The Lean Startup

Goodreads

https://www.goodreads.com/book/show/10127019-the-lean-startup

1. The Lean Startup Framework

The Lean Startup methodology is built around several core principles designed to minimize waste, optimize development cycles, and maximize customer feedback. The framework consists of three main steps: Build, Measure, and Learn. This cycle helps companies develop products that truly meet customer needs while minimizing wasted time and resources.

2. Build-Measure-Learn Loop

The Build-Measure-Learn loop forms the heart of the Lean Startup approach. In this cycle:

• Build: The first step is to take an idea and transform it into a minimum viable product (MVP)—the simplest version of the product that allows the team to begin learning from customers.
• Measure: Once the MVP is in the market, it’s critical to measure its performance, gathering data on how customers respond to and use the product.
• Learn: The final step is to analyze the data collected, reflect on whether the product hypothesis was correct, and decide whether to pivot (make a significant change) or persevere (continue on the current course).

The goal is not simply to complete each cycle but to do so quickly and iteratively, constantly refining the product based on real-world data.

3. Validated Learning

“Validated learning” is Ries’s term for the insights that startups gain by testing hypotheses in the real world. Unlike traditional businesses that often focus on delivering a fully polished product, a lean startup seeks to validate its ideas through customer feedback, even if the product is still in an early form. Ries stresses that this is the most reliable way to determine whether a business idea has potential because it emphasizes learning what customers actually want, rather than what the startup assumes they want.

4. Minimum Viable Product (MVP)

One of the most important concepts in the book is the Minimum Viable Product (MVP). The MVP is a simple version of a product that allows a company to test its core value proposition with the least amount of development time and effort. By releasing an MVP, companies can begin learning from customers with real-world data without the need for a fully developed product. This approach is particularly useful in reducing the risks associated with full-scale launches by enabling testing in real market conditions.

5. Pivot or Persevere

Another key idea in “The Lean Startup” is the concept of the pivot. A pivot occurs when a company makes a fundamental change to its product or business model based on the feedback received through the Build-Measure-Learn loop. Ries argues that most startups eventually reach a point where they must decide whether to pivot or persevere. Pivoting is not seen as a failure; instead, it’s a way to adapt to new insights and find a more promising direction.

6. Innovation Accounting

Ries introduces “innovation accounting” as a method to measure progress in startups, which may not yet have traditional revenue metrics to track. Innovation accounting focuses on three learning milestones:

• Establishing a baseline: understanding where the company stands currently.
• Tuning the engine: experimenting to improve metrics that reflect the startup’s growth hypothesis.
• Pivoting or persevering: assessing whether progress is significant enough to continue with the current strategy.

By tracking these milestones, startups can have a more objective view of their progress and determine whether they are moving closer to their goals.

7. Achieving Product/Market Fit

A critical goal of any startup is to achieve product/market fit, where a product satisfies the needs of a specific market segment. Ries explains that the Lean Startup method helps startups reach this fit more efficiently by using data to validate assumptions. Instead of pouring resources into a product without clear demand, companies can use customer feedback to iteratively shape their product to better meet market needs. 8. The Five Whys Technique

To address and prevent recurring issues, Ries recommends the “Five Whys” technique—a process of asking “why” five times to get to the root cause of a problem. By identifying the fundamental issues behind challenges, companies can implement solutions that tackle the problem at its core rather than simply addressing surface-level symptoms. This approach encourages continuous improvement and helps build resilience within the organization.

9. Accelerated Development with Small Batches

In the Lean Startup methodology, Ries advocates for working in small batches rather than completing large amounts of work at once. This allows companies to see results quickly, identify and fix issues sooner, and learn from each cycle more effectively. Small batches also support faster feedback, which reduces the risk of investing too much in a product direction that may not resonate with customers.

10. Lean Thinking and Continuous Deployment

Ries borrows ideas from lean manufacturing, emphasizing efficiency, eliminating waste, and maximizing value. Continuous deployment is one application of these principles in software development, where code is released to users as soon as it’s ready, allowing for faster iteration and adaptation. This practice ensures that customers’ needs drive development, as real feedback informs the next steps.

11. Building an Agile Organization

The Lean Startup framework is not just for product development but can also be applied to build a more agile organization. Ries discusses how lean principles can help create a company culture that embraces change, is adaptable to new information, and remains customer-focused. By fostering a learning organization, startups can maintain relevance even as market dynamics shift.

