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The Official Workshop (Iteration Zero)
The Leaders’ Guide 

by Eric Ries
Janice Fraser
Director, Innovation Practice
November 2015
Keep in touch!
@clevergirl
3 Pivotal points in time…and a fourth
Let’s take a moment to remember 1987.
“To meet the demands of
the fast-changing
competitive scene, we
must simply learn to love
change as much as we
have hated it in the past.”
–Tom Peters, 1987
Now let’s take a moment to consider today.
Software is disrupting entire industries
$6B Valuation
Financial Services
$50B Valuation
Transportation
$3.2B Acquisition by Google
Home Automation
$25B Valuation
Travel & Hospitality
$42B Valuation
Entertainment
S&P 500 churn since 2002
ADDED TO the index LEFT the index
The greatest risk for any
business today is the pace
of change.
For 100 years, the business
world has emphasized
planning and control as a
means of ensuring predictable
outcomes.
When change is your greatest threat,
plans and predictions are (literally)
unbelievable.
Tom Peters saw the problem
coming in 1987, but nobody
really figured out what to do
about it, until now.
Lean Startup is a management approach
that mitigates the risk of change, turning
it into an asset that can be leveraged, by
supporting entrepreneurship throughout
any company.
Lean Startup is not religion.
These are not rigid rules set in stone.
I don’t care if you use the jargon.
It’s the thought behind your action that counts.
How do you retool for
entrepreneurship when your
planning and accountability
processes look like this?
Analyze
Plan
Stakeholders
Feedback
Revise
Budget (staged-gate system)
Approve
Execute
Measure
Level 1: Project processes
Start prioritizing assumptions, running experiments, measuring outcomes,
and making learnings-based decisions.
Level 2: Broad company culture
Share the experience and value with leadership. Share the know-how with
teams. Emphasize experiential learning and corporate storytelling.
Level 3: Deep operating systems
Yes, You Can. Retool incentive, budget allocations, and other management
mechanisms.
To change your company, target three levels:
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
Session 1: Culture
November 2015
Pair Up
November 2015
Find the Acute Problem
(Molecule)
November 2015
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
Vision

Your vision is your destination,
and provides a navigational
beacon for your internal
entrepreneurs.
Work to open up any process,
assumption, or person that
gets in the way.
LEADER’S GUIDE
Gaining Focus
Why is your company here?
What are you trying to accomplish?
How might you measure progress?
Removing Barriers To Your Vision
Which company beliefs and values support
entrepreneurship?
Which beliefs and values hinder entrepreneurship?
Culture > Focus on What Matters > Vision
Leadership

Getting leaders behind the
change is essential. Look for
understanding, belief, advocacy,
and decision-making.
Storytelling is a powerful tool in
creating support for the Lean
Startup mindset.
LEADER’S GUIDE
Storytelling
• How do we talk about success and failure?
• What stories exemplify the change?
• What are the key messages you want to
convey?
Advocacy and Decision-Making
• How can you help fellow leaders understand how
their actions support innovation?
• Which employees have proven themselves to be
effective change agents?
• How are they rewarded for entrepreneurial
behavior?
Culture > Focus on What Matters > Leadership
Sharpen Your Vision
(Vision Pyramid & 5 Whys)
November 2015
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
LEADER’S GUIDE
Cross-Functional
What are the barriers to cross-functional
teaming?
Which other leaders need to allocate their
workers to this team?
Who manages the cross-functional team?
Fully Dedicated
What are the barriers to allocating the core
team 100% to the project?
Collaborative
What does collaboration mean?
How can you share ideation and decision-
making?
Team Structure

Entrepreneurial teams are cross-
functional, collaborative, and fully
dedicated.
Recognize the systems that are
creating drag on your startup
teams and begin devising
strategies to change them.
Culture > Focus on What Matters > Team Structure
Team Mapping Activity
November 2015
Leader-Entrepreneur
Contract
November 2015
Session 2: 

Project Process
November 2015
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
LEADER’S GUIDE
Leap of Faith Assumptions
What beliefs do you hold that must be true in
order for the project to be successful?
Which LOFAs represent the most risk?
Learning Metric
What metric would convince you that your
assumption is true?
MVP
What is the smallest thing that you can build or
do to get that learning metric?
Pivot or Persevere Meeting
When will you make a decision based on
experiment results?
Experimentation

