[Blog 07] Lean Startup for Social Impact

Back to Basics – A Matter of Definition

Up to this moment, I have not defined the term “startup”. Let’s do it now.

It is interesting to note that the definition being used by the three most influential authors on Lean Startup – Eric Ries, Steve Blank, and Ash Maurya are very different.

Normally I don’t care too much about definition. But how one defines startups would have great implications to analyze and highlight its characteristics. So we should take a look at the three definitions.

Eric Ries’ Definition

Let us begin with Eric Ries’ definition as found in his book The Lean Startup: How Constant Innovation Creates Radically Successful Businesses. (2011)

Here is how he puts it:

“A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.”

There are two key components in this definition, ‘human institution’ and ‘conditions of extreme uncertainty’.

When I first read this statement, I was intrigued by the term ‘human institution’. Could it be simpler just to say a small team or a group of individuals?

But Eric chose to use ‘human institution’ to highlight a number of vital facts about whatever groups that are trying to startup, such as:

• The group concerned comprises of individuals who have come together with very different motives and aspirations but it is too early even to call it a team.

• The members might not know what to be expected of them and they have to find their way along.

• The members are not sure how communication should proceed among them, much less about division of labour, decision-making process, reporting relationships, etc.

• As a startup group, there might or might not be any compensation for members’ contribution, e.g. they might be working for the group full-time, part-time or spare-time and there is no definite way to tell how long each would stay.

Eric tried to characterize the startup as ‘human institution’ in order to highlight the unpredictability of the relationship and pattern of interaction among the members.

Another key component is ‘conditions of extreme uncertainty’. Eric opined that as a startup, the group is going into the unknown and full of uncertainty. One might not know exactly who would be the customer(s), the kind of product/service needed, features being included, market-value, the key market segment, price of the product/service, and/or the costs that could be afforded, etc.

In a word, startups must be prepared to operate under conditions of extreme uncertainty.

Steve Blank’s Definition

In his book written with Bob Dorf, The Startup Owner’s Manual: The Step-by-Step Guide for Building a Great Company (2012), Blank’s definition is as follows:

“A startup is a temporary organization in search of a repeatable and scalable business model.”

It is different from that defined by Eric.

For Steve, a startup is first of all a ‘temporary organization’, meaning that if it is not successful, it will cease to exist.

The other key idea is ‘business model’, which is absent from Eric’s definition. It is not just a business model, but one that is ‘repeatable and scalable’.

In Steve’s version of the Lean Startup, the focus of discussion is the way of creating a repeatable and scalable business model.

Ash Maurya’s Definition

Ash’s book, Running Lean: Iterate from Plan A to a Plan That Works (2012), is by far the most readable text on the subject of Lean Startup. Eric Ries actually wrote the Foreword for it.

Ash’s definition of startup is:

“Startup is a process for iterating from Plan A to a plan that works.”

Here again, it is different from Steve and Eric’s definitions.

Ash indeed tried to emphasize that most startups work initially with a plan (called it Plan A), but this plan will hardly work. Instead, it requires numerous ‘iterations’ (changes, modifications, pivoting, etc.) until it finds that works.

Ash’s version of Lean Startup is a systematic examination of the process making these iterations.

A Composite Definition?

In an attempt to synthesize the insights of the three authors, I have come up with the following:

“A startup is a temporary human institution in search of a repeatable and scalable business model through a process of iterations under conditions of extreme uncertainty.”

I have found this quite useful as it reminds us of some critical elements in the startup process, and I could build on the insights offered by the three authors in their respective works.

Based on my previous experience working with a number of social purpose organizations, I noticed that something very important is missing.

The missing piece is the driver, or more explicitly, the social entrepreneur.

So I changed it to something like this:

“A social purpose startup is a temporary human institution led by a social entrepreneur in search of a repeatable and scalable business model through a process of iterations under conditions of extreme uncertainty.”

The presence of social entrepreneur might be taken for granted. But I have learnt from bitter experience that as far as learning and applying the Lean Startup approach is concerned, the role of a driven, committed and passionate social entrepreneur is vital.

Launching a startup is never easy, even with the aid of a powerful methodology like Lean Startup. The entrepreneur concerned must possess a compelling vision and the determination to make things happen against all odds.

A recent example is illustrative.

We have been training and coaching a startup team from one of the most innovative NGOs in Hong Kong. After a 12-month engagement with some encouraging progress, the team was losing most of its members. One by one they left for other organizations.

A ‘post-mortem’ review indicated that most team members who left the organization were not comfortable with the ‘additional’ works being created during the ‘iteration’ process. Those extra works included systematic testing of major assumptions, conducting series of experiments, making multiple changes in product offerings, talking to a variety of potential and existing customers, continuous effort to develop marketing channels, endless collection and analysis of data, not to say numerous meetings that ‘disturb’ normal work.

Above all, there is the lack of a social entrepreneur who is prepared to lead, motivate and inspire everyone in the team to put in the effort, learn from failures, and persevere under great pressure and constraints.

The moral is clear:

While the Lean Startup methodology is powerful, it is basically a tool. For social purpose organizations trying to reap the benefits of Lean Startup, the presence of a committed social entrepreneur is a must.

Your feedback is most welcome. Please send it to kakuitse@gmail.com