Running Lean
By Ash Maurya
Introduction
Ash Maurya believes that even though there are more products being conceived and created than ever before, most of them see little or no success. The reason for this failure rate is the waste of time, funds, and effort being put into developing “the wrong product,” and he explains that the innovative start-ups that do manage to succeed share an interesting common factor. A great idea and a solid plan are important elements of success, but they’re not necessarily enough on their own. It’s reported that two-thirds of successful start-ups state they drastically changed their plans along the way, indicating that having an awareness of what you’re doing not working and finding another way that will work before resources run out is of equal importance and is in fact the biggest differentiator between those who see success and those who don’t.
This leads the author to assert that innovators would have a much higher chance of succeeding if they had some way of vetting product ideas before going too far down a path that’s destined to fail, and in the pages of Running Lean, he sets out his “systematic process” to help businesses do exactly that. The information shared with the reader provides everything needed to determine the “product/market fit for your fledgling venture” from the outset, helping to set you up for success from the first step.
My Top 3 Takes from the Summary
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Principles guide what you do in business and tactics show you how.
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An entrepreneur’s main job is to identify and reduce risk.
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Iteration is needed to create and refine a business model that works.
Iterate from Plan A to a Plan That Works
Understanding how to apply the Running Lean process begins with understanding the framework it was built on, and being able to separate principles from tactics. The author explains that principles guide what you do while tactics show you how.
In the first part of the book, three core principles are explained in detail:
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Creating and documenting your Plan A
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Identifying risks and determining which need attention
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And testing your Plan A in a systematic way.
Creating and documenting your Plan A:
The first principle of Running Lean is to get the vision in your head written down and documented. If you’re an entrepreneur with an idea you’re particularly enthused and passionate about, you’ll quickly develop a strong vision or mental image of it in your mind which becomes your Plan A. However, it’s a vision that has been created in isolation in your mind, therefore it’s generally based on your own untested assumptions. Writing it down not only helps to clarify things in your own mind, it also gives you something to share with other people, thereby facilitating conversations with others about your idea.
Identifying risks and determining which need attention:
The author comments that building a successful product is fundamentally about risk mitigation. He adds that an entrepreneur’s main job essentially becomes reducing risk because customers will only buy products if they believe it will solve a problem they have, and investors will only fund a start-up if they believe there’s a scalable business model. This means there’s a need to be clear on what the risks are for both groups, and then a need to determine whether those risks warrant a solution.
Testing your Plan A in a systematic way:
A “systematic way” is described by the author as testing that’s rooted in the scientific method. A series of experiments will be needed to either validate or invalidate your Plan A, and in the process, you will also be putting your assumptions about it to the test – is it a good solution to customers’ problems, and is it a good product for a particular market?
Your Plan A
To come up with your Plan A, you need to get your hypothesis out of your head and written down, then you can systematically test it. The author suggests keeping it to an outline, rather than a lengthy business plan, and a one-sheet planning tool (Lean Canvas) is included in the book. The format you use is your choice, but the point of doing it is to go through each step necessary to create your Plan A.
Identifying your customer is one of the important first steps. You also need to identify the problem they are experiencing, and the solution to that problem your product brings. The author recommends beginning with a list of all the potential customer segments for your product, then breaking those down into smaller segments, and then focusing on just two or three that you understand best or find the most promising. Next comes defining the problems faced by customers in each of those segments, and asking yourself what differences your product brings in terms of solving those problems compared to existing solutions. The author states that a deep understanding of the problems, their solutions, and existing products that offer a solution is paramount, and you need to pinpoint your product’s “unique value proposition” in relation to existing alternatives.
Your Unique Value Proposition (UVP) – It’s one of the most difficult things to pinpoint and get absolutely right, but your UVP is one of the most important aspects of your business as a whole. The author describes it as the first interaction customers will have with your product, therefore it needs to be clearly visible on your website and all other forms of messaging. It needs to communicate the essence of your product in just a few words, so it must be clear, concise, and unique, but also tweakable as you continue to build your plan A.
Once you have established a set of customer problems and your UVP, the next consideration is your potential solutions. These need to remain simple at this stage as they may change and evolve as you progress your plan, but pricing and revenue streams should be defined. Armed with this information, you’re in a position to estimate the amount of time, money, and effort you’ll need to put in to reach a point of breaking even.
