The Lean Startup

This event marks the publication of Eric Ries new book The Lean Startup as part of the LSE’s public lecture series.

“Most new businesses fail. But most of those failures are preventable. The Lean Startup is a new approach to business that’s being adopted around the world. It is changing the way companies are built and new products are launched. The Lean Startup is about learning what your customers really want. It’s about testing your vision continuously, adapting and adjusting before it’s too late. Now is the time to think Lean.”

I liveblogged the event – and here are my notes.

The Lean Startup

Eric Ries

Linda Hickman says the book has started a whole movement; there is some controversy about his thinking. Started as a software developer, founder of IMTU and on the board of startups and working with HBS.  The contentiousness of his approach is related to his reflective practice – it’s not about the ‘Great Man’.

Ground rules – don’t want anyone to be disconnected on his account. Use your mobiles.

Public policy-makers are keen on ‘entrepreneurialism’ – v exciting.

Startups are difficult and boring – and product improvement meetings don’t make good movies. The stuff that’s important is ‘too boring to be in the movies’.

A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainly.

“A startup is an experiment – can we build a sustainable organisation”.

  • Most startups fail
    • Some get bought – by big companies.
    1. Some enter the Land of the Living Dead

“We can build anything we can imagine”

Entrepreneurship is management. He blames Taylor – “In the past, the man was first. In the future, the system will be the first.” (1911). Fred Taylor’s scientific management gives the wrong signals – we needed more stuff; it was about building it; not thinking about whether is should be built.

We are dealing with ‘extreme uncertainty’
It’s about “The Pivot”

Pivoting is a core concept – a change in strategy; not a change it vision. Pivot sooner. Expands the runway without raising more money.

Achieving failure = successfully executing a bad plan.

Forecasting ad planning only works in a stable environment.

Which activities (from the perspective of the customer) add value and which don’t.

Pivot for him was throwing away 6 months worth of code development. But learning is the excuse to justify failure. “Learning is our most valuable asset” as entrepreneurs.

Validated learning is about how we achieve the learning with minimum effort. Need to minimise the total time through the loop. Build – measure – learn. The point of continuous deployment is implementing features very rapidly – but as experiments.  Need to make the “Minimum Viable Product”.

Innovation accounting. [Cites the Toyota Way]. Need to hold entrepreneurs accountable. Normally the metrics are ‘vanity metrics’.

“They can’t [VCs] tell whether you’re on the brink of success or whether you’ve spent the year ‘goofing off’.”

You need to:

  • Establish the baseline
  • Tune the engine
  • Pivot or persevere

“It’s better to have bad news that’s true than good news that’s made up”.

“When experiments reach diminishing returns; it’s time to Pivot”.

Questions

Q – re leadership of the business; why don’t you mention the directors?

A – masses of advice on that. It’s more about the process and the environment that they work in.

Q – re e-commerce; what does MVP look like?

A – inventory is about satisfying demand. Building up inventory in advance of a sale is not a good plan. Start with a very small number of early adopters. Apologies and take pre-orders.

Q – why should I listen to this – what have you built that’s successful?

A – argument by case study. The point of a framework is that it makes predictions – start with one concept and see what happens – make predictions and test. Do it for yourself and see what works.

Q – re scaling. How do you implement a MVP?

A – take one idea; try to get a competitor to steal it. ‘We should be so lucky!’. Big companies have plenty of ideas – but they can’t implement. If you can’t out iterate them – shame on you.

Q – stuff gets released that people don’t really want.

A – it’s about batch size. Think manufacturing. Apply it to software development. Cluster immune system.

Q – re Investors and their attitudes. How do they react?

A – Not easy to sell to investors. It’s difficult. We pivoted to a better product. A few of our investors understood what we were trying to do as a micro-scale experiment. And we knew what the inflection points were caused by. It’s a tough sell. “Don’t pitch the buzzwords – pick the results.”

‘There is zero penalty for shipping the MVP too early.”

Q – from a big company guy from an established brand. What are the challenges of getting big companies to change their ways’

A – The challenge is to get them to change the accountability. Start something that doesn’t need the corporate brand. Reverse the thinking – needs to come down from the top. Middle managers get paid to ‘make the quarter’ – and they kill innovation.

Q – What are you going to do next?

A – I have no idea. Something to do with the short term nature of public markets. Targets are part of the problem. We need a long term stock exchange. Needs full-on ecosystem reform.