Lean startups Partial Summary

Lean Startups by Eric RiesGeneral Concepts summarized (partial) by George Howard (@gah650) Partial Summary of Eric Reis Lean Startups 2

IntroThis deck provides a basic and partial summary of the book Lean Startups by Eric Ries. You should buy the book. Partial Summary of Eric Reis Lean Startups 3

It’s the boring stuff that matters the most Partial Summary of Eric Reis Lean Startups 4

Entrepreneurship is a kind of management Partial Summary of Eric Reis Lean Startups 5

Lean Startup• Builds on – Lean manufacturing – Design thinking – Customer development – Agile development Partial Summary of Eric Reis Lean Startups 6

Lean Startup• Characterized by – Extremely fast cycle time – Focus on what customers want without asking them) – Scientific approach to decision making Partial Summary of Eric Reis Lean Startups 7

5 principles• Entrepreneurs are everywhere• Entrepreneurship is management• Validated Learning• Build-Measure-Learn• Innovation Accounting Partial Summary of Eric Reis Lean Startups 8

Why Startups Fail Partial Summary of Eric Reis Lean Startups 9

Established business metrics don’t apply• Startups don’t yet know who their customer is or what their product should be• Planning and forecasting are only accurate when based on a long, stable operating history, and relatively static environment Partial Summary of Eric Reis Lean Startups 10

“Just Do it” is a myth• An “unmanaged” startup will fail• Entrepreneurship is management• Entrepreneurship is a discipline Partial Summary of Eric Reis Lean Startups 11

Part One VisionPartial Summary of Eric Reis Lean Startups 12

Entrepreneurial management• Problem – many Entrepreneurs eschew traditional management theory as too constraining• Problem – traditional management not designed to deal with the chaos of startups Partial Summary of Eric Reis Lean Startups 13

Theory of Entrepreneurship must encompass• Vision and concept• Product development• Marketing and sales• Scaling up• Partnerships and distribution• Structure and organizational design Partial Summary of Eric Reis Lean Startups 14

Theory of Entrepreneurship must encompass• Provide method for measuring progress in the context of extreme uncertainty• Give Entrepreneurships clear guidance on how to make trade-off decisions: – Whether and when to invest in process – Formulating, planning, and creating infrastructure – When to go it alone/when to partner – When to respond to feedback and when to stick to vision – How and when to invest in scaling the business Partial Summary of Eric Reis Lean Startups 15

Theory of Entrepreneurship must (more than anything else)• Allow Entrepreneurs to make testable predictions Partial Summary of Eric Reis Lean Startups 16

Lean Startup• Ask people to start measuring their productivity differently• Startups accidentally build something nobody wants, it doesn’t matter if they do it on time and on budget• The goal of the startup is to figure out the right thing to build – the thing customers want and will pay for – as quickly as possible Partial Summary of Eric Reis Lean Startups 17

Lean Startup• Emphasizes fast iteration and customer insight a huge vision, and great ambition, all at the same time Partial Summary of Eric Reis Lean Startups 18

Engine of growth• Every new version of a product, every new feature, and every new marketing program is an attempt to improve the engine of growth• Directional planning – more rocket ship than daily commute (i.e. over-adherence to a set- in-stone direction) - is bad – Rigorous and faithful achievement of failure Partial Summary of Eric Reis Lean Startups 19

Drive a startup• LS approach: instead of making complex plans that are based on a lot of assumptions, you can make constant adjustments with a steering wheel called the build-measure-learn feedback loop. – Sharp turn = pivot Partial Summary of Eric Reis Lean Startups 20

True North• Startups have a True North – a destination – in mind – LS refers to this as its vision – To achieve that vision, startups employ a strategy • Business model • Product road map • Pov about partners and competitors • Ideas about who the customer will be – The product is the end result of this strategy Partial Summary of Eric Reis Lean Startups 21

Partial Summary of Eric Reis Lean Startups 22

Change/constant• Products change constantly through the process of optimization (tuning the engine)• The strategy may have to change (less frequently) = a pivot• The overarching vision rarely changes – Entrepreneurship’s are committed to seeing the startup through to that destination – Every setback is an opportunity for learning how to get where they want to go Partial Summary of Eric Reis Lean Startups 23

DefinePartial Summary of Eric Reis Lean Startups 24

“Intrapreneurs”• Convert raw materials of innovation into real- world breakthrough successes• Entrepreneurs who operate inside an established organization sometimes are called “Intrapreneurs” because of the special circumstances that attend building a startup within a larger company. Partial Summary of Eric Reis Lean Startups 25

Startup definition• A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty – Nothing to do with: • Size of the company • Industry • Sector – A startup is greater than the sum of its parts; it an acutely human enterprise Partial Summary of Eric Reis Lean Startups 26

Innovator’s dilemma• Established companies are very good at creating incremental improvements to existing products and serving customers (sustaining innovation), but struggle to create breakthrough new products (disruptive innovation) than can create new sustainable sources of growth Partial Summary of Eric Reis Lean Startups 27

Importance of LS in established companies• The amount of time a company can count on holding on to market leadership to exploit its earlier innovations is shrinking, and this creates an imperative for even the most entrepreneurial companies to invest in innovation.• The only sustainable path to long-term economic growth is to build an “innovation factory” to create disruptive innovations on a continuous basis Partial Summary of Eric Reis Lean Startups 28

LearnPartial Summary of Eric Reis Lean Startups 29

Fundamental goal• Engage in organization building under conditions of extreme uncertainty• Most vital function is learning – Learn the truth bat which elements of our strategy are working to realize our vision and which are just crazy – Learn what customers really want, not what they say they want or what we think they should want Partial Summary of Eric Reis Lean Startups 30

