In Defense Of The Not-So-Lean Startup

Last year, from Silicon Valley to Wall Street, it was impossible to escape the concept of the "Lean Startup"—especially the great ideas espoused by the preeminent thought leader on the topic, Eric Ries.

Hundreds, if not thousands, of entrepreneurs embraced these tenets and joined the "Lean Startup movement." In addition to curbing costs, an entrepreneur would begin by creating their first "minimal viable product" to test that initial business idea. If it failed? No big deal! The strategy of launching quietly held that few people would even know about the product in the first place—and thus wouldn’t have been the wiser to its initial failure. Eventually, the goal was to achieve product/market fit—another Riesian commandment that equates to plowing through "build-measure-learn" feedback loops until one discovers that special (and monetizable) moment when a product and its market interest collide.

But there are also tremendous drawbacks and limits to the Lean Startup cycle of listen/respond/fail/adapt. In life and in business, failure can mean certain death, without a chance for another loop. Indeed, too many startups have died (or are doomed to) by applying this method to their businesses, especially as their investors watch in horror.

So, we’ve got a new idea for the startup world. Entrepreneurs: Ready your Evernote because you’ll want to remember this for years to come.

Be in a Rush to Get Big

“Don’t be in a rush to get big,” Ries once said, “be in a rush to have a great product.”

I’m here to tell you that it’s not either/or. You can be in a rush to be both big and to have a great product. After all, you only get one shot to make a real splash with a product launch and truly impress the world, right? I don’t believe in the strategy of rushing a product to market as cheaply as possible and hoping for the best. Yes, there are plenty of entrepreneurs who swear it works—and have the good fortune to be able to prove that. But there are a lot more who don’t. It can also seriously hinder growth and limit revenue potential. And when you’re a startup founder, shouldn’t you (and your investors) be all about growing your company, delighting your customers, and bringing in the big bucks?

With the right maneuvers, a company can best use its money to both grow fast and grow smart. Unlike the Lean Startup methods, this enables measurable—and repeatable—success. Don’t just take my word for it—I built four companies from scratch and led two to successful IPOs by following these tenets.

Here are a few proven ways to launch big, not lean: 

Build the Route to Market in Parallel to Building Your Product

Many great products have failed because there were no buyers or users ready. Remember Pets.com or Webvan? Of course you do—but for entirely the wrong reasons. It’s vital to remember that building a viable sales channel is just as important as building the viable product itself.

The Lean Startup method would have you rush a product to market. Then, you would maybe flounder on initial launch but iterate nonstop—and put what few, loyal customers adopt early through countless revisions, updates, and interface changes. Finally, you might eke out a product worth the mass market’s purchasing dollars. 

But what happens if your product development issues are so vast that it leads to poor word-of-mouth? What happens if you have no other leads in the pipeline ready for your robust, top-of-class final product? Well, then you’ve put in all that effort for zero payoff. It’s terrible to push for so long on a bootstrapped budget and then be stuck saying, “Now what?”

When we first started Marketo, we actually put our first efforts into SEO (and content creation, more on that below)—then began product development in parallel. We knew we needed to find buyers even before our product was ready. We seeded interest very early by talking about the problem we aimed to solve and finding folks who were looking for answers. Five years later, it’s still paying off.

Create Pre-Launch Demand

At Marketo, not only did we have SEO in place even before product development—we also had a blog. We talked about the problems we aimed to solve (the changing buyer-seller relationship)—and which we knew our target audience faced—and we mastered our strategy on approaching them. 

Instead of beta testing a product, we beta tested an idea and integrated the feedback we received from our readers early on in our product development process. This strategy far trumps the Lean Startup method of rushing a product to market. It means a lot to future customers to be in on the ground level and feel as though you’re truly building a product specifically for them and the issues that keep them up at night. 

By using this content strategy, we at Marketo began drumming up interest in our solutions with so much advance notice we had a pipeline of more than 14,000 interested buyers when the product came to market. 

How does that compare to your last product release? Ask your salespeople. You say you don’t have salespeople? Okay. Keep reading. The next bullet is especially for you.

Spend to Sell 

“Invest in your success” is corny but true—and in this case, carries a couple different meanings.

First off, forget about counting every last penny. Yes, the lean startup movement is correct in saying you shouldn’t throw wild parties and give Teslas to all your new employees—but isn’t that just common sense? Where you should make serious spends is in areas that will eventually lead to sales down the road. And yes, naturally, that means investing in some quality salespeople, as well as quality sales and marketing tools to make it happen.

At the first instance you’re able, start shifting funds from R&D into sales. As great as your product is, it won’t sell itself, and you won’t make any money unless you can actually make it move. As you look to expand your senior leadership team, make sure a VP of sales is one of your first hires.

But remember, sales can’t function to its true potential without marketing. Once you have salespeople in place, you need marketers and marketing tools to make sure they’re in touch with the right people at the right time. Buyer-seller relationships aren’t what they used to be—buyers have far more access to information and make more judgments before engaging with sellers than ever before. That means it’s marketing's responsibility to ultimately craft your public message, nurture leads, and monitor their sales readiness. With this intel, your company can pursue the right leads and generate far more sales. Make sure your sales and marketing teams are in lockstep to drive revenue at a more efficient rate. 

