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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.
his
                                             pany    – used t
                           earn   ing com              lit
             an  online l             ts, u sing “sp
Grokit –                   th sprin                    ts) to
         l in on  e-mon            red to   A/B tes            s the w
                                                                          ere
mode                        refer                      ange
               m  etimes                   o f the ch                  et
te sts” (so              ffect  iveness            n, pro   ducts g
   etermi     ne the e           ct. Qu ite ofte            heard f
                                                                       rom
 d                       rodu                        t he
              to the p             CEO    says tha            , or a
 making                hen the                     ature X
                 d” w                       ke fe                     the
  “ improve                  ey   didn’t li             improve
                       at th                       can                  have
  so  me    body th               ys t hat they              hanges
                            r sa                      se c
                 enginee                   ften the           and mo
                                                                         st
   p roduct                 g Y.   Most o             t all,
               t by doin                eh aviour a                  is a
    produc              cust omer b              notic  ed. This
     no e   ffect on            fact   goes un               king
                  at  critical                 W  hen ma                  r of
     t imes th               unde    rstand.           e onl   y arbite
                   oint to                  duct, th                       . And
      c ritical p            o yo   ur pro               the    metrics
              ove  ments t              ucc   essful is             ent to y
                                                                               our
      impr              not it w
                                   as s                       vem
                    or                           a n impro                  ent
        w hether             mple    menting            at im   provem
           hen y  ou are i             be te  sting th             impact
                                                                              the
        w                    hould                        any –
                   t, you s                     hat – if
        produc                line to s
                                         ee w              ts.
                     a base               sine  ss resul
         against                your bu
                       as on
          c hange h
Didn’tyou
                                   hear?
                                 Moneyis
                                goingout
                                 ofstyle!




P.S. This is the only way a
company should be
implementing a product
development strategy. Unless,
of course, you somehow have
millions of dollars somewhere
that doesn’t need to be
accounted for to anybody,
and that you don’t need to
provide a positive return on.
PIVOT?

At some point, you will need to
make the decision about whether or
not your business strategy has a reasonable
chance of success. This is the time where you
will need to decide to either “pivot or persevere”.
Of course, if things are working well and you can see a path
the great success and profits, keep working on the idea you’ve
started with. Just make sure to make your decision based on the cold hard facts.




PERSEVERE?
A pivot is a fundamental change in business strategy. If
you conclude that your business strategy isn’t likely to
succeed, you can change your strategy. This is where
the mindset of an entrepreneur comes in. A true
entrepreneur is learning how to build a sustainable
enterprise, not make a single product idea a success.
There are many kinds of pivots you could make.
• Zoom-in: where a single feature of your product becomes the entire product.
• Zoom-out: where your product is too narrow to support a business, and you
 decide to make a broader product.

• Customer segment: where you realize that you are building a product that
 solves a need for a segment of customers that is different than the one you
 started with.

• Customer need: based on an intimate understanding of the customers
 developed during your iteration process, you realize that the need you were
 solving for isn’t very important. But you find new needs you can solve instead.

• Business architecture: this is where you go from a high margin, low volume
 solution to a low margin high volume solution.

• Technology: where you realize that you could solve the exact same problem
 using a completely different (and usually less expensive) technology.


There are other pivots you could make, and we’d encourage you to buy
the book to find out what they are. But most importantly, realize that
whatever pivot you make, it’s only the next hypothesis in your business
model, and that it should be rigorously tested just like everything else.
One company that took this idea and ran with it built a technology called Aardvark – an
alternative to other search engines where the answer needs some form of human
interaction. For instance, a question like “where’s the best place to get a drink after the
movies tonight” is not something that Google will give you a great answer for. However,
Aardvark will. But this wasn’t the first product launched by Max Ventilla and Damon
Horowitz. In fact, is was the sixth product they launched. In fact, it was their sixth product
in less than six months. Because they had used the Lean Startup model of the MVP along
with rapid prototyping and measuring the results, they found out very quickly that their
first 5 products were destined to become flops. Aardvark was the first and only product
that pointed to success, and not surprisingly, it’s the product that they are now growing
using the same principles we’ve discussed so far.
One company that took this idea and ran with it built a technology called
Aardvark – an alternative to other search engines where the answer needs
some form of human interaction. For instance, a question like “where’s the
best place to get a drink after the movies tonight” is not something that
Google will give you a great answer for. However, Aardvark will. But this
wasn’t the first product launched by Max Ventilla and Damon Horowitz. In
fact, is was the sixth product they launched. In fact, it was their sixth
product in less than six months. Because they had used the Lean Startup
model of the MVP along with rapid prototyping and measuring the
results, they found out very quickly that their first 5 products were
destined to become flops. Aardvark was the first and only product that
pointed to success, and not surprisingly, it’s the product that they are now
growing using the same principles we’ve discussed so far.
GROWTH
Now that you’ve found the product that
you know will help you create a
sustainable business, you need to have
sustainable growth. And the only way
you can build a sustainable business is
when your new customers come from old
customers. There are 3 ways to do this.
First, you can create a “sticky” growth
     engine. This depends on having a
     product or service that customers will
continue to pay for over time. In this model, if
you can bring in new customers at a faster
rate than your old customers leave the
service, your business will grow. The metric
that you’ll want to pay the most attention
to is your retention rate.



