7 Lean Mistakes That Destroy Startups | by Max Weinbrown | Jul, 2022

And how you can recognize and fix them

Photo by Per Lööv on Unsplash

In 2019, at least 9 out of 10 startups had Failed by their 10th year.

At the same time, the “Lean” movement surged in popularity. Founders and companies started using buzzwords they didn’t understand just to attract talent and inspire confidence.

The connection between failing startups and the Lean movement? Waste.

By the end of this article, you’ll be better at spotting the most wasteful activities at your company. First, we’ll discuss what Failure is and the origin of Lean. I also think it’s valuable to call out the common myths about Lean before going through the top 7 mistakes, but feel free to skip down and jump right into them!

When I hear people talk about growth-hacking, new web3-enabled business models, and accelerator/incubator/venture studio mashups, it really sounds like startups have matured in the last decade or so! The data, unfortunately, tells a very different story.

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The overall failure rate of startups in 2019 was ~90%. (source: StartupGenome, SBA). That means that 9 out of 10 startups, after years of work and millions of dollars spent, were eventually reduced to farewell emails and Linkedin posts.

In the startup world, failure is a badge of honor — but there’s more than one kind of failure. “Failing fast” usually means to iterate and learn, something we typically promote.

Then there’s Failure as in “shut down the company and sell everything”. That kind of Failure is the result of producing more waste than value.

In a high-growth organization, filled with unknowns, learning is the key value, and that’s why the goal of Lean is to waste less in the effort of learning more.

“Lean” isn’t a framework or a silver bullet, it’s a mindset. That nuance might be why so many founders and startup teams don’t seem to understand Lean.

Photo of Taiichi Ohno

Steve Blank is credited with creating the Lean movement, as influenced by Taiichi Ohno of Toyota (“the Seven Wastes”) and the existing Agile Development movement. Eric Ries popularized and embellished the concept in his book “The Lean Startup”. Some key takeaways:

  • Prioritize experimentation over elaborate planning
  • Value customer feedback over intuition
  • Use an iterative, rather than “up-front”, design process

These may sound simple, but they are terribly easy to violate, sometimes as a perceived solution to the problems created by violating them!

For example, when building a product on intuition, the first version may expand in scope to account for unknowns. When it takes a long time to finally delivery, an elaborate planning process is put in place as a hopeful solution.

Other important concepts in the Lean Startup are “build, measure, learn”, “pivoting”, and its relationship to “runway”. We’ll discuss these in more detail in the 7 mistakes later.

“Lean means doing low-quality work”

Nope. Quality is relative and only your customers’ opinion matters. It’s possible that customer require a beautiful polished UI, but maybe they care more that it’s fast and secure, or that it feels “bleeding edge”. Whatever the case, the Lean goal is to reduce costs, not quality.

And since a “high-quality” product which doesn’t meet your customers’ needs is basically useless, quality shouldn’t prevent you from learning how to best solve your customers’ problems.

“You still learn at the end…”

Also false. People hear the term “build-measure-learn”, a major theme of the Lean Startup, but not that the concept hinges on planning in reverse.

Example, let’s say you want to know if your customers want a new type of report in your SaaS product. You can decide a metric for “interest”, maybe clicks on a stub report name. Building that “MVP”, the stub report name (and necessary analytics) can help you learn the goal.

“Customer interviews are just asking people what to build”

It’s common wisdom that you can’t trust customers to verbalize their needs, especially around innovation. So what’s the answer?

Some entrepreneurs use this wisdom to justify avoiding customer development altogether. They usually invoke a quote about “faster horses”, (which Henry Ford, who probably did customer interviews, never said).

Customers only lie when you ask them to speculate. “Is this a good product”, “would you be interested in this if I built it”, “do other people feel that way”.

Also, if you’re not fully prepared for the interview, the customer will casually start interviewing you! They’ll ask you about your idea or product, and then they’ll congratulate you for having such nice ideas. It’ll be a pleasant, useless, meeting.

Remember to ask good questions, “what is the most frustrating part of this process”, or “how often do you perform X”. The book The Mom Test is an amazing resource on how to find, talk to, and follow up with potential customers.

And without further ado, here are the most common mistakes I’ve seen kill or maim startups.

Hope should not appear in your business strategy. Find your customers before you commit time and money to creating a product for them.

And I don’t mean “pick a demographic out of thin air”, I mean find actual people. Letters of intent, leads, or a waiting list, for example.

Don’t overpromise early customers just to get commitmentyou’ll end up with a false sense of desirability and it’ll come back to haunt you in #2.

On the other hand, don’t be vague and mysterious without a clear value proposition. The goal is to find customers who want what you’re building, not just engage as many people as you can. (possible exception here for using marketing to do customer development, but only if that’s the lowest lift for you).

If you can’t prove that someone will use your product, you can’t prove that the time spent building it wouldn’t be better spent on vacation.

