Does the Lean-Startup Philosophy Work for Manufactured Products?

by Cindy Glass
- May 31 2014 - 4 min read
lean_startup_manufacturing

Back in the early days when I was young and stupid, I asked anyone who would listen for small-business advice about starting my product design business.

The notion of “lean startup” popped up in almost every discussion. Eric Reis popularized these guidelines in his book The Lean Startup. Put simply, Reis’s principles are:

1. Entrepreneurs Are Everywhere
2. Entrepreneurship Is Management
3. Validated Learning
4. Build-Measure-Learn
5. Innovation Accounting

The concepts are straightforward, but like most things, application is nuanced. Steve Blank, a Stanford business school professor and mentor of Reis, summarizes the salient message in his Why Lean Start-Up Changes Everything for the Harvard Business Review. He wrote that lean startup “favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional ‘big design up front’ development. Although the methodology is just a few years old, its concepts—such as ‘minimum viable product’ and ‘pivoting’—have quickly taken root in the startup world, and business schools have already begun adapting their curricula to teach them.”

Move fast! Mitigate risk! Launch a “good-enough” product, get feedback, fix it, launch again! Great stuff, right?

No. Not at all. Not when you just placed an order for 20,000 items for your first product-line launch after seeing, oh, maybe seven production samples and asking a bunch of friends for feedback. Not welcome advice at all. What’s with all of the iteration, feedback, and relaunches? Who can afford that? At some point our factory said, “No more samples. Place an order or lose our phone number.”

I spent the next two years complaining to anyone who would listen that if I heard the words “lean startup” one more time, I’d stick a fork in my eye. My gripe was that the principles of lean startup, taken literally, only seemed to be possible if you were a funded software startup that never had to take possession of inventory—ones and zeroes startups seemed like such different animals, with different rules.

“Hardware businesses are different,” I proclaimed, especially if you are small, like me. Because if you are small, trying to launch into a mass market, working with offshore factories with no pre-existing relationships, needing to place a purchase order with significant volumes, having limited understanding of your distribution channels, and are bootstrapping the entire adventure, lean startup just doesn’t work.

Oh. Wait a minute. Or does it?

More than anything, my now more mature understanding of lean startup is that entrepreneurs are being encouraged to understand their business model and value proposition to ultimate paying customers before they waste a lot of time and money succeeding at failure. Instead of being solely focused on how you are going to launch your business, in my opinion, the principles first ask you to consider whether you should.

In my case and with the expensive clarity of hindsight, the reason I gleaned zero value from lean startup was that I’d gone too far down the path with the wrong business model, the wrong product, the wrong era, and the wrong team. I’d brilliantly succeeded at achieving failure by never thinking to answer the question, “Should I do this?”

lean startup

In retrospect, the fact that I couldn’t figure out how to prototype enough and attract feedback from unbiased customers about our value proposition pointed to fundamental problems with our business model that I ignored at our peril. In short, given our resource constraints (money, relationships, bandwidth, market segment), the answer to “Should I?” was “No.”

I’m not suggesting that lean-startup principles are an infallible recipe for success. They aren’t. In the few short years since its rapid ascent to the startup lexicon, it has drawn its share of criticism. Tech CEO Michael Sharkey criticized the burnout potential of the model in a recent Venture Beat article, stating that “Most of the time, it fits in the earliest phase of the company’s lifecycle when money is tight and time to market is everything. Keep iterating, but not in a way that subjects your team to the risk of burnout.” (That early stage, when money was really tight, happened to be the one that really applied to me.)

It takes some thought and, frankly, courage to apply the principles to hardware businesses, but it is possible. Geekwire recently featured a story about Nathan Kaiser, a tech entrepreneur familiar with lean-startup principles who endeavored to learn whether they could easily be applied to a capital-intensive manufacturing startup—specifically, 2bar Spirits, a Seattle-based craft distillery. He concluded that they could, stating that the “lean startup methodology works exceptionally well with product companies. The limiting factors are different, but the process is the same.”

Uncharted Play is a products company that brought its prototyping function in house to get the required iterations cheaply enough and fast enough for Soccket, a soccer ball with an embedded generator capable of providing light to kids in under-resourced communities with limited infrastructure. Further, the company changed its business model to attract high-volume customers ahead of placing purchase orders to allow it to hit minimum order quantities with their factory.

So, if I had to do it over again, I’d be much more confrontational with myself about why I couldn’t apply the lean-startup method. In retrospect, I was banking on luck to get us over significant hurdles. And, while luck is always welcome, it tends to favor the prepared, which we, quite frankly, weren’t. And, whatever framework you choose for making decisions about your business, I’d encourage you to invite not moving forward as a reasonable outcome for a given product or concept. It’s not a failure. You are just iterating.

For more small-business advice, check out Small-Business Tips: 5 Confessions/Lessons Learned from a Product-Design Entrepreneur, Part 1 and Small-Business Owner Tips: 3 Confessions/Lessons Learned from the Trenches, Part 2.

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