Here are some ways Lean Startup principles can be applied:
- Build minimum viable products (MVPs) instead of fully developed products to get feedback early from real customers. MVPs allow for frequent iterations.
- Use the Build-Measure-Learn feedback loop. Rapidly introduce small changes, measure their impact on key metrics, and learn what works and what doesn't.
- Continuously validate hypotheses about problem-solution fit and business model fit with customers. Pivot as needed based on learning.
- Focus on actionable, validated metrics over vanity metrics to guide decisions. Metrics should demonstrate clear cause-and-effect relationships.
- Embrace failure and treat it as an opportunity to learn.
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Lean startup notes
1. Michael’s notes on:
“The Lean Startup: How
Today's Entrepreneurs Use
Continuous Innovation to
Create Radically
Successful Businesses”
by Eric Ries
2. Lean Startup
1. Entrepreneurs are everywhere
You don’t have to work in a garage to be in a startup.
2. Entrepreneurship is management
A startup is an institution, not just a product, and so it requires a new kind of
management specifically geared to its context of extreme uncertainty.
3. Validated learning
Startups exist not just to make stuff, make money, or even serve customers. They exist
to learn how to build a sustainable business
4. Build-Measure-Learn
The fundamental activity of a startup is to turn ideas into products, measure how
customers respond, and then learn whether to pivot or persevere.
5. Innovation accounting
To improve entrepreneurial outcomes and hold innovators accountable, we need to
focus on the boring stuff: how to measure progress, how to set up milestones, and how
to prioritize work.
3. Lean Startup
1. Entrepreneurs are everywhere
You don’t have to work in a garage to be in a startup.
2. Entrepreneurship is management
A startup is an institution, not just a product, and so it requires a new kind of
management specifically geared to its context of extreme uncertainty.
3. Validated learning
Startups exist not just to make stuff, make money, or even serve customers. They exist
to learn how to build a sustainable business
4. Build-Measure-Learn
The fundamental activity of a startup is to turn ideas into products, measure how
customers respond, and then learn whether to pivot or persevere.
5. Innovation accounting
To improve entrepreneurial outcomes and hold innovators accountable, we need to
focus on the boring stuff: how to measure progress, how to set up milestones, and how
to prioritize work.
4. Lean Startup
1. Entrepreneurs are everywhere
You don’t have to work in a garage to be in a startup.
2. Entrepreneurship is management
A startup is an institution, not just a product, and so it requires a new kind of
management specifically geared to its context of extreme uncertainty.
3. Validated learning
Startups exist not just to make stuff, make money, or even serve customers. They exist
to learn how to build a sustainable business
4. Build-Measure-Learn
The fundamental activity of a startup is to turn ideas into products, measure how
customers respond, and then learn whether to pivot or persevere.
5. Innovation accounting
To improve entrepreneurial outcomes and hold innovators accountable, we need to
focus on the boring stuff: how to measure progress, how to set up milestones, and how
to prioritize work.
5. Lean Startup
1. Entrepreneurs are everywhere
You don’t have to work in a garage to be in a startup.
2. Entrepreneurship is management
A startup is an institution, not just a product, and so it requires a new kind of
management specifically geared to its context of extreme uncertainty.
3. Validated learning
Startups exist not just to make stuff, make money, or even serve customers. They exist
to learn how to build a sustainable business
4. Build-Measure-Learn
The fundamental activity of a startup is to turn ideas into products, measure how
customers respond, and then learn whether to pivot or persevere.
5. Innovation accounting
To improve entrepreneurial outcomes and hold innovators accountable, we need to
focus on the boring stuff: how to measure progress, how to set up milestones, and how
to prioritize work.
6. Lean Startup
1. Entrepreneurs are everywhere
You don’t have to work in a garage to be in a startup.
2. Entrepreneurship is management
A startup is an institution, not just a product, and so it requires a new kind of
management specifically geared to its context of extreme uncertainty.
3. Validated learning
Startups exist not just to make stuff, make money, or even serve customers. They exist
to learn how to build a sustainable business
4. Build-Measure-Learn
The fundamental activity of a startup is to turn ideas into products, measure how
customers respond, and then learn whether to pivot or persevere.
5. Innovation accounting
To improve entrepreneurial outcomes and hold innovators accountable, we need to
focus on the boring stuff: how to measure progress, how to set up milestones, and how
to prioritize work.
