The Lean Startup is a book on entrepreneurship focusing on how to effectively bring products to market.
- Bullet Summary
- Lean Startup Summary
- Real Life Applications
- The Lean Startup Review
- Launch quickly (MVP)
- Change and iterate as quickly as possible
- Use lean methodology to move quickly and efficiently
Lean Startup Summary
About The Author: Eric Ries is an American entrepreneur, blogger, and creator of the Lean Startup Methodology, which he explains in “The Lean Startup”.
He studied at Yale and in 2010, he became an Entrepreneur-in-Residence at Harvard Business School.
Eric Ries says that too much effort and human capital is wasted in startups that fail to leave their mark and add no real value to the world.
He believes that a good chunk of that failure is because of a wrong methodology which many entrepreneurs use.
And he aims to fix the issue with The Lean Startup.
The Determination Myth
Eric Ries says that determination leading startups to success is a myth.
It’s an appealing one, because it gives us the false belief that perseverance is the key and we can all be perseverant (I’m looking at you, Gary Vaynerchuck and Angela Duckworth!).
But it’s not true, and it’s an unhelpful myth.
We heard a few stories of people who won without ever giving up, but we don’t hear about the many more who kept wasting time beating a dead horse.
Methodology Leads to Startup Success
Eric Ries says that success doesn’t happen because you’re in the right place at the right time.
And it’s not the flamboyant stuff that makes success, or the dogged determination.
It’s the boring stuff that leads to success. It’s processes and methodology.
Startup success can be engineered following and taught.
Entrepreneurship is a Type of Management
Eric Ries says that most people in startup and entrepreneurship circles see management as dull and boring. They see management as the opposite of entrepreneurship, with entrepreneurship being instead daredevil and exciting.
But that’s wrong.
Entrepreneurship needs management. A specific kind of management geared towards uncertainty
Entrepreneurship IS management
What’s a Startup
Eric Ries defines startup as:
A human institution to create a new products and services under conditions of extreme uncertainty.
This is startups’ biggest problems:
Startups often build products that nobody wants. And they find out too late, when they spent all the budget and there’s no more time to pivot.
The solution is a new way of looking at product development. A new way which emphasizes fast iterations, customers’ insights, huge vision and great ambitions all at the same time.
Here’s how you do it:
#1. Minimum Viable Product (MVP)
Some entrepreneurs can fall victim to analysis paralysis: talking to prospects, white board strategies and research reports.
There’s no point in spending too long in the research phase: you can’t predict the future on a whiteboard.
The perfect mix between no analysis and over-analyzing, says Ries, is a minimum viable product.
The quickest, simplest product you can assemble to start testing your assumptions right away,
An MPV is the bare minimum you can ship so that the first users -usually the innovators– can give you that early, precious feedback that will help you steer your development.
What if Someone Steals Your MVP?
Eric Ries says that one of the biggest push-back against an MVP is that other companies will steal your ideas.
This is something Jay Samit also discussed in Disrupt You, with the core concept being that nobody cares about your lousy idea.
And if the competitor can out-execute you once the idea is out there, you’re doomed anyway.
The push behind a successful start up is to accelerate that build-measure-development feedback loops faster than anyone else.
Keeping your product under wrap, away from the feedback it desperately needs, will only make your failure more likely.
The only way to win is to learn faster than anyone else
# 2. Test Hypothesis (Measure)
Marketing and product experiments must follow scientific methodology.
It starts with a clear hypothesis based on your visions and makes predictions on what’s supposed to happen.
You need hypothesis because if you “just do it” and see what happens you will always succeed, even when you fail.
# 3. Change Based On Feedback
Based on the feedback you get, keep testing and refining your product and marketing as quickly as possible.
If you don’t see results or if the feedback leads you somewhere else, consider pivoting.
These are the ten types of pivots:
- Zoom-in pivot. This pivot can be useful when you see that one feature in your product gets far more traction and interest than the other features in your product. You can then “pivot” by offering a new product that offers only that one feature.
- Zoom-out pivot. This is the above pivot in reverse. You broaden your product to include more features. Now what was considered the whole product becomes one (or several) features of a larger product.
