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The Lean Startup

Eric Ries

In The Lean Startup, Eric Ries explains how today's entrepreneurs use continuous innovation to create radically successful businesses. The idea is simple idea: applying lean thinking to the process of innovation. If you associate startups and entrepreneurship with chaos, this marriage will sound an unlikely one, but The Lean Startup is full of pleasant surprises.

Sure, startups tend to be chaotic and disorganized, and quite often innovation is undertaken for the sake of innovation, something abhorrent to regular established businesses with a high threshold of profitability and expectations. But, today's entrepreneurs recognize the capital constraints and the importance of speedy innovation. Lean management concepts add discipline and structure to the startup innovation chaos, empowering startups achieve their business goals without undue waste of time or resources.

"Startup success is not a consequence of good genes or being in the right place at the right time," says Ries in the introduction. "Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught". And then he says something that may be counter intuitive, but really isn't: "Entrepreneurship is a kind of management."

The principles and methodologies are applicable to any business at any level. Jeff Immelt, Chairman and CEO of GE, begins his forward to The Lean Startup this way:

Robert Cullen

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"Entrepreneurs are different in many ways, whether starting their own small

company or inventing new products and businesses within a company like GE. But

they also share certain traits. They are fast, They embrace new thinking. they are

geared for disruption and innovation through uncertainty. One of the things I

admire about Eric Ries's The Lean Startup is its ability to teach anyone how to do

this using a scientific approach.

Immelt then goes on to say that "GE is all about constant reinvention", that "We are adding the principles of The Lean Startup to GE's long tradition of continuous improvement, and across GE there are many projects where we are learning, iterating and delivering outcomes in a new way." In Immelt’s view, “For GE, these concepts accelerate impact, learning, improvement, and validation." He praises Ries as "one of the people with great ideas helping us think about how a company like ours, operating at a massive scale, can be faster in everything we do, to bring more progress to our customers and to the world.” He concludes the forward saying that he hopes that "readers find as much inspiration and guidance in Eric's book as GE has."

The Steering wheel: build-measure-learn

The books is presented in three parts: Vision, Steer and Accelerate. And you do this with a build-measure-learn steering wheel.

The whole idea of The Lean Startup is to figure out the right thing to build; what customers want and are willing to pay for; and to do this as quickly as possible. This is a world where making costly prototypes and perfecting a product before launch is frowned upon.

Lean thinking calls for the creativity of individual workers and acceleration of cycle times. The typical lean concepts—shrinking batch sizes, just-in-time production and inventory control—are fully taken on board. In this world, progress is measured through validated learning. This way you will know soon enough whether you need to pivot, make a sharp turn or change course completely or give up (on a product or service).

An innovation factory based on validated learning

A company must become an innovation factory; create disruptive innovations on a continuous basis. That is the only sustainable path to long-term economic growth.

Validated learning is the process of demonstrating empirically the present and future prospects of a startup business. In some ways, because it involves actual customers from the get go, it is more concrete, accurate, and faster compared to business planning and forecasting.

It is not learning for the sake of learning... or to find out 'can this product be built?'; forgetting about customers. Instead, validated learning looks at finding the answer to the

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more pertinent questions: 'can this product be built?' and 'can we build a sustainable business around this set of products and services?'

In lean thinking, value is defined as providing benefit to the customer, making anything else a waste. Learning is the essential unit of progress for startups and should be among its core metrics. Activities that aren't necessary for learning what customers want can be eliminated. However, the challenge here is immense because in a startup, there is uncertainty about who the customer is and what the customer might find valuable.

An entrepreneur's job is to find a synthesis between your vision and what your customers would accept. Asking customers will not work because customers may not know what they want.

This is why true startup productivity is defined as systematically figuring out the right things to build. Everything a startup does is considered to be an experiment designed to achieve validated learning.

