The lean startup : how today's entrepreneurs use continuous innovation to create radically successful businesses

In late 2011, The Lean Startup by Eric Ries became one of the top selling business books. A significant portion of the content is dedicated to the development of radically new products. Ries asserts that “Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught” (p. 3). His stated mission is “to improve the success rate of new innovative products worldwide” (p. 8). The book is written for entrepreneurs around his definition of a startup which is “a human institution designed to create new products and services under conditions of extreme uncertainty” (p. 8). In The Lean Startup, use of the term ‘lean’ is consistent with the meaning in the phrase ‘lean manufacturing,’ the management philosophy derived from the Toyota Production System (TPS). In this context, lean is an approach that strives to minimize the expenditure of resources for anything but the creation of value for the customer. The Lean Startup is not difficult to read or comprehend. It is also available in an audio version that is nine hours in duration. It is segmented into three parts. The first two, Vision and Steer, address fundamentals. The focus of the Vision part is to provide a paradigm for entrepreneurial management. The central tenet demands ‘validated learning’ to determine if your assumptions correct. It is rigorous method for demonstrating progress that benefits customers. The Steer part provides technique to speed learning. The final part, Accelerate, presents techniques to allow “Lean Startups to grow without sacrificing the speed and agility that are the lifeblood of every startup” (p. 182). Much of the book’s content is derived from of stories that describe the author’s approach to dealing with the extreme uncertainty that is typical in startups. In Chapter 3, Ries relates the story of six months of his development efforts that produced a product that no one wanted. Ries’ realized that he could have learned this lesson earlier. Knowing this earlier would have reduced wasted efforts. This realization shaped the core recommendations described in The Lean Startup. The author’s recommendations include: 1. Validated Learning: An empirical method of measuring progress regarding present and future business prospects (p. 38). A typical scenario starts with a hypothesis and then quickly transitions to an experiment. A common experiment involved building two version of a prototype. This enabled split testing (also known as A/B testing) that produced empirical results. In The Lean Startup, entrepreneurs are advised to seek experimental results instead of accepting information from unvalidated opinions in the form of estimate, projections, and forecasts. 2. Build-Measure-Learn Feedback Loop: The graphical representation of Ries’ process that produces validated learning. The entire loop includes Ideas (preceding Build), Product (preceding Measure), and Data (preceding Learn). 3. Minimum Viable Product: a version of a product during development that “enables a full turn of the Build-Measure-Learn loop with a minimum amount of effort and the least amount of development time” (p. 77). Ries recommends testing the riskiest elements of a startup’s plan first (p. 76). To test fundamental business hypotheses, the recommendation is to test new versions of minimum viable products throughout product development. In contrast, a common use of product prototypes is to test functionality. 4. Innovation Accounting: an approach that uses the concepts of a minimum viable product, tuning, and pivot or persevere decisions to test business plan assumptions. It is used to determine if a product is becoming more valuable to customers. Innovation accounting does not reward items such as the achieveJ PROD INNOV MANAG