Instead of making big, thoroughly
vetted plans, entrepreneurial
teams quickly sketch out a
framework and then experiment
to validate which parts of their
framework are correct or
incorrect.
The experimentation process is
straightforward in theory, but
nuanced in practice.
Project Process > Lean Startup Experimentation
It’s a blow to our egos when we
discover that a lot of our beliefs
about the future are wrong.
But when we get over that, it’s quite
liberating. We realize that we don’t
need to know everything.
We can put our ideas to the test and
change course based on what we
learn.
—Eric Ries, The Leader’s Guide
• Teams shift questioning from “can this be done” to “should
this be done?”
• Seeing predictions falsified inspires exploration and fosters
informed humility.
• Seeing customers actions creates confidence.
• Confidence creates a drive for definitive action.
• Experimentation discourages vagueness and ambiguity.
Impact of using Experiments rather than Plans
Assumptions & Experiments
Activity
November 2015
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
LEADER’S GUIDE
No Surveys or Focus Groups
The most likely outcome of these techniques in
this context is unreliable results. What other
options are there?
Customer Actions
What could you ask the customer to DO that
would be a gesture of commitment to prove your
assumption?
Per Customer Learning Metrics
Learning metrics are per customer. Any metric
expressed as a per customer can be looked at
the same way no matter the business size.
Better Experiments

To get better results, you will
need to improve your experiment
approach. It is common to find
that each step causes you to
refine the prior step.
Project Process > Better Results
“In this group, 5 of 7 hospitals
built a room.”
“This quarter we had an average
of 3.5 Sessions/user/week”
1. Actionable

Metrics must demonstrate a clear cause and effect.
2. Accessible

Make reports simple and give everyone on the team access to them.
3. Auditable 

Metrics must be based on credible data.
The 3 As of Learning Metrics
Metrics to avoid: ROI, Margin, Market Share, and gross numbers of any kind.
Behavioral Experiment
Activity
November 2015
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
LEADER’S GUIDE
Sequence Your Learning Priorities
Which learning objectives (LOFAs) are most
critical to the success of your business?
Smallification
What can you NOT do and get learning sooner?
Reducing Complexity
What are the components of your effort that
cause complexity (eg, geography, scale,
comprehensiveness)?
Can you isolate and eliminate most of them in
order to gain urgent learnings sooner?
.
Being Efficient

Moving quickly means learning
quickly. You will not be able to
learn everything at once.
Therefore, find ways to simplify
and reduce the experiment and
MVP.
Project Process > Being Efficient
“Smallification”
November 2015
Session 3: 

Deep Systems
November 2015
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
1. At the Start: Set a baseline 

Create a simple dashboard of 3-5 metrics the team agrees are vital to the success of your
project. Figure out where you are. Get some practice learning under your belt and make the
model more complicated over time. What you measure here is necessary but not sufficient.
2. Upgrade to a dashboard of inputs to an eventual ROI case

Build a dashboard that represents a complete set of “input” metrics that make up your business
case.
• Conversion rates
• selling price
• average revenue per customer
• A first stab at margin calculation
• Cost to acquire a customer
3. Translate our learning into dollars by running a complete business case after your
learning metrics have changed. This is where you run your ROI.
3 Levels of Innovation Accounting
Starter Dashboard
LOFA
We can fund loans (value)
We can close more loans over time (growth)
Lenders will get paid back (value)
Avg. loan offers/request/week
Loans closed/week
% late payments/week
Learning Metric
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
1. Go Slow 

Being “buttoned up at every step”
2. Leverage Collective Institutional Wisdom

Make decisions about future performance
based on conclusions drawn from past
experience
3. Measure Project Outcomes

Reward on-plan delivery
4. Staged Gate Systems

Accomplishing predefined milestones
How Risk Is Managed Currently
Analyze
Plan
Stakeholders
Feedback
Revise
Budget
Approve
Execute
Measure
Technical or Compliance Risk
For example, a product will fail if you don't do your
technical due diligence.
IMPACT: A mistake can put people's lives in danger.
ACTION: Avoid at all costs.
Rethinking Quality and Risk
Strategy Risk
For example, customers won't like our offering or
we'll be embarrassed by showing them a prototype.
IMPACT: Insignificant.
ACTION: We change strategy
When looking for places to speed up learning,
“Let’s look for things where we're not going to
short up someone's pacemaker.”
—Cindy Alvarez
Session 1: Culture
TODAY’S PROGRAM
• Introductory Talk & Setup
• How to Refocus on What Matters
• How to Set Up Entrepreneurial Teams
(Each bullet is a 30min hands-on segment)
• Lean Startup Experimentation Basics
• How to Get Better Results
• How to Be Efficient
• How to Monitor Progress
• How to Manage Risk
• Retro
Session 2: Project Process
Session 3: Deep Systems
Thank you!
@clevergirl

