40% of Startup Failures Are Due to Building 'Things Nobody Wants.' The Essential Global Read to Prevent Tragedy: 'The Lean Startup'

When launching a new business, many companies end up failing.

The primary reason for this is that they spend a lot of money and time building products that customers don't want at all.

In fact, research data shows that about 40% of the reasons startups fail is due to a lack of market need (nobody wants it).

To prevent this tragedy, entrepreneur Eric Ries wrote the book 'The Lean Startup' in 2011.

'Lean' means 'trimmed down and without waste.'

Instead of creating a perfect plan from the start and pouring in huge amounts of money, it spread across the world as a groundbreaking method to minimize the waste of money and time by 'building small, observing customer reactions, and pivoting.'

Today, I would like to introduce this book to you all.

The origin of The Lean Startup

The author, Eric Ries, himself experienced a major failure in the past when he created a 3D avatar chat service called 'IMVU'.

For several months, he worked hard to develop 'perfect features' without showing them to anyone.

However, when he finally released it to the world, customers didn't use those features at all.

From the regret of having 'worked to death for features nobody uses,' he changed his approach 180 degrees.

He stopped raising large amounts of capital to build something perfect, and instead adopted a method of releasing a 'minimum viable product' in just six months and making small improvements multiple times a day.

As a result, IMVU became a huge success, and this experience became the foundation of 'The Lean Startup'.

The '5 Basic Principles' of The Lean Startup

This method consists of the following five simple concepts.

1. Entrepreneurs are everywhere

   • Not just young people starting businesses in garages, but anyone taking on uncertain new challenges, such as those in charge of new business development at large corporations or public servants, is an entrepreneur

2. Entrepreneurship is management

   • Rather than just 'spirit and action,' you need a 'solid management system' to navigate situations where the future is unpredictable

3. Validated learning

   • It is most important to learn from actual customer behavioral data, rather than assumptions or armchair theories

4. Build-Measure-Learn

   • Turn ideas into products, measure reactions, and learn from them

   • The key to success is how quickly you can cycle through this process

5. Innovation Accounting

   • Using new standards (metrics) to correctly measure whether a business is truly moving forward, rather than relying on ordinary numbers like sales.

The key to success is the Build-Measure-Learn loop.

The driving force behind The Lean Startup is to continuously cycle through the following three steps.

1. Build

First, you form a hypothesis (e.g., 'customers will want this') and create a Minimum Viable Product (called an MVP).

This is not a perfect product, but a minimal prototype to verify if your hypothesis is correct.

2. Measure

Have a group of early adopters use the MVP and observe their reactions.

At this stage, it is important not to be deceived by vanity metrics like page views, but to look at numbers that reflect actual behavior, such as whether it is being used repeatedly.

3. Learn

Look at the data; if your initial idea is correct, continue to improve it.

If the customer response is poor and your idea was wrong, make a bold change in direction.

This is called a 'pivot'.

Differences from traditional methods

Traditional methods involve creating a detailed plan, spending time to build something perfect, and finally launching it in a big way.

However, if it turns out to be a failure, the waste of time and money is too damaging.

The Lean Startup assumes from the start that plans will change, so you release prototypes quickly and on a small scale, making adjustments while listening to customer feedback.

Because you can start over immediately even if you fail, there is less waste.

Famous success stories

An MVP (minimum viable prototype) does not necessarily have to be a polished product.

It is like an experiment to verify if 'customers really want it'.

However, since that might be hard to understand, I will write down a few success stories.

• Dropbox

Because it was a system that was extremely difficult to develop, before building the actual program, they created a 3-minute video showing 'this is what it will be like when the product is finished' and posted it online.

This became the MVP, and because they received an overwhelming number of registration requests from people who saw the video, they were convinced that 'this idea will work' and began development.

• Zappos

To verify 'are there people who will buy shoes online?', before having a huge warehouse, they took photos of shoes at a local shoe store and posted them on a simple website.

When an order came in, the CEO himself would go buy the shoes at the shoe store and ship them from the post office.

The backend was manual labor, but it was a brilliant MVP that verified demand with zero inventory risk.

• Buffer

Surprisingly, they created a webpage that only contained 'product descriptions and a price list' without writing a single line of code.

Only when a customer pressed the purchase button did they realize 'they are really willing to pay!', and it was an amazing technique to start building from there.

• Examples of Pivots

Companies like Instagram, Slack, and Twitter, which everyone knows today, actually failed with their initial ideas and became huge successes by pivoting (changing direction) to other ideas based on the lessons they learned.

Weaknesses of The Lean Startup

While The Lean Startup is very convenient, it is not a universal magic wand.

There are also some weaknesses and criticisms to be aware of.

• Not suitable for groundbreaking major inventions

For 'future products that no one has ever seen' like those of Steve Jobs, or advanced technologies like space development, asking customers for their opinions in advance will not help.

This method does not fit businesses that require a clear vision and massive investment.

• Giving up too easily

Some experts point out that because it encourages pivoting (changing direction) as soon as customer feedback is poor, it can become a reason for people to easily run away instead of overcoming difficulties.

• Used as an excuse for 'cutting corners'

In the field, there is no end to cases where people use 'it's an MVP' as an excuse to release nothing more than a shoddy, bug-ridden product.

An MVP should not be about cutting corners, but rather 'the minimum experiment to prove that there is demand.'

• Dangerous if you already have customers

If you already have a loyal fan base, such as with a sequel to a popular game, releasing an unfinished MVP carries the risk of being perceived as 'low quality,' causing you to lose the brand trust you spent years building in an instant.

An amazing book...

The Lean Startup is the ultimate weapon for saving wasted time and money in unpredictable situations where you don't know if customers actually want it.

However, it does not apply to every aspect of business.

It is unsuitable for projects that are technically very difficult and require strong conviction.

What is important is not to blindly believe in one method, but to use this lean (eliminating waste) philosophy wisely, adapting it to the situation of your own business.

This is considered one of the essential books in the world, and it is said that there isn't a global businessperson who hasn't read it.

I hope you all will read it too.