William James once said “First a new theory is attacked as absurd; then it is admitted to be true, but obvious and insignificant; finally it is seen to be so important that its adversaries claim that they themselves discovered it.” The ideas contained in The Lean Startup by Eric Ries seem to have advanced to the third stage, with people claiming that the ideas are not new. While there’s a little truth to this, as Ries admits his debt to Toyota’s lean manufacturing philosophy and to Steve Blank’s Customer Development methodology, the larger truth is that Ries has introduced a revolutionary, counter-intuitive approach to building startups, which if followed, should greatly improve the odds of success.
There are so many important ideas in this book that it is difficult to know where to begin. But let’s start with Ries’s definition of a startup.
Startup: a human institution designed to create new products and services under conditions of extreme uncertainty.
Note that this definition says nothing about the size or type of organization. Throughout the book, in his examples and his advice, Ries makes clear that his methods apply to organizations large and small, new and old, for-profit or non-profit, private or governmental.
Entrepreneurship Can Be Learned
The second big idea is that entrepreneurship is not magic or something that great entrepreneurs are just born with; entrepreneurship is management of the process of learning how to build a sustainable business. Like any management discipline, entrepreneurship can be learned and taught. And teach it he does, giving would be entrepreneurs not a road map, but a way of steering in uncharted territory designed to maximize (but not guarantee) our chances of finding the right path through the wilderness.
Entrepreneurship as Scientific Method
Which leads me to the third big idea: the application of the scientific method and lean manufacturing techniques to execute what Ries calls the build-measure-learn feedback loop, a series of “experiments” against a “testable hypothesis” that prove or disprove the assumptions that are part of the vision of every startup. There are some very important concepts here, including the concept of a minimum viable product (MVP), innovation accounting and “the pivot.” This is also an area that has received the most pre-publicity, and where in my opinion there are many misconceptions.
When I first heard the MVP term, I thought it meant the minimum set of features that I needed in a product in order for someone to buy it. But as I read more of Eric Ries’s The Lean Startup, I came to understand that the MVP is something different – it is the minimum thing I need to create to cycle through the build-measure-learn feedback loop. In some cases, it’s not even a product. For example, at Austin, Texas-based startup Food on the Table, the founders emulated a product-based service that delivered weekly meal plans and grocery shopping lists based on the best deals at grocery stores, by doing everything by hand – looking up recipes, researching sale items at grocery stores, and delivering the results personally. Ries refers to this as the “concierge” MVP. But the key concept is to create something that will prove or disprove your assumptions, not to sell something (although that may be part of the process).
Another misconception is around the term “lean”. Some people equate a lean startup with a capital-efficient startup, and they argue that this concept has been around since the internet bubble burst in 2000. But the Lean in Lean Startup does not refer to the startups capital needs; instead, it comes from lean manufacturing, and it refers to many of the principles pioneered by Toyota: genchi gembutsu or “go and see for yourself”, working in small batches, the Five Whys, and fixing quality problems right away rather than doing re-work. Capital efficiency is a by product of the Lean Startup methodology, not the defining quality.
The last big idea that Eric Ries introduces is the concept of innovation accounting. Innovation accounting ensures accountability by measuring the impact of tuning the MVP and provides data to help entrepreneurs rationally decide whether to persevere or pivot (change some of their base assumptions). The key concepts that Ries introduces are cohort analysis and actionable metrics versus vanity metrics.
This is a great book, and deserving of careful reading. My copy is already highlighted and dog-eared. Highly recommended.