It’s a terrible shame that so many entrepreneurs think sales and marketing teams can’t be just as creative or innovative as product teams—don’t be one of them. By bringing the right individuals on board, you enable your company to tell a dynamic story and bring far more context to the solutions your product offers that it might not tell on its own. It’s a crowded world out there, and quality sales and marketing teams will help your company rise above the noise. That investment makes sure the best and boldest executives are accelerating product adoption and the revenue channel. And it lets your product team focus on their main initiatives: future product versions, and thinking about what things your thriving company might try next..

You can’t be a startup forever. And you shouldn’t want to. The lean startup model only offers tools to get you so far. By implementing these tips into your growing business, you’ll be better poised for long-term success down the road, wherever your company chooses to roam. Trade the lean for the green. Revenue and growth are great, great things.

Author Phil Fernandez is President and CEO of Marketo. You can follow him on Twitter at @philf1217.

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[Image: Flickr user sfslim]

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15 Comments

  • Adam Fox

    While your arguments have merit, half of them are completely erroneous as to Lean Startup.  I suggest you go back and actually read every word in the book. You'll see that your impressions of Lean are off the mark. It actually suggests many of the things you urge as alternatives to Lean. It is applicable for large businesses as well - GE and Inuit use it.
    An interesting critique of this article is at http://onstartups.com/tabid/33...

  • Jim Genet

    Not sure if the point of this post was how "bad" you think Lean Startup Methodology is or how much better you think your version is over that of Mr. Ries but regardless it was a waste of time reading. 

  • Tristan Kromer

    This is a pretty funny article.

    You are saying lean startup is wrong and then proceed to tell people to do EXACTLY what lean startup suggests.

    It's pretty obvious you didn't even bother to read the book or blog. Apparently you agree with Eric Ries on a number of points.

  • susan emmer

    Hi Phil,

    Thanks for reinforcing the importance of sales and marketing. As a marketing/pr/branding expert, I feel that we often get pushed to the side with the attitude that "anyone can do marketing!" I really believe in the collaborative approach where the technical and marketing/sales people all have a vested interest in the success of the new product.

  • Colin Duff

    Phil,

    This is a great aleternative perspective on 'Lean'. I agree with most of your points, especially those on the importance of 'pre-launch demand', investing in sales and the creativity of non techies.  

    There's a few other areas I'd challenge Ries on as well. Firstly, given he acknowledges adoption 'feels worse before it feels better' one has to give consideration to the psychological impact of such a radical strategy on staff; esepcially in long establsihed and non tech. focsued orgnastions. Secondly, whilst tradional customer insight (e.g. focus groups) can be slow, costly and of variable/limited value new methods such as vox pox are really effective. (Especially reassuring senior managers outside the projedct about it's direction).

    Finally, I'd be very interested in views about 'Lean's' appliation in a (non technical) corporate setting. As despite Ries' assertion it  "can be applied
    to… companies regardless of size" he provides little guidance on adaption and there's been little coverage of this topic. I've written a short article about this @: http://www.businessbigbrother....  

  • Barry O Sullivan

    I read this article expecting some interesting insights into the flaws of Lean Startup, What I got was an attempt to attack the lean startup by someone that hasn't actually read it. 

    "Instead of beta testing a product, we beta tested an idea and integrated the feedback we received from our readers early on in our product development process. This strategy far trumps the Lean Startup method of rushing a product to market."This is the definition of an MVP, if you'd read the book you'd know this."In life and in business, failure can mean certain death, without a chance for another loop. Indeed, too many startups have died (or are doomed to) by applying this method to their businesses, especially as their investors watch in horror." Yes, it would have been much better is they had spent lots of time and money building a product based on an assumption, launched it, and then watched as it failed spectacularly.   "The Lean Startup method would have you rush a product to market. Then, you would maybe flounder on initial launch but iterate nonstop." Your MVP is not your launch product, it is an experiment that you run to make sure you have the right idea of what your client wants. "“Don’t be in a rush to get big . . . be in a rush to have a great product.”"Reis did say this, but he was talking about making sure someone wants your product before you try to grow. This is something that "Webvan" should have done, instead of becoming big before figuring out no-one was ready for their product. "Spend to Sell". Nowhere in the Lean Startup does it advocate not spending on marketing, infact it says the opposite and talks about how important marketing really is.  
    The lean startup is not a fix all idea, it's a name put to the process of using the scientific method to test your assumptions before you build on them, which makes perfect sense. 

    So in the end we have a contradictory article, it says "test" and then "don't test", it talks about it being important to get big, then cites products that failed because they got too big too soon. The only cohesive message is about the importance of sales and marketing, which is in an important past of Eric Reiss book. 

    There are a lot of people that advocate the lean startup without understanding it and what you've done is attack their (and your) misunderstanding of it, which makes you as bad as the people you're trying to educate. 

    Next time read the book before you attack a concept you don't actually understand. 