7. Traditional Management does NOT work for Startups and Innovation
• Planning and forecasting are only accurate when based on a long, stable
operating history and a relatively static environment
• In general management, a failure to deliver results is due to either a failure
to plan adequately or a failure to execute properly
• Both are significant lapses, yet new product development in our modern
economy routinely requires exactly this kind of failure on the way to
greatness
• Most tools from general management are not designed to flourish in the
harsh soil of extreme uncertainty in which startups thrive
• Innovation is a bottoms-up, decentralized, and unpredictable thing, but
that doesn’t mean it cannot be managed
8. How to Measure Progress in Innovation?
• As an engineer and managers we are accustomed to measuring
progress by making sure our work proceeded according to
plan, was high quality, and cost about what we had projected
• Lethal problem of achieving failure:
successfully executing a plan that leads nowhere
9. Validated Learning
• Lean thinking defines value as providing benefit to the customer;
anything else is waste
• Validated learning is the process of demonstrating empirically that a team
has discovered valuable truths about a startup’s present and future
business prospects
• It is called validated learning because it is always demonstrated by
positive improvements in the startup’s core metrics
• Validated learning is backed up by empirical data collected from real
customers.
10. The question is not “Can this product be built?”
In the modern economy, almost any product that
can be imagined can be built. The more pertinent
questions are “Should this product be built?” and
“Can we build a sustainable business around this
set of products and services?”
11. Two Main Assumptions
Value hypothesis
The value hypothesis tests whether a product or service
really delivers value to customers once they are using it
Growth hypothesis
Does startup has a business model that can achieve a
sustainable growth
13. MVP Minimum Valuable Product
• 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
• Unlike a prototype or concept test, an MVP is designed not just to answer product design
or technical questions. Its goal is to test fundamental business hypotheses.
• The lesson of the MVP 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
• Always focused on scaling something that was working rather than trying to invent
something that might work in the future.
• Remove any feature, process, or effort that does not contribute directly to the learning
you seek
14. What about Quality?
• Modern business and engineering philosophies focus on producing high-quality
experiences for customers as a primary principle;
• It is the foundation of Six Sigma, lean manufacturing, design thinking, extreme
programming, and the software craftsmanship movement.
• These discussions of quality presuppose that the company already knows what
attributes of the product the customer will perceive as worthwhile.
• In a startup, this is a risky assumption to make. Often we are not even sure who the
customer is. Thus, for startups, I believe in the following quality principle:
If we do not know who the customer is,
we do not know what quality is
15. FROM THE MVP TO INNOVATION ACCOUNTING
• When one is choosing among the many assumptions in a business plan, it makes sense
to test the riskiest assumptions first. If you can’t find a way to mitigate these risks toward
the ideal that is required for a sustainable business, there is no point in testing the
others.
• Once the baseline has been established, the startup can work toward the second
learning milestone: tuning the engine. Every product development, marketing, or other
initiative that a startup undertakes should be targeted at improving one of the drivers of
its growth model.
• For example, a company might spend time improving the design of its product to make it
easier for new customers to use. This presupposes that the activation rate of new
customers is a driver of growth and that its baseline is lower than the company would
like. To demonstrate validated learning, the design changes must improve the activation
rate of new customers
16. OPTIMIZATION VERSUS LEARNING
• If you are building the wrong thing, optimizing the product or its marketing will not yield
significant results
• Thus the downward cycle begins: the product development team valiantly tries to build a
product according to the specifications it is receiving from the creative or business
leadership. When good results are not forthcoming, business leaders assume that any
discrepancy between what was planned and what was built is the cause and try to
specify the next iteration in greater detail.
• Learning milestones prevent this negative spiral by emphasizing a more likely
possibility: the company is executing — with discipline! — a plan that does not make
sense.
• The innovation accounting framework makes it clear when the company is stuck and
needs to change direction.
17. User stories were are not 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)
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
18. ACTIONABLE METRICS VERSUS VANITY METRICS
• Actionable
For a report to be considered actionable, it must demonstrate clear cause
and effect
• Accessible
All too many reports are not understood by the employees and managers
who are supposed to use them to guide their decision making.
• Auditable
We must ensure that the data is credible to employees
20. Catalog of Pivots
• Zoom-in Pivot
In this case, what previously was considered a single feature in a product
becomes the whole product.
• Zoom-out Pivot
In the reverse situation, sometimes a single feature is insufficient to
support a whole product. In this type of pivot, what was considered the
whole product becomes a single feature of a much larger product.
• Customer Segment Pivot
In this pivot, the company realizes that the product it is building solves a
real problem for real customers but that they are not the type of
customers it originally planned to serve. In other words, the product
hypothesis is partially confirmed, solving the right problem, but for a
different customer than originally anticipated.