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2015 Lean Startup Conference - Leaders' Guide Workshop

  • 1. The Official Workshop (Iteration Zero) The Leaders’ Guide 
 by Eric Ries Janice Fraser Director, Innovation Practice November 2015
  • 3. 3 Pivotal points in time…and a fourth
  • 4. Let’s take a moment to remember 1987.
  • 5. “To meet the demands of the fast-changing competitive scene, we must simply learn to love change as much as we have hated it in the past.” –Tom Peters, 1987
  • 6.
  • 7. Now let’s take a moment to consider today.
  • 8. Software is disrupting entire industries $6B Valuation Financial Services $50B Valuation Transportation $3.2B Acquisition by Google Home Automation $25B Valuation Travel & Hospitality $42B Valuation Entertainment
  • 9. S&P 500 churn since 2002 ADDED TO the index LEFT the index
  • 10. The greatest risk for any business today is the pace of change.
  • 11. For 100 years, the business world has emphasized planning and control as a means of ensuring predictable outcomes.
  • 12. When change is your greatest threat, plans and predictions are (literally) unbelievable.
  • 13. Tom Peters saw the problem coming in 1987, but nobody really figured out what to do about it, until now.
  • 14. Lean Startup is a management approach that mitigates the risk of change, turning it into an asset that can be leveraged, by supporting entrepreneurship throughout any company.
  • 15. Lean Startup is not religion. These are not rigid rules set in stone. I don’t care if you use the jargon. It’s the thought behind your action that counts.
  • 16. How do you retool for entrepreneurship when your planning and accountability processes look like this? Analyze Plan Stakeholders Feedback Revise Budget (staged-gate system) Approve Execute Measure
  • 17. Level 1: Project processes Start prioritizing assumptions, running experiments, measuring outcomes, and making learnings-based decisions. Level 2: Broad company culture Share the experience and value with leadership. Share the know-how with teams. Emphasize experiential learning and corporate storytelling. Level 3: Deep operating systems Yes, You Can. Retool incentive, budget allocations, and other management mechanisms. To change your company, target three levels:
  • 18. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems
  • 19. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems
  • 22. Find the Acute Problem (Molecule) November 2015
  • 23. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems
  • 24. Vision
 Your vision is your destination, and provides a navigational beacon for your internal entrepreneurs. Work to open up any process, assumption, or person that gets in the way. LEADER’S GUIDE Gaining Focus Why is your company here? What are you trying to accomplish? How might you measure progress? Removing Barriers To Your Vision Which company beliefs and values support entrepreneurship? Which beliefs and values hinder entrepreneurship? Culture > Focus on What Matters > Vision
  • 25. Leadership
 Getting leaders behind the change is essential. Look for understanding, belief, advocacy, and decision-making. Storytelling is a powerful tool in creating support for the Lean Startup mindset. LEADER’S GUIDE Storytelling • How do we talk about success and failure? • What stories exemplify the change? • What are the key messages you want to convey? Advocacy and Decision-Making • How can you help fellow leaders understand how their actions support innovation? • Which employees have proven themselves to be effective change agents? • How are they rewarded for entrepreneurial behavior? Culture > Focus on What Matters > Leadership
  • 26. Sharpen Your Vision (Vision Pyramid & 5 Whys) November 2015
  • 27. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems
  • 28. LEADER’S GUIDE Cross-Functional What are the barriers to cross-functional teaming? Which other leaders need to allocate their workers to this team? Who manages the cross-functional team? Fully Dedicated What are the barriers to allocating the core team 100% to the project? Collaborative What does collaboration mean? How can you share ideation and decision- making? Team Structure
 Entrepreneurial teams are cross- functional, collaborative, and fully dedicated. Recognize the systems that are creating drag on your startup teams and begin devising strategies to change them. Culture > Focus on What Matters > Team Structure
  • 31. Session 2: 
 Project Process November 2015
  • 32. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems
  • 33. LEADER’S GUIDE Leap of Faith Assumptions What beliefs do you hold that must be true in order for the project to be successful? Which LOFAs represent the most risk? Learning Metric What metric would convince you that your assumption is true? MVP What is the smallest thing that you can build or do to get that learning metric? Pivot or Persevere Meeting When will you make a decision based on experiment results? Experimentation
