2010 08 19 The Lean Startup TechAviv

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Presentation by Eric Ries for TechAviv at the Stanford GSB August 19, 2010

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  • I’m not leaving you, I’m pivoting to another man
  • Truth: The Lean Startup method is not about cost, it is about speed. Lean Startups waste less money, because they use a disciplined approach to testing new products and ideas. Lean, when used in the context of lean startup, refers to a process of building companies and products using lean manufacturing principles applied to innovation. That process involves rapid hypothesis testing, validated learning about customers, and a disciplined approach to product development.
  • Truth: The Lean Startup methodology applies to all companies that face uncertainty about what customers will want. This is true regardless of industry or even scale of company: many large companies depend on their ability to create disruptive innovation. Those general managers are entrepreneurs, too. And they can benefit from the speed and discipline of starting with a minimum viable product and then learning and iterating continuously.
  • Truth: There’s nothing wrong with raising venture capital. Many lean startups are ambitious and are able to deploy large amounts of capital. What differentiates them is their disciplined approach to determining when to spend money: after the fundamental elements of the business model have been empirically validated. Because lean startups focus on validating their riskiest assumptions first, they sometimes charge money for their product from day one – but not always.
  • Truth: Lean Startups are driven by a compelling vision, and they are rigorous about testing each element of this vision against reality. They use customer development, split-testing, and actionable analytics as vehicles for learning about how to make their vision successful. But they do not blindly do what customers tell them, nor do they mechanically attempt to optimize numbers. Along the way, they pivot away from the elements of the vision that are delusional and double-down on the elements that show promise.
  • 2010 08 19 The Lean Startup TechAviv

    1. The Lean Startup#leanstartup<br />Eric Ries (@ericries)<br />http://StartupLessonsLearned.com<br />
    2. What is a startup?<br /><ul><li>A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.
    3. Nothing to do with size of company, sector of the economy, or industry</li></li></ul><li>What is a startup?<br />STARTUP <br />=<br />EXPERIMENT<br />
    4. Most Startups Fail<br />
    5. Most Startups Fail<br />
    6. Most Startups Fail<br />
    7. Most Startups Fail<br /><ul><li>But it doesn’t have to be that way.
    8. We can do better.
    9. This talk is about how.</li></li></ul><li>Entrepreneurship is management<br /><ul><li>Our goal is to create an institution, not just a product
    10. Traditional management practices fail</li></ul>- general management” as taught to MBAs<br /><ul><li>Need practices and principles geared to the startup context of extreme uncertainty
    11. Not just for “two guys in a garage”</li></li></ul><li>The Pivot<br />
    12. I’<br />
    13. The Pivot<br /><ul><li>What do successful startups have in common?
    14. They started out as digital cash for PDAs, but evolved into online payments for eBay.
    15. They started building BASIC interpreters, but evolved into the world's largest operating systems monopoly.
    16. They were shocked to discover their online games company was actually a photo-sharing site.
    17. Pivot: change directions but stay grounded in what we’ve learned. </li></li></ul><li>Speed Wins<br />If we can reduce the time between pivots<br />We can increase our odds of success<br />Before we run out of money<br />
    18. A Tale of Two Startups<br />
    19. Startup<br />1<br />
    20. Stealth Startup Circa 2001<br />
    21. All about the team<br />
    22. A good plan?<br /><ul><li>Start a company with a compelling long-term vision.
    23. Raise plenty of capital.
    24. Hire the absolute best and the brightest.
    25. Hire an experienced management team with tons of startup experience.
    26. Focus on quality.
    27. Build a world-class technology platform.
    28. Build buzz in the press and blogosphere.</li></li></ul><li>Achieving Failure<br /><ul><li>Product launch failed </li></ul> - $40MM and five years of pain<br /><ul><li>… but the plan was executed well
    29. Crippled by “shadow beliefs” that destroyed the effort of all those smart people.</li></li></ul><li>Shadow Belief #1<br /><ul><li>We know what customers want. </li></li></ul><li>Shadow Belief #2<br /><ul><li>We can accurately predict the future. </li></li></ul><li>Shadow Belief #3<br /><ul><li>Advancing the plan is progress.</li></li></ul><li>A good plan?<br /><ul><li>Start a company with a compelling long-term vision.
