What is a Startup? (According to Lean Startup)

Startup is a boom nowadays. But, we hardly find a clear definition or explanation about startup itself. Maybe, definition from Eric Ries in Lean Startup books can help us:

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

“Anyone who is creating a new product or business under conditions of extreme uncertainty is an entrepreneur, whether he or she knows it or not and whether working in a government agency, a venture-backed company, a nonprofit, or a decidedly for-profit company with financial investors”

More detailed explanation from the sentences above:

  • When we hear institutions word, we somehow directly imagine the bureaucracy, complicated hierarchy, etc. So, how can startup which related to ‘freedom’, ‘less-hierarchy’ is an institution? Yes, even successful startup will have a lot of activities of such an institution, like hiring employees, coordinating and manage their activities, creating company culture, etc.
  • Startup is identical with innovative products/services. Ries uses broadest definition of product, which is “one that encompasses any source of value for the people who become customers” Whether the product is goods or services, as long as the customers gain experience from the interaction with the company, it should be considered as product.
  • Innovation is the heart of company’s success, undeniably. Many kind of innovation can be made by startup, such as scientific discoveries, repurposing an existing technology for new use, devising new business model that unlocks hidden value before, or even simply bringing product/services to new location.
  • One of the most important point from startup life is extreme uncertainty it faces caused by innovation they’ve been trying to make. So, opening up a new business that is a clone from existing business is not a startup, because it success mostly will depend only on execution (from previous experience, you can make a model with high accuracy). It’s not happen with startup. Sometimes, even the founder cannot accurately imagine what the future of their company will be. But, their dreams and motivation will lead them forward 🙂

Now we can know further about what we called startup nowadays. Maybe the definition can change in the future (still a long way to go). But, remembering those points above that distinguish startup from conventional stable companies, most of the general management tools will not fit in many startup cases. It’s why Eric Ries, with its own experiences building startups, create what so-called Lean Startup.

Any comment or opinion? 😉