Risk Assessment
A point made by the author is that not all risks are equal, and he believes the inability to properly identify risks and then prioritise them is a major contributor to waste and eventual failure in a start-up. Each risk needs to be assessed in terms of the “opportunity cost” and the “real costs,” something that can be figured out by giving consideration to the probability of achieving the outcome you want along with quantifying the associated loss if you don’t get the outcome you want. Through this process, priority can be assigned to all risks and the riskiest of them can then be identified.
The author suggests dividing risks into three basic categories: product risk, customer risk; and market risk, as these risks are universal irrespective of your product type or business model. He adds that as you start the process, your “objective is to find a model with a big enough market you can reach with customers who need your product that you can build a business around.” Priority should be given to customers identified as needing your product the most, and those who are going to be easiest to reach, but then the size of the market must also be considered.
Once the associated risks of your business model have been prioritised, an important next step is to seek external opinions. The author suggests looking to “prototypical customers, potential investors, or other entrepreneurs.” Any advisor with appropriate knowledge or expertise relating to your situation will help you to see the bigger picture, and thereby help to refine your model further by identifying any risks you may have missed. Be honest and open with your plan and ask them for their opinion on what they see as the riskiest aspects of it. To get the most out of these meetings, ask specific questions, seek advice on how they would go about testing your plan and be prepared to listen and learn.
Experiment and Iterate
Only by experimenting can you determine whether everything about your product is on track or if iteration is needed. The author gives readers detailed instructions on how to stress test your plan to iterate from Plan A to a plan that works.
Assembling a small team of people is recommended for the testing process, and a mix of skills will help to speed up the iteration process. The author comments that it’s possible to experiment on your own, but having at least one other person involved helps to “enforce periodic reality checks.” Combined skills across the team should include those in the areas of development, design, and marketing, and the goal is to find a plan that works before resources run out. For this reason, the experimentation process needs to be speedy and focused on learning at each stage if you are to stay ahead of your competition.
Systematically testing your plan is a four-stage process:
Understand the problem – the author recommends direct customer interaction, rather than focus groups, as the most efficient way to understand their problems.
Define the solution – your team now needs to propose potential solutions to combat those customer problems. A demo in the form of “anything that can reasonably stand in for the actual solution” can then be presented to the customers to gauge their reaction, and refinements can be made from there.
Validate qualitatively – after releasing your first version, the real learning about your product begins. You now need to understand what customers liked and disliked, and how potential customers can be made into actual customers. This part of the process involves building and refining your landing page to attract interest, and conducting customer interviews to get their feedback on what changes they want to see in your product. It’s a highly detailed stage that continues until interested parties become your customers.
Verify quantitatively – after validating your product for quality with a small group of customers, you are ready to launch. Fine-tuning of your product can take place by conducting split tests in which one set of customers tries a new feature and the feedback is then compared to that of feedback from a previous group of customers who didn’t have access to the new feature. The author describes this part of the process as a “key engine of growth,” in that a means of progression needs to be identified and demonstrated to ensure your model has the ability to grow and scale for long-term viability.
Conclusion
The information presented in the pages of the book is instructional and highly detailed by design, offering business managers, small business owners, developers, programmers, and anyone starting a business project a solid and practical framework on which to develop their product. For this reason, the contents are designed to be studied and then applied, meaning it’s not a book that can be skimmed through quickly to pick out a few useful ideas.
Highlights
The author’s experience, insights, and recommendations make the detailed framework presented in the book every bit as valuable to the reader as a graduate-level course in product development.
Bio of the Author
Ash Maurya is the creator of the one-page business modelling tool ‘Lean Canvas’ and is well-known in the lean start-up community. He’s an author, blog writer, and creator of a series of products aimed at helping entrepreneurs raise their odds of success. Also a passionate international speaker, Ash holds workshops around the globe, is a mentor to several accelerators, a lecturer at a number of universities, and serves on the advisory board of numerous start-ups. He is the founder of Sparks 59 in Austin, Texas, and he previously bootstrapped WiredReach in 2002 which he sold in 2010.
