What is a lean start-up?
It is the process of continuous innovation to build up a start-up, and it includes developing the business concept, product-market fit and a plan for scalability. A start-up is not a company, but it is an early-stage concept that is searching for the best business model to become a company. The word ‘lean’ reveals the method of developing a start-up, and this methodology exists to eliminate wastes, reduce lead time and cost, increase quality, reduce work-in-process and inventory, increase inventory turnover and increase productivity and efficiency. Not only this method focuses on internal processes, but it is putting more efforts on improving customer satisfaction.
The lean start-up concept was derived from the lean manufacturing philosophy. In the early 1980s, the Toyota Production System (TPS) introduced a practical approach to lean manufacturing, which is a method of improving efficiency and minimizing waste. It aims at adding value to the business by reducing non-value-added activities such as wastes.
The 5 principles of lean manufacturing
Lean manufacturing exists to achieve the following five principles:
Principle (1)- Understanding customer value: value must be focused on customers, and only what they perceive as value is essential. Therefore, you should get to know what values customers want.
Principle (2)- Value stream analysis: this involves identifying how the business creates values. This process includes managing values including, steps and measures, to realize the values that customers collectively want. If any action does not add value, you should consider changing or removing it from the process.
Principle (3)- Flow: this involves making continuous flow of raw materials into finished goods in dedicated production cells to avoid waste resulting from moving products between production stations. Therefore, it is efficient to allocate independent stations for production to avoid waste.
Principle (4)- Pull: Instead of making goods to stock, customer demand pulls finished products, which means a business must strive to produce and deliver goods as required by a customer.
Principle (5)- Perfection: This means minimizing waste and improving the quality of products and includes steps to fulfil customers’ requirements more efficiently. A business can be improved if only it eliminates waste from its processes to meet the demands of value streams, flow and pull. Any business should realize that there is no end to reducing waste, including time, cost, space, mistakes, and effort.
Lean start-up approach
The lean start-up approach applies the same concepts as lean-manufacturing, by striving to create, deliver and capture the values that customers want. It uses design thinking to figure out customers’ needs and create value, then tests the value by engaging with customers and evaluating their feedback. Therefore, it involves customer-centred thinking. The lean start-up tries to break down the steps required to develop and deliver benefits to customers, including value creation, reducing resources, enabling of validated learning and mitigating any risks of failure.
This article is extracted from my new book- Mastering Enterprise Skills for Potential Entrepreneurs, which can be found on www.amazon.co.uk. If you want to receive more information about the book and our activities, you can register in our newsletter by using this link.
Prepared by Munther Al Dawood
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