21. Catalog of Pivots (Continued)
• Customer Need Pivot
As a result of getting to know customers extremely well, it sometimes becomes clear that
the problem we’re trying to solve for them is not very important. However, because of
this customer intimacy, we often discover other related problems that are important and
can be solved by our team
• Platform Pivot
A platform pivot refers to a change from an application to a platform or vice versa. Most
commonly, startups that aspire to create a new platform begin life by selling a single
application, the so-called killer app, for their platform
• Business Architecture Pivot
This pivot borrows a concept from Geoffrey Moore, who observed that companies
generally follow one of two major business architectures:
• high margin, low volume (complex systems model) or
• low margin, high volume (volume operations model)
22. Catalog of Pivots (Continued)
• Channel Pivot
In traditional sales terminology, the mechanism by which a company
delivers its product to customers is called the sales channel or
distribution channel. A channel pivot is a recognition that the same basic
solution could be delivered through a different channel with greater
effectiveness.
• Technology Pivot
Occasionally, a company discovers a way to achieve the same solution by
using a completely different technology. Technology pivots are much
more common in established businesses. In other words, they are a
sustaining innovation, an incremental improvement designed to appeal to
and retain an existing customer base.
•
23. Catalog of Pivots (Continued)
• Value Capture Pivot
There are many ways to capture the value a company creates. These
methods are referred to commonly as monetization or revenue models.
Often, changes to the way a company captures value can have far-
reaching consequences for the rest of the business, product, and
marketing strategies
• Engine of Growth Pivot
There are three primary engines of growth that power startups:
the viral
sticky
paid growth
In this type of pivot, a company changes its growth strategy to seek faster or more profitable
growth.
24. Engines of Sustainable Growth
• Sticky
Attract and retain customers for a long time. The rules that govern the sticky
engine of growth are simple: rate of new customer acquisition needs to exceed
the churn rate
• Viral
Awareness of the product spreads rapidly from person to person similarly to the
way a virus becomes an epidemic. The viral coefficient measures how many
new customers will use a product as a consequence of each new customer who
signs up
• Paid
Customers are acquired based on investment in advertising or sales force
Customer lifetime value needs to exceed customer acquisition cost
25. Product Market Fit
Product/Market Fit was a phrase coined by
Marc Andreessen.
“Product/market fit means being in a good market
with a product that can satisfy that market.”
26. We often miss the memo
Dear XXX, Congratulations!
The job you used to do at this company is no longer available. However, you have
been transferred to a new job in the company.
Actually, it’s not the same company anymore, even though it has the same name
and many of the same people. And although the job has the same title, too, and
you used to be good at your old job, you’re already failing at the new one.
This transfer is effective as of six months ago, so this is to alert you that you’ve
already been failing at it for quite some time.
Best of luck!
27. Wisdom of Five Whys
A new release disabled a feature for customers.
1. Why?
Because a particular server failed.
2. Why did the server fail?
Because an obscure subsystem was used in the wrong way.
3. Why was it used in the wrong way?
The engineer who used it didn’t know how to use it properly.
4. Why didn’t he know?
Because he was never trained.
5. Why wasn’t he trained?
Because his manager doesn’t believe in training new engineers because
he and his team are “too busy”
28. Learning to use Five Whys
• Make a Proportional Investment
The investment should be smaller when the symptom is minor and larger when
the symptom is more painful. We don’t make large investments in prevention
unless we’re coping with large problems
• Avoid Five Blames
When blame inevitably arises, the most senior people in the room should repeat
this mantra: if a mistake happens, shame on us for making it so easy to make
that mistake.
• Be tolerant of all mistakes the first time. Never allow the same mistake to
be made twice
• Start Small; Start with a narrowly targeted class of symptoms
• Appoint a Five Whys Master To facilitate learning
two leaps of faith stand above all others: the value creation hypothesis and the growth hypothesis. The first step in understanding a new product or service is to figure out if it is fundamentally value-creating or value-destroying.Read more at location 1108
Top of Form
Bottom of Form
it’s essential that entrepreneurs understand the reasons behind a startup’s growth. There are many value-destroying kinds of growth that should be avoided. An example would be a business that grows through continuous fund-raising from investors and lots of paid advertising but does not develop a value-creating product.
Although we write the feedback loop as Build-Measure-Learn because the activities happen in that order, our planning really works in the reverse order: we figure out what we need to learn, use innovation accounting to figure out what we need to measure to know if we are gaining validated learning, and then figure out what product we need to build to run that experiment and get that measurement
Most important, teams working in this system begin to measure their productivity according to validated learning, not in terms of the production of new features.
Startups also have a true north, a destination in mind: creating a thriving and world-changing business. I call that a startup’s vision.
