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The Lean Startup - Visual Summary

  1. 1. EFFECTIVE & ENGAGING BOOK SUMMARIES VISUAL BOOK SUMMARY
  2. 2. 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.
  3. 3. 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.
  4. 4. 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.
  5. 5. 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.
  6. 6. 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.
  7. 7. 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
  8. 8. 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.
  9. 9. 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
  10. 10. 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
  11. 11. 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.
  12. 12. 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.
  13. 13. 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.
  14. 14. 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.
  15. 15. 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)
  16. 16. 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.
  17. 17. 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.
  18. 18. 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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