 Instead of making big, thoroughly vetted plans, entrepreneurial teams quickly sketch out a framework and then experiment to validate which parts of their framework are correct or incorrect. The experimentation process is straightforward in theory, but nuanced in practice. Project Process > Lean Startup Experimentation
  • 34. It’s a blow to our egos when we discover that a lot of our beliefs about the future are wrong. But when we get over that, it’s quite liberating. We realize that we don’t need to know everything. We can put our ideas to the test and change course based on what we learn. —Eric Ries, The Leader’s Guide
  • 35. • Teams shift questioning from “can this be done” to “should this be done?” • Seeing predictions falsified inspires exploration and fosters informed humility. • Seeing customers actions creates confidence. • Confidence creates a drive for definitive action. • Experimentation discourages vagueness and ambiguity. Impact of using Experiments rather than Plans
  • 37. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems
  • 38. LEADER’S GUIDE No Surveys or Focus Groups The most likely outcome of these techniques in this context is unreliable results. What other options are there? Customer Actions What could you ask the customer to DO that would be a gesture of commitment to prove your assumption? Per Customer Learning Metrics Learning metrics are per customer. Any metric expressed as a per customer can be looked at the same way no matter the business size. Better Experiments
 To get better results, you will need to improve your experiment approach. It is common to find that each step causes you to refine the prior step. Project Process > Better Results “In this group, 5 of 7 hospitals built a room.” “This quarter we had an average of 3.5 Sessions/user/week”
  • 39. 1. Actionable
 Metrics must demonstrate a clear cause and effect. 2. Accessible
 Make reports simple and give everyone on the team access to them. 3. Auditable 
 Metrics must be based on credible data. The 3 As of Learning Metrics Metrics to avoid: ROI, Margin, Market Share, and gross numbers of any kind.
  • 41. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems
  • 42. LEADER’S GUIDE Sequence Your Learning Priorities Which learning objectives (LOFAs) are most critical to the success of your business? Smallification What can you NOT do and get learning sooner? Reducing Complexity What are the components of your effort that cause complexity (eg, geography, scale, comprehensiveness)? Can you isolate and eliminate most of them in order to gain urgent learnings sooner? . Being Efficient
 Moving quickly means learning quickly. You will not be able to learn everything at once. Therefore, find ways to simplify and reduce the experiment and MVP. Project Process > Being Efficient
  • 44. Session 3: 
 Deep Systems November 2015
  • 45. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems
  • 46. 1. At the Start: Set a baseline 
 Create a simple dashboard of 3-5 metrics the team agrees are vital to the success of your project. Figure out where you are. Get some practice learning under your belt and make the model more complicated over time. What you measure here is necessary but not sufficient. 2. Upgrade to a dashboard of inputs to an eventual ROI case
 Build a dashboard that represents a complete set of “input” metrics that make up your business case. • Conversion rates • selling price • average revenue per customer • A first stab at margin calculation • Cost to acquire a customer 3. Translate our learning into dollars by running a complete business case after your learning metrics have changed. This is where you run your ROI. 3 Levels of Innovation Accounting
  • 47. Starter Dashboard LOFA We can fund loans (value) We can close more loans over time (growth) Lenders will get paid back (value) Avg. loan offers/request/week Loans closed/week % late payments/week Learning Metric
  • 48. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems
  • 49. 1. Go Slow 
 Being “buttoned up at every step” 2. Leverage Collective Institutional Wisdom
 Make decisions about future performance based on conclusions drawn from past experience 3. Measure Project Outcomes
 Reward on-plan delivery 4. Staged Gate Systems
 Accomplishing predefined milestones How Risk Is Managed Currently Analyze Plan Stakeholders Feedback Revise Budget Approve Execute Measure
  • 50. Technical or Compliance Risk For example, a product will fail if you don't do your technical due diligence. IMPACT: A mistake can put people's lives in danger. ACTION: Avoid at all costs. Rethinking Quality and Risk Strategy Risk For example, customers won't like our offering or we'll be embarrassed by showing them a prototype. IMPACT: Insignificant. ACTION: We change strategy When looking for places to speed up learning, “Let’s look for things where we're not going to short up someone's pacemaker.” —Cindy Alvarez
  • 51. Session 1: Culture TODAY’S PROGRAM • Introductory Talk & Setup • How to Refocus on What Matters • How to Set Up Entrepreneurial Teams (Each bullet is a 30min hands-on segment) • Lean Startup Experimentation Basics • How to Get Better Results • How to Be Efficient • How to Monitor Progress • How to Manage Risk • Retro Session 2: Project Process Session 3: Deep Systems