Role of experimentation

One of the most important lessons of the scientific method–if you cannot fail, you cannot learn. Startup experimentation is guided by its vision. The goal is to discover how a sustainable business can be built around that vision. Negative results and failures are instructive and can influence business strategy.

The most important assumptions—whether a product or service really delivers value to customers using it (the value hypothesis) and how new customers will discover the product or service (the growth hypothesis)—must be tested.

Four questions can help find the truth:

Do consumers recognize that they have the problem you are trying to solve? If there was a solution, would they buy it? Would they buy it from us? Can we build a solution for that problem?

Success, it must be remembered, is learning how to solve the customer’s problem.

The learning feedback loop

The entire process discussed in The Lean Startup can be summed up with the feedback loop:

Ideas > build > product > measure > data > learn > ideas > and so on (repeat)

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Source: http://beforweb.com/node/125

Stratups should focus all their energies on minimizing the total time through this feedback loop.

There are two approaches to creating sustainable products and services. One is to maximize chances of success with as many features as possible. The problem is that there will be no feedback till the end. At this point, it may be too late to adjust.

The second is to release products early and to release often. This helps get as much feedback as possible, quickly. However, you may end up running in circles, chasing what customers think they want.

According to Eric Ries, the Minimum Viable Product is a hybrid of the two approaches.

Minimum Viable Product

Once the startup is clear on the leap-of-faith decisions, the goal is to enter the build phase as soon as possible with a minimum viable product or the MVP. The MVP shouldn't be considered a full featured or refined product. But it is a version of the product that enables the startup take a full turn of the build-measure-learn loop; with the least amount of development time and effort.

It has a minimum set of features needed to learn from earlyvangelists (visionary early adapters). They can help fill in the gaps on missing features, if indeed the product solves a real problem. MVP allows the startup achieve a big vision in small increments, without going in circles. And it helps avoid building products no one wants. MVP allows to maximize learning per each dollar spent. As Ries notes in a video on his blog, MVP helps you "get the facts before its too late" and it is "probably much more minimum than you think".

You cannot build the MVP and be done. The MVP is just the first step on a journey of learning. It requires a commitment to iteration; to hundreds of changes till you can figure it out or give up. Down the road, you may discover flaws in some elements of the product or the strategy that calls for a sharp turn (pivot) to help you find another way to achieve the vision.

A concierge MVP, a personalized service, is not the product but an activity designed to test

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the leap of faith assumptions to the growth model. A formal growth model helps avoid the trap of being satisfied with a small profitable business; when a change in course or strategy, a pivot, may lead the way to more significant growth. Pivots can be made in terms of product features, customer segments or needs, platform, business architecture, value capture, growth, channels or technology.

The MVP rule

In building the MVP, remove any feature, process or effort that does not directly contribute to learning. Even low quality MVPs can help in building great high-quality products.

Seeking constant feedback is an imperative. Startups should continually bring in people to react to product mockups, prototypes and simulations. This ensures that the product serves a real customer need.

Learning milestones in a lean startup are alternatives to traditional business and product milestones. They help entrepreneurs assess their progress accurately and objectively.

Accelerate

The Accelerate section of The Lean Startup addresses the aspects of batches, growth, adaptation and innovation.

Think of lean startup as framework rather than a blueprint

In startups things constantly change or go wrong. Thinking of lean startup principles as a framework rather than a blueprint helps entrepreneurs adapt it to the conditions of their own company.

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Resources

I would like to recommend these resources:

Minimum Viable Product: a guide (video from Eric Ries’s Startup Lessons Learned Blog)

Validated learning about customers (article from Startup Lessons Learned)

Eric Ries on The Lean Startup and Entrepreneurship – This is an 1 hour 14 min video.

Eric Ries explains The Pivot (a short TED video)

Conclusion

The Lean Startup is an interesting book. And as you saw at the beginning of this article, it provides useful lessons to startups and established businesses alike. I strongly recommend you give it a try.

The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries. 2011. Crown Business.