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The Lean Startup

Eric Ries

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  • Despite the volumes written on business strategy, the key attributes of business leaders, and ways to identify the next big thing, innovators still struggle to bring their ideas to life. This was the frustration that led us to try a radical new approach at IMVU, one characterized by an extremely fast cycle time, a focus on what customers want (without asking them), and a scientific approach to making decisions. (Location 144)
  • Lean Startup: the application of lean thinking to the process of innovation. (Location 167)
  • My hope all along was to find ways to eliminate the tremendous waste I saw all around me: startups that built products nobody wanted, new products pulled from the shelves, countless dreams unrealized. (Location 177)
  • The Lean Startup takes its name from the lean manufacturing revolution that Taiichi Ohno and Shigeo Shingo are credited with developing at Toyota. (Location 263)
  • The goal of a startup is to figure out the right thing to build—the thing customers want and will pay for—as quickly as possible. In other words, the Lean Startup is a new way of looking at the development of innovative new products that emphasizes fast iteration and customer insight, a huge vision, and great ambition, all at the same time. (Location 289)
  • The markets and customers for startups are diverse: a toy company, a consulting firm, and a manufacturing plant may not seem like they have much in common, but, as we’ll see, they operate with the same engine of growth. (Location 299)
  • 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. (Location 342)
  • Entrepreneurs who operate inside an established organization sometimes are called “intrapreneurs” because of the special circumstances that attend building a startup within a larger company. (Location 371)
  • A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty. (Location 379)
  • Unfortunately, “learning” is the oldest excuse in the book for a failure of execution. It’s what managers fall back on when they fail to achieve the results we promised. Entrepreneurs, under pressure to succeed, are wildly creative when it comes to demonstrating what we have learned. We can all tell a good story when our job, career, or reputation depends on it. However, learning is cold comfort to employees who are following an entrepreneur into the unknown. It is cold comfort to the investors who allocate precious money, time, and energy to entrepreneurial teams. It is cold comfort to the organizations—large and small—that depend on entrepreneurial innovation to survive. You can’t take learning to the bank; you can’t spend it or invest (Location 506)
  • Validated learning is the process of demonstrating empirically that a team has discovered valuable truths about a startup’s present and future business prospects. (Location 519)
  • Metcalfe’s law: the value of a network as a whole is proportional to the square of the number of participants. In other words, the more people in the network, the more valuable the network. (Location 533)
  • In our situation, many entrepreneurial teams give in to fear and postpone the launch date. Although I understand this impulse, I am glad we persevered, since delay prevents many startups from getting the feedback they need. Our previous failures made us more afraid of another, even worse, outcome than shipping a bad product: building something that nobody wants. (Location 563)
  • We figured this out empirically, through experimentation, rather than through focus groups or market research. Customers could not tell us what they wanted; most, after all, had never heard of 3D avatars. Instead, they revealed the truth through their action or inaction as we struggled to make the product better. (Location 582)
  • For a time, this “learning” consolation made me feel better, but my relief was short-lived. Here’s the question that bothered me most of all: if the goal of those months was to learn these important insights about customers, why did it take so long? How much of our effort contributed to the essential lessons we needed to learn? Could we have learned those lessons earlier if I hadn’t been so focused on making the product “better” by adding features and fixing bugs? (Location 643)
  • Lean thinking defines value as providing benefit to the customer; anything else is waste. (Location 652)
  • I’ve come to believe that learning is the essential unit of progress for startups. The effort that is not absolutely necessary for learning what customers want can be eliminated. I call this validated learning because it is always demonstrated by positive improvements in the startup’s core metrics. As we’ve seen, it’s easy to kid yourself about what you think customers want. It’s also easy to learn things that are completely irrelevant. Thus, validated learning is backed up by empirical data collected from real customers. (Location 670)
  • We adopted the view that our job was to find a synthesis between our vision and what customers would accept; it wasn’t to capitulate to what customers thought they wanted or to tell customers what they ought to want. (Location 684)
  • This is true startup productivity: systematically figuring out the right things to build. (Location 708)
  • 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?” To answer those questions, we need a method for systematically breaking down a business plan into its component parts and testing each part empirically. (Location 751)
  • The value hypothesis tests whether a product or service really delivers value to customers once they are using it. (Location 829)
  • The point is not to find the average customer but to find early adopters: the customers who feel the need for the product most acutely. Those customers tend to be more forgiving of mistakes and are especially eager to give feedback. (Location 841)
  • For example, what if no volunteers can be found who are experiencing the conflict of values within the organization that was such an important assumption in the business plan? If so, congratulations: it’s time to pivot (Location 859)
  • Mark explained, “Traditionally, the product manager says, ‘I just want this.’ In response, the engineer says, ‘I’m going to build it.’ Instead, I try to push my team to first answer four questions: 1. Do consumers recognize that they have the problem you are trying to solve? 2. If there was a solution, would they buy it? 3. Would they buy it from us? 4. Can we build a solution for that problem?” (Location 871)
  • Cook realized that they had done the work backward. He explained, “Until we could figure out how to sell and make the product, it wasn’t worth spending any engineering time on.” (Location 881)
  • Cook led the group through a process of identifying risks and assumptions before building anything and then testing those assumptions experimentally. (Location 887)
