Running Lean Methodology (RLM) is a set of three steps that guide a company through the process of capturing a business idea, testing it with potential customers, adapting it to customer needs, building a prototype and finally taking it to market. RLM is a systematic process for iterating from the initial product idea to a business model. It answers three questions: is there a problem worth solving; is there a significant sized group of customers willing to pay for the product and is the business model profitable, repeatable and scalable?
The RLM steps comprise: Step 1 document plan A; Step 2 identify the greatest risks or riskiest part of the plan and Step 3 systematically test assumptions (the plan).
The First Step involves writing down the initial vision and sharing it in order to capture the business model hypotheses. The key point is the business model is the product. At this stage it is fundamental to build the best solution in the entire business model and make all the pieces fit. Then the business model can be deconstructed into nine distinct subparts that are systematically tested, in order of highest to lowest risk.
The Second Step, building a successful product, is fundamentally about risk mitigation. Customers buy from a company when they trust it to solve their problems. There are three stages of Business Development in this step. The first is Problem/Solution fit where the question is: “do I have a problem worth solving”. To determine that a series of questions should be addressed. Is it something customers want? (A must-have.) How do you identify early adopters? Will they pay for it? If not, who will? (Viable.) Can it be solved? (Feasible.) After that a company can derive the minimum feature set to address the right set of problems, known as the Minimum Viable Product (MVP). The second stage is Product/Market Fit, where the question is: “have I built something people want”. Once a company has a problem worth solving and the MVP has been built, they should be tested to find out how well the solution solves the problem. The third stage is Scale, where the question is: “how do I accelerate growth”. The focus shifts toward growth or scaling of the business model. Before Product/Market fit, the focus of business development is on learning and pivots. After Product/Market fit, the focus shifts towards growth and optimizations. The first goal is a course correction (or a pivot). The second goal is efficiency (or scale the business). To reduce the scope of the MVP to its essence, reducing the scope of the MVP not only shortens the development cycle it also removes unnecessary distractions that dilute company product messaging.
The Third Step is to test the plan through a series of experiments, which are a cycle around the validated learning loop Build-Measure-Learn. The build stage starts with a set of ideas that are used to create products for the purpose of testing a hypothesis. The measure stage relates to measuring customer response using a combination of qualitative and quantitative data. The data is derived from learning that serves to validate a hypothesis and drives the next set of actions. Collectively, the first two stages (understand problem and define solution) concern getting to the problem/solution fit and finding a problem worth solving, which is effectively the basic iteration meta-pattern. From this point a company can iterate toward Product/Market fit by testing whether it has built something people want using a two-stage approach: qualitative (micro-scale) followed by quantitative (macro-scale). Finally a company can then validate or invalidate one of the business model hypotheses. Once able to demonstrate early traction, the focus should shift toward achieving sustainable growth, things that make the business model scalable.
Source: Ash Maurya, 2012, “Running Lean, iterate from plan A to plan that works”.
Source: Eric Ries, 2011, “Lean Startup”.