2009 05 01 How To Build A Lean Startup Step By Step

How to Build a Lean Startup,  step‐by‐step #leanstartup  Eric Ries (@ericries)  h?p://StartupLessonsLearned.blogspot.com 

Agenda  What is a startup?  •  Why do startups fail?  •  IntroducJon to the Lean Startup  •  Product Development in a Lean Startup  •  Speciﬁc techniques  •  –  ConJnuous Deployment  –  Rapid Split‐tesJng  –  Five Why’s 

What is a startup?  •  A startup is a human ins)tu)on designed to  deliver a new product or service under  condiJons of extreme uncertainty.   •  Nothing to do with size of company, sector of  the economy, or industry 

Why do startups fail?  •  Rarely fail because the product doesn’t work  •  Usually fail because there are no customers  •  Quality of the iniJal idea is not correlated with  success  •  Startups that succeed are those that manage  to iterate enough Jmes before they run out of  resources  •  Time between these iteraJons is fundamental 

The Lean Startup  •  Anything we can do to shrink the Jme  between major iteraJons will increase the  likelihood of success.  •  Speed is the startup compeJJve advantage. 

Lean Startups Go Faster  •  Commodity technology stack, highly leveraged  (free/open source, user‐generated content,  SEM).  •  Customer development – ﬁnd out what  customers want before you build it.   •  Agile so]ware development – but tuned to  the startup condiJon. 

Commodity technology stack  •  Leverage = for each ounce of eﬀort you invest  in your product, you take advantage of the  eﬀorts of thousands or millions of others.  •  It’s easy to see how high‐leverage technology  is driving costs down.  •  More important is its impact on speed.  •  Time to bring a new product to market is  falling rapidly.  

Customer Development  ConJnuous cycle of customer    interacJon  Rapid hypothesis    tesJng about market,  pricing, customers, …    Extreme low cost, low  burn, Jght focus    Measurable gates for  investors  h?p://bit.ly/tpTtE 

A tale of two startups, revisited  •  Mirrors the changes in development  methodologies over the past few years.  •  Let’s look at those changes schemaJcally.  •  These examples are drawn from so]ware  startups, but increasingly:  –  All products require so]ware   –  All companies are operaJng in a startup‐like  environment 

TradiJonal Product Development  Unit of progress: Advance to Next Stage  Waterfall Requirements  Design  Implementa2on  Veriﬁca2on  Maintenance  Problem: Known Solution: Known

Agile  Unit of progress: a line of working code  “Product Owner” or in-house customer Problem: Known Solution: Unknown

Product Development at Lean Startup  Unit of progress: validated learning about customers ($$$)  Problem: Unknown Solution: Unknown

Minimize TOTAL Jme through the loop  IDEAS  LEARN  BUILD  DATA  CODE  MEASURE 

How to build a Lean Startup  •  Let’s talk about some speciﬁcs. These are not  everything you need, but they will get you  started  •  ConJnuous deployment  •  Split‐test (A/B) experimentaJon  •  Five why’s  

ConJnuous Deployment  IDEAS  Learn Faster  Code Faster  LEARN  BUILD  Five Whys Root  ConJnuous  Cause Analysis  Deployment  DATA  CODE  Measure Faster  MEASURE  Rapid Split Tests 

Continuous Deployment •  Deploy new software quickly •  At IMVU time from check-in to production = 20 minutes •  Tell a good change from a bad change (quickly) •  Revert a bad change quickly •  Work in small batches •  At IMVU, a large batch = 3 days worth of work •  Break large projects down into small batches

Cluster Immune System What it looks like to ship one piece of code to production: •  Run tests locally (SimpleTest, Selenium) Everyone has a complete sandbox o  •  Continuous Integration Server (BuildBot) o  All tests must pass or “shut down the line” Automatic feedback if the team is going too fast o  •  Incremental deploy  Monitor cluster and business metrics in real-time  o  Reject changes that move metrics out-of-bounds o  •  Alerting & Predictive monitoring (Nagios)  Monitor all metrics that stakeholders care about  o  If any metric goes out-of-bounds, wake somebody up  o  Use historical trends to predict acceptable bounds o  When customers see a failure:  Fix the problem for customers o  Improve your defenses at each level  o 

