The Scientific Approach to Building a Successful, Innovative and Sustainable Business – The Lean Startup

The Lean Startup, by Eric Ries, is a book that leverages the scientific method to redefine entrepreneurship as the process of developing successful, innovative and sustainable businesses.

I just finished reading a book that will undoubtedly influence decisions that I make for the rest of my life. The book is called, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, and was written by Eric Ries.

Background

Here is what I have learned about Eric Ries:

  • He graduated from Yale in 2001
  • Ries was the CTO and co-founder of IMVU, a successful startup based on the framework outlined in the book
  • He has received numerous awards and accolades from various business and tech publications
  • In 2010, Ries was selected by Harvard Business School as an Entrepreneur in Residence
  • He is equally well-versed in both the technology and business aspects of leading a successful startup

After being a part of a startup that failed in the infamous dot com boom/crash, Ries went on to achieve great success by applying the scientific method to the art and practice of entrepreneurship. Over the last several years, he has become the leader of the Lean Startup movement that has taken both new and existing businesses, inside and outside of the tech world, to sustainable models of growth. After years of speaking, training, consulting and blogging about these proven strategies, Ries published a book on the subject in September 2011.

The Lean Startup, in a nutshell

Too many startups begin with an idea for a product that they think people want. They then spend months, sometimes years, perfecting that product without ever showing the product, even in a very rudimentary form, to the prospective customer. When they fail to reach broad uptake from customers, it is often because they never spoke to prospective customers and determined whether or not the product was interesting. When customers ultimately communicate, through their indifference, that they don’t care about the idea, the startup fails.

via The Lean Startup: Methodology

The key to success of any business, is to offer the right product to the right people at the right price. But when you are developing a new product or service, how do you know if you are right? According to Ries, the answer is simple: get the product into the hands of customers as soon as possible, and learn as much as you can in the process. Obviously that is easier said than done. So Ries has developed a rigorous evidence-based approach to accelerating the product development cycle based on the following principles:

  1. “Entrepreneurs are everywhere” – Even if you work for an existing/established firm, in order to continue to grow, innovation has to be fostered. In the book, Ries cites Intuit as an example of a firm that used Lean Startup principles to create new products and services. He refers to the entrepreneurial leaders at existing firms as intrapreneurs.
  2. “Entrepreneurship is management” – Contrary to popular belief, creativity and innovation can be managed. The key is that new product development needs to be both simultaneously supported and held accountable by managers (and/or investors, stakeholders, etc.). Something most traditional managers are ill-equipped for.
  3. Validated Learning – The paradigm shift that Ries advocates stronger than perhaps anything else, is that “[s]tartups exist not to make stuff, make money, or serve customers. They exist to learn how to build a sustainable business.” That type of learning is something that is quantifiable and should be approached through carefully validated experimentation. The key is to identify the right types of variables to be tested in each experiment – no different than what we are taught in elementary science classes.
  4. Innovation Accounting – Most new and existing business leaders are accustomed to what Ries refers to as vanity metrics, which are numbers such as total number of “hits” to the site. In other words, that number might sound impressive, but what does it really mean? Instead, Ries recommends using actionable metrics, which might focus on amount of revenue generated per customer, for example. The key is to establish clear methods of measuring progress, establishing milestones, and prioritizing work.
  5. Build-Measure-Learn – When you are creating a new product or service, you are making what Ries calls leap-of-faith assumptions. The most important of those assumptions are the value hypothesis (will this product/service have value in the marketplace) and the growth hypothesis (what will fuel growth – long-term customer relationships, so-called viral growth, or paid advertising). To test these hypotheses, the lean startup builds a minimum viable product (“that version of a new product which allows a team to collect the maximum amount of validated learning with the least effort”), measures response to that product release using the aforementioned actionable metrics, and applies the learning from that data to guide future development. The key is to move through the Build-Measure-Learn cycle as quickly as possible.

What’s The Point?

The Lean Startup isn’t going to tell you how to design a better mousetrap. But this book will help you to develop the successful business platform for developing better and better mousetraps. The old ways of doing things simply do not work anymore. Great ideas are born every second. But it takes a clear and cogent plan in order to develop a business around a great idea. And sometimes, the original idea that we have, may not be what customers want. By following the Lean Startup framework, it is possible to create a successful, innovative and sustainable business – whether you’re just starting up, or trying to transform an existing company.

You can purchase the book at Amazon:

http://rcm.amazon.com/e/cm?lt1=_blank&bc1=000000&IS2=1&bg1=FFFFFF&fc1=000000&lc1=CC0000&t=blhill-20&o=1&p=8&l=as4&m=amazon&f=ifr&ref=ss_til&asins=0307887898

Image courtesy The Lean Startup

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