    30. Raise plenty of capital.
    31. Hire the absolute best and the brightest.
    32. Hire an experienced management team with tons of startup experience.
    33. Focus on quality.
    34. Build a world-class technology platform.
    35. Build buzz in the press and blogosphere.</li></li></ul><li>Startup<br />2<br />
    36. IMVU<br />
    37. IMVU<br />
    38. New plan<br /><ul><li>Shipped in six months – a horribly buggy beta product
    39. Charged from day one
    40. Shipped multiple times a day (by 2008, on average 50 times a day)
    41. No PR, no launch
    42. Results 2009: profitable, revenue > $20MM</li></li></ul><li>Making Progress<br /><ul><li>In a lean transformation, question #1 is – which activities are value-creating and which are waste?
    43. In traditional business, value is created by delivering products or services to customers
    44. In a startup, the product and customer are unknowns. We need a new definition of value for startups: validated learning about customers</li></li></ul><li>Traditional Product DevelopmentUnit of Progress: Advance to Next Stage<br />Waterfall<br />Requirements<br />Specifications<br />Design<br />Problem: known<br />Solution:known<br />Implementation<br />Verification<br />Maintenance<br />
    45. Agile Product DevelopmentUnit of Progress: A line of Working Code<br />“Product Owner” or in-house customer<br />Problem: known<br />Solution:unknown<br />
    46. Lean StartupUnit of Progress: Validated Learning About Customers ($$$)<br />Customer Development<br />Hypotheses, Experiments,<br />Insights<br />Problem:unknown<br />Data, Feedback,<br />Insights<br />Solution:unknown<br />Agile Development<br />
    47. Minimize TOTAL time through the loop<br />
    48. There’s much more…<br />Build Faster<br />Unit Tests<br />Usability Tests<br />Continuous Integration<br />Incremental Deployment<br />Free & Open-Source<br /> Components<br />Cloud Computing<br />Cluster Immune System<br />Just-in-time Scalability<br />Refactoring<br />Developer Sandbox<br />Minimum Viable Product<br />Learn Faster<br />Split Tests<br />Customer Interviews<br />Customer Development<br />Five Whys Root Cause<br />Analysis<br />Customer Advisory Board<br />Falsifiable Hypotheses<br />Product Owner<br />Accountability<br />Customer Archetypes<br />Cross-functional Teams<br />Semi-autonomous Teams<br />Smoke Tests<br />Measure Faster<br />Funnel Analysis<br />Cohort Analysis<br />Net Promoter Score<br />Search Engine Marketing<br />Real-Time Alerting<br />Predictive Monitoring<br />Measure Faster<br />Split Tests<br />Clear Product Owner<br />Continuous Deployment<br />Usability Tests<br />Real-time Monitoring<br />Customer Liaison<br />
    49. Myth #1<br />Myth<br />Lean means cheap. Lean startups try to spend as little money as possible.<br />Truth The Lean Startup method is not about cost, it is about speed. <br />
    50. Myth #2<br />Myth<br />The Lean Startup is only for Web 2.0/internet/consumer software companies.<br />Truth The Lean Startup applies to all companies that face uncertainty about what customers will want. <br />
    51. Myth #3<br />Myth<br />Lean Startups are small bootstrapped startups.<br />Truth Lean Startups are ambitious and are able<br /> to deploy large amounts of capital. <br />
    52. Myth #4<br />Myth<br />Lean Startups replace vision with dataor customer feedback.<br />Truth Lean Startups are driven by a compelling vision, and are rigorous about testing each element of this vision<br />
    53. Thanks!<br /><ul><li>Startup Lessons Learned Blog
    54. http://StartupLessonsLearned.com
    55. In print: http://bit.ly/SLLbookbeta
    56. Getting in touch (#leanstartup)
    57. http://twitter.com/ericries
    58. eric@theleanstartup.com
    59. Additional resources
    60. Lean Startup Wiki http://leanstartup.pbworks.com
    61. Lean Startup Circle http://leanstartupcircle.com</li></li></ul><li>How to build a Lean Startup<br /><ul><li>Let’s talk about some specifics.
