The Lean Startup#leanstartupEric Ries (@ericries)http://StartupLessonsLearned.com

Most Startups Fail

Most Startups Fail

Most Startups Fail

Most Startups FailBut it doesn’t have to be that way. We can do better. This talk is about how.

What is a startup?A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. Nothing to do with size of company, sector of the economy, or industry

The PivotWhat do successful startups have in common?They started out as digital cash for PDAs, but evolved into online payments for eBay. They started building BASIC interpreters, but evolved into the world's largest operating systems monopoly. They were shocked to discover their online games company was actually a photo-sharing site.Pivot: change directions but stay grounded in what we’ve learned. http://startuplessonslearned.blogspot.com/2009/06/pivot-dont-jump-to-new-vision.html

Speed Winsif we can reduce the time between major iterationswe can increase our odds of success

A Tale of Two Startups

Startup #1

Stealth Startup Circa 2001

All about the team

A good plan?Start a company with a compelling long-term vision. Raise plenty of capital.Hire the absolute best and the brightest.Hire an experienced management team with tons of startup experience.Focus on quality. Build a world-class technology platform.Build buzz in the press and blogosphere.

Achieving FailureCompany failed utterly, $40MM and five years of pain.Crippled by “shadow beliefs” that destroyed the effort of all those smart people.

Shadow Belief #1We know what customers want.

Shadow Belief #2We can accurately predict the future.

Shadow Belief #3Advancing the plan is progress.

A good plan?Start a company with a compelling long-term vision. Raise plenty of capital.Hire the absolute best and the brightest.Hire an experienced management team with tons of startup experience.Focus on quality. Build a world-class technology platform.Build buzz in the press and blogosphere.

Startup #2

IMVU

IMVU

New planShipped in six months – a horribly buggy beta productCharged from day oneShipped multiple times a day (by 2008, on average 50 times a day)No PR, no launchResults: 2007 revenues of $10MM

Lean Startups Go FasterCommodity technology stack, highly leveraged (free/open source, user-generated content, SEM).Customer development – find out what customers want before you build it. Agile (lean) product development – but tuned to the startup condition.

Customer DevelopmentContinuous cycle of customer interactionRapid hypothesis testing about market, pricing, customers, …Extreme low cost, low burn, tight focusMeasurable gates for investorshttp://bit.ly/FourSteps

Continuous cycle of customer interaction

Rapid hypothesis testing about market, pricing, customers, …

Extreme low cost, low burn, tight focus

Measurable gates for investors

Agile Product Development(A tale of two startups, revisited)Principles drawn from Lean Manufacturing and Toyota Production SystemThese examples are drawn from software startups, but increasingly:All products require software All companies are operating in a startup-like environment of extreme uncertainty

Principles drawn from Lean Manufacturing and Toyota Production System

These examples are drawn from software startups, but increasingly:

All products require software

All companies are operating in a startup-like environment of extreme uncertainty

Traditional Product DevelopmentUnit of Progress: Advance to Next StageWaterfallRequirementsSpecificationDesignProblem: knownSolution: knownImplementationVerificationMaintenance

Agile Product DevelopmentUnit of Progress: A line of Working Code“Product Owner” or in-house customerProblem: knownSolution: unknown

Product Development at Lean StartupUnit of Progress: Validated Learning About Customers ($$$)Customer DevelopmentHypotheses,Experiments,InsightsProblem: unknownData,Feedback,InsightsSolution: unknown

Minimize TOTAL time through the loopIDEASLEARNBUILDDATACODEMEASURE

How to build a Lean StartupLet’s talk about some specifics. Continuous deploymentMinimum Viable ProductFive why’s

Continuous DeploymentIDEASLEARNBUILDLearn FasterCustomer DevelopmentFive WhysBuild FasterContinuous DeploymentSmall BatchesContinuous IntegrationRefactoringDATACODEMEASUREMeasure FasterSplit TestingActionable MetricsNet Promoter ScoreSEM

Continuous DeploymentDeploy new software quicklyAt IMVU time from check-in to production = 20 minutesTell a good change from a bad change (quickly)Revert a bad change quicklyAnd “shut down the line” Work in small batchesAt IMVU, a large batch = 3 days worth of workBreak large projects down into small batches

Deploy new software quickly

At IMVU time from check-in to production = 20 minutes

Tell a good change from a bad change (quickly)

Revert a bad change quickly

And “shut down the line”

Work in small batches

At IMVU, a large batch = 3 days worth of work

Break large projects down into small batches

Cluster Immune SystemWhat it looks like to ship one piece of code to production:Run tests locally (SimpleTest, Selenium)Everyone has a complete sandboxContinuous Integration Server (BuildBot)All tests must pass or “shut down the line”Automatic feedback if the team is going too fastIncremental deployMonitor cluster and business metrics in real-timeReject changes that move metrics out-of-boundsAlerting & Predictive monitoring (Nagios)Monitor all metrics that stakeholders care aboutIf any metric goes out-of-bounds, wake somebody upUse historical trends to predict acceptable boundsWhen customers see a failure:Fix the problem for customersImprove your defenses at each level

