EFFECTIVE & ENGAGING BOOK SUMMARIES
VISUAL BOOK SUMMARY

Each and every
day, new
entrepreneurs
around the
world are
starting their
own
enterprises.
Most of whom
are armed with
an idea for an
amazing
service or
product (so
they think), but
not armed with
the tools they
need to build
an enduring
business.

Each and every
day, new
What awaits you in these
That’s where author Eric Ries comes
entrepreneurs literally the keys to a
pages is
in. He has seen numerous
around the system that – almost
businesses start and fail – most
world are
without fail – will lead you
notably, his own. However, he
starting their a successful business.
to
has also learned the lessons
ownSo if you are willing to put
from these false starts and has
enterprises. you think you know
what
gone on to great success
Most of whom
aside, you are about to
building a multi-million
are armed with way almost every
learn the
dollar enterprise, and
an idea for an
new business in the world will
coaching others to do the
amazing
be run in less than 10 years.
same.
service or
According to Ries, there are 5
product (so
principles that are critical
they think), but
to the success of a
not armed with
startup, and what
the tools they
makes a startup
need to build
a “lean” one.
an enduring
business.

What does it mean to run a Lean Startup?
First is the idea that entrepreneurs are everywhere. They are the person who just lost their job
in the recession and have struck out on their own. They are the person who has started and
sold his first 5 businesses, and is on to his sixth. These are the people we traditionally read
about in magazines and books – the self-made success stories. However, entrepreneurs are also
found in global corporations, working on the next big idea.
The second idea is that entrepreneurship is management. The goal of an entrepreneur is to
build a sustainable enterprise, and so there needs to be a new (and predictable) method
of doing so – especially in the middle of the cool digital revolution we find ourselves in.

ENT
GEM
M ANA
OD
METH
ABILITY
SUSTAIN
ABILITY
PREDICT
The third idea is that startups exist – not to make money or even to serve customers – but to
learn how to build a sustainable business. This is the idea that is the most critical to Ries’ entire
premise, and it’s a revolutionary one. Most entrepreneurs start a business with a new idea
thinking (most of the time, incorrectly) that they have an idea that will be a huge success. Why
else start a business and take all that risk? They then plod along, hustling the hell out of that
idea until it either succeeds or fails – usually in spectacular fashion.

LAUNCH
T
AP
LE
AD
AR
N
VALIDATED
LEARNING
RN
AD
EA
A
L
PT
LAUNCH
However, Ries argues, if the organization can learn as quickly as possible what the
marketplace values enough to pay for, they will be able to adapt their business
and grow it into a sustainable enterprise. He calls this validated learning.

Fourth is the method in which companies should approach
this task – build, measure and learn. The idea is to
get back to “build” as quickly as possible after
learning from the marketplace. The quicker you
can get through this cycle, the faster you’ll
learn what the market values, and the better MEASURE
chance you have of surviving and building a
sustainable business.
LEARN
BUILD

Lastly is the idea of innovation accounting. Although it sounds sexy, this is
actually the boring stuff that will make a company successful. It’s the
measurements you take, the milestones you set, and how you prioritize
your work.

What these 5 principles add up to is a new way of thinking
about management. Because if you value innovation
Biggus Bloatus Corpus
as a company – whether you are
a startup or a multi-billion
behemoth – this is the way
you will accomplish it.
Ventura Capitalista
Startupitus
Optimus

The first thing you need to do is to build a
quality product or service for the
marketplace. And if you don’t know who
the customer is, you don’t know what
quality is. So the first step is to create
something called a customer archetype.
The purpose of the archetype is to
humanize the target market for your
business. It will guide all of the decisions
you make about product development and
allocation of resources moving forward. So,
before you make anything, make sure you
know exactly who you are making it for.
SUPERbot
BUILD A PRODUCT

Second, you are going to need to take a
leap of faith at some point. No matter
how much research you’ve done, and
how certain you are of your chances of
success, your new venture is going to
have to make some assumptions on
some very important things. The key is
to know just what part of your plan is a
leap of faith. A simple tool for this would
be the analogue/antilog. There’s no
problem basing the strategy for your
new business based on the success of
some other company or industry, as long
as you also know what you don’t know.

be the analogue/antilog. There’s no
problem basing the strategy for your
new business based on the success of
some other company or industry, as long
as you also know what you don’t know.
For instance, when they were building
the iPod, Apple knew that people would
listen to music in public places wearing
earphones based on the success of the
Sony Walkman. This answered a critical
question for Apple. However, what they
didn’t know was whether or not people
would pay for music. The anitlog to this
is that Napster had just proven that
people – in record numbers – would stop
paying for music when offered a free
(albeit illegal) alternative. So they built
their now insanely successful business on
a leap of faith, but they knew exactly
where the risk lied.

The next step on this process
is to build a rapid prototype.
Most people have heard of
Zappos by now – the billion
dollar a year online shopping
portal. It had started out as a
rapid prototype by founder
Nick Swinmurn. In fact, his
original idea was to build a
brand new retail experience –
which he could have pursued
at great cost and risk.
Instead, he chose to run an
experiment. He wanted to
see if people would buy
shoes online. So, he went
around to shoe stores in his
area and asked if he could
take pictures of the shoes the
stores had in stock. He would
take those pictures and put
them up on a website, and if
people bought the shoes
from him, he would return to
the store and buy them at full
price. There, for next to
nothing except for time and
energy, Nick had figured out
that people would indeed
buy shoes online.

There are a few important lessons to glean here. The first is to always build what the startup
community now calls a “minimum viable product” (MVP). It’s the smallest product or service
that you can create and start generating learning from. Nick didn’t need anything more than a
simple website to start Zappos, and it’s likely that you need a heck of a lot less than you think
you do to launch your new product. Second, you should be attempting to attract the early
adopter market with this MVP. Because these early adopters know that they will almost always
get a product with “bugs” in it, you don’t need to worry about having the best possible
product to launch. In fact, any effort beyond what you need for an MVP is considered waste –
because it wasn’t driven in a response to the marketplace.

WHERE ARE WE?
The startup’s job is to figure out where they are right now, confront the cold hard facts, and
then design experiments to move the numbers closer to what they laid out in the business
plan. These come together in what Ries calls the 3 Learning Milestones:
(1) establish the baseline (2) tuning the engine (3) pivot (or persevere)

In establishing the baseline, you need to make sure you are setting the right metrics. One thing to be wary
of are “vanity metrics”. In the web startup world these metrics might include “website visitors”, and in
some cases even “registered users”. In almost every case, these metrics will lead you to focus on actions
that, at best, limit your chances for success. In order to prevent this, you should sure your metrics meet
the “3 A’s test”, where your metrics are actionable, accessible and audit-able.

Actionable: demonstrate a clear cause and effect
relationship so that you can take definitive action in
response to it.
Accessible: be easily understood and available
widely to people in the company.
Auditable: be able to go back to the source of
data to prove that the metrics were telling the true
(and entire) story.

One example of these kinds of metrics would be the ones
used by IMVU (Ries’ company) in their startup phase. The
company sold a 3D avatar/social networking service that I
would describe as a chat service where you can dress up
your character. Using $5 a day in pay per click advertising,
they were able to get 100 visits to their website to test their
product. They considered each day’s visitors to be one
cohort, and tested each cohort on the following data points:
• Registration – how many people signed up
• Activation – how many people then went on to
actually login to their account
• Retention – how many people had 1 chat, how many
people had 5 chats, and how many people became
paying customers.
A good way to do this for your own business is to pick
metrics in the following buckets: registration, activation,
retention and referral.

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