The Lean Startup is a business approach coined by Eric Ries that fundamentally aims to change the way that new companies are built and new products are shipped.

At its core it is built upon three key areas:

Iterative product releases with extremely fast cycle times
Validated learning to focus on what customers want
A scientific approach to decision making

This allows the output of shortened product development cycles, measured progress, and input of valuable customer feedback (observing behaviour, not directly asking).

Organizations can design their products and services to directly meet the demands of their customer base without requiring large amounts of initial funding or expensive product launches that may fail. Waste spending and risk are massively reduced.

Originally designed for high-tech companies, the philosophy has now expanded out to include any individual, team, agency or company looking to introduce new products or services into the market.

Background

Ries developed the Lean Startup methodology through his direct experiences as a startup employee, founder and advisor. Through success and failure (and especially failure), he began to highlighted the biggest mistakes made by these emerging organizations.

In the twentieth century, a good plan, a solid strategy and thorough market research were often indicators of likely success. The problem with a startup (and indeed a lot of businesses right now) is that they do not yet know who their customers are or what their products should be - as startups are essentially a search for a viable business model there is too much uncertainty for accurate forecasting.

Failure then was the result of having too concrete a vision. It did not accurately represent consumer demand, and assumptions were not validated. When a product finally launched after a huge amount of investment, it ended up being something customers either didn’t want or wouldn’t pay for.

Ries calls this “achieving failure” - successfully, faithfully, and rigorously executing a plan that turned out to be utterly flawed.

A new methodology was required to address this.

The AARRR Framework: Metrics for Pirates

I am always on the lookout for good digital frameworks, especially when it comes to metrics, as they really help simplify the complexity of our modern business environment. Complexity can lead to infinite choice, which often leads to paralysis.

Dave McClure’s AARRR framework (or Startup Metrics for Pirates) is an excellent antidote to this situation. The following essay outlines it in detail.

This framework was originally created for startups. A startup is essentially a search for a repeatable and scalable business model, so testing a series of hypotheses about the various parts of the business. It needs to adapt over time, and tell if the business model is worth scaling into a company.

Established organisations already have a repeatable and profitable business model. Any business school will tell you that the numbers to track are Income Statements, Balance Sheets and Cash Flow Statements, however more and more as platforms are becoming the backbone of these organisations, adopting the startup mentality to product is increasingly worth paying attention to.

An example would be a large organisation switching to offer their product through a managed e-commerce website. Traditional activity switches from broad scale mass marketing to targeted and measurable activity on the platform, with new tactics required to evolve to shifting customer needs.

To this end, I’ll phrase this essay to be inclusive of both startups and established businesses who are managing a product - as a definition product will refer to any sort of digital platform (e.g e-commerce website, widget or service or sharing based platform).