Book: The Lean Startup

  • 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