Read: January 2012
Rating: 8/10
The Lean Startup by Eric Ries is a good introduction to lean philosophies. While the book is a good starting point, I do believe that there were definitely some lacking areas and it could have been a little more actionable. It’s still worth a read, if you get a chance. Otherwise, just take a look at my notes below.
My Notes
Five Lean Startup Principles:
Entrepreneurs are Everywhere
Entrepreneurship is Management
Validated Learning
Build-Measure-Learn
Innovation Accounting
Avoid the “just do it” entrepreneurship attitude
Civilization’s precious resources = time, passion, and skill
How to measure:
code/product is easy/tangible, but may not be what you want
learning, frustratingly intangible, but much better
Goal = Figure out the right thing to build
Follow the build-measure-learn feedback loop (more later)
“A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty”
“Innovation is a bottoms-up, decentralized, and unpredictable thing, but that doesn’t mean it cannot be managed”
Measure (innovations):
number of customers using product that didn’t exist X years ago
percentage of revenue coming from offerings that didn’t exist X years ago
What if we build something that nobody wants?
What did it matter if we did it on time and on budget?
Learn what customers really want
Startup productivity = systematically figuring out the right thing to build
If you cannot fail, you cannot learn
Value Hypothesis = test whether product or service really delivers value to customer
Growth Hypothesis = how new customers will discover a product or service
4 questions:
Do consumers recognize that they have a problem you are trying to solve?
If there was a solution, would they buy it?
Would they buy it from us?
Can we build a solution for that problem?
Identify elements of plan that are assumptions and not facts = riskiest elements = leap of faith
Build-Measure-Learn feedback loop (MORE)
Build => (Product) => Measure => (Data) => Learn => (Ideas)
Try to minimize the total time in the feedback loop
This helps to create learning milestones
Strategy is based on assumptions
Identify facts clearly
Steve Blank’s “Get Out of the Building”
Customers are breathing, thinking, buying individuals
Customer Archetype = humanize the proposed target customer
MVP = Minimum Viable Product = Note “Viable”. Any additional work beyond what was required to start learning is waste
“Wizard of Oz testing” = fake it
Often we are not sure who the customer is:
“If we do not know who the customer is, we do not know what quality is”
“Customer’s don’t care how much time something takes to build. They care only if it serves their needs”
Are you making your product better?
How do you know?
Innovation Accounting enables startups to prve objectively they are learning to grow sustainable business:
Establish a baseline
Tune the engine = every change must improve customer behaviour for the better
If you are building the wrong thing, optimizing the product or its marketing will not yield significant results.
Use A/B (also called Split) Testing
Kanban, or capacity constraint. User stories are not complete until they lead to validated learning.
Metrics must have the three A’s:
Actionable = demonstrate clear cause and effect
Accessible = “metrics are people too”
Auditable = data is credible to employees
Ignore vanity metrics:
total number of users
total revenue
As they can distract from real metrics, such as growth rate
A startup’s runway is the number of pivots it can still make.
Pivot or persevere
Don’t throw everything out in a pivot, just repurpose it
Catalog of pivots
Zoom in pivot = single feature becomes full product
Zoom out pivot = full product becomes single feature
Customer segment pivot = change your customers
Customer need pivot = discover different customer needs
Platform pivot = change from an application to a platform or vice versa
Business architecture pivot = high margin, low volume to low margin, high volume or vice versa
Value capture pivot = monetization and capturing value other ways
Engine growth pivot = viral, sticky, and paid growth model
Channel pivot = switching how product reaches customers
Technology pivot = changing technology
Small batches allow quality problems to be identified sooner
Watch out for the large-batch death spiral
Pull = Just-in-time what you need
New customers come from the actions of past customers:
Word of Mouth
As a side effect of product usage = think luxury goods
Through funded advertising
Through repeat purchase or use
“If the rate of new customer acquisition exceeds the churn rate, the product will grow”
Viral Coefficient = how many new customers will use a product as a consequence of each new customer who signs up
You want this to be greater than 1, in order to grow
Don’t just tack on bureaucracies as you grow:
Be an adaptive organization and adjust your process and performance based on your current conditions
Five whys:
Utilize the five “Whys?” in order to get to the root of problems
Watch out for the five “blames,” which can arise from people not understanding how to use the five whys
The five whys require mutual trust and empowerment
Use them to determine new problems, not old baggage
Everyone connected to the problem should be at the five whys session
Explain the five whys process to those unfamiliar at every meeting
Startups require three attributes:
Scarce but secure resources
Independent authority to develop their business
Personal stake in the outcome
For bigger companies, you may want to utilize a sandbox approach
Let the sandbox grow, don’t just move the team out of the sandbox