2013-01-16, Nerijus Celkonas

The Lean Startup

 

Most of you have probably heard about „The Lean Startup“ - a book by Eric Ries published in 2011.

For those who haven‘t heard or read it, I strongly recommend to find a copy as soon as possible, as this isn‘t just another one of those less than challenging books for Startups. This book depicts the best adaptations of today‘s business practices of the ever changing world of today. Furthermore, these thoughts are even more suitable for big companies, as disruptive innovations create completely new markets and existent products simply disappear.

Product development circle: Minimum variable product (MVP)->Continuous development->Split testing->Actionable metrics->Pivot-> Continuous development and so on.

Look at Spotify real life circle

 

Here I present few extracts that I found personally thought provoking:

 „What differentiates the success stories from the failures is that the successful entrepreneurs had the foresight, the ability, and the tools to discover which parts of their plans were working brilliantly and which were misguided, and adapt their strategies accordingly“ 

 

„Entrepreneurship is management. And yet, imagine a modern manager who is tasked with building a new product in the context of an established company. Imagine that she goes back to her company’s chief Financial officer (CFO) a year later and says, “We have failed to meet the growth targets we predicted. In fact, we have almost no new customers and no new revenue. However, we have learned an incredible amount and are on the cusp of a breakthrough new line of business. All we need is another year.” Most of the time, this would be the last report this intrapreneur would give her employer. The reason is that in general management, a failure to deliver results is due to either a failure to plan adequately or a failure to execute properly.“ 

 

„Before new products can be sold successfully to the mass market, they have to be sold to early adopters. These people are a special breed of customer. They accept—in fact prefer—an 80 percent solution; you don’t need a perfect solution to capture their interest.“

 

„This is a hard truth for many entrepreneurs to accept. After all, the vision entrepreneurs keep in their heads is of a high-quality mainstream product that will change the world, not one used by a small niche of people who are willing to give it a shot before it’s ready. That world-changing product is polished, slick, and ready for prime time. It wins awards at trade shows and, most of all, is something you can proudly show Mom and Dad. An early, buggy, incomplete product feels like an unacceptable compromise. How many of us were raised with the expectation that we would put our best work forward? As one manager put it to me recently, “I know for me, the MVP (Minimum viable products) feels a little dangerous—in a good way—since I have always been such a perfectionist.” Minimum viable products range in complexity from extremely simple smoke tests (little more than an advertisement) to actual early prototypes complete with problems and missing features. Deciding exactly how complex an MVP needs to be cannot be done formulaically. It requires judgment. 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.“

 

„The lesson of the MVP (Minimum viable products)  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. „

 

„It is important to contrast this with the case of a small business, in which it is routine to see the CEO, founder, president, and owner serving customers directly, one at a time. In a concierge MVP, this personalized service is not the product but a learning activity designed to test the leap-of-faith assumptions in the company’s growth model. In fact, a common outcome of a concierge MVP is to invalidate the company’s proposed growth model, making it clear that a different approach is needed. This can happen even if the initial MVP is profitable for the company. Without a formal growth model, many companies get caught in the trap of being satisfied with a small profitable business when a pivot (change in course or strategy) might lead to more significant growth. The only way to know is to have tested the growth model systematically with real customers. „

 

„As you consider building your own minimum viable product, let this simple rule sufice: remove any feature, process, or effort that does not contribute directly to the learning you seek. „

 

„Legal risks may be daunting, but you may be surprised to learn that the most common objection I have heard over the years to building an MVP is fear of competitors—especially large established companies—stealing a startup’s ideas. If only it were so easy to have a good idea stolen! Part of the special challenge of being a startup is the near impossibility of having your idea, company, or product be noticed by anyone, let alone a competitor. In fact, I have often given entrepreneurs fearful of this issue the following assignment: take one of your ideas (one of your lesser insights, perhaps), find the name of the relevant product manager at an established company who has responsibility for that area, and try to get that company to steal your idea. Call them up, write them a memo, send them a press release—go ahead, try it. The truth is that most managers in most companies are already overwhelmed with good ideas. Their challenge lies in prioritization and execution, and it is those challenges that give a startup hope of surviving. If a competitor can outexecute a startup once the idea is known, the startup is doomed anyway. The reason to build a new team to pursue an idea is that you believe you can accelerate through the Build-Measure-Learn feedback loop faster than anyone else can. If that’s true, it makes no difference what the competition knows. If it’s not true, a startup has much bigger problems, and secrecy won’t fix them. Sooner or later, a successful startup will face competition from fast followers. A head start is rarely large enough to matter, and time spent in stealth mode—away from customers—is unlikely to provide a head start. The only way to win is to learn faster than anyone else. „

 

„Following the lean manufacturing principle of kanban, or capacity constraint, Grockit changed the product prioritization process. Under the new system, user stories were not considered complete until they led to validated learning. Thus, stories could be cataloged as being in one of four states of development: in the product backlog, actively being built, done (feature complete from a technical point of view), or in the process of being validated. Validated was defined as “knowing whether the story was a good idea to have been done in the first place.” This validation usually would come in the form of a split test showing a change in customer behavior but also might include customer interviews or surveys. „

 

„They were confident in this feature because lazy registration is considered one of the design best practices for online services. In this system, customers do not have to register for the service up front. Instead, they immediately begin using the service and are asked to register only after they have had a chance to experience the service’s benefit. I encouraged the team to try a simple split-test. They took one cohort of customers and required that they register immediately, based on nothing more than Grockit’s marketing materials. To their surprise, this cohort’s behavior was exactly the same as that of the lazy registration group: they had the same rate of registration, activation, and subsequent retention. In other words, the extra effort of lazy registration was a complete waste even though it was considered an industry best practice. „


„The decision to pivot requires a clear-eyed and objective mind-set. We’ve discussed the telltale signs of the need to pivot: the decreasing effectiveness of product experiments and the general feeling that product development should be more productive. Whenever you see those symptoms, consider a pivot. „

 

„The decision to pivot is emotionally charged for any startup and has to be addressed in a structured way. One way to mitigate this challenge is to schedule the meeting in advance. I recommend that every startup have a regular “pivot or persevere” meeting. In my experience, less than a few weeks between meetings is too often and more than a few months is too infrequent. However, each startup needs to find its own pace. „

 

Now think about what were you taught in universities and colleges and where should you invest your next 50 bucks?

 

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