- Title: The Lean Startup
- Sub-title: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses
- Author: Eric Ries
- About the author: Eric Ries is an entrepreneur and author. He was a co-founder and CTO at IMVU. He has a lengthy resume in the startup world and has advised startups, large companies, and venture capital firms.
- Pages: 336
- Published: 2011
- Link to book
The Lean Startup presents an efficient approach to building, managing, and scaling a startup company. Author Eric Ries has had many successes and failures throughout his startup career. He was able to see what worked, what didn’t work, and why. His mission is “to improve the success rate of new innovative products worldwide.”
The Lean Startup method pulls from the principles of lean manufacturing and processes such as the famous Toyota Production System. It’s all about using time, capital, and other resources as effectively as possible. It’s about finding out what’s valuable and what is wasteful.
This book is divided into three parts: “Vision,” “Steer,” and “Accelerate.” Within those three parts, topics covered include:
- Starting a startup
- Learning as a company and entrepreneur
- Experimenting efficiently
- Taking a leap
- Building and testing a minimum viable product
- Measuring with actionable metrics rather than vanity metrics
- The importance of pivoting
- Growing a startup and being adaptable
The Lean Startup is a wildly popular book, and for good reason. Author Eric Ries shares knowledge and advice from his accumulated experience in working at startups and also consulting for startups.
I highly recommend this book to anyone interested in startups, anyone who is building a startup, and anyone who works for a startup.
This book helps you look at companies in a unique way. Many of the concepts will be eye-opening, but make you wonder, “How didn’t I think of that? This seems so obvious.” You’ll surely find value to help you as an entrepreneur or employee.
Top 30 Takeaways
* In no particular order
1. The grim reality is that most startups fail. Most new products are not successful. Most new ventures do not live up to their potential. Yet the story of perseverance, creative genius, and hard work persists.
2. I have learned from both my own successes and failures and those of many others that it’s the boring stuff that matters the most. Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught.
3. I studied lean manufacturing, a process that originated in Japan with the Toyota Production System. This line of thought evolved into the Lean Startup: the application of lean thinking to the process of innovation.
4. The five principles of the Lean Startup are as follows: 1) Entrepreneurs are everywhere. 2) Entrepreneurship is management. 3) Validated learning. 4) Build-measure-learn. 5) Innovation accounting.
5. Why are startups failing so badly everywhere we look? The first problem is the allure of a good plan, a solid strategy, and thorough market research.
6. Building a startup is an exercise in institution building; thus, it necessarily involves management.
7. A comprehensive theory of entrepreneurship should address all the functions of an early-stage venture: vision and concept, product development, marketing and sales, scaling up, partnerships and distribution, and structure and organizational design.
8. The Lean Startup asks people to start measuring their productivity differently. Because startups often accidentally build something nobody wants, it doesn’t matter much if they do it on time and on budget. The goal of a startup is to figure out the right thing to build—the thing customers want and will pay for—as quickly as possible. In other words, the Lean Startup is a new way of looking at the development of innovative new products that emphasizes fast iteration and customer insight, a huge vision, and great ambition, all at the same time.
9. Yet if the fundamental goal of entrepreneurship is to engage in organization building under conditions of extreme uncertainty, its most vital function is learning. We must learn the truth about which elements of our strategy are working to realize our vision and which are just crazy. We must learn what customers really want, not what they say they want or what we think they should want.
10. In the Lean Startup model, we are rehabilitating learning with a concept I call validated learning. Validated learning is the process of demonstrating empirically that a team has discovered valuable truths about a startup’s present and future business prospects.
11. In other words, which of our efforts are value-creating and which are wasteful? This question is at the heart of the lean manufacturing revolution; it is the first question any lean manufacturing adherent is trained to ask. Learning to see waste and then systematically eliminate it has allowed lean companies such as Toyota to dominate entire industries.
12. It is also the right way to think about productivity in a startup: not in terms of how much stuff we are building but in terms of how much validated learning we’re getting for our efforts.
13. In the Lean Startup model, every product, every feature, every marketing campaign—everything a startup does—is understood to be an experiment designed to achieve validated learning.
