Staying competitive is essential to the success of any establishment. It requires business leaders to possess the mindsets and skills of entrepreneurs or startup owners. However, is it possible to learn entrepreneurial skills, or are these skills inherent?
The “startup mindset” was once considered an antagonistic way of doing business. However, it has now become the norm among successful organizations, including Facebook, WeWork and Airbnb. What started as a determination among startups is now something companies of all size are trying to nurture. It's been said that businesses that adopt a startup mindset are more likely to increase revenue, reduce overhead, improve the customer experience and employ top talent.
Background: Eric Ries came up with the concept of the lean startup method in 2008 for the purpose of developing companies and products/services — although it can be applied to businesses across all industries. According to Ries, the lean startup approach is focused on when to change course, and when to persist and grow a business with maximum acceleration.
The startup mindset is a systematic method of creating a company that gets its products and services into the hands of its consumers with increasing speed. It helps entrepreneurs pivot and adjust course to keep up with customer demands and interests.
The startup mindset is based on a three-step process known as the “build-measure-learn” feedback loop, wherein:
- Build involves developing a minimum viable product (MVP) based on a set of assumptions.
- Measure means launching the MVP and measuring the hypothesis based on those assumptions.
- Learn pertains to accepting or rejecting the initial hypothesis and iterating on the MVP.
The process is called a feedback loop because after learning from measurements, entrepreneurs go back to the drawing board and come up with a better and newer version of the original product. Then they release that new version and assess the results, learning from them and restarting the process yet again, if necessary. This informational loop allows organizations to develop, launch, learn and iterate on new and existing products.
The Lean Mentality: The startup mindset is also called “the lean mentality” because when business owners think like a startup, they think lean. The lean mentality helps them get their product and/or service to market with accelerating speed.
The lean mentality forces entrepreneurs to think outside the box and work within a tight budget. Rather than using money to solve business problems, they do so by removing unnecessary product features, streamlining processes and maximizing operational effectiveness. This allows them to release their MVPs, learning from customer input and iterating on the feedback. Eventually, basic features get refined and new features get added to the products/services until the consumer is fully satisfied.
How a Startup Mindset Can Help Businesses Succeed
The startup mindset allows businesses to create the finest products and services possible, based on real market data. Instead of trying to launch a perfect product, they create a product that is minimally viable, release it, collect consumer feedback and update the product as needed.
The startup mindset can help businesses in these distinct ways:
- Reduces time-to-market: Time-to-market is the time it takes from inception (ideation) of a product/service to its release in the marketplace. Businesses that are quick to market have a better chance of getting a larger market share and maximizing the return on product launches. With a startup mindset, an MVP reduces the lead time between inception and launch.
- Lowers operational costs: The lean mentality forces organizations to manage their resources more efficiently. For instance, if an MVP is required to have only one or two features, it becomes easy for business owners to remove most of its operational costs. The startup mindset also compels them to think lean and look for alternative inputs for their product/service, saving a lot of money in the process.
- Improves customer experience: Having an MVP allows businesses to connect with their customers in near real time. Instead of creating a product with multiple features at the start itself, the lean mentality forces them to build products with a smaller number of features and ask for customer feedback. This strategy ultimately serves the customers better.
- Grows organizational effectiveness: The startup mentality leads to an increase in a business’ organizational effectiveness. Overheads are reduced, processes are streamlined and the time to receive market data is shortened. Essentially, it allows a business owner to run a highly-efficient business that is more effective at meeting consumer demands and needs.
How to Embrace a Startup Mindset
Businesses looking to grow their bottom lines can consider adopting a startup mindset by thinking differently about risk, prioritizing speed over perfection and quickly adapting to market changes.
Here are a few tips on how an organization can achieve this feat:
Accept risk like a startup: Startup-style dexterity and swiftness typically requires a high appetite for risk — the one thing many business owners try to avoid. By embracing risk strategically, however, they can unlock opportunities for enhanced products and new revenue streams.
As discussed earlier, startups focus on speed to market with an MVP and iterate on the product based on consumer feedback. And if they fail, they learn with agility everything they can and then try something new, which gives them another opportunity at success.
Established organizations are usually set in their ways, or they may not have the luxury of taking their time. However, once they learn to pivot based on customer feedback, they can leverage their resources to stay ahead of the competition.
Work on a tight budget: Startups need to be frugal because they have limited capital and other resources to invest. This mindset can also benefit established businesses greatly.
To get a more realistic view of what may happen, after figuring out how much capital will be needed until a new product or service turns a profit, businesses must estimate what the total expenses and sales will be, and then alter the forecasts accordingly.
It is also important to keep the fixed overhead costs low and direct variable expenses toward only those things that generate revenue. In addition, enterprises should keep inventory to a minimum and not recruit employees to deliver the product/service until there are paying customers.
Utilize available resources and outsource everything else: Success does not depend solely on the creativity of the idea, but rather on the execution by the team members. Every staff member should be very flexible and be capable of wearing multiple hats.
Therefore, the next logical thing to do is to match customers’ needs with the assets that the organization already has (including data, human resources and so on).
Let customer feedback inform new products and services: Consumers’ needs and wants keep changing all the time — what they wanted, say, last year, may not be what they want this year. Therefore, reaching out to existing customers and asking them what they want, or whether they would like to see any changes in the current offering, can help businesses of all sizes and tenures provide their customers with what they need and when.
Ramp up market testing and iterate based on the results: Like startups, large businesses can do well by experimenting in order to see what works and what doesn’t.
Most startups carry out periodic testing of their products and service rollouts, and pivot based on the results each time. Established businesses can also begin by testing small initiatives constantly and then making changes based on what they learn in the process.
Network to build connections: Startups view networking as an extremely critical endeavor. This is because they never know which connections they make will lead them to new consumers or resources. Established businesses should also pursue all networking opportunities even if they are not directly related to what they are trying to accomplish in that moment.