Rapid Split Tests  IDEAS  Learn Faster  Code Faster  LEARN  BUILD  Five Whys Root  ConJnuous  Cause Analysis  Deployment  DATA  CODE  Measure Faster  MEASURE  Rapid Split Tests 

Split‐tesJng all the Jme  •  A/B tesJng is key to validaJng your  hypotheses  •  Has to be simple enough for everyone to use  and understand it  •  Make creaJng a split‐test no more than one  line of code:  if( setup_experiment(...) == quot;controlquot; ) {      // do it the old way  } else {     // do it the new way  } 

The AAA’s of Metrics  •  AcJonable  •  Accessible  •  Auditable 

Measure the Macro  •  Always look at cohort‐based metrics over Jme  •  Split‐test the small, measure the large  Control Group (A)  Experiment (B)  # Registered  1025  1099  Downloads  755 (73%)  733 (67%)  AcJve days 0‐1  600 (58%)  650 (59%)  AcJve days 1‐3  500 (48%)  545 (49%)  AcJve days 3‐10  300 (29%)  330 (30%)  AcJve days 10‐30  250 (24%)  290 (26%)  Total Revenue  $3210.50  $3450.10  RPU  $3.13  $3.14 

Five Whys  IDEAS  Learn Faster  Code Faster  LEARN  BUILD  Five Whys Root  ConJnuous  Cause Analysis  Deployment  DATA  CODE  Measure Faster  MEASURE  Rapid Split Tests 

Five Whys Root Cause Analysis  •  A technique for conJnuous improvement of  company process.  •  Ask “why” ﬁve Jmes when something  unexpected happens.  •  Make propor)onal investments in prevenJon  at all ﬁve levels of the hierarchy.  •  Behind every supposed technical problem is  usually a human problem. Fix the cause, not  just the symptom. 

There’s much more…  IDEAS  Learn Faster  Code Faster  LEARN  BUILD  Split Tests  Unit Tests  Customer Interviews  Usability Tests  Customer Development  ConJnuous IntegraJon  Five Whys Root Cause Analysis  Incremental Deployment  Customer Advisory Board  Free & Open‐Source Components  Falsiﬁable Hypotheses  Cloud CompuJng  Product Owner Accountability  Cluster Immune System  DATA  CODE  Customer Archetypes  Just‐in‐Jme Scalability  Cross‐funcJonal Teams  Refactoring  Semi‐autonomous Teams  Developer Sandbox  Smoke Tests  Measure Faster  MEASURE  Split Tests  Funnel Analysis  Clear Product Owner  Cohort Analysis  ConJnuous Deployment  Net Promoter Score  Usability Tests  Search Engine MarkeJng  Real‐Jme Monitoring  Real‐Time AlerJng  Customer Liaison  PredicJve Monitoring 

The Lean Startup  •  You are ready to do this, whether you are:  –  Thinking of starJng a new company, but haven’t  taken the ﬁrst step  –  Are in a startup now that could iterate faster  –  Want to create the condiJons for lean innovaJon  inside a big company  •  Get started, now, today. 

Thanks!  •  Startup Lessons Learned Blog  –  h?p://startuplessonslearned.blogspot.com/  •  The Lean Startup Workshop   –  An all‐day event for a select audience  –  May 29 and June 18, 2009 in San Francisco  –  h?p://training.oreilly.com/theleanstartup/  •  Other upcoming events  –  h?p://bit.ly/b9w1y 

2009 05 01 How To Build A Lean Startup Step By Step

Eric Ries

2009 05 01 How To Build A Lean Startup Step By Step