                Stickytron 100
Second,
                                              you could create
                                            a “viral” engine of
                                    growth. In this model, you
                                      depend on your current
                              customers to bring in your new
                                 customers. The most famous
                        example of this is Hotmail, which was
                      once a slow growth business struggling
                           to get traction. That was until they
                       decided to append each mail message
                You sent with an invitation for other people
   to sign up for the service, with a link directly to the sign
up page. The metric for this engine is something called the
    “viral loop”. If you can get each new customer to bring
     in 1 or more customers, the viral growth will continue.
LCV  CAC = :)
The last engine for growth is the “paid”
model. In this model, you take the profits
you’ve earned from your old customers,
and invest it into advertising (or any new
business development tactic) to attract
new customers. The metrics to pay
attention to in this case are the Lifetime
Customer Value (the profits you’ll make
off each customer over the lifetime of
doing business with you) and the
Customer Acquisition Cost. As long as
your LCV exceeds your new customer
acquisition costs, you will grow.
gines
                                                                                                  one o f these en
                                                                                    p ecialize in               eat to
                                                                 e band  width to s            engin e is too gr
                                                   on ly have th               any particular               f you star
                                                                                                                       t on
                                          panies                        ng in                       urse, i
                        that  most com              ine-tun e everythi             busin ess. Of co             wth
           s the point                   test and f             t is best for your           n alwa ys do “gro
Ries make             time it tak
                                  es to
                                                      ngine tha                   pe, you ca
                 the                            the e                       ’d ho
of g rowth, and            ke sure you pick               work  out as you
           foc us. So ma              it isn’ t going to            rd.
split your          es an d you find              e mov  ing forwa
 one of the engin              nad  ifferent on
            ivot a nd focus o
 engine” p
So there you have it – everything you
need to know in order to begin your
Lean Startup journey. If you are truly an
entrepreneur, you’ll take Ries’ advice and
get passionate about building a
sustainable enterprise rather than seeing
your new idea succeed at all costs. Good
luck, and I hope to see your next idea
and become one of your customers.
For more information about this book and our other
great book summaries, visit:




EFFECTIVE  ENGAGING BOOK SUMMARIES

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The Lean Startup - Visual Summary

