Lean start up methodology in M&A
Gabe Galvez
October 27, 2014
By now, many are familiar and actively applying Eric Ries’ The Lean Startup to their business decision-making.
His methodology aims to help improve success for businesses in any industry. The ideas behind these methodologies are becoming increasingly essential for businesses. As far as M&A goes, technology is cutting costs and pushing investment bankers and private equity groups to do the same.
Aside from cutting costs, the lean startup methodology is very adamant about measuring strategies. Putting analytics to work is almost as important as concept implementation itself. The idea is to learn what works and quickly iterate.
How can M&A firms apply the lean methodology while growing their business and profits?
First and foremost: cut the fat. A significant amount of M&A firms pile on unnecessary costs that dig into their profits due to the income structure of the industry. A lean approach means having what you need and when you need it. Your costs follow your income and not allowing your business to be committed to unnecessary expenses.
In order to know what exactly is necessary in your business model, measuring results is key to a lean method. Log everything that goes into dealmaking and to your everyday workflow. In a previous post, we explained the importance of implementing CRM tools. These tools can help firms take their work efficiency to lean effectiveness with measurable analytics to keep all things accountable.
A term used in The Lean Startup is “Validated Learning.” This considers using the Scientific Method to learning and growing a business. This brings in the earlier two points of cutting unnecessary expenses and measuring results. Without an objective mindset, companies are bound to fail. Intuition can only take you so far, but running a business is more technical than some might think.
Finally: flexibility. A lean methodology gives a company the breathing space it needs to adapt to changes. Too many times, executives don’t see the importance of change and bring their business down along with their antiquated ideologies. Organizations must adapt or they will inevitably come to an end. The business environment is constantly changing with new technologies, new confidences, new trends, etc. Without the flexibility to follow all of these as part of your strategy, your company will get left behind.
