Eric Ries sllconf keynote: state of the lean startup movement

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Presentation by Eric Ries to kick off the 2011 Startup Lessons Learned conference #sllconf. Livestream here: http://www.justin.tv/startuplessonslearned

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  • I’m not leaving you, I’m pivoting to another man
  • Conference structure
  • 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.
  • I’m not leaving you, I’m pivoting to another man
  • Eric Ries sllconf keynote: state of the lean startup movement

    1. #sllconf<br />Welcome to the <br />Lean Startup Movement#leanstartup<br />Eric Ries (@ericries)<br />http://StartupLessonsLearned.com<br />
    2. Global<br />http://lean-startup.meetup.com/<br />
    3. Academic<br /><ul><li>Harvard Business School
    4. Minimum Viable Product Fundhttp://www.hbs.edu/news/releases/mvpwinners2011.html
    5. Launching Technology Ventureshttp://platformsandnetworks.blogspot.com/2011/01/launching-tech-ventures-part-i-course.html
    6. Stanford University
    7. Lean LaunchPadhttp://steveblank.com/category/lean-launchpad/
    8. BYU
    9. Lean Startup Research Projecthttp://nathanfurr.com/2010/09/15/the-lean-startup-research-project/</li></li></ul><li>http://bit.ly/FourSteps<br />http://bit.ly/Custdev<br />RunningLeanHQ.com<br />
    10. Coming September 13, 2011<br />http://lean.st or http://bit.ly/LeanStartupBook<br />
    11. Watch what happens behind the scenes & see every experiment we’ve run at: http://lean.st<br />
    12. Lean Startup Principles<br />Entrepreneurs are everywhere<br />Entrepreneurship is management<br />Validated Learning<br />Build – Measure - Learn<br />Innovation Accounting<br />
    13. Lean Startup Principles<br />Entrepreneurs are everywhere<br />
    14. 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.
    15. 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 />
    16. STOPWASTINGPEOPLE’STIME<br />
    17. Who to Blame<br /><ul><li>Father of scientific management</li></ul>Study work to find the best way<br />Management by exception<br />Standardize work into tasks<br />Compensate workers based on performance<br />“In the past, the man was first. In the future, the system will be first.” (1911)<br />Frederick Winslow Taylor<br />(1856 – 1915)<br />
    18. Lean Startup Principles<br />Entrepreneurs are everywhere<br />Entrepreneurship is management<br />
    19. Entrepreneurship is management<br /><ul><li>Our goal is to create an institution, not just a product
    20. 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
    21. Not just for “two guys in a garage”</li></li></ul><li>The Pivot<br />
    22. I’<br />
    23. The Pivot<br /><ul><li>What do successful startups have in common?
    24. They started out as digital cash for PDAs, but evolved into online payments for eBay.
    25. They started building BASIC interpreters, but evolved into the world's largest operating systems monopoly.
    26. They were shocked to discover their online games company was actually a photo-sharing site.
    27. 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 />
    28. Lean Startup Principles<br />Entrepreneurs are everywhere<br />Entrepreneurship is management<br />Validated Learning<br />
    29. Achieving Failure<br /><ul><li>If we’re building something nobody wants, what does it matter if we accomplish it:</li></ul>On time?<br />On budget?<br />With high quality?<br />With beautiful design?<br /><ul><li>Achieving Failure = successfully executing a bad plan </li></li></ul><li>The Lean Revolution<br />W. Edwards Deming<br />(1900 – 1993)<br />TaiichiOhno - 大野 耐<br />(1912 – 1990)<br />“The customer is the most important part of the production line.” -Deming<br />
    30. Lean Startup Principles<br />Entrepreneurs are everywhere<br />Entrepreneurship is management<br />Validated Learning<br />Build – Measure - Learn<br />
    31. Minimize TOTAL time through the loop<br />
    32. There’s much more…<br />Build Faster<br />Unit Tests<br />Usability Tests<br />Continuous Integration<br />Incremental Deployment<br />Free & Open-Source<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 Development<br />Five Whys<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 />Predictive Monitoring<br />Measure Faster<br />Split Tests<br />Continuous Deployment<br />Usability Tests<br />Real-time Monitoring & Alerting<br />Customer Liaison<br />
    33. STOPWASTINGPEOPLE’STIME<br />
    34. The Toyota Way<br />http://bit.ly/thetoyotaway<br />
    35. The Startup Way<br />
    36. Lean Startup Principles<br />Entrepreneurs are everywhere<br />Entrepreneurship is management<br />Validated Learning<br />Build – Measure - Learn<br />Innovation Accounting<br />
    37. Innovation AccountingThe Three Learning Milestones<br />Establish the baseline<br /><ul><li>Build a Minimum Viable Product (MVP)
    38. Measure how customers behave right now</li></ul>Tune the engine<br />- Experiment to see if we can improve metrics from the baseline towards the ideal <br />Pivot or persevere<br />- When experiments reach diminishing returns, it’s time to pivot. <br />
    39. Questions<br />How do we know when to pivot?<br />Vision or Strategy or Product?<br />What should we measure?<br />How do products grow?<br />Are we creating value?<br />What’s in the MVP?<br />Can we go faster?<br />
    40. Coming September 13, 2011<br />http://lean.st or http://bit.ly/LeanStartupBook<br />
    41. Thanks!<br /><ul><li>Buy the book @ http://lean.st
    42. Startup Lessons Learned Blog
    43. http://StartupLessonsLearned.com
    44. Getting in touch (#leanstartup)
    45. http://twitter.com/ericries
