The lean startup

(Update April, 2011: In September, 2008 I wrote the following post in which I published my thoughts on the term "lean startup" for the first time. In the interests of preserving that history, I have left the original post unchanged and unedited. To learn more about the progress of the the lean startup movement since 2008, click here.)

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I've been thinking for some time about a term that could encapsulate trends that are changing the startup landscape. After some trial and error, I've settled on the Lean Startup. I like the term because of two connotations:

1. Lean in the sense of low-burn. Of course, many startups are capital efficient and generally frugal. But by taking advantage of open source, agile software, and iterative development, lean startups can operate with much less waste.
2. The lean startup is an application of Lean Thinking. I am heavily indebted to earlier theorists, and highly recommend the books Lean Thinking and Lean Software Development. I also owe a great debt to Kent Beck, whose Extreme Programming Explained: Embrace Change was my first introduction to this kind of thinking. (So far, I have found "lean startup" works better with the entrepreneurs I've talked to than "agile startup" or even "extreme startup.")

What are the characteristics of a lean startup? One that is powered by three drivers, each of which is a part of a major trend:

1. The use of platforms enabled by open source and free software. At the application-stack layer, I see LAMP + Danga as the most common combination. In recent years, we've also got great new options all up and down the stack, in particular things like Amazon EC2 and RightScale (none of which would be possible without the free software movement).
2. The application of agile development methodologies which dramatically reduce waste and unlock creativity in product development. (See Customer Development Engineering for my first stab at articulating the theory involved)
3. Ferocious customer-centric rapid iteration, as exemplified by the Customer Development process.

My belief is that these lean startups will achieve dramatically lower development costs, faster time to market, and higher quality products in the years to come. Whether they also lead to dramatically higher returns for investors is a question I'm looking forward to studying.