Run tests locally (SimpleTest, Selenium)

Everyone has a complete sandbox

Continuous Integration Server (BuildBot)

All tests must pass or “shut down the line”

Automatic feedback if the team is going too fast

Incremental deploy

Monitor cluster and business metrics in real-time

Reject changes that move metrics out-of-bounds

Alerting & Predictive monitoring (Nagios)

Monitor all metrics that stakeholders care about

If any metric goes out-of-bounds, wake somebody up

Use historical trends to predict acceptable bounds

Fix the problem for customers

Improve your defenses at each level

Minimum Viable ProductIDEASCode FasterLearn FasterBUILDLEARNContinuousDeploymentMinimum Viable ProductCODEDATAMeasure FasterMEASURERapid Split Tests

Possible Approaches“Maximize chances of success”Build a great product with many features that increase the odds that customers will want itProblem: no feedback until the end, might be too late to adjust “Release early, release often”Get as much feedback as possible, as soon as possibleProblem: run around in circles, chasing what customers think they want

Minimum Viable ProductThe minimum set of features needed to learn from earlyvangelists – visionary early adoptersAvoid building products that nobody wantsMaximize the learning per dollar spentGet the facts before it’s too lateProbably much more minimum than you think!

Minimum Viable ProductVisionary customers can “fill in the gaps” on missing features, if the product solves a real problemAllows us to achieve a big vision in small increments without going in circlesRequires a commitment to iteration

FearsFalse negative: “customers would have liked the full product, but the MVP sucks, so we abandoned the vision”Visionary complex: “but customers don’t know what they want!”Too busy to learn: “it would be faster to just build it right, all this measuring distracts from delighting customers”

Five WhysIDEASCode FasterLearn FasterBUILDLEARNContinuousDeploymentFive Whys RootCause AnalysisCODEDATAMeasure FasterMEASURERapid Split Tests

Five Whys Root Cause AnalysisA technique for continuous improvement of company process.Ask “why” five times when something unexpected happens.Make proportional investments in prevention at all five levels of the hierarchy.Behind every supposed technical problem is usually a human problem. Fix the cause, not just the symptom.

A technique for continuous improvement of company process.

Ask “why” five times when something unexpected happens.

Make proportional investments in prevention at all five levels of the hierarchy.

Behind every supposed technical problem is usually a human problem. Fix the cause, not just the symptom.

There’s much more…IDEASCode FasterLearn FasterBUILDLEARNUnit TestsUsability TestsContinuous IntegrationIncremental DeploymentFree & Open-Source ComponentsCloud ComputingCluster Immune SystemJust-in-time ScalabilityRefactoringDeveloper SandboxMinimum Viable ProductSplit TestsCustomer InterviewsCustomer DevelopmentFive Whys Root Cause AnalysisCustomer Advisory BoardFalsifiable HypothesesProduct Owner AccountabilityCustomer ArchetypesCross-functional TeamsSemi-autonomous TeamsSmoke TestsCODEDATAMeasure FasterMEASURESplit TestsClear Product OwnerContinuous DeploymentUsability TestsReal-time MonitoringCustomer LiaisonFunnel AnalysisCohort AnalysisNet Promoter ScoreSearch Engine MarketingReal-Time AlertingPredictive Monitoring

Get Started TodayYou are ready to do this, no matter who you arewhat job you havewhat stage of company you’re inGet started now, today.

Thanks!Startup Lessons Learned Bloghttp://StartupLessonsLearned.com/Getting in touch (#leanstartup)http://twitter.com/ericrieseric@theleanstartup.comUpcoming eventsWeb 2.0 Expo New York Nov 16-19MIT Enterprise Forum Nov 19 More at http://bit.ly/LeanStartupEvents

Startup Lessons Learned Blog

http://StartupLessonsLearned.com/

Getting in touch (#leanstartup)

http://twitter.com/ericries

eric@theleanstartup.com

Upcoming events

Web 2.0 Expo New York Nov 16-19

MIT Enterprise Forum Nov 19

More at http://bit.ly/LeanStartupEvents

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Rapid Split TestsIDEASCode FasterLearn FasterBUILDLEARNContinuousDeploymentFive Whys RootCause AnalysisCODEDATAMeasure FasterMEASURERapid Split Tests

Split-testing all the timeA/B testing is key to validating your hypothesesHas to be simple enough for everyone to use and understand itMake creating a split-test no more than one line of code:if( setup_experiment(...) == "control" ) { // do it the old way} else { // do it the new way}

The AAA’s of MetricsActionableAccessibleAuditable

Measure the MacroAlways look at cohort-based metrics over timeSplit-test the small, measure the large