Now that you’ve finished Part 1 of our Entrepreneurship 101 series, it’s time for juicy Part 2! For this part, we talk about the different approaches you will often hear about when you first enter the startup world. It’s easy to throw these buzzwords around, without really knowing what they actually mean — I know I do!
This article is the second in our series is about concepts relating to early-stage startups, including explanations of the “lean startup” methodology, an MVP (Minimum Viable Product), and bootstrapping. Scroll down and immerse yourself!
1. What is a “lean startup” approach?
A lean startup approach is a style of business development that values a business’s ability to change quickly and with little waste of resources. The goal is to utilise a flat management structure (i.e. getting rid of middle management) and resources in a flexible manner so that the business runs efficiently. This approach means that the development cycle of a startup becomes shorter and more based on iteration (repetition and revision) with three phases: build, measure, learn.
The idea of the lean startup method is that if startups invest their time into building products or services to meet the demands of early customers (through iteration), they can reduce the need for large amounts of initial funding and expensive product launches/tests. For example, a tech startup utilising the lean startup method will build a prototype quickly (build stage), release it into the market and gauge the success of the product through data analysis from early market testing (measure stage), then use this data to iterate and further develop the process for the next building of the product (learn phase). This method doesn’t only just apply to tech startups and can be used across all types of startups.
2. What is agile development? What is a scrum/sprint?
The philosophy of agile development is concerned more with software development. It is a methodology that places importance on incremental software development, by empowering startups to work collaboratively, as well as continuously testing and integrating the product in a manner that is flexible to changes in market or technology. From a tech startup’s point of view this will involve, delivering more software frequently (anywhere from every few weeks to every few months), encouraging in-person collaboration, and regular team reflection and adaptive planning to changes in market demand. It can be considered somewhat analogous to the lean startup method.
A very popular type of agile development that is used by startups is the “Scrum”. Borrowed from the offensive tactic used in rugby, the scrum is a type of agile framework that was initially used for software development projects but has since expanded to be used for any complex project or product development cycle. The scrum starts off with a “product owner”, the main driver of the initiative who creates a “product backlog” that is essentially made to outline all the features that are needed in a product. For example, if your end product is an online-based tutoring service one such product feature that is laid out in the “product backlog” may be a user-centric app with 24hr customer service. The “product owner” will make this backlog in accordance with the needs of customers, the team, stakeholders and executives.
In order to make the completion of these product features and goals more easy to follow, the individual features of the product are approached bit by bit through what’s known as “Sprint planning”. In doing so, certain features are picked out and further divided into a “sprint backlog”, another list of smaller tasks that are needed to complete that product feature e.g. if we are using the “24 hr user-centric app” product feature in the example mentioned earlier, one such smaller task could be the creation of the technical framework of the app itself. In completing the smaller tasks associated with the product feature, the team comes together for a “sprint” which is a set time frame to complete all the smaller tasks associated with that product feature; this “sprint” will usually run for a few weeks. The purpose of all this is to divide the product development and its features into smaller tasks with a set time frame to make it easier to track and complete the task by breaking it up into sub-projects or “sprints”.
During the “sprint” the team will meet-up on a daily basis to see how the overall scrum product process is going and to see how the smaller tasks in each product feature are planning out. The “scrum master”, who is on the team, will help the rest of the team keep focus and help evaluate the direction and efforts of the team. After the sprint, a feature of the product should be completed and ideally this is a “potentially shippable product”, a feature of the whole product that works and can be tested.
The step after the sprint is completed, is the “sprint review” of the product and a “retrospective” which considers the whole sprint: what went well and what can be improved for the next sprint. After this, the next product features are chose from the product backlog and the cycle continues until all the features of the final product are produced and tested. This whole process is incremental and involves a lot of iteration, reviewing, and constant improving.
3. What is bootstrapping?
Bootstrapping is the process whereby an entrepreneur starts a company with very little capital to no capital (but themselves) and will often build the company through financing it themselves. From a small startup’s point of view bootstrapping is good as it allows the team or sole entrepreneur to control all decisions; however given that there is little to no financial backing (apart from family and friends) there is a large financial risk.
4. What is an MVP (Minimum Viable Product)?
A minimum viable product is a product that is in its early stages of development but has just enough features to satisfy early customers, collate data on traction, and provide feedback on future development. The reason why MVPs are popular amongst startups, is because gathering data from an MVP is less expensive than developing a full product with more features. A full product will increase the overall cost of developing the product and leave the startup with a high risk of failure if the product’s traction isn’t tested early. MVPs essentially streamline the development process as risks can be reduced, costs can be saved, and time can be used effectively.
5. What is Proof of Concept (POC)?
A proof of concept is a demonstration of a product which showcases that a concept, theory, or product, has the potential to succeed in the market or real world. In essence, it is a type of prototype that tests the feasibility of a concept to show its practical benefits or potential. For startups, the purpose of a proof of concept is to show the financial viability of a product, often to VCs, investors, and other potential stakeholders. The production of a POC will involve a lot of research and review and will showcase the potential of a startup’s revenue model, developmental costs, and long-term projections.
6. What is scalability?
When talking about scaling a startup or its product, “scalability” refers to the ability of a business, or function, to perform well under an increased or expanding workload. A scalable model or business will be able to increase its performance of efficiency in the face of a rise in operational demands. For example, a tech-based or software developing startup has a high scalability if it is able to serve an increasingly large number of customers and functions as its popularity and use grows. Essentially scalability aligns with the ability of a company to grow and serve ever increasing market demand for their business.
More coming soon! Have a term or concept you’re confused about?
Feel free to e-mail us at firstname.lastname@example.org for any other terms or concepts in the startup world you want explained, or just leave a comment below.