This technique later became known as split-testing or A/B testing. Lean Startup works best when you have a business model based on a hypothesis that needs to be tested very quickly. The Lean Startup Summary Part 1: Vision | Chapter 1: Startups Need Managing ‘Management’ is often a dirty word in startups because it conjures images of grey suits, bureaucracy, and TPS reports. You just have to follow the Vivek Kundra which summarized the startup process as “Think big. This situation was dangerous because without constant product improvement, their growth could easily crash. Vanity metrics can easily mislead and cause overconfidence. Nobody had ever done anything like that before successfully. At that time, most of their users were enthusiastic early adopters, which is really a small percentage of people that would dry up eventually. Taking photos of shoes himself and fulfilling shoe orders one-by-one at the full retail price. As a side effect, methods like this earned Toyota an enviable reputation for quality. The approach allows us to identify and focus on important parts of the development process. Then, if your actionable metrics begin improving again after the pivot, that is a good sign you’ve made a successful pivot. There are many advantages to implementing a lean startup approach. We’ve all heard the story before. This chapter [which i found to be one of the most important] defines the view that learning is the most important measure of progress of a startup. So he tried a new product development approach based on split testing. Of course, if you enjoy this, then you’ll LOVE the book which gives many more details and examples. Errors have serious consequences in high-risk situations such as legal issues for corporates, lean needs to be used with extra care. Corporates developing such products can adopt a modified approach that we cover in our guide. During the dot-com boom, start-ups often operated in “stealth mode” (to avoid alerting potential competitors to a market opportunity), exposing prototypes to customers only during highly orchestrated “beta” tests. The solution is The Lean Startup, which is really a process to help you FIND OUT what customers really want in the least amount of time possible through small experiments. For example, Toyota factories famously had an andon cord. Eliminate waste and produce real value through validated learning, 3. Eric Ries says when your actionable metrics are not improving no matter what you try, then you probably need to pivot. You’ll actually measure it with experiments, tests and metrics. You see, in the 1990s Japanese car makers found it difficult to compete. Start small. Every successful startup has grown in one of three ways. Best of all, right here on this page you’ll read a fast and fun overview of The Lean Startup. By focusing hard on these actionable metrics, the IMVU team started making real improvements to the product. If you are relying on viral spread for your growth, then you want this number as high as possible. Adobe multiplied their gross profits by switching to a subscription business model. He ordered several thousand pairs of custom shoes from an overseas factory. Basically, actionable metrics are very important. Entrepreneurs are everywhere; – This phrase means that anyone can launch a start-up no matter what age and where you are from everyone has it I’m them! The learning process must be validated— it must be demonstrated that learning, and therefore progress, is indeed occ… By doing this, it is possible to analyze what will be a successful practice. This was basically a rope any employee in the factory could pull if they saw a defect. As a result, the company became a lot more productive and efficient. But then Ries changed his approach to growing the startup and everything changed. So those are the 3 growth engines! The process that Eric Ries teaches in this book is more like driving a car. They couldn’t attract any users or make a profit. With a car you can quickly change direction to a better road. Start Stage of Lean Startup. Sticking with your current group of customers and building a totally new product for them. In a startup, your first goal is to find out what is valued from the eyes of your customer. In fact, Steve Blank was an early investor in IMVU and he insisted their team attend his entrepreneurship course at UC Berkeley. Summary: Lean startup strategy greatly reduces the chances that start-ups will spend a lot of time and money launching products that no one actually will pay for. Evaluate each new product change with scientific split tests, 5. The best concept which I learned from the Lean Startup … You see, IMVU was getting more users every day, but their product itself was no longer improving. Everything is planned out in careful detail years in advance. In 2011, Eric Reis published ‘The Lean Startup’ covering the lean startup framework, a proven model and strategy for innovators to follow to successfully validate their ideas as quickly and cost-effectively as possible. Startups … Your email address will not be published. This was the secret that made Toyota go from being a small company to being the largest car manufacturer in the world by 2008. However, they saw that real users didn’t care about these integrations! Sure, you start out with a clear direction, but you can easily turn left or right at any moment as you see obstacles. This gave him confidence to then invest in a proper website, set up warehouses, hire employees, etc. Eric Ries had the smarts, he had the ambition and he graduated from Princeton. © InnovateFromZero is a trading division of Connect In. Well, it turns out that the andon cord was a great idea! Find out what customers want as soon as possible, 2. You don’t want to spend $100 on advertising and then only make $50 in sales. The lean start-up methodology makes those concepts obsolete because it holds that in most industries customer feedback matters more than secrecy and that constant feedback yields better results than cadenced un… Lean thinking defines value as providing benefit to the customer; anything else is waste. For example, he saw that only 1% of their free users were becoming paid users, and all of his team’s hard work over the past several months had not improved this metric even a little. In The Lean Startup, Eric Ries goes through the process that you need to take to create a startup that is sustainable and successful. Since the vast majority of startups … For example, when Microsoft used to sell a new version of Microsoft Word annually, each new version contained dozens of new features and big changes. Now we’ll talk about the ‘three growth engines’ that Ries says drive sustainable growth in every successful startup. They just need to let it out and explore your creative juices. This quick feedback loop helped IMVU’s engineers learn from their users directly. Similarly, The Lean Startup