12. The Lean Startup in Large Organizations

Although the Lean Startup method is most commonly associated with new ventures, Ries also explains how large, established companies can benefit from applying these principles. In large organizations, lean practices can create innovation teams that operate independently and experiment with new ideas, insulated from the bureaucracy that often stifles agility. By fostering intrapreneurship (entrepreneurial thinking within an organization), larger companies can keep innovating and responding to customer needs effectively.

Things to remember

• Startup success is not a consequence of good genes or being in the right place at the right time. Startup success can be engineered by following the right process, which means it can be learned.
• A startup is not launching a rocket, its like driving a car. You will have to course-correct on the fly to be able to survive.
• Unfortunately, too many startup business plans look more like they are planning to launch a rocket ship than drive a car. They prescribe the steps to take and the results to expect in excruciating detail, and as in planning to launch a rocket, they are set up in such a way that even tiny errors in assumptions can lead to catastrophic outcomes.
• “Developing these experimentation systems is the responsibility of senior management; they have to be put in by the leadership. It’s moving leaders from playing Caesar with their thumbs up and down on every idea to—instead—putting in the culture and the systems so that teams can move and innovate at the speed of the experimentation system.”
• Learning to see waste and then systematically eliminate it has allowed lean companies such as Toyota to dominate entire industries
• For example, what if we simply had offered customers the opportunity to download the product from us solely on the basis of its proposed features before building anything? Remember, almost no customers were willing to use our original product, so we wouldn’t have had to do much apologizing when we failed to deliver.
• 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.4
• This is true startup productivity: systematically figuring out the right things to build.
• The more pertinent questions are “Should this product be built?” and “Can we build a sustainable business around this set of products and services?” To answer those questions, we need a method for systematically breaking down a business plan into its component parts and testing each part empirically.
• This is one of the most important lessons of the scientific method: if you cannot fail, you cannot learn.
• 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.
• Instead, I try to push my team to first answer four questions:
  1. Do consumers recognize that they have the problem you are trying to solve?
  2. If there was a solution, would they buy it?
  3. Would they buy it from us?
  4. Can we build a solution for that problem?”
• As Cook says, “Success is not delivering a feature; success is learning how to solve the customer’s problem.”
• We can visualize this three-step process with this simple diagram:
• Once clear on these leap-of-faith assumptions, the first step is to enter the Build phase as quickly as possible with a minimum viable product (MVP). 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.
• I recommend is called innovation accounting, a quantitative approach that allows us to see whether our engine-tuning efforts are bearing fruit.
• Luckily, this judgment is not difficult to develop: most entrepreneurs and product development people dramatically overestimate how many features are needed in an MVP. When in doubt, simplify.
• That one early adopter got the concierge treatment.
• Instead of looking at cumulative totals or gross numbers such as total revenue and total number of customers, one looks at the performance of each group of customers that comes into contact with the product independently. Each group is called a cohort.
• Under the surface, it should have been clear that our efforts at tuning the engine were reaching diminishing returns, the classic sign of the need to pivot.
• A CATALOG OF PIVOTS
• Sustainable growth is characterized by one simple rule: New customers come from the actions of past customers.
• There are four primary ways past customers drive sustainable growth:
• Imagine another pair of businesses. The first makes $1oneachcustomeritsignsup;thesecondmakes$100,000 from each customer it signs up. To predict which company will grow faster, you need to know only one additional thing: how much it costs to sign up a new customer.
• “Stop production so that production never has to stop.”
• You should be able to spot the many problems with this situation: the use of vanity metrics instead of actionable metrics, an overly long cycle time, the use of large batch sizes, an unclear growth hypothesis, a weak experimental design, a lack of team ownership, and therefore very little learning.
• Split testing, continuous deployment, and customer testing were all standard practice.
• However, the individual efficiency of these specialists is not the goal in a Lean Startup. Instead, we want to force teams to work cross-functionally to achieve validated learning.
• There is surely nothing quite so useless as doing with great efficiency what should not be done at all.
• It is insufficient to exhort workers to try harder. Our current problems are caused by trying too hard—at the wrong things. By focusing on functional efficiency, we lose sight of the real goal of innovation: to learn that which is currently unknown.
• Anytime a team attempts to demonstrate cause and effect by placing highlights on a graph of gross metrics, it is engaging in pseudoscience. How do we know that the proposed cause and effect is true? Anytime a team attempts to justify its failures by resorting to learning as an excuse, it is engaged in pseudoscience as well.