Design Thinking vs Lean Startup. What is best for your organization?-EN

Recently, I was fortunate to be asked to present at the Agile Trends Spain Festival, an online event that was focused around the theme of “Agility to prosper after the COVID 19 crisis.” This article is about the session that I presented, “Corporate Innovation Dilemma: Design Thinking vs. Customer Development, Connections and Differences.”

Before you start reading this article, we recommend having prior knowledge about Design Thinking and Lean Startup, as reflections are made on both disciplines.

Design Thinking vs. Lean Startup

You have probably heard on many occasions that in your organization you have to imitate startups in the way they move, in how they launch products to the market, in how fast they reach the customer with a new value proposition, and, in short, in how they innovate.

You have probably also realized that this is not as simple as it sounds, because the structure of a startup, its culture, its processes or purpose, among hundreds of different factors, are not at all similar to those of a small company, let alone medium or large companies. And do you know why? Because a startup is not a miniature company. In the same way, a large organization it is not equivalent to a large startup.

If an innovation project goes wrong in a large corporation, it is very rare that it would cause the closure of the organization and a massive layoff of its employees. Instead, because startups must find and validate their business models before their resources (time and money) run out, a serious error in the selection of the target market, the type of product functionalities, etc. in a startup can easily cause its extinction. These small nuances make the culture – the innovative mindset in one environment or another (startup vs. company) – radically different.

Instead, there are some aspects in which both worlds tend to converge. Both need to:

• Transform ideas into successful products.
• Understand what the customer really needs and expects.
• Define a value proposition that is perceived by the client as different, relevant, and difficult to imitate by the competition.
• Get all of this done by positioning the customer at the center of the process.

From a methodological point of view, we could say that these points could be the cover letter of two well-known methods among innovation and/or solution development teams: Design Thinking and Lean Startup.

Both of these customer-centric methods are powerful tools for innovation. On the other hand, they are not exactly the same; they cannot always be complemented, and depending on your situation, you should either start with one or the other.

You might think the linear process is to first apply Design Thinking, then Lean Startup, and then Agile, right? Unfortunately, no. I wish it could be simplified like this to ensure the successful launch of a product to market, but I’ll assume that if you are reading this article and have put it into real practice, you already know this truth.

Using Design Thinking or Lean Startup

At the risk of information gaps, while also focusing on rapid understanding and opening a thread that allows us to continue talking and delving into future articles, I will try to condense some of the criteria that should help you when choosing a methodology: 

Design Thinking

Starting Point

• Start with a problem or challenge to solve (example: how to improve the customer service experience in our organization).
• Environment of uncertainty
• No urgency (the time we have to complete the entire process of research, definition, ideation, and prototyping is not a decisive factor)
• The team and economic resources are available to develop the process with guarantees.

Objectives

• To understand the depth of the challenge.
• To exactly define who our clients are.
• To stimulate the creative process through continuous flow of divergence and convergence.
• To generate a great number of ideas about how to resolve the challenge.
• To refine solution ideas until we find the best one to resolve the challenge in the eyes of the client.
• To search for facts and truths outside of the office.
• To reduce the risk of failure in a new product by building prototypes in order to, after successive iterations, validate with the client that the design best meets their expectations.
• The process can be extended over time, especially in those cases in which the investigation phase results in complexity.

Discoveries

• Extensive information resulting from research,  categorized and grouped by challenge and solution.
• A solution that satisfies the actual needs of the client, that is technologically viable, and is realistically executable.
• The connection between the specific challenge and solution.
• Innovative ways to resolve complex problems through a systemic vision.
• The experience of creative and collaborative work.
• A new team mindset oriented around the resolution of problems using innovation.

Lean Startup

Starting Point

• Start with a business idea already in mind (example: a group of entrepreneurs have come up with a new formula and want to launch an energy drink for runners using only organic ingredients).
• Begin with a hypothesis about the problem, the solution, the clients, and every aspect that ties into the business model.
• There is an environment of great uncertainty (examples: new or barely explored market, no certainties of who the consumer will ultimately be, questions about the investment needed, etc.).
• Shortage of resources (time and money). This is not “cheap” innovation, but a focus that the “failure” isn’t expensive.

Objectives

• Product/Market-fit
• Confirm if potential customers really experience the problem like you assumed. See how much it affects them. Did you actually hit the target, or is your real customer base different from the one initially targeted?
• Test whether or not your solution really solves their problems.
• Is there a market big enough for your business model to be profitable, repeatable, and scalable?
• Search for facts and truths outside of the office.
• Velocity. The key is not to hit the market first, but to be the first to learn if the product can actually work. This needs to be determined as soon as possible, before the window of opportunity closes and  resources are used up.
• Reduce uncertainty by building a Minimum Viable Product that allows for hypotheses validation, measurement, and learning as much as possible.

Discoveries

• Sufficient information, derived from the experiment metrics, in order to facilitate rapid decision making each time an MVP is built (do we stay the course or pivot?).
• A validated business model (problem-solution-market).
• A solution that satisfies the needs of the customer; a solution that you are certain fits the users’ expectations, it has been validated it with experiments.
• A market that has been confirmed through many tests that measured the capacity to grow your customer base.
• The understanding of your “engine of growth”, which will create traction for our business model.

Is it possible to use both disciplines in our company?

Absolutely yes. In fact, if you really want to have a robust innovation system, you will need both supports.

Design Thinking will enable you to better understand the new challenges that your organization has to face and then approach them systemically. In addition, it helps teams develop key competencies in corporate innovation, such as: working collaboratively, overcoming the fear of divergence, learning when to defer to our more creative side to produce large volumes of possible solutions (without filtering), when to try and converge to make reality more manageable, and when to build prototypes to validate our solutions with customers. 

Lean Startup will bring the principle of empiricism to your organization in the way of designing new business models and launching new products and solutions in the market. Nothing is assumed or taken for granted. Paraphrasing Steve Blank (father of Customer Development, the soul of Lean Startup): “There are no facts inside the office.” Everything starts with defining hypotheses and constructing experiments (fast, simple, and that allow us learn as much as possible). The next step is to get out on the street, into reality, and try to demolish these hypotheses. If they survive our experiment, we will be closer to the facts and truths, the principles that Lean Startup draws on to assume that a product or service really responds to the root problem, that there is an audience willing to pay for it, and that we have discovered the engine that drives the growth of our business model (hypotheses, experiments, metrics, sufficient information, decision-making).

And what does Agile look like in all this?

To simplify, Lean Startup has agile product development embedded in its philosophy, since it is focuses on speed and iterative and incremental development. When we build Minimum Viable Products, we start with low-fidelity, rapid developments to validate or invalidate our risk assumptions as soon as possible (for example: product functionalities), and step-by-step, we build successive Minimum Viable Products with greater fidelity until we reach the product which will eventually be sold to customers. This would be impossible to do from a Lean philosophy without an agile approach.

The mixture of both elements (the empirical approach to the design process of a business model + agile development) is what helps us minimize failure when building what we really need to build, that is, what our customers are waiting for.

Agile product development, without prior validation of the hypotheses that have led us to decide that we are going to bet on this or that product, could lead to a rather undesirable situation: agilely developing products or services that do not provide value and do not allow us to grow and advance as an organization.

I hope I was able to clarify some of the questions you might have when determining if a Design Thinking or Lean Startup approach is right for your team! 

Thank you, 

 — Juan Luis

We use Design Thinking and Lean Startup as best practices at Netmind to help us better meet your learning needs. We’d love to help you implement the same!