Validated Learning• Not after-the-fact rationalization or a good story designed to hide failure• Is a rigorous method for demonstrating progress when one is embedded in the soil of extreme uncertainty• Is the process of demonstrating empirically that a team has discovered valuable truths about a startup’s present and future business prospects Partial Summary of Eric Reis Lean Startups 31

Validated Learning• Is more concrete, more accurate, and faster than market forecasting or classical business planning• Is the principal antidote to the lethal problem of achieving failure: successfully executing a plan that leads nowhere Partial Summary of Eric Reis Lean Startups 32

Quantitative Targets• Create the motivation to engage in qualitative inquiry and guides questions Partial Summary of Eric Reis Lean Startups 33

Value v waste• Lean thinking defines value as providing benefit to the customer; anything else is waste – Remember, this is different from asking customers what they want; most customers don’t know what they want in advance. Partial Summary of Eric Reis Lean Startups 34

Avoidance of waste• Shipping faster allows you to see what the customer values, and thus you can avoid debating what features the customer wants, etc.• Learning is the essential unit of progress for startups – Effort that is not absolutely necessary for learning what customers want can be eliminated • This is VALIDATED learning – always demonstrated by positive improvement in the startup’s core metrics. Partial Summary of Eric Reis Lean Startups 35

Key points Effort that is not absolutely necessary for learning what customers want can be eliminated • This is VALIDATED learning – always demonstrated by positive improvement in the startup’s core metrics.• Look for synthesis b/w vision and what customers would accept Partial Summary of Eric Reis Lean Startups 36

The audacity of zero Partial Summary of Eric Reis Lean Startups 37

Zero invites imagination• At the start – when the number is zero – people can imagine success• Once you launch, and the numbers are small, it pours cold water over the project – Therefore, people delay launch, delay initiatives until they are CERTAIN of success. • However, these delays cause waste, and decrease feedback, and thus increase risk that a startup builds something nobody wants Partial Summary of Eric Reis Lean Startups 38

paradox• Releasing a product – w/o planning – and hoping for the best is not a good plan either Partial Summary of Eric Reis Lean Startups 39

tension• Backers, etc want hockey-stick growth• If you lack the language of validated learning, people will focus on the wrong metrics – Must look beyond small gross numbers to see real progress (assuming there is real progress being made) – Must show that product dev are leading towards success w/o giving in to the temptation to fall back on “success theater.” Things you can do to look successful Partial Summary of Eric Reis Lean Startups 40

Success theater examples• Marketing gimmicks• Super bowl ads• Flamboyant pr – All meant to juice gross numbers – = illusion of traction • Eventually the fundamentals of the biz win out and the PR bump passes. Partial Summary of Eric Reis Lean Startups 41

Key questions• Should this product be built?• Can we build a sustainable biz around this set of products? – To answer, we need a method for systematically breaking down a biz plan into its component parts and testing each part empirically – In the LS model every product, feature, marketing campaign – everything a startup does – is understood to be an experiment designed to achieve validated learning. Partial Summary of Eric Reis Lean Startups 42

Ch 4 ExperimentPartial Summary of Eric Reis Lean Startups 43

paradox• If the plan is to see what happens, a team is guaranteed to succeed – at seeing what happens – but won’t necessarily gain validated learning – If you cannot fail, you cannot learn Partial Summary of Eric Reis Lean Startups 44

LS method• Reconceives a startup’s efforts as experiments that test its strategy to see which parts are brilliant and which are crazy• Begins witha clear hypothesis that makes predictions about what is supposed to happen – Then tests those predictions empirically – Just as scientific experimentation is informed by theory, startup exp is guided by the startup’s vision Partial Summary of Eric Reis Lean Startups 45

goal• The goal of every startup is to discover how to build a sustainable biz around that vision Partial Summary of Eric Reis Lean Startups 46

Think big, start small• Zappos approach – Small-scale efforts did not prevent a huge vision from being realized Partial Summary of Eric Reis Lean Startups 47

For long-term change, experiment immediately• Have to deal with untested assumptions and a lot of vision – Break it down – vision into component parts (TWO MOST IMPORTANT ASSUMPTIONS ENTREPRENEURS MAKE): • Value hypothesis – test whether a product or services really delivers value to customers once they’re using it • Growth hypothesis – tests how new customers will discover a product or service Partial Summary of Eric Reis Lean Startups 48

An experiment is a product• That is, an experiment must be more than just a theoretical inquiry; it is also a first product – Allows managers to get started with the campaign • Get early adopters Partial Summary of Eric Reis Lean Startups 49

Key questions• Do customers recognize that they have the problem you’re trying to solve?• If there was a solution, would they buy it?• Would they buy it from you (company)?• Can we build a solution for that problem?• Typically, companies go to step 4 prior to confirming customers have the problem Partial Summary of Eric Reis Lean Startups 50

Success is not delivering a feature• Success is learning how to solve the customer’s problem Partial Summary of Eric Reis Lean Startups 51

Key approach• Treat the new venture as an experiment• Id the elements of the plans that are assumptions rather than facts• Figure out ways to test them• Using these insights, build a min viable product and have something up and running before the official plan was set in motion Partial Summary of Eric Reis Lean Startups 52

remember• Planning is a tool that only works in the presence of a long and stable operating history Partial Summary of Eric Reis Lean Startups 53

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Lean startups Partial Summary

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