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Photo from Field of Dreams, where the players magically appear after Kevin Costner builds a baseball field.

Also known as feature creep or scope creep, this means including unnecessary features in the product. Since an MVP is the *minimum* viable product, it should be the smallest/cheapest thing that helps you achieve learning.

In contrast, a bloated MVP (or full-fledged product) takes longer to create and release, which delays the measuring and learning we care about. Sometimes that difference is only a few extra weeks, but it can be months, or even years. It will obviously cost more to build, but the delay in learning is what makes a bloated MVP deceptively expensive.

People rationalize unnecessary features, they say it’s a platform MVP, or that their customers are already expecting it (see #1). There’s a common thread amongst these excuses: fear.

Fear of failure is a powerful motivator, and fear of product failure is no different. When it comes time to build your MVP, remember that it’s ok, even necessary, for people to reject it.

In short, don’t let all the ideas in your product devolve into one giant release. Build MVP’s that you can learn from knowing they are designed to be rejected some portion of the time.

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Photo of someone holding a “Super Big Gulp” as large as some “MVP”s I’ve seen.

If you combine the first two problems, you get a fully-featured product which still hasn’t found a market.

There’s only two options in this situation. Many founders choose to forge ahead and try to turn this product into a success. The other option is to pivot.

A pivot is a change in your overall strategy based on something you’ve learned. That could be discovering a related market you can serve or a new problem you think you can address.

Too often, founders think that pivoting is a sign of weakness, as if their job was to guess correctly from the very beginning. Maybe that’s because we revere founders for their biggest success, instead of recognizing and handling their failures.

In reality, as long as your pivot is informed by information, it’s a sign that you are paying attention and not motivated by ego. Don’t be afraid to change directions when you have new information.

Photo by Mark Galer on Unsplash (whippets running and pivoting)

This may be a company’s final mistake. The sunken cost fallacy is about investing more in the hope of salvaging what is already lost. It’s “throwing good money after bad”.

In the last stage, we launched a product to the sound of crickets. We also decided not to pivot, but to forge ahead. If we make excuses for our lack of customers and choose to keep building out the product, we are accepting the sunken cost fallacy.

In this stage, founders might tell anxious investors they are “prepping for scale” while telling their ready-to-quit team to “trust them” and “believe in the product”. Meanwhile, they may be fundraising to buy enough time to find advisors and partnerships which can make those customers appear out of thin air.

If you accept these excuses from founders, you might commit the same fallacies! You might feel incapable of reclaiming your own time and resources because you don’t want to accept how much of them have already been spent. You might justify building things which also don’t need to exist, aka gold-plating.

The solution here is painfully simple: use data to validate your product and even to justify its development. Wherever the sunken cost is, acknowledge it publicly and make it everyone’s focus to resolve it. You may even learn something in the process which can be used to pivot.

As an employee in this situation, you should be willing to leave the company if they don’t address the problem using data. You don’t want to work somewhere that lives on excuses and lip service, and with 9 out of 10 startups failing, you’ll probably be ahead of the curve by leaving.

The first four mistakes form a clear path to Failure, but there are other common mistakes which can happen at any time, even in large, otherwise successful organizations.

Vanity metrics appear impressive, but aren’t directly related to the health of the product. Think about visitor counts or total registered accounts, when these numbers are higher, people tend to feel good about the overall product.

However, if it can’t be explained, it also can’t be controlled, so it won’t be a useful driver for business decisions. By contrast, metrics like CAC and LTV might be able to paint a more meaningful picture of your business’s health.

It’s often more useful to measure conversion rates than look at the total number of users in a given state. Focus on goal outcomes of the business and known precursors.

Lean Analytics is a great reference for mapping your business model to the analytics and metrics you should care about. Additionally, Dave McClure’s “Pirate Metrics”, and it’s sequel “Product-Led Growth”, are both valuable perspectives on building growing products using data.

Founders often feel validated or even successful when they receive funding. Understand that funding is not the objective, it’s a means to an end.

A startup founder’s job is to create value before running out of money. The relationship between cash and the current burn rate is often called “runway”. This is an important concept, but it only addresses the cost of existing and not the cost of changing.

Measuring pivots, as discussed in #3, lets us understand the relationship between time, money, and the cost of change. If we understand the cost of pivoting, we can measure our runway in pivots, effectively measuring how many times we could change our strategy based on new information.

If raising money extends the runway temporarily, lowering the cost of pivoting means requiring less runway, permanently. It’s like being able to take off faster.

Another major issue encountered at most tech companies is planning, estimating, and deadlines. Unfortunately, I’ve already gone longer than I intended, so if you’re interested to learn about it, subscribe and come back soon when it’s written!

Want to Connect?Max Weinbrown is a principal engineer with experience at pre-seed through post-IPO companies. His opinions are his own, but you can borrow them or tear them to shreds.

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