Based on “The Lean Startup Method”
Ries uses, both in his blog and in his book, specific terminology to describe the essential principles of the lean startup.
A minimum viable product (MVP) is “the version of a new product that allows a team to collect with minimal effort the maximum amount of validated knowledge about consumers.”[2][15] The goal of an MVP is to evaluate the fundamental hypotheses of a business (or “leaps of faith”) and help entrepreneurs begin the learning process as quickly as possible.[2] As an example, Ries points out that Zappos founder Nick Swinmurn wanted to test the hypothesis that customers were willing and wanted to buy shoes online.[2] Instead of developing a website and a huge database of footwear, Swinmurn contacted local shoe stores, took photographs of their inventory, uploaded the images to the Internet, bought the shoes from them at market price, and sold them directly to customers if they purchased them through his website.[2] Swinmurn deduced that there was latent consumer demand, and Zappos became a multimillion-dollar business based on his strategy. in selling shoes online.
Continuous deployment is a process “where all the code that is written for an application is put into production immediately”, which results in a reduction in product delivery cycles.[16] Ries highlights that in some of the companies he has worked for, the code is put into production up to fifty times a day.[16] This concept was created by Timothy Fitz, one of Ries' colleagues and one of the first engineers to work at IMVU.[2][17].
A split-test experiment or A/B experiment is one in which “different versions of a product are offered at the same time.”[2] The goal of a split-test experiment is to observe changes in behavior between the two groups to measure the impact of each version on an actionable indicator.
A/B experiments can also be carried out serially, so that a group of users can see one version of the product one week, while the next they see a different one. This way of working may raise questions in circumstances where external events may influence behavior in one period, but not in another. For example, a split-test of two flavors of ice cream carried out in series during the summer and winter could show a sharp drop in demand during the winter, due to the weather, not the flavor itself offered.
Actionable indicators allow you to make judicious business decisions and establish relevant actions[2][18] On the contrary, “vanity” indicators offer biased measurements, showing the world “in rosy color”, but do not adequately reflect the true growth drivers of a company.
Vanity metrics for one company may be actionable for another. For example, a company specializing in creating dashboards for financial markets could be using the number of page views[13] per person as a vanity indicator, since its revenue is not based on that metric. However, an online magazine that displays advertising may view the number of page views as an essential indicator, since it is directly correlated to the revenue figure of their business.
A typical example of a vanity indicator is “the number of new users per day.” Although a high number of new users per day seems beneficial for any company, if the price of acquiring each user through expensive advertising campaigns is significantly higher than the revenue generated per user, then increasing their number could quickly lead to bankruptcy.
A pivot is a “structured correction designed to test a new basic hypothesis about the product, strategy, and growth engine.”[2] A notable example of a company that uses the pivot is Groupon; In its beginnings, it was an activism platform called The Point.[5] Faced with a lack of impact, the founders created a blog on WordPress and launched their first promotional coupon to be used at the pizzeria located in the lobby of their office building.[5] Although only 20 coupons were redeemed, the founders realized that their idea was important, and had led people to coordinate a group action.[5] Three years later, Groupon grew to become a multimillion-dollar business.
This topic addresses how entrepreneurs can maintain accountability and maximize results by measuring progress, planning milestones, and prioritizing tasks.
[19].
The Create-Measure-Learn circuit is the central core of the lean startup methodology and explains what should be done between the ideation (Create), coding (Measure) and data verification (Learn) phases. In other words, it is an iterative process of transforming ideas into products, measuring customer reaction and behavior towards the products, and learning whether to persevere or pivot from an idea. This process is repeated continuously.
Definitions popularized after “The lean startup method”
The Business Model Canvas is a lean startup and strategic management template for developing or documenting new or existing business models. It consists of a visual representation that describes a company's value proposition, its infrastructure, customers and finances.
The Lean Canvas is an adaptation within the lean startup of the so-called Business Model Canvas. The Lean Canvas focuses on studying the problems and solutions that consumers generally have to apply them to specific consumer segments through a unique value proposition.[20].
The Create-Measure-Learn circuit focuses on speed as the critical ingredient for product development. The effectiveness of a team or a company is determined by its ability to ideate, quickly build a Minimum Viable Product from that idea, measure its effectiveness in the market, and learn from the experiment.
This rapid interaction allows teams to determine the most appropriate path to finding market fit.[21][22].