To achieve that vision, startups employ a strategy, which includes
a business model,
a product road map,
a point of view about partners and competitors, and
ideas about who the customer will be. The product is the end result of this strategy (see the chart on this page). Products change constantly through the process of optimization, what I call tuning the engine. Less frequently, the strategy may have to change (called a pivot). However, the overarching vision rarely changes. Entrepreneurs are committed to seeing the startup through to that destination. Every setback is an opportunity for learning how to get where they want to go (see the chart below
Pivots come in different flavors. The word pivot sometimes is used incorrectly as a synonym for change. A pivot is a special kind of change designed to test a new fundamental hypothesis about the product, business model, and engine of growth
The Sticky Engine of Growth when customer is returning to the site to use product constantly Dropbox or Evernote
Therefore, companies using the sticky engine of growth track their attrition rate or churn rate very carefully. The churn rate is defined as the fraction of customers in any period who fail to remain engaged with the company’s The rules that govern the sticky engine of growth are pretty simple: if the rate of new customer acquisition exceeds the churn rate, the product will grow.
The Viral Engine of Growth Online social networks and Tupperware are examples of products for which customers do the lion’s share of the marketing.
Awareness of the product spreads rapidly from person to person similarly to the way a virus becomes an epidemic.
Customers are not intentionally acting as evangelists; they are not necessarily trying to spread the word about the product. Growth happens automatically as a side effect of customers using the product. Viruses are not optional.
viral engine is powered by a feedback loop that can be quantified. It is called the viral loop, and its speed is determined by a single mathematical term called the viral coefficient. The higher this coefficient is, the faster the product will spread. The viral coefficient measures how many new customers will use a product as a consequence of each new customer who signs up.
The Paid Engine of Growth advertising or sales force
Each engine requires a focus on unique metrics to evaluate the success of new products and prioritize new experiments.
Sticky collectable market place, customers has reason to return or some subscriptions models
Viral is Hotmail or social netwroks
The Sticky Engine of Growth when customer is returning to the site to use product constantly Dropbox or Evernote
Therefore, companies using the sticky engine of growth track their attrition rate or churn rate very carefully. The churn rate is defined as the fraction of customers in any period who fail to remain engaged with the company’s The rules that govern the sticky engine of growth are pretty simple: if the rate of new customer acquisition exceeds the churn rate, the product will grow.
The Viral Engine of Growth Online social networks and Tupperware are examples of products for which customers do the lion’s share of the marketing.
Awareness of the product spreads rapidly from person to person similarly to the way a virus becomes an epidemic.
Customers are not intentionally acting as evangelists; they are not necessarily trying to spread the word about the product. Growth happens automatically as a side effect of customers using the product. Viruses are not optional.
viral engine is powered by a feedback loop that can be quantified. It is called the viral loop, and its speed is determined by a single mathematical term called the viral coefficient. The higher this coefficient is, the faster the product will spread. The viral coefficient measures how many new customers will use a product as a consequence of each new customer who signs up.
The Paid Engine of Growth advertising or sales force
A startup can evaluate whether it is getting closer to product/ market fit as it tunes its engine by evaluating each trip through the Build-Measure-Learn feedback loop using innovation accounting. What really matters is not the raw numbers or vanity metrics but the direction and degree of progress.
Getting a startup’s engine of growth up and running is hard enough, but the truth is that every engine of growth eventually runs out of gas. Every engine is tied to a given set of customers and their related habits, preferences, advertising channels, and interconnections. At some point, that set of customers will be exhausted. This may take a long time or a short time, depending on one’s industry and timing.
Product market fit is not forever. Business is changing and growing and what was sufficient before is not guaranteed to work in the future
When Eric was CTO of IMVU
To accelerate, Lean Startups need a process that provides a natural feedback loop. When you’re going too fast, you cause more problems. Adaptive processes force you to slow down and invest in preventing the kinds of problems that are currently wasting time. As those preventive efforts pay off, you naturally speed up again.
At the root of every seemingly technical problem is a human problem. Five Whys provides an opportunity to discover what that human problem might be
A new release disabled a feature for customers.
1)Why? Because a particular server failed.
2. Why did the server fail? Because an obscure subsystem was used in the wrong way.
3. Why was it used in the wrong way? The engineer who used it didn’t know how to use it properly.
4. Why didn’t he know? Because he was never trained.
5. Why wasn’t he trained? Because his manager doesn’t believe in training new engineers because he and his team are “too busy
Five Whys sessions as new problems come up. Since baggage issues are endemic, they naturally come up as part of the Five Whys analysis and you can take that opportunity to fix them incrementally. If they don’t come up organically, maybe they’re not as big as they seem. 2. Everyone who is connected to a problem needs to be at the Five Whys session. Many organizations face the temptation to save time by sparing busy people from the root cause analysis. This is a false economy, as IGN discovered the hard way. 3. At the beginning of each Five Whys session, take a few minutes to explain what the process is for and how it works for the benefit of those who are new to it. If possible, use an example of a successful Five Whys session from the past. If you’re brand new, you can use my earlier example about the manager who doesn’t believe in training. IGN learned that, whenever possible, it helps to use something that has personal meaning for the team