Lean Startup Conference 2013 Takeaway 4 – Principles Behind the Best Practices

Principles Behind the Best Practices
Lean thinking is historically known to have evolved in Toyota. “The Lean Startup” has its roots in these basic principles. Donald Reinertsen who often highlights the lean principles that go beyond practices followed in Toyota presented seven big ideas of lean startup.

1. Converting proxy metrics to economic lifecycle profits helps decision. “The Lean Startup” tests viability by asking customers to sign up instead of feeling good about vanity metrics like number of views.
2. Changes in loading have nonlinear impact on queue length depending on capacity utilization. If you have all your development capacity utilized with everyone frantically working to meet the deadline, you are not equipped to deal with unexpected emergencies. This results in long queues and delayed feedback resulting in more unexpected emergencies.
3. In product development we should try to alter economic impact of variability than eliminate it. Options have value because of asymmetry in payoff function. “The Lean Startup” deals with variability by applying the portfolio approach by increasing the probability of a hit ,which compensates for several misses.
4. Reduce the batch size to reduce the length of the queues. Smaller products with quicker time to market reduce the impact of uncertainty.
5. The easiest way to reduce the cycle time of a process is by limiting the WIP in the process. Software work and capacity is hard to estimate. You can only indirectly limit capacity utilization by limiting queue length.
6. Prioritization is made easier and effective with smaller batch size. All big monolithic batches look equally important.
7. Fast Feedback exponentially reduces the cost. If you go to market sooner, you have less waste in terms of code that is not yet in production. Moreover early feedback can potentially prevent unwanted code.

Conclusion
The lean startup movement is not only about “startups” as commonly understood by all. Any innovative undertaking in an extremely uncertain business environment can be called a “Startup”. It’s strongly rooted in lean manufacturing principles evolved in Toyota. Large companies, including Governments are following these principles. It’s not a movement of large company haters. In fact Eric Ries says that “If you don’t like large companies, why are you building one?”