Every so often a business book comes along that changes how we think about innovation and entrepreneurship… The Lean Startup has the chops to join this exalted company. – Financial Times
Since the Lean Start Up was written in 2011, it has revolutionized the approach of entrepreneurs to start-ups. The Lean Start Up methods are now being taught in some Business Schools. Some of the terms coined by Ries such as pivot, minimally viable product, and continuous innovation are now enmeshed in entrepreneurial circles.
The book, defines start-ups as “an organization dedicated to creating something new under conditions of extreme uncertainty.” Thus, he places start-ups in the realm of large corporations as well as small businesses.
The lean start-up model is based on the principles of Toyota including using small batch sizes, just-in-time production, inventory control and faster cycle times.
Startups often build things that no-one wants. It doesn’t matter how quickly or brilliantly or cheaply we build something, if no-one wants it. Ries wrote that the goal of a startup “is to figure out the right thing to build – the thing that customers want and will pay for as quickly as possible”.
Startups are more than the product, but an institution that requires management. Thus, entrepreneurship requires a managerial discipline. Ries, discusses in detail the role of the manager in a startup, to enable an environment in which experimentation and the lean startup principles can flourish.
The idea is to make a minimum viable product and then start testing with real customers. Ries suggests that anything added above that which is required to make a minimum viable product that can be shown and tested with early adopters is waste.
Startups have what Ries terms an “engine of growth.” Any changes to the product should drive the engine of growth. The lean start up model uses a measure of progress called validated learning, where any change requires the formulation and then testing of an hypothesis. The results of the constant testing can then guide the entrepreneur as to whether it is appropriate to continue or pivot. Ries refers to the as the build-measure-learn feedback loop. The measurement must include actionable metrics based on the hypothesis and not vanity metrics which can be misleading. In this way, waste of time producing items or features not wanted by the market can be avoided. He explains that this often involves one or more pivots of different types.
The lean startup model views problems and defects as an opportunity for learning. Its method of root cause analysis is the five whys – simply asking why five times. This very simple technique enables the root cause to be identified, which is often hidden behind more obvious symptoms. Then all five levels need to be addressed.
However, the lean startup model is more than a set of techniques to be ticked off from a list. It is a model that should be adapted to the business in question.
Pros: Many businesses have in the past spent months or even years in building their product before it is seen by a single customer. Then, often, after months or even years of development, entrepreneurs learn the hard way that customers do not need or want either the product itself or most of the product’s features. The lean start-up model reduces this waste.
Cons: A lot of his book talks about teams and management, which makes the book appear less useful for the small startup with only one or two people. The minimum viable product needs to be decided with care. Some have used the Lean Startup model as an excuse to rush incomplete or mistake ridden products to market. This can have consequences for how you are regarded in the market that can be difficult or impossible to overturn. Finally the pace of innovation and testing can increase the workload beyond the point that it is useful. In the book Ries gave the example of SnapTax, a part of Inuit. SnapTax tested over 500 innovations during the two-and-a-half-month tax period, up to seventy in a week, or 14 a day.
Conclusion: A longer book than necessary for the information that it contains. It contains a lot of useful concepts and techniques such as minimum viable product and the five whys. Interacting with customers from early on in development is important. Understanding how to predict and measure is useful and being given permission to pivot is, well pivotal. It deserves its place in the classics of business but must be taken with a good dose of common sense.
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