Most startups fail. But many of those failures are preventable. The Lean Startup – Eric Ries is a new approach being adopted across the globe, changing the way companies are built and new products are launched.
Eric Ries defines a startup as an organization dedicated to creating something new under conditions of extreme uncertainty. This is just as true for one person in a garage or a group of seasoned professionals in a Fortune 500 boardroom. What they have in common is a mission to penetrate that fog of uncertainty to discover a successful path to a sustainable business.
The Lean Startup approach fosters companies that are both more capital efficient and that leverage human creativity more effectively. Inspired by lessons from lean manufacturing, it relies on “validated learning,” rapid scientific experimentation, as well as a number of counter-intuitive practices that shorten product development cycles, measure actual progress without resorting to vanity metrics, and learn what customers really want. It enables a company to shift directions with agility, altering plans inch by inch, minute by minute.
Rather than wasting time creating elaborate business plans, The Lean Startup offers entrepreneurs—in companies of all sizes—a way to test their vision continuously, to adapt and adjust before it’s too late. Ries provides a scientific approach to creating and managing successful startups in a age when companies need to innovate more than ever. “Amazon”
The principles of Lean Startup
In the following pages, Eric Ries explains the five principles of Lean Startup:
Entrepreneurs are everywhere.
An entrepreneur is anyone who runs a startup as the author defines it: a business structure designed to develop new products or services under conditions of extreme uncertainty. Therefore, the Lean Startup approach can be suitable for any business, regardless of its size or sector of activity.
Entrepreneurship is a form of management.
A startup is a business structure, not just a product. It therefore requires a new type of management adapted to its context of extreme uncertainty.
Validation of lessons.
The sole purpose of a startup is not to deliver products, make money or serve customers. Its goal is to learn how to build a viable long-term business.
The produce-measure-learn feedback loop.
The core business of a startup is turning ideas into products. The startup then evaluates customer feedback and learns from it to decide whether it should revolve or persist.
Analytical innovation management.
A new type of accounting management specifically for start-ups is needed to measure progress, define milestones and set priorities.
Structure of the book “Lean Startup – Embrace Continuous Innovation”.
The book is divided into three parts: “Vision”, “Steering” and “Acceleration”.
The “Vision” part
Éric Ries pleads, in this section, for a new technique enabling startups to evaluate their progress: the validation of lessons learned. Based on scientific experimentation, this technique helps startups discover how to found a sustainable business, whether they are taking their first steps in a garage or within an established company.
The “Steering” part
In this part, Eric Ries presents the Lean Startup method in detail, describing the produce-measure-learn feedback loop.
- how to develop a Minimum Viable Product (MVP) in order to test its fundamental assumptions with the utmost rigor;
- how to evaluate our progress with a new cost accounting system;
- how to decide whether to pivot, i.e. change course, or persist on the same path.
The “Acceleration” section
In this section, Éric Ries proposes several techniques to help a startup go through the production-measurement-learn loop as quickly as possible. He also discusses :
Lean manufacturing concepts that apply to startups, such as small batch production;
The startup’s organizational structure and how it grows;
The principles of Lean Startup to be applied beyond the legendary garage, and even within the largest multinationals.
The role of the Minimum Vital Product (MVP)
Unlike traditional product development methods, which require a long period of reflection and incubation of ideas in an attempt to achieve perfection from the outset, the Minimum Vital Product helps the startup creator to start (and not end) his or her learning process through feedback quickly.
The PMV will allow you to go through all the steps of the produce-measure-learn method with minimum effort. It is the product that is intended to test fundamental assumptions.
Quality and design in a MVP
Before they can be mass-marketed, the products need to be sold to first-time adopters. These are, in a sense, early adopters who want to be the first to adopt a new product or technology.
For many entrepreneurs, this revolutionary product needs to be perfect, well thought out and ready for the mass market. It is then difficult to present a product early, incomplete and full of defects. We then have to put aside our traditional professional criteria and adopt an approach of validation of lessons learned through feedback.
During the development of the SMP, we must be guided by a simple rule: eliminate any function, any procedure, any effort that does not directly contribute to the desired lessons. SEP is there to teach us that any extra work beyond what is strictly necessary to start learning is wasteful, no matter how much importance was initially given to it.
The minimum viable product can, in fact, take different forms. Eric Ries describes several examples, citing the startups Dropbox, Food on the Table (FotT) and Aardvark.
Decisional and illusory indicators
Analytical innovation management is useless if the startup is wrongly guided by illusory figures: the total number of customers, for example.
Éric Ries cites the example of the Grockit company to develop several decisional and not illusory indicators:
The agile development method
This one allows you to reorient yourself very quickly. Its flexible and light operation facilitates reactivity to changes requested by the product owner.
A/B comparative tests
An A/B comparison test simultaneously offers two versions of the same product to two customer groups. By observing the differences in behaviour between the two groups, the impact of the various variants can be deduced.
In the Lean Startup model, startups often integrate this type of comparative tests (sometimes called split tests) directly into their product development phases. Indeed, these comparisons help teams to refine their knowledge of customers, what they want or don’t want.
