A642.8.3.RB_DellElceCamila

A642.8.3.RB – How Dangerous are Lean Startups?

            What is a startup? “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty” (Niculescu et. al., 2014, para. 3). Startups businesses are the most challenging organization to take to success. Entrepreneurs believe that starting a company is easy and that money is all they need. However, people with that mentality end up being part of the at least seventy-five percent of startups that fail, as per Steve Blank (2013). Being optimistic is not as important as being realistic when it comes to creating any kind of corporation, organization, etc. While being honest is not a way to discourage others from trying, honesty and realism help people into understanding what they are about to start. Organizations do not start in one day; In fact, it takes many months and maybe years before an organization can be well established and recognized by the public. Part of successfully leading a startup is being patient.

            One of the most important steps in creating a startup company is to come up with a unique idea. A careful survey of failed startups determined that “42% of them identified the lack of a market need for their product as the single biggest reason for their failure” (Patel, 2015, para, 6). The creation of a useful product will define the success or failure of any startup. Following this step comes creating a plan. Thankfully, a new methodology has been elaborated and although is fairly new, it has adjusted two different concepts. One is the minimum viable product and the other is the pivoting. Even business schools are transforming their curriculum in order to implement the new methodology. “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” (Blank, 2013, para. 3).

            “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” (Blank, 2013, para. 1), but this should not led anybody from trying. Instead, lean startups should be reinforced to prevent future failures. It is good to remember that even the most established companies suffer from maintaining their innovation up to date. As companies become bigger, they are all faced with changes, and knowing ahead of time what to expect out of a foreseeable outcome can prevent many headaches. A business plan, which describes “the size of an opportunity, the problem to be solved, and the solution that the new venture will provide,”  (Blank, 2013, para. 4) typically, is forecasted in a five year timeframe.

            Moreover, politics have a lot to do with the well being of the organization. If a crisis emerges elsewhere in the organization, their budget might suddenly be reduced. This would mean that employees would end up working longer hours, while getting less economical reward. On the other hand, if an organization stars with too much money it could also be harmful. Like the saying goes, “Extremes are easy. Strive for balance.” Startups are extremely sensitive to midcourse budgetary changes. “It is extremely rare for a stand - alone Startup Company to lose x percent of its cash on hand suddenly. In a large number of cases, this would be a fatal blow, as independent startups are run with little margin for error” (Niculescu et. al., 2014, para. 7).

            Nevertheless, Steve Blank (2013) talks about three specific lean principles to make start-ups a success, which contradict previous ideas. To begin with, he suggests to become aware of that the organization is just starting and not to presume that makes an organization a superstar. It is all about building value for the company and the customers as well. Secondly, being humble is yet another quality of good startups. If you wait to have consumers, then the organization will die waiting. Instead, it is recommended to approach outdoor people into trying the new product and that way obtain feedback to improve the model. This is an inexpensive way of doing marketing. And lastly, practicing agile development, which allows companies to create a product in slow motion. As it is tested by users, implementations are added and the redefined final model makes its way publicly, after several attempts. Assuring good quality products. In conclusion, “the lean start-up methodology makes those concepts obsolete because it holds that in most industries customer feedback matters more than secrecy and that constant feedback yields better results than cadenced unveilings” (Blank, 2013, para. 11).

References

Blank, S. (2013). Why lean start-ups change everything. Harvard Business Review.91.5.65-72

Niculescu, G., Jinaru, A., & Cojocaru, F. (2014). Beyond lean startup towards integrated lean startup. Analele Universitatii "Constantin Brancusi" Din Targu Jiu.Serie Litere Si Stiinte Sociale, (4), 21-27. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/1747343406?accountid=27203

Patel, N. (2015). 90% of startups fail: here’s what you need to know about the 10%. Forbes Entrepreneurs. Retrieved from http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-about-the-10/#2fe5220955e1