minimizes waste in startups by helping you learn what customers really want through experiments, tests and metrics. Build-measure-learn feedback loop:instead of making a lot of … A minimum viable product can provide a much-needed ‘dose of reality’ but this is also why so many entrepreneurs hesitate to release one. If people didn’t like a feature, the engineers tried to improve it or they scrapped it. This means they first released every new feature to a small group of random users and then measured how those user’s behavior changed. This is why Eric Ries says The Lean Startup is more like driving a car than launching a rocket. Most people would assume that this cord is a bad idea. I mean, if ANYBODY can pull it when there’s a little problem, then that will ruin their productivity, right? So when should you pivot? He is a serial entrepreneur and professor who created a ‘customer development process’ for startups. In basketball, a pivot is when a player keeps one foot stuck to ground, but they rotate the rest of their body to face whichever direction they want. This data should reveal insights, inform learning at every stage of the game, and pivot where needed. I’ve pulled out some real GEMS to share with you from the book. At one point, IMVU’s vanity metrics were increasing exponentially, like their total number of users was skyrocketing. Because they assumed people wouldn’t want to sign up for a new app separately when all their friends were elsewhere. Claude Hopkins was one of the inventors of split-testing.). Ever heard the term ‘lean startup’ and been curious to understand exactly what it meant or how it is used with the innovation process? Entrepreneurship IS management; – “A startup is an institution, not just a product, so it requires management, a new kind of management specifically geared to its context. By putting little codes in the coupons at the bottom of each flyer. But Eric Ries had enough experience to know this wasn’t necessarily a great situation. Validated Learning; – The purpose of a startup is not to produce products, generate profits, or to provide a service. Build-Measure-Learn; – this three-step process involves building upon what has been learned so far. This topic is covered more elaborately in our Q&A guide attached. That’s why so many of them crash and burn. Does that sound like a weird idea? Lean Startup Summary – First Basic Requirement: It needs an EXPERIMENTATION mindset that will produce sufficiently useful DATA. This can happen when you learn a lot about a certain type of customers during the course of creating your first unsuccessful product. In a nutshell, Cohort analysis splits your users into groups/cohorts based on their actions. This is really a new way of management because even tech startups are ultimately groups of humans. Paid subscriptions are ideal for this, because your customers pay automatically each month. So they learned what customers value can be very different from what company managers, engineers or designers value. But the reality was the IMVU engineers had rushed this feature out at the last second and felt it was way too primitive. A few college kids build the next earth-shattering company in their garage with just a couple computers and pepperoni pizzas. As Ries mentions in the book, you have to look at a startup differently than … In a rush, Phil started his own brand that would later be called Nike. Your email address will not be published. These metrics are invaluable for learning what your customers want. For a long time, they had always charged a one-time payment of hundreds of dollars for their software. The Lean Startup teaches entrepreneurs how to effectively bring products to market in a way that maximizes effort, time and ROI. Second, through paid advertising, where you just have to make sure you making more money than what you’re spending for the advertising. Split testing began as a direct marketing technique. That’s why the business really struggled in the beginning. By the way, Eric Ries says a lot of this book is heavily inspired by Steve Blank. Many businesses grow by paying for advertising which attracts new customers. So lean manufacturing aims to minimize waste in factories. It wasn’t until he found a whole new process for growing a startup that he could achieve significant success. First he visited local retail shoe stores and asked to take photos of the shoes. But the Japanese companies like Toyota were far too small to use that method, so they decided to try something totally different which is now called lean manufacturing. Launch a basic version of your product to the public, even when you don’t think it’s ready. This means learning is a goal we begin with at the planning stage, not just a story or excuse told after the fact. Changing your strategy is known as a pivot but that doesn’t mean your vision changes. And The Lean Startup aims to minimize waste in startups. These entrepreneurs focus on how to measure the progress that is made, how to plan for the future, and how to balance and prioritize their workload. The big downside of it was that customer feedback was only heard very late in the development process, when it was often too late to reverse a bad idea or poorly designed feature. Eric Ries’ “The Lean Startup” is not just about starting a new business. Lean thinking defines value as … Does that make sense? Copyright © 2020 All rights reserved. That was more than enough for them to get some early metrics and begin the process of optimizing their product. Can you guess who these companies are? Pivoting means keeping your team the same, and usually your product the same, but trying a different business strategy. First through viral spread like includes word of mouth or customer referrals. The engineering team led by Ries actually felt embarrassed to release it! At IMVU, Eric Ries didn’t want to spend a year working blindly on a hundred new features, only to find out half their work was unnecessary. This can include: There’s actually a number called the viral coefficient that measures how viral or contagious a product is. Eric Ries says regular business plans are like launching a rocket. By applying the Lean Startup methodology, the likelihood of failure is also considerably reduced. The lean approach is not suitable for complex mature data driving processes about trying to make fractional improvement. They discovered their role-playing game site was actually a photo sharing … The lean startup methodology is a way for you to use a feedback loop to test your business idea. The most important part of this is making sure that you’re paying LESS for each new customer than the PROFIT they’ll bring you. The Lean Startup Summary - Book Summary Club Eric Ries: The Lean Startup Summary The lowdown: The Lean Startup is the most important book ever written for people starting businesses. 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