR.ORG Why thE LEan Start-Up ChangES EvErythIng
What Lean Start-Ups Do Differently
The founders of lean start-ups don’t begin with a business plan;
they begin with the search for a business model. Only after
quick rounds of experimentation and feedback reveal a model
that works do lean founders focus on execution.
Get out of the office and test hypotheses
Build the product iteratively and
Customer and Agile Development Teams
Hire for learning, nimbleness, and speed
Prepare offering for market following a
linear, step-by-step plan
Agile or Waterfall Development
Build the product iteratively, or fully
specify the product before building it
Departments by Function
Hire for experience and ability to execute
Metrics That Matter
Customer acquisition cost, lifetime
customer value, churn, viralness
Fix by iterating on ideas and pivoting away
from ones that don’t work
Operates on good-enough data
Income statement, balance sheet, cash
Fix by firing executives
Operates on complete data
5. The concentration of real expertise in how
to build start-ups, which in the United States was
mostly found in pockets on the East and West coasts.
(This is less an issue in Europe and other parts of the
world, but even overseas there are geographic entrepreneurial hot spots.)
The lean approach reduces the first two constraints by helping new ventures launch products
that customers actually want, far more quickly and
cheaply than traditional methods, and the third by
making start-ups less risky. And it has emerged at
a time when other business and technology trends
are likewise breaking down the barriers to start-up
formation. The combination of all these forces is altering the entrepreneurial landscape.