  • Where customers complained about missing features, this suggested that the team was on the right track. The team now had early evidence that those features were in fact important. What about features that were on the road map but that customers didn’t complain about? Maybe those features weren’t as important as they initially seemed. (Location 898)
  • “Success is not delivering a feature; success is learning how to solve the customer’s problem.” (Location 906)
  • To apply the scientific method to a startup, we need to identify which hypotheses to test. I call the riskiest elements of a startup’s plan, the parts on which everything depends, leap-of-faith assumptions. (Location 1006)
  • The method I recommend is called innovation accounting, a quantitative approach that allows us to see whether our engine-tuning efforts are bearing fruit. It also allows us to create learning milestones, which are an alternative to traditional business and product milestones. Learning milestones are useful for entrepreneurs as a way of assessing their progress accurately and objectively; they are also invaluable to managers and investors who must hold entrepreneurs accountable. (Location 1017)
  • most important, there’s the pivot. Upon completing the Build-Measure-Learn loop, we confront the most difficult question any entrepreneur faces: whether to pivot the original strategy or persevere. If we’ve discovered that one of our hypotheses is false, it is time to make a major change to a new strategic hypothesis. (Location 1023)
  • More important, is it really true that there are large numbers of potential customers out there who want our solution right now? The earlier analogy was designed to convince stakeholders that a reasonable first step is to build the new startup’s technology and see if customers will use it. The restated approach should make clear that what is needed is to do some empirical testing first: let’s make sure that there really are hungry customers out there eager to embrace our new technology. (Location 1087)
  • 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. (Location 1110)
  • The first step in understanding a new product or service is to figure out if it is fundamentally value-creating or value-destroying. (Location 1114)
  • As with value, 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. (Location 1118)
  • The importance of basing strategic decisions on firsthand understanding of customers is one of the core principles that underlies the Toyota Production System. At Toyota, this goes by the Japanese term genchi gembutsu, which is one of the most important phrases in the lean manufacturing vocabulary. In English, it is usually translated as a directive to “go and see for yourself” so that business decisions can be based on deep firsthand knowledge. (Location 1130)
  • All successful sales models depend on breaking down the monolithic view of organizations into the disparate people that make them up. (Location 1161)
  • Startups need extensive contact with potential customers to understand them, so get out of your chair and get to know them. The first step in this process is to confirm that your leap-of-faith questions are based in reality, that the customer has a significant problem worth solving.8 (Location 1164)
  • The goal of such early contact with customers is not to gain definitive answers. Instead, it is to clarify at a basic, coarse level that we understand our potential customer and what problems they have. With that understanding, we can craft a customer archetype, a brief document that seeks to humanize the proposed target customer. This archetype is an essential guide for product development and ensures that the daily prioritization decisions that every product team must make are aligned with the customer to whom the company aims to appeal. (Location 1178)
  • In fact, a new breed of designers is developing brand-new techniques under the banner of Lean User Experience (Lean UX). They recognize that the customer archetype is a hypothesis, not a fact. The customer profile should be considered provisional until the strategy has shown via validated learning that we can serve this type of customer in a sustainable way.10 (Location 1188)
  • If too much analysis is dangerous but none can lead to failure, how do entrepreneurs know when to stop analyzing and start building? The answer is a concept called the minimum viable product, (Location 1200)
  • A minimum viable product (MVP) helps entrepreneurs start the process of learning as quickly as possible.3 It is not necessarily the smallest product imaginable, though; it is simply the fastest way to get through the Build-Measure-Learn feedback loop with the minimum amount of effort. Contrary to traditional product development, which usually involves a long, thoughtful incubation period and strives for product perfection, the goal of the MVP is to begin the process of learning, not end it. 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. (Location 1223)
  • 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.4 (Location 1237)
  • Early adopters use their imagination to fill in what a product is missing. They prefer that state of affairs, because what they care about above all is being the first to use or adopt a new product or technology. In consumer products, it’s often the thrill of being the first one on the block to show off a new basketball shoe, music player, or cool phone. In enterprise products, it’s often about gaining a competitive advantage by taking a risk with something new that competitors don’t have yet. Early adopters are suspicious of something that is too polished: if it’s ready for everyone to adopt, how much advantage can one get by being early? As a result, additional features or polish beyond what early adopters demand is a form of wasted resources and time. (Location 1243)
  • 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 feels a little dangerous—in a good way—since I have always been such a perfectionist.” (Location 1252)
  • First, if it turns out that we’re building something nobody wants, the whole exercise will be an avoidable expense of time and money. If customers won’t sign up for the free trial, they’ll never get to experience the amazing features that await them. Even if they do sign up, there are many other opportunities for waste. For example, how many features do we really need to include to appeal to early adopters? Every extra feature is a form of waste, and if we delay the test for these extra features, it comes with a tremendous potential cost in terms of learning and cycle time. 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. (Location 1265)
  • The challenge was that it was impossible to demonstrate the working software in a prototype form. The product required that they overcome significant technical hurdles; it also had an online service component that required high reliability and availability. To avoid the risk of waking up after years of development with a product nobody wanted, Drew did something unexpectedly easy: he made a video. (Location 1292)