Understanding the Lean Startup Mindset

With my experience working with early-stage startup founders, 9 times out of 10, they fall into the following persona:

I have an idea, I have done a lot of research and analysis on the market and I can show you the stats if you want, I have talked to my friends, and done surveys with many other people and they all love it. The idea is fully validated. I have also done 3 years of financial projections and I’m 100% confident that this idea is going to work, and it will be massive. This is where I’m at, I have got a detailed requirements specification for the proposed solution. And all I need is just some funding or a tech co-founder to build the solution so we can launch it to the market.

If that sounds like you, you might just want to invest a few minutes of your time to read through this article.

What is the #1 reason why startups fail?

No Market Need.

And the lack of market need is often due to the lack of testing and people went off to build something nobody wants. A lot of entrepreneurs say to me: “I can’t test it until I have funding to build the product so we can show customer what the idea is about. Find me funding or a tech co-founder.”

To be honest, no one is going to give you money, or put their lives into building YOUR product, just because of an idea.

So, how do we overcome that chicken and egg dilemma, without breaking our own bank account? - You need to change your mindset completely.

First we need to understand what is a startup? If we look at Steve Blank’s definition:

A startup is a temporary organization used to search for a repeatable and scalable business model.

The keywords here are – “temporary” and “to search”.

We are not building a business yet, we are basically using an idea as a starting point to carry out a series of experiments so we can further understand who our potential customers are, their real needs and their true motivation to buy.

If you have not fully figured those out yet, whatever business model, building a team, financial projections, raising capital, they are all totally irrelevant.

So to do that, we need to tune into the lean mindset. You might have heard about the lean startup previously, but the fundamental principle of the lean mindset is “you don’t know until you test”. Yes, “you don’t know until you test”. Say that a hundred and one times to yourself. So basically, we are taking that phrase “you don’t know until you test” and baking it into everything that we do.

So from now on, I want you to throw away all of your pre-conceived notions, all of the things that you think you know about your idea, and just trash them. Whatever you have heard, whatever you think will happen or is common sense, or anything that you have read.

The only things that we know, comes from repeated tests. Getting out there and showing customers your product or services in a way that they don’t actually know it is a test, they think it’s real and under a real, non-pressured, non-biased buying situation, is the only time when the magic happens and we can actually learn something.

You need to recognize that, anything you read that’s from secondary research, or any information you gathered from basic conversations or surveys that are not in a test environment, we simply call those learnings. But if you learn something in an actual test environment that’s well designed, we call that validated learning. Seriously, write this one down, it’s so important.

Experiment with Hypothesis

Remember back in the days, depending on how old you are, in chemistry class where you would have to do a science experiment.

You would have to make a hypothesis on what is going to happen if you say mix oil and water together.Even the result seems so obvious, we still have to design an experiment to test out our assumption. So you would have to write a brief, and the brief would have a hypothesis, like I think that even if we mix oil and water, they can easily be separated.

And then we need to list out assumptions, like, I’m assuming that oil and water don’t mix. These are the type of things you would write in your scientific brief. Then you would go out and test it right, you would go mix oil and water together, and see what happens.

Then you record the information and observation, and that’s what you have learnt in a purpose-built test environment. And then you would redesign the experiment again based on the validated learnings you gathered from the first experiment and repeat the process until the outcome satisfied all of your assumptions.

The lean validation process works exactly like that. In fact, it is called the scientific method for business. Let’s pull up the graph of the scientific method and put it right next to the lean startup validation cycle. Look how unbelievably similar they are. They are basically the same thing, it’s just a scientific way to look at business ideas.

So this is exactly how you are going to test your business idea. First we start with a hypothesis, we are going to list our assumptions, we are going to design an experiment, run the experiment, have a conclusion, and then take all the validated learnings that we got from that test, and re-incorporate them into the next cycle of testing with a brand new hypothesis.

So no more subjective judgement or gut feeling, which many people believe that’s what business is. With the lean mindset, that stops.

Want to learn more about the Lean Startup? It’s best to read the book by Eric Ries: http://theleanstartup.com/book