Burgess COMMENTARY

Peter Burgess

Why the Lean Start-Up Changes Everything

Photography: Courtesy of the artist and the Wallace Trust ... Artwork: Sara Hughes, Download, 2005, acrylic on linen, 1.5 m x 1.5 m, Wallace Trust Collection

Launching a new enterprise—whether it’s a tech start-up, a small business, or an initiative within a large corporation—has always been a hit-or-miss proposition. According to the decades-old formula, you write a business plan, pitch it to investors, assemble a team, introduce a product, and start selling as hard as you can. And somewhere in this sequence of events, you’ll probably suffer a fatal setback. The odds are not with you: As new research by Harvard Business School’s Shikhar Ghosh shows, 75% of all start-ups fail.

But recently an important countervailing force has emerged, one that can make the process of starting a company less risky. It’s a methodology called the “lean start-up,” and it favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development. 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.

The lean start-up movement hasn’t gone totally mainstream, however, and we have yet to feel its full impact. In many ways it is roughly where the big data movement was five years ago—consisting mainly of a buzzword that’s not yet widely understood, whose implications companies are just beginning to grasp. But as its practices spread, they’re turning the conventional wisdom about entrepreneurship on its head. New ventures of all kinds are attempting to improve their chances of success by following its principles of failing fast and continually learning. And despite the methodology’s name, in the long term some of its biggest payoffs may be gained by the large companies that embrace it.

In this article I’ll offer a brief overview of lean start-up techniques and how they’ve evolved. Most important, I’ll explain how, in combination with other business trends, they could ignite a new entrepreneurial economy.

The Fallacy of the Perfect Business Plan

According to conventional wisdom, the first thing every founder must do is create a business plan—a static document that describes the size of an opportunity, the problem to be solved, and the solution that the new venture will provide. Typically it includes a five-year forecast for income, profits, and cash flow. A business plan is essentially a research exercise written in isolation at a desk before an entrepreneur has even begun to build a product. The assumption is that it’s possible to figure out most of the unknowns of a business in advance, before you raise money and actually execute the idea.

Once an entrepreneur with a convincing business plan obtains money from investors, he or she begins developing the product in a similarly insular fashion. Developers invest thousands of man-hours to get it ready for launch, with little if any customer input. Only after building and launching the product does the venture get substantial feedback from customers—when the sales force attempts to sell it. And too often, after months or even years of development, entrepreneurs learn the hard way that customers do not need or want most of the product’s features.

After decades of watching thousands of start-ups follow this standard regimen, we’ve now learned at least three things:

1. Business plans rarely survive first contact with customers. As the boxer Mike Tyson once said about his opponents’ prefight strategies: “Everybody has a plan until they get punched in the mouth.”

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Most everyone who has commented seems to think that these ideas are as revolutionary as 'sliced bread' and very useful and important, but for me they confirm that the business school community are teaching and learning a very limited piece of what business leaders and policy experts really need to know and practice.

The President of Ireland recently addressed the European Union and drew attention to the total inability of modern thinkers to handle the big problems of the day ... the fact of massive unemployment in many developed economies, and the huge global problem of poverty, lack of education, lack of health services, huge damage to the environment, and on an on.

Making business more 'efficient' ... so that business can make more profit, while ignoring the issues of society is only doing half the job. My view is that modern money profit accounting should be reformed so that there is also rigorous accounting for value or impact as well. There should be this sort of accounting not only in the organization but also in the community ... same data showing how well the organization is doing and also how well society is doing.

It is probably time to do some rethink about how money works ... the so-called fractional reserve system does not seem to have the resilience needed for an economy to work in a sensible way.

I believe the intellectual capacity exists to rethink how business and society works ... but I do not see it being used.

I love your comment at HBR on the Lean Start-Up article.

I so agree with you and wanted to know what you did and found you here on LinkedIn.

What an inspiring work you do!

Cheers, ~J'HeaLee

Summary

I help people and businesses transform 'the way they create,' and become conscious and effective creators.

I help with three key aspects of life and business:

• * Clarity
• * Authentic Decision-Making
• * Effective Actions

Through hands-on consulting supported with coaching, I also participate and help my clients in the real-life and business tasks and projects, such as organizing, restructuring, strategic planning and operations.

Working with specific life and business situations and questions, I guide my clients through the practical process of how to achieve clarity, make authentic decisions, and take balanced and effective actions toward their goals.

With a PhD in Electrical Engineering from Yale University, I come from a practical, problem-solving background. I went from being a Chief Technology Officer, Creative Director, and Business Consultant for startups in New York City, to a healer and coach to recover my own health. As a transformation specialist, I share practical tools and skills from my own experiences to help people with their artistry in discovering and fulfilling your deepest personal and professional aspirations.

Specialties: Executive/Business/Leadership Coaching, Life Coaching, Business Consulting, Operations, Professional Organizing, Strategic Planning, Stress Management, Wellness, Workshops.

Experience

Principal Truth In Motion 2000 – Present (13 years) www.jhealee.com

Founder Heaven Us Earth 2000 – Present (13 years)

Public Information Consultant United Nations February 2007 – December 2008 (1 year 11 months)

Integrative Stress Management Consultant St. Vincent's Hospital January 2002 – July 2005 (3 years 7 months)

Chief Technology Officer Women's Sports Network, Inc. 2000 – 2001 (1 year)

Director of Engineering & Creative Director Eyeweb, Inc. 1998 – 2000 (2 years)

Senior Associate Kinderhook Systems, Inc. 1996 – 1998 (2 years)

Research Associate Haskins Laboratories 1994 – 1996 (2 years) Languages

Korean

• 19Coaching
• 13Start-ups
• 11Management Consulting
• 10Workshops
• 9Entrepreneurship
• 7Stress Management
• 6Public Speaking
• 5Consulting
• 5Wellness
• 5Project Management

• 4Healing
• 2Life Coaching
• 1Problem Solving
• Operations
• Professional Organizing

Yale University Ph.D., Electrical Engineering Dissertation in Medical Imaging: 'Bayesian Reconstruction In Emission Tomography Using Gibbs Priors.'

State University of New York at Stony Brook B.E., Electrical Engineering, Applied Mathematics Roslyn High School

My Luu1st Program Director of Global Innovation, Solutions & Policy at IBM; President of the Yale Alumni Association of New York