  • Jignesh Shah

    Phil, I share your concerns of risks associated with taking a half-baked product to market. But I tend to agree with Ries that in most cases the benefits of early feedback will outweigh the risk of upsetting early customers.

    But other than this one point I do not see where you are drawing a sharp contrast to Lean Startup thinking. In fact your tactic of "instead of beta testing a product, we beta tested an idea" is completely in line with Lean Startup thinking. It's what a Lean entrepreneur would call a 'smoke test' MVP.

    And Lean thinking does not eschew spending on sales and marketing. It simply recommends doing so when you are ready to scale.

    The only tenet of Lean Startup that really bothers me is "fail fast". Having launched several new products, I can tell you that we would have missed out on at least a couple of large markets had we given up too soon and too easily. Vision combined with perseverance has it's rewards.

  • Leonard Feldman

    Phil, rather than taking on a marketer/product manager after hiring a sales team, I'd suggest bringing them in together. The reason is that for a sales team to be effective, it needs market and competitive analysis, effective collateral materials, sales presentations, ROI calculators and more, all of which an experienced marketer can provide. Having sales and marketing working as a team from the outset will make the startup's sales efforts much more successful.

  • Mark Wojtasiak

    Great advice Phil. Even though I am a Product Marketing Manager for a large company, this approach resonates with me.  We see our roles as marketing managers of individual businesses we are leading. We have the luxury of in-house creative, sales teams, PR, social media, etc, but we still need to put the customer first in our go-to-market approach when launching a new product. All of these in-house services and expertise won't amount to anything without the principles you have identified - a great product, focus on routes to market, a solid launch plan, and a serious investment in sales and marketing.  I come from small company roots, and the start-up mentality still resonates with me to this day, so thanks for the advice.

  • Mark Von Der Linn

    Some good points here. Just goes to show, you don't generally find all the answers in one place. That, and there's never only one right way to approach things.

  • Samuel Campbell II

     Thanks for the added perspective, but I'm concerned that your comment regarding Reis' product centric approach makes it seem as if he was stuck in that box.  The primary story that he tells is about his first attempt at "Lean" and how they reduced their cycle to 6 months only to realize that they could have learned that the customers were not interested by spend 15 mins designing a splash page.  The splash page is actually idea focused rather than product focused.  I do feel that your perspective helps "Lean" devotees to translate the tenets to their business model and you may get much more traction by lending your view to helping us adjust Reis' software development model into our various types of ideas/products.  Basically, I feel that your blog's title made me think you may have been balanced in your approach, but instead you were biased and assumed that we were not broad enough to consume, digest and retool what he shared to suit our own situations.  Again, your perspective has merit, you may want to pivot your approach to suit the "Lean" consumer so that your idea is not brushed aside by the "Lean" army.

  • Matt

    Phil, great article. 

    I'm based in the UK and the wave of lean startup is flooding our shores with the same impact it had over there. And hey, we're all embracing it to the max. 

    But there are a couple of even bigger issues in the UK - above and beyond what you've outlined. 

    1. Mums don't like entrepreneurs
    First of all the idea/stigma of being an entrepreneur (and I'm talking as someone who has received many entrepreneurial accolades). It's becoming a little more readily accepted - especially as it seems the majority of the country is struggling to find work - but on the whole it's one of those 'dirty' words you wouldn't like to mention to your mum. 

    2. What do you mean it might not work? 
    And secondly the market's ability to adopt a start-up. We just don't get it over here. Sure we have the early adopters, but when comparing like for like I'd say the make up of people willing to invest (even if that's as little as them saying 'I like this idea') over here to the US is significantly smaller as a percentage. Multiply that by your population and we're talking small numbers. 

    Well, that was a downbeat comment. I wasn't quite intending it to be so! 

    What I really wanted to say was that I agreed with your post ; )

    Nice one. 

    Matt
    WeAreMatt Ltd

  • Eric T. Wagner

    Thanks Phil.  Great insight.  Especially like the part of having a blog and engaging before you had a product.  Man, if more start-ups would do this.  And, the wanna-be entrepreneurs.

    Here's the formula:  Find + Engage + Learn + Serve = Trusted Leader Over Your Pack.  That's my 2 cents anyway.

    Oh, by the way, you've started a debate over here:  
    http://onstartups.com/tabid/33... again...  Eric T. Wagner, mightywisemedia.com

  • Toby Murdock

    Great post Phil. 

    I've been thinking about this theme from a different perspective with a draft post title "Content Marketing Extends Customer Development" (cust dev being the Steve Blank term that preceded Eric Ries). 

    In a start-up, the primary objective is understanding customer needs. Eric Ries and Steve Blank stress that by "getting out of the building" and talking to customers, you achieve this understanding and guide your product development. 

    But as you point out and as the Content Marketing revolution is showing, that knowledge of customer needs can be a great driver of sales as well. As start-ups achieve that understanding of customer needs, they should convert that into content, which can drawn in prospects, and, as in your case, sets up the sales funnel. 

    The start-up journey is primarily an exploration for understanding the customer need. Ries and Blank stress the importance of that understanding's guidance of product development. But as you point out, that understanding, through Content Marketing, can be a great driver of sales growth as well.