    62. Minimum viable product
    63. Five why’s
    64. Rapid split-tests
    65. Continuous Deployment</li></li></ul><li>Minimum Viable Product<br />Learn Faster<br />Customer Development<br />Five Whys<br />Build Faster<br />Continuous Deployment<br />Small Batches<br />Minimum Viable Product<br />Refactoring<br />Measure Faster<br />Split Testing<br />Actionable Metrics<br />Net Promoter Score<br />SEM <br />
    66. Why do we build products?<br /><ul><li>Delight customers
    67. Get lots of them signed up
    68. Make a lot of money
    69. Realize a big vision; change the world
    70. Learn to predict the future</li></li></ul><li>Possible Approaches<br /><ul><li>“Maximize chances of success”
    71. build a great product with enough features that increase the odds that customers will want it
    72. Problem: no feedback until the end, might be too late to adjust
    73. “Release early, release often”
    74. Get as much feedback as possible, as soon as possible
    75. Problem: run around in circles, chasing what customers think they want</li></li></ul><li>Minimum Viable Product<br /><ul><li>The minimum set of features needed to learn from earlyvangelists – visionary early adopters
    76. Avoid building products that nobody wants
    77. Maximize the learning per dollar spent
    78. Probably much more minimum than you think!</li></li></ul><li>Minimum Viable Product<br /><ul><li>Visionary customers can “fill in the gaps” on missing features, if the product solves a real problem
    79. Allows us to achieve a big vision in small increments without going in circles
    80. Requires a commitment to iteration
    81. MVP is only for BIG VISION products; unnecessary for minimal products.</li></li></ul><li>Techniques<br /><ul><li>Smoke testing with landing pages, AdWords
    82. SEM on five dollars a day
    83. In-product split testing
    84. Paper prototypes
    85. Customer discovery/validation
    86. Removing features (“cut and paste”)</li></li></ul><li>Fears<br /><ul><li>False negative: “customers would have liked the full product, but the MVP sucks, so we abandoned the vision”
    87. Visionary complex: “but customers don’t know what they want!”
    88. Too busy to learn: “it would be faster to just build it right, all this measuring distracts from delighting customers”</li></li></ul><li>Five Whys<br />Learn Faster<br />Five Whys Root<br />Cause Analysis<br />Code Faster<br />Continuous Deployment<br />Measure Faster<br />Rapid Split Tests<br />
    89. Five Whys Root Cause Analysis<br /><ul><li>A technique for continuous improvement of company process.
    90. Ask “why” five times when something unexpected happens.
    91. Make proportional investments in prevention at all five levels of the hierarchy.
    92. Behind every supposed technical problem is usually a human problem. Fix the cause, not just the symptom.</li></li></ul><li>Rapid Split Tests<br />Learn Faster<br />Five Whys Root<br />Cause Analysis<br />Code Faster<br />Continuous Deployment<br />Measure Faster<br />Rapid Split Tests<br />
    93. Split-testing all the time<br /><ul><li>A/B testing is key to validating your hypotheses
    94. Has to be simple enough for everyone to use and understand it
    95. Make creating a split-test no more than one line of code:</li></ul>if( setup_experiment(...) == "control" ) {<br /> // do it the old way<br />} else {<br /> // do it the new way<br />}<br />
    96. The AAA’s of Metrics<br /><ul><li>Actionable
    97. Accessible
    98. Auditable</li></li></ul><li>Measure the Macro<br /><ul><li>Always look at cohort-based metrics over time
    99. Split-test the small, measure the large</li></li></ul><li>Continuous Deployment<br />Learn Faster<br />Customer Development<br />Five Whys<br />Build Faster<br />Continuous Deployment<br />Small Batches<br />Minimum Viable Product<br />Refactoring<br />Measure Faster<br />Split Testing<br />Actionable Metrics<br />Net Promoter Score<br />SEM <br />
    100. Continuous Deployment<br /><ul><li>Deploy new software quickly
    101. At IMVU time from check-in to production = 20 minutes
    102. Tell a good change from a bad change (quickly)
    103. Revert a bad change quickly
    104. And “shut down the line”
    105. Work in small batches
    106. At IMVU, a large batch = 3 days worth of work
    107. Break large projects down into small batches</li></li></ul><li>Cluster Immune SystemWhat it looks like to ship one piece of code to production:<br /><ul><li>Run tests locally (SimpleTest, Selenium)
    108. Everyone has a complete sandbox
    109. Continuous Integration Server (BuildBot)
    110. All tests must pass or “shut down the line”
    111. Automatic feedback if the team is going too fast
    112. Incremental deploy
    113. Monitor cluster and business metrics in real-time
    114. Reject changes that move metrics out-of-bounds
    115. Alerting & Predictive monitoring (Nagios)
    116. Monitor all metrics that stakeholders care about
    117. If any metric goes out-of-bounds, wake somebody up
    118. Use historical trends to predict acceptable bounds
    119. When customers see a failure
    120. Fix the problem for customers
    121. Improve your defenses at each level</li></li></ul><li>Thanks!<br /><ul><li>Startup Lessons Learned Blog
    122. http://StartupLessonsLearned.com
    123. In print: http://bit.ly/SLLbookbeta
    124. Getting in touch (#leanstartup)
    125. http://twitter.com/ericries
    126. eric@theleanstartup.com
    127. Additional resources
    128. Lean Startup Wiki http://leanstartup.pbworks.com
    129. Lean Startup Circle http://leanstartupcircle.com</li>

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