- Customer segment pivot. Your product may prove popular but not with the user segment that you had initially targeted. Therefore your product positioning may need to change and the value proposition, pricing, and channels would all need to be reviewed.
- Customer need pivot. If you identify that the problem you are trying to solve with your product is not very important to customers, you may need to point your existing product at solving a different customer problem or you may need a completely new product.
- Platform pivot. This talks about a change from an application to a platform or vice versa. (Examples of platforms are eBay, Airbnb, Uber, Android store etc.)
- Business architecture pivot. Geoffrey Moore, author of Crossing the Chasm, tells us there are two types of business: high-margin, low-volume businesses and low-margin, high-volume businesses. You cannot be both but sometimes you can pivot from one to the other.
- Value capture pivot. This pivot refers to changes to how you monetize or earn revenue. This is how the business captures value, typically by charging customers money.
- Engine of growth pivot. Most startups these days use one of three primary growth engines: the viral, sticky, and paid growth models (more on that later). You can pivot from one of these growth engines to another.
- Channel pivot. Here you change how and where you sell your products and services (in stores, online, through partners, in-app).
- Technology pivot. This pivot is when a new technology can be used to achieve the same outcome. (This can be beneficial if the new solution has lower cost and/or better performance.)
# 4. Accelerate Business Growth
There are three main ways to drive sustainable growth:
- The sticky engine: retaining most of your users and keeping a low churn rate (i.e. making sure your customers come back to use your product or service again—creating and keeping repeat customers).
- The viral engine: word of mouth and virality (i.e. current users recommend other users).
- The paid engine: spending money on marketing to acquire customers.
Note: The “churn rate” is your “people leaving rate”. So, for example, for a product or service, it’s the percentage of customers that unsubscribe in a given period.
#5. Use Lean Methodology
The last part of the book was mostly focused on the lean methodology, a product development system born in Japan with Toyota.
Here are a few techniques Eric Ries discusses:
- The 5 WHYs: ask “why” five times to go at the roots of the issue
- Small batch sizes: the idea of repeating sequentially the same tasks over and over instead of assembling the final product one by one won’t allow you to spot the mistakes early
Real Life Applications
Get everyone in the room when brainstorming issues
If you don’t get everyone involved in the room, says Ries, the one not present is usually the one everyone will blame.
And if it’s a junior employee most will assume the fix is to replace him; if it’s the CEO most will assume you can’t fix the issue. Both assumption are often wrong.
Reading is good, action is better
I totally agree with this one. To save time on knowledge absorption check my metasummaries.
It’s more tailored towards software development than on physical products.
Less interesting Lean Methodology
I found the part of the book discussing lean methodologies a bit less interesting.
Not so great examples
I found the examples that were supposed to confirm how awesome the Lean Startup method is to be somewhat lacking.
The Lean Startup not only introduces an awesome methodology for launching successful startups, but also shares awesome and empowering mindsets.
- if a new employee breaks the product environment, it’s no shame on the newbie. The senior developers should focus on building an environment that’s not so easy to break;
- if something goes wrong always ask yourself: how can I prevent being in the same situation ever again (which the founding idea of Principles by Ray Dalio)
There’s a good reason why this book has become so popular: the idea was groundbreaking. And groundbreakingly useful.
The Lean Startup Review
Years ago a former boss of mine sent me this book.
I had no intention of reading it though because back then I was fully focused on people and social skills and had no time for entrepreneurship.
But I played along pretending I was going to read it just because he was my boss.
Unluckily he didn’t forget, and a few weeks later when he asked me I had to confess I hadn’t even started it.
To which, he replied:
Sebastian: hey, did you read the Lean Startup already?
Me: Ehmm, it’s in my to read list, gonna get there soon
Sebastian: Oh my God, how can’t you not read the startup Bible!
LOL, cheers Sebastian :).
I did read it now, and it’s awesome.
Of all the entrepreneurship and wealth creation books that I have read, I consider “The Lean Startup” to be the most useful. I personally put “The Lean Startup” far ahead of Zero to One and even better than the widely acclaimed “Launch“.
I have used Lean Startup methodologies for ThePowerMoves.com as well. And if I had to go back, I would use it even more.
This is a must-read for anyone interested in entrepreneurship, startups or launching a product.