When EricRies developed the “Lean Startup” approach for startups in 2008, he was merely trying to package his 8 years of experience growing different tech startups. Today, the idea of lean startup has grown so much that the Silicon Valley veteran and blogger now has one of the bestselling books on startups. Whether the idea of a lean startup has succeeded or failed would depend on how the ideas postulated in the book have played out. Here, we review the lean startup strategy, how it has fared, and how you can use it to grow your business.
Dropbox As A Case Study
Dropbox, the American cloud computing application remains the best model for exploring the effectiveness of lean startup. Quite surprising is how Dropbox grew so tremendously even in a heavily saturated market, with the likes of Microsoft’s OneDrive, Google Drive, pCloud, etc. Dropbox CEO, Drew Houston, has severally said that much of Dropbox’s success derives from its application of Eric Ries’ Lean Startup principles. Houston has also narrated how Dropbox went lean and succeeded. A few of his success stories would be interpreted in the light of the lean startup principles.
Minimum Viable Product (MVP)
- At the launch of Dropbox in September of 2008, it was such a big joke.The concept was a raw, coded prototype, supported with an ambitious development calendar for the product and nothing else.
- With just those assets at his disposal, and armed with the most basic video demos and a landing web page for collecting email addresses, he went all out in search of potential investors and Dropbox’s first time users.
- His first video presentation was a quick and summarized breakdown of Dropbox’s interface and the explanation of the problems it intended to solve. The video was sent to Hacker News and other industry news outlets, and also to venture capital firms.
- Although the video was a hastily organised crap, it proved effective not only in fascinating Y-Combinator, but also became viral.
- The second video went viral on Digg.com, which describes itself as the homepage of the internet, featuring the best articles, videos, and original content that the web is talking about right now. The viral video resulted in over 75,000 potential users added to Dropbox’s waiting list in just one day.
With this, Dropbox has not only tested its products, but also has saved itself from the costly failure it would have been faced with in the future.
The Minimum Viable Product strategy allowed Dropbox to go to market, test and learn how its product performed. The performance of the product was noted through the customer feedback loop. The loop allows startups going through the lean startup ways to answer the most important question for every startup: “Is this a product people are willing to pay for?”. This feedback loop helps, later in developing a product that is either discarded, better polished or entirely readjusted.
“Build it and they will come” Almost Never Works
- With Dropbox, Houston recognized early on that he and his co-founders were, themselves, early tech adopters. Hence, the best way to go about pushing their products was to push them to consumers they knew well and understood. The result of this disciplined, targeted development of its customer base through the videos and other resources was the rapid adoption and profitable growth of Dropbox. As at 2018, Dropbox had more than 500 million users and was valued at $12 billion.
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- The crucial point every startup must note here, according to Eric Ries is that they need to approach the development of their customer base or target audience in just as rigorous and disciplined a way as they approach product development, quality control, and marketing.
Creative Thinking Through Product Experimentation
- The decade old formula for setting up a business is that you first carry out market research, draw up a business plan, get the project going and then struggle to find investors to pitch deals to. The Lean Startup says you don’t have to follow all those time-consuming, wasteful, and most times unsuccessful approaches. The Lean Startup believes you must constantly experiment, monitor and evaluate your startup.
- The idea is to demystify the fact that most traditional marketing and growth strategies startups feel compelled to implement because “that’s just how you do it” just don’t work.
- Dropbox followed the same pattern as traditional product developers did. Before its first public launch, it had invested heavily in Search Engine Optimization and Search Engine Marketing, like their competitors were doing. However, upon close study of the marketing model, Dropbox was able to find that the strategies were proving costlier than they had imagined — over $300 is needed to acquire a customer. Selling a $99 product, those figures were unacceptable.
- Creative thinking meant that Dropbox recognized that much of its continued growth was due to satisfied users regularly telling friends about the app. Dropbox immediately established its now-iconic referral program — invite a friend to Dropbox and you both get 500 megabytes of bonus cloud storage space. That singular act meant Dropbox grew by 3900% in just 15 months after the launch of the program.
The Bottom Line
The lean startup strategy is all together altering the entrepreneurial landscape. The impact of the lean startup can best be summarised as follows:
- Today open source software, like GitHub, and cloud services, such as Amazon Web Services, have cut down the cost of software development from millions of dollars to thousands.
- Hardware startups are no longer constructing their own factories, since offshore manufacturers are so easily accessible.
- Indeed, it’s become quite common to see young tech companies that practice the lean start-up methodology offer software products that are simply “bits” delivered over the web or hardware that’s built in China within weeks of being formed.
- Finally, think about, Roominate, a startup designed to inspire girls’ confidence and interest in science, technology, engineering, and math. Once its founders had completed testing and iterating on the design of their wired dollhouse kit, they sent the specifications off to a contract manufacturer in China. Three weeks later the first products arrived.
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.