So I Finally Read The Lean Start Up — My Thoughts
The Lean Start Up by Eric Ries is an almost decade old book about what it takes to make it as a start-up, although some of the information has been constantly repeated and spread around by this point there are still loads of timeless information in the book.
The Story
It’s about a computer programmer (Ries) who has spent years of his life creating products as an entrepreneur, over time he noticed that he was scrapping a lot of his products for trivial reasons.
These products failed in the marketplace because of some inefficient technical solution, or poor market timing.
Eric’s usual order of operation was to build a product he believed was revolutionary in secret, so he could surprise investors, and then soon after launch it into the market.
But there was a point in his life where he kept missing the mark with these launches and wondered if he could find a way to not waste so much of his talent on things destined to fail.
IMVU
IMVU is a social networking site that uses 3D avatars in a virtual reality space.
Ries was advised there by an investor to focus on marketing and customers from the very start, not after launch. So this means he actually had to let customers buy products way before they were ready, and do split testing on early customers to determine which variation was the most popular, in addition to having a fast production cycle.
Ries was trained as an engineer to make sure his software was immaculate before launching and to get rid of any bugs he could. This approach seemed completely backwards to him.
But IMVU succeeded and it only succeeded because of this business philosophy.
“My hope all along was to find ways to eliminate the tremendous waste I saw all around me: startups that built products nobody wanted, new products pulled from the shelves, countless dreams unrealized.”
- Eric Ries
Entrepreneurship Is Really About Management
Many people in the world of entrepreneurship started because they were inspired by tales of entrepreneurs running their business from a garage and turning it into a huge enterprise.
As much as Ries liked these stories he couldn’t help but feel like the details on how the entrepreneurs built their businesses got glossed over to focus on the glamorous parts.
Things like what decisions they made, what systems they utilized, and how they actually scaled the business were usually relegated to just a few pages.
Eric started wondering if business wasn’t a heroic story after all and if it was more of a process. A process that potentially anybody could follow if they had a good head on their shoulders.
It was at IMVU that Ries realized that entrepreneurship was about management.
It’s not just about coming up with the next big product (That’s the engineer’s job), but also to get feedback from the market even at the beginning (management’s responsibility).
Before he couldn’t see how a new company could benefit from market research as they don’t even know who their market is yet.
Ries said “Planning and forecasting are only accurate when based on a long, stable operating history and a relatively static environment. Startups have neither.”
Lean start-up thinking was inspired by the work of Frederick Winslow Taylor, a mechanical engineer who sought to improve industrial efficiency, he was also one of the worlds first management consultants so his knowledge was exactly what Ries was looking for.
The New Approach
A start-up as defined by Ries is “a human institution designed to create new products and services under extreme uncertainty.”
This is the difference between a start-up and any other enterprise, there is a ton of uncertainty and the start-ups that admit that this is a real factor have a higher chance of success because they won’t delusionally keep following a plan that isn’t yielding any results.
When IMVU first started, it wasn’t making any money and Ries was honest about that, everyone knew that their monthly revenue goal was only $300-$500 but they couldn’t even hit that.
Ries says he could have done marketing, PR, or gimmicks to get people to try the game but it wouldn’t have lasted long and those resources could be used on improving the software.
There were a lot of websites at the time that had a giant infrastructure before they even launched and found out too late that all the money that was sunk into the venture was wasted because there wasn’t a huge market there to support it. An example of this was webvans and pets.com.
So even though it is very unintuitive, just putting out a minimum viable product into the market is what a start-up should do, that way they can test their ideas on actual customers and not assumptions. This also allows the business to tweak their products and after some time reach an offering that is specifically tailored to the target market.
Without throwing a product out into the market as soon as it could possibly be used then you would never know what the market likes or dislikes until you’ve sunk a ton of money into a finished project.
What Are Some Components Of A Lean Start-Up?
Because Ries felt that he had to break from conventional business thinking he looked into other fields for ideas. He learned about lean manufacturing and how Toyota made their batch sizes small so they were allowed more flexibility in regards to customization for the customer.
There was also a practice called “just-in-time production” that eliminated waste and he learned about speeding up your production cycles so every product iteration is closer to ideal.
When Ries applied all these philosophies to start-up thinking, he came up with…
3 Principles
- Validated Learning start-ups aren’t trying to create a perfect product or service yet, they need to first figure out how they are going to be a sustainable business. This is done by constantly experimenting to find what is valuable to customers.
- Build — Measure — Learn when a start-up measures how customers respond, it knows whether to keep going with an idea or to discard it for something new.
- Innovation Accounting accurately measure your results, and find processes to make your business more efficient.
For a traditional company, efficiency is the most important thing to focus on but for a start-up you need your target needs to be centered on learning everything you can about what the customer is really looking for in your market.
You can have a big vision, but it must be supported by reality and flexible enough that you can adapt it for the markets needs as you discover them.
In short, your ambition must be so open and non-egotistical that you use the best working means to achieve your goal.
The traditional way of learning in business happened when an idea launch ed fully formed and if it totally collapsed… well then that’s how you learned.
With validated learned, start-ups can change their approach on the fly because nothing has been set in stone, this allows you to make better products, or abandon bad ones at a rapid pace.
The traditional way dictates that you follow through with your business plan even if it isn’t working.
Ries had an idea for IMVU that involved instant messaging and spent thousands of hours working on it only to find out that users weren’t interested in it. He could’ve saved time and found out if people wanted that or not by adding a simple version to the site and measuring the response.
Success comes from killing things that don’t make sense fast and doubling down on things that do.
In Conclusion
What The Lean Start-Up did was bring the scientific method into business and created companies that quickly rose from nothing. It’s not simply the hottest thing to buy into this decade, it’s how successful business is done now.
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Originally published at https://forgefinancialfreedom.com on September 17, 2019.
