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

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

The implications of lean startups and why they can be so disruptive to well-established, older, industry giants.

            Traditional start-ups generally include coming up with a business plan and pitching it to a bank or sponsor for financial backing. The life-span of a start-up is usually not very long, the exception are those start-ups that succeed. Recently, new “lean” start-ups have become more and more common. Blank describes these lean start-ups as a methodology [that] favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development (2013). When I look at this and how it could impact my organization, I think about a mouse (lean start-up) and an elephant (big companies like Boeing). The mouse is small and agile, it can get into spaces that an elephant can’t. It takes the elephant more time to move and maneuver. However, once the elephant gets moving, it can go fast and will trample the mouse that happens to get in the elephant’s path.

            The agility and flexibility of the lean start-up companies can be a benefit because it allows for the company to change the focus of a project. One of the critical differences is that while existing companies execute a business model, start-ups look for one. This distinction is at the heart of the lean start-up approach. It shapes the lean definition of a start-up: a temporary organization designed to search for a repeatable and scalable business model (Blank, 2013). Instead of telling the public what it needs, a lean start-up looks for solutions they can come up with for problems they’ve found. If a lean start-up wants to get into the basket-weaving industry but upon talking to potential users of these baskets find out that what’s actually needed is wire baskets because they are less susceptible to rodents and mold issues – then they figure out how to manufacture the wire baskets instead. A traditional start-up would have already come up with a supplier of materials, a five-year business plan, and secured orders for their baskets. If the consumer changed their minds and wanted a wire basket at that point, the traditional start-up would have to scrap their plan and start over – or find new consumers. Although the methodology is just a few years old, its concepts—such as “minimum viable product” and “pivoting”—have quickly taken root in the start-up world, and business schools have already begun adapting their curricula to teach them (2013).

Identify in detail, the elements that provide a unique competitive position and how to combat such an adversary.

            One of the elements of a unique competitive position is timing. Being ahead of the main players allows you to shape the market for your idea…timing cannot be so early that it will not work... [o]r too late to capture attention (McKeown, 2014). Another element is effective creative thinking. These skills are all about generating good ideas about possible new products and services that add to company revenues and profit (Canfield & Smith, 2011).  Another element is to have solid funding for a product. In order to do that, a start-up needs to remove as much risk and the known unknowns of the investment. It’s also important that a start-up be aware of and have a plan for disrupters. [This plan] often requires an industry-defying approach to doing business and an extraordinary commitment to ensuring that customers gain the benefits they’re seeking (Mount, 2013).

            It’s impossible to plan for every single disrupter or challenge to each start-up but creative thinking, being flexible, and understanding the consumer’s true needs go a long way in paving the way to a promising future for a business.

References

Blank, S. (2013). Why lean start-ups change everything. Harvard Business Review.91.5.65-72

Canfield. J. & Smith, G. (2011). Imagine: Ideation skills for improvement and innovation today. Holland, MI: Black Lake Press.

McKeown, M. (2014). The innovation book: How to manage ideas and execution for outstanding results. Edinburgh Gate, Harlow, United Kingdom. Pearson Education Limited.

Mount, M. (2013). Kiva the Disruptor. Harvard Business Revies.90.12.74-80.