    46. eric@theleanstartup.com
    47. Additional resources
    48. NEW: http://theleanstartup.com
    49. Lean Startup Wiki: http://leanstartup.pbworks.com</li></li></ul><li>
    50. 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 />
    51. 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 />
    52. 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 />
    53. 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 />
    54. Lean Startup Principles<br />Entrepreneurs are everywhere<br />Entrepreneurship is management<br />Validated Learning<br />Build – Measure - Learn<br />Innovation Accounting<br />
    55. Minimum Viable Product<br /><ul><li>Visionary customers can “fill in the gaps” on missing features, if the product solves a real problem
    56. Allows us to achieve a big vision in small increments without going in circles
    57. Requires a commitment to iteration
    58. MVP is only for BIG VISION products; unnecessary for minimal products.</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 />
    59. Continuous Deployment Principles<br />Have every problem once<br />Stop the line when anything fails<br />Fast response over prevention<br />
    60. Continuous Deployment<br /><ul><li>Deploy new software quickly
    61. At IMVU time from check-in to production = 20 minutes
    62. Tell a good change from a bad change (quickly)
    63. Revert a bad change quickly
    64. And “shut down the line”
    65. Work in small batches
    66. At IMVU, a large batch = 3 days worth of work
    67. 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)
    68. Everyone has a complete sandbox
    69. Continuous Integration Server (BuildBot)
    70. All tests must pass or “shut down the line”
    71. Automatic feedback if the team is going too fast
    72. Incremental deploy
    73. Monitor cluster and business metrics in real-time
    74. Reject changes that move metrics out-of-bounds
    75. Alerting & Predictive monitoring (Nagios)
    76. Monitor all metrics that stakeholders care about
    77. If any metric goes out-of-bounds, wake somebody up
    78. Use historical trends to predict acceptable bounds
    79. When customers see a failure
    80. Fix the problem for customers
    81. Improve your defenses at each level</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 />
    82. Why do we build products?<br /><ul><li>Delight customers
    83. Get lots of them signed up
    84. Make a lot of money
    85. Realize a big vision; change the world
    86. Learn to predict the future</li></li></ul><li>Possible Approaches<br /><ul><li>“Maximize chances of success”
    87. build a great product with enough features that increase the odds that customers will want it
    88. Problem: no feedback until the end, might be too late to adjust
    89. “Release early, release often”
    90. Get as much feedback as possible, as soon as possible
    91. 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
    92. Avoid building products that nobody wants
    93. Maximize the learning per dollar spent
    94. 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
    95. Allows us to achieve a big vision in small increments without going in circles
    96. Requires a commitment to iteration
    97. 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
    98. SEM on five dollars a day
    99. In-product split testing
    100. Paper prototypes
    101. Customer discovery/validation
    102. 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”
    103. Visionary complex: “but customers don’t know what they want!”
    104. 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 />
    105. Five Whys Root Cause Analysis<br /><ul><li>A technique for continuous improvement of company process.
    106. Ask “why” five times when something unexpected happens.
    107. Make proportional investments in prevention at all five levels of the hierarchy.
    108. 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 />
    109. Split-testing all the time<br /><ul><li>A/B testing is key to validating your hypotheses
    110. Has to be simple enough for everyone to use and understand it
    111. 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 />
    112. The AAA’s of Metrics<br /><ul><li>Actionable
    113. Accessible
    114. Auditable</li></li></ul><li>Measure the Macro<br /><ul><li>Always look at cohort-based metrics over time
    115. Split-test the small, measure the large</li></li></ul><li>Lean Startup Principles<br />Entrepreneurs are everywhere<br />Entrepreneurship is management<br />Validated Learning<br />Innovation Accounting<br />
    116. Minimum Viable Product<br /><ul><li>The minimum set of features needed to learn from earlyvangelists – visionary early adopters
    117. Avoid building products that nobody wants
    118. Maximize the learning per dollar spent
    119. 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
    120. Allows us to achieve a big vision in small increments without going in circles
    121. Requires a commitment to iteration
    122. MVP is only for BIG VISION products; unnecessary for minimal products.</li></li></ul><li>Split-testing all the time<br /><ul><li>A/B testing is key to validating your hypotheses
    123. Has to be simple enough for everyone to use and understand it
    124. 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 />
    125. The AAA’s of Metrics<br /><ul><li>Actionable
    126. Accessible
    127. Auditable</li></li></ul><li>Measure the Macro<br /><ul><li>Always look at cohort-based metrics over time
    128. Split-test the small, measure the large</li></li></ul><li>I’<br />

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