The Kanban Principle
The Kanban method, which originated in the Japanese automotive industry, is an integral part of the Lean Startup approach: it uses a pull-flow system, created by the customer’s consumption, instead of a push-flow system (as most companies do). According to this principle, the company produces a product at the customer’s request, only when it is requested and only in the quantity requested.
The kanban approach also makes it possible to interrupt the production process at any time in order to solve an identified problem.
The triple A (Action, Accessibility, Audit) in the analytical management of innovation
For an analysis to be actionable, it must clearly and objectively establish a causal link. Otherwise, it is an illusory indicator.
For an objective use of the figures in reports used for decision making, these should be :
- simplified as much as possible so that everyone can understand the indicators (concrete and tangible units of measurement), based on cohort studies (which make it possible to transform human and complex behaviours into numerical reports).
- accessible to all: sent by e-mail to all or placed on the website, well arranged and easy to read (each experiment and its results being explained in simple language), with a simple page summarising the results.
Entrepreneurship isn’t just about a big innovative idea: the big idea is only 5% of the story. The remaining 95% consists of the thankless tasks measured by innovation analytics: defining development priorities, targeting customers, selecting customers to listen to, courageously subjecting a great visionary idea to continuous testing and feedback.
The “five whys”
This systematic problem-solving tool created by Taiichi Ohno, the father of the Toyota production system, is based on the principle of asking the question “why?” five times and answering it. In the Lean Startup concept, this method makes it possible to react quickly to problems, without investing more than necessary.
First of all, the “five whys” method makes it possible to go back to the root cause of a problem that lies behind more obvious symptoms. Éric Ries explains that most problems that at first glance appear to be due to a single error are in fact the result of insufficient training of personnel or inadequate instruction in the company’s procedures manual.
In addition, the author proposes to follow the “five whys” method to invest proportionally in each of the five levels. In fact, it is a question of investing less when the symptom is minor, and more when the symptom is more important.
The “five whys” method is intended to help us realize that recurring problems are the result of an inadequate process, and not the result of an individual’s ill will.
Therefore, there is no question of blaming anyone in this method.
Knowing your clients the 5 reasons why
In order to avoid the “five blame” trap and to optimize the results of the “five whys” method, Eric Ries recommends several tactics:
- Make sure that everyone affected by the problem is present in the room when analyzing the root causes;
- Look at things at the systems level;
- Create an environment of mutual trust and accountability;
- Be lenient in dealing with all mistakes the first time and never let the same mistake happen a second time;
- Be prepared to uncover unpleasant facts about your business;
- Appoint a “five whys” manager: this person should be sufficiently high up in the company hierarchy to have the authority to verify the execution of these tasks, but not too high to be available for each meeting;
- Don’t submit all your problems at once: start “five whys” sessions as new problems arise;
- Take a few minutes to explain to new participants what this process is all about and what it is for.
For recap of “Lean Startup – Embrace Continuous Innovation”:
At the beginning of the book, Éric Ries, tells us about a well-known scenario in project implementation: the team works hard to imagine and then create a first product that is industrially perfect. They manage to put it on the market only to realize that the product only interests a marginal public, works poorly and, consequently, does not have the indispensable functionalities.
We understand, after this reading, that the idea of Lean Startup is to work differently so that such a scenario does not take place.
Indeed, the essential notion of Lean thinking is the confirmation, or validation of the teachings. Eric Ries starts from the observation that intuition is a very bad guide to conceive new offers as long as it is not validated by a rigorous “confirmation”:
- On the one hand, developers of new products get the wrong idea of what customers are really interested in;
- On the other hand, customers themselves usually have difficulty expressing their precise needs.
In Lean Startup, the important thing is to get to know your customer without relying on what they say. To do this, it is necessary to offer him concrete models of the product, functional prototypes (the famous minimum living product) in order to see him react in a situation and stay tuned to his reactions. Indeed, it is a question of measuring these purchasing behaviours in order to guide the design which, in the Lean Startup method, highlights the importance of “small batches”.
Resulting from the ideas of Lean management, Lean Startup is an innovative method for all those who wish to create a company or develop a new project. By following the principle of continuous innovation, this approach allows the company to constantly adapt its products and its company to the needs of its customers and to market developments.
In short, Lean Startup allows more precisely to optimize speed and quality in terms of production. It eliminates “waste” to obtain commercial results, according to Éric Ries, that are unequalled. It avoids useless work that does not bring any learning. Finally, it is a source of new business structures whose long-term mission would be to create sustainable value and make the world a better place.
The Lean Startup – Eric Ries – Book Adopt Continuous Innovation” is essential reading for any entrepreneur or business creator who wants to increase his chances of success and who wants to change his original business model. It is a real reference, rich in essential concepts, for any company, large or small, which plans to totally change its way of working by adopting the Lean Startup methodology.
An inspiring methodology illustrated with numerous examples of companies that have been able to encourage creativity by adapting to the needs of their clients;
All the key concepts of Lean Startup are developed to re-invent the way of working and strive towards continuous innovation: the feedback loop produce-measure-learn, the Minimum Vital Product, the Kanban principle, the five whys, agile development, the growth engine, analytical management of innovation, etc.
“Eric has created a science where previously there was only art. A must read for every serious entrepreneur—and every manager interested in innovation.”
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