14. The two most important assumptions entrepreneurs make are what I call the value hypothesis and the growth hypothesis. The value hypothesis tests whether a product or service really delivers value to customers once they are using it. For the growth hypothesis, which tests how new customers will discover a product or service, we can do a similar analysis.
15. This Build-Measure-Learn feedback loop is at the core of the Lean Startup model. Instead, we need to focus our energies on minimizing the total time through this feedback loop.
16. The MVP is that version of the product that enables a full turn of the Build-Measure-Learn loop with a minimum amount of effort and the least amount of development time.
17. Every business plan begins with a set of assumptions. Because the assumptions haven’t been proved to be true (they are assumptions, after all) and in fact are often erroneous, the goal of a startup’s early efforts should be to test them as quickly as possible. The first challenge for an entrepreneur is to build an organization that can test these assumptions systematically.
18. All successful sales models depend on breaking down the monolithic view of organizations into the disparate people that make them up. Startups need extensive contact with potential customers to understand them, so get out of your chair and get to know them.
19. WHY FIRST PRODUCTS AREN’T MEANT TO BE PERFECT: Before new products can be sold successfully to the mass market, they have to be sold to early adopters. Early adopters use their imagination to fill in what a product is missing. The lesson of the MVP is that any additional work beyond what was required to start learning is waste, no matter how important it might have seemed at the time.
20. Innovation accounting enables startups to prove objectively that they are learning how to grow a sustainable business. Innovation accounting begins by turning the leap-of-faith assumptions discussed in Chapter 5 into a quantitative financial model.
21. Innovation accounting works in three steps: first, use a minimum viable product to establish real data on where the company is right now. Second, startups must attempt to tune the engine from the baseline toward the ideal. That is the third step: pivot or persevere. When a company pivots, it starts the process all over again, reestablishing a new baseline and then tuning the engine from there.
22. If you are building the wrong thing, optimizing the product or its marketing will not yield significant results. A startup has to measure progress against a high bar: evidence that a sustainable business can be built around its products or services.
23. Innovation accounting will not work if a startup is being misled by these kinds of vanity metrics: gross number of customers and so on. The alternative is the kind of metrics we use to judge our business and our learning milestones, what I call actionable metrics.
24. 3 A’s of metrics: Actionable. For a report to be considered actionable, it must demonstrate clear cause and effect. Accessible. There is an antidote to this misuse of data. First, make the reports as simple as possible so that everyone understands them. Auditable. This is the only way to be able to check if the reports contain true facts. Managers need the ability to spot check the data with real customers.
25. Only 5 percent of entrepreneurship is the big idea, the business model, the whiteboard strategizing, and the splitting up of the spoils. The other 95 percent is the gritty work that is measured by innovation accounting: product prioritization decisions, deciding which customers to target or listen to, and having the courage to subject a grand vision to constant testing and feedback.
26. Companies that cannot bring themselves to pivot to a new direction on the basis of feedback from the marketplace can get stuck in the land of the living dead, neither growing enough nor dying, consuming resources and commitment from employees and other stakeholders but not moving ahead.
27. The critical first question for any lean transformation is: which activities create value and which are a form of waste? Once you understand this distinction, you can begin using lean techniques to drive out waste and increase the efficiency of the value-creating activities.
28. There are four primary ways past customers drive sustainable growth: 1) Word of mouth. 2) As a side effect of product usage. 3) Through funded advertising. 4) Through repeat purchase of use.
29. The three engines of growth. The Sticky Engine of Growth. The Viral Engine of Growth. The Paid Engine of Growth. Technically, more than one engine of growth can operate in a business at a time. However, in my experience, successful startups usually focus on just one engine of growth, specializing in everything that is required to make it work. Therefore, I strongly recommend that startups focus on one engine at a time.
30. However, focusing on speed alone would be destructive. To work, startups require built-in speed regulators that help teams find their optimal pace of work. Service businesses have the same challenges. Just ask any manager of a training, staffing, or hospitality firm to show you the playbook that specifies how employees are supposed to deliver the service under various conditions. The higher-quality the existing playbook is, the easier it will be for it to evolve over time.