  • 1. EFFECTIVE & ENGAGING BOOK SUMMARIES VISUAL BOOK SUMMARY
  • 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.
  • 19. his pany – used t earn ing com lit an online l ts, u sing “sp Grokit – th sprin ts) to l in on e-mon red to A/B tes s the w ere mode refer ange m etimes o f the ch et te sts” (so ffect iveness n, pro ducts g etermi ne the e ct. Qu ite ofte heard f rom d rodu t he to the p CEO says tha , or a making hen the ature X d” w ke fe the “ improve ey didn’t li improve at th can have so me body th ys t hat they hanges r sa se c enginee ften the and mo st p roduct g Y. Most o t all, t by doin eh aviour a is a produc cust omer b notic ed. This no e ffect on fact goes un king at critical W hen ma r of t imes th unde rstand. e onl y arbite oint to duct, th . And c ritical p o yo ur pro the metrics ove ments t ucc essful is ent to y our impr not it w as s vem or a n impro ent w hether mple menting at im provem hen y ou are i be te sting th impact the w hould any – t, you s hat – if produc line to s ee w ts. a base sine ss resul against your bu as on c hange h
  • 20. Didn’tyou hear? Moneyis goingout ofstyle! P.S. This is the only way a company should be implementing a product development strategy. Unless, of course, you somehow have millions of dollars somewhere that doesn’t need to be accounted for to anybody, and that you don’t need to provide a positive return on.
  • 21. PIVOT? At some point, you will need to make the decision about whether or not your business strategy has a reasonable chance of success. This is the time where you will need to decide to either “pivot or persevere”. Of course, if things are working well and you can see a path the great success and profits, keep working on the idea you’ve started with. Just make sure to make your decision based on the cold hard facts. PERSEVERE?
  • 22. A pivot is a fundamental change in business strategy. If you conclude that your business strategy isn’t likely to succeed, you can change your strategy. This is where the mindset of an entrepreneur comes in. A true entrepreneur is learning how to build a sustainable enterprise, not make a single product idea a success. There are many kinds of pivots you could make.
  • 23. • Zoom-in: where a single feature of your product becomes the entire product. • Zoom-out: where your product is too narrow to support a business, and you decide to make a broader product. • Customer segment: where you realize that you are building a product that solves a need for a segment of customers that is different than the one you started with. • Customer need: based on an intimate understanding of the customers developed during your iteration process, you realize that the need you were solving for isn’t very important. But you find new needs you can solve instead. • Business architecture: this is where you go from a high margin, low volume solution to a low margin high volume solution. • Technology: where you realize that you could solve the exact same problem using a completely different (and usually less expensive) technology. There are other pivots you could make, and we’d encourage you to buy the book to find out what they are. But most importantly, realize that whatever pivot you make, it’s only the next hypothesis in your business model, and that it should be rigorously tested just like everything else.
  • 24. One company that took this idea and ran with it built a technology called Aardvark – an alternative to other search engines where the answer needs some form of human interaction. For instance, a question like “where’s the best place to get a drink after the movies tonight” is not something that Google will give you a great answer for. However, Aardvark will. But this wasn’t the first product launched by Max Ventilla and Damon Horowitz. In fact, is was the sixth product they launched. In fact, it was their sixth product in less than six months. Because they had used the Lean Startup model of the MVP along with rapid prototyping and measuring the results, they found out very quickly that their first 5 products were destined to become flops. Aardvark was the first and only product that pointed to success, and not surprisingly, it’s the product that they are now growing using the same principles we’ve discussed so far.
  • 25. One company that took this idea and ran with it built a technology called Aardvark – an alternative to other search engines where the answer needs some form of human interaction. For instance, a question like “where’s the best place to get a drink after the movies tonight” is not something that Google will give you a great answer for. However, Aardvark will. But this wasn’t the first product launched by Max Ventilla and Damon Horowitz. In fact, is was the sixth product they launched. In fact, it was their sixth product in less than six months. Because they had used the Lean Startup model of the MVP along with rapid prototyping and measuring the results, they found out very quickly that their first 5 products were destined to become flops. Aardvark was the first and only product that pointed to success, and not surprisingly, it’s the product that they are now growing using the same principles we’ve discussed so far.
  • 26. GROWTH Now that you’ve found the product that you know will help you create a sustainable business, you need to have sustainable growth. And the only way you can build a sustainable business is when your new customers come from old customers. There are 3 ways to do this.
  • 27. First, you can create a “sticky” growth engine. This depends on having a product or service that customers will continue to pay for over time. In this model, if you can bring in new customers at a faster rate than your old customers leave the service, your business will grow. The metric that you’ll want to pay the most attention to is your retention rate. Stickytron 100
  • 28. Second, you could create a “viral” engine of growth. In this model, you depend on your current customers to bring in your new customers. The most famous example of this is Hotmail, which was once a slow growth business struggling to get traction. That was until they decided to append each mail message You sent with an invitation for other people to sign up for the service, with a link directly to the sign up page. The metric for this engine is something called the “viral loop”. If you can get each new customer to bring in 1 or more customers, the viral growth will continue.
  • 29. LCV CAC = :) The last engine for growth is the “paid” model. In this model, you take the profits you’ve earned from your old customers, and invest it into advertising (or any new business development tactic) to attract new customers. The metrics to pay attention to in this case are the Lifetime Customer Value (the profits you’ll make off each customer over the lifetime of doing business with you) and the Customer Acquisition Cost. As long as your LCV exceeds your new customer acquisition costs, you will grow.
  • 30. gines one o f these en p ecialize in eat to e band width to s engin e is too gr on ly have th any particular f you star t on panies ng in urse, i that most com ine-tun e everythi busin ess. Of co wth s the point test and f t is best for your n alwa ys do “gro Ries make time it tak es to ngine tha pe, you ca the the e ’d ho of g rowth, and ke sure you pick work out as you foc us. So ma it isn’ t going to rd. split your es an d you find e mov ing forwa one of the engin nad ifferent on ivot a nd focus o engine” p
  • 31. So there you have it – everything you need to know in order to begin your Lean Startup journey. If you are truly an entrepreneur, you’ll take Ries’ advice and get passionate about building a sustainable enterprise rather than seeing your new idea succeed at all costs. Good luck, and I hope to see your next idea and become one of your customers. For more information about this book and our other great book summaries, visit: EFFECTIVE ENGAGING BOOK SUMMARIES