Table of Contents
- My One-Line Summary
- Key Takeaways
- My Review
- Final Verdict
My One-Line Summary
The Lean Startup by Eric Ries asserts two bold hypotheses:
- A scientific process/framework can be used to build a startup.
- This framework can also be used by established companies.
“Build, Measure, Learn” Feedback Loop
Every startup idea is built on a foundation of hypotheses that are assumed to be true. The core concept of the book is this feedback loop, which gives a framework for testing those assumptions.
First, build the minimum viable product (MVP) that is able to test just one hypothesis.
Then, measure the value that the MVP is providing to customers, and whether the MVP is demonstrating sustainable growth. Ries offers examples of actionable, accessible, auditable metrics to measure an MVP’s value and growth, and cautions against the use of vanity metrics. Ries also describes 3 common engines of growth (sticky, viral, and paid) and the appropriate metrics for each.
Finally, demonstrate learning by deciding whether to persevere in proving this hypothesis or pivot away to a new startup idea altogether. Persevering can take the form of optimizing the existing MVP to find a tweak that dramatically improves metrics, or trying a new MVP altogether.
Redefining Progress and Burn Rate
Ries argues that his framework of innovation accounting should be the new criteria of evaluating startup growth as opposed to traditional accounting that favors raw vanity metrics (Annual Run Rate, Quarterly Revenue/Profits/Expenses, etc). Innovation Accounting puts an emphasis on quickly proving/disproving the key assumptions underlying the startup’s vision. This can be measured by Ries’ actionable metrics and how quickly the startup goes through the “Build, Measure, Learn” cycle described above.
Ries re-conceptualizes a startup’s burn rate as nothing more than the number of pivots (and the required “Build, Measure, Learn” cycles) that a startup can still afford to make. This definition causes the startup to focus on learning and cutting waste.
Creating an Innovative Environment
The last few chapters focus on managerial changes that established companies can make to create an innovation “sandbox”: an environment where intra-preneurs have pre-defined limits on the scope of their project, but also have full freedom within that scope.
Before reading business books, I try to gauge how much useful knowledge I can gain relative to the time investment needed to finish the book. Now, I will reflect on the gained-knowledge:time ratio for The Lean Startup.
It’s hard to review business books for their usefulness at my age because I am not yet in a managerial position to try out the changes suggested in these types of books. The Lean Startup is even harder to review because very few people have committed themselves to building a startup full-time, and those are precisely the people that are best fit to review a book like this.
However, my novice perspective still has some value. I came into this book with hypotheses about building a company that are widely circulated by movies, documentaries, and TV shows. This book has thoroughly refuted the most problematic myths, and provides structure to a lot of the obfuscated, fuzzy aspects of building a startup.
Lots of popular media on startups, like HBO’s hit show Silicon Valley, love to highlight the drama within a quirky startup team, as well as the corporate games played by established competitors to sabotage the startup. Ries directly refutes this representation of startup struggles in The Lean Startup:
“Unfortunately, the real work that determines the success of startups happens during the photo montage. It doesn’t make the cut in terms of the big story because it is too boring. Only 5 percent of entrepreneurship is the big idea, the business model, the whiteboard strategizing, and the splitting up of the spoils. The other 95 percent is the gritty work that is measured by innovation accounting: product prioritization decisions, deciding which customers to target or listen to, and having the courage to subject a grand vision to constant testing and feedback.” ~ The Lean Startup, Page 148
Popular media also circulates this hypothesis that all super successful startups need a visionary savant that comes up with a brilliant idea, and that the idea immediately connects with customers. Ries maintains that visionaries and their bold visions are still needed. However, Ries also acknowledges that 1 or more of the underlying assumptions behind any visionary idea is likely to be false, and provides a framework for validating those assumptions. The Lean Startup provides a guide on how to fail quickly towards the next pivot or next startup idea that has a better chance of success due to the learning gained from validating previous ideas. This is why I believe The Lean Startup is more useful than books like Zero To One by Peter Thiel, which emphasize finding society’s “secrets” to create monopolistic businesses but don’t explain what to do when your idea is built on flawed assumptions.
The Lean Startup is certainly a page-turner. I can’t recall any other career-oriented book that I read so quickly and avidly. The prose is simple and concise, which can be expected of a previous Software Engineer like Ries.
However, I wish Ries had given his reader more credit at times. In the early chapters of the book, Ries would constantly re-iterate and re-word his radical hypothesis that the underlying assumptions of startup ideas should be validated scientifically. I understand Ries’ urge to make each chapter self-contained and create ultra-clear business writing. However, this disrespects the intelligence of Ries’ readers, who are capable of finding the connections between his current point and his validated learning thesis on their own. When reading these frequent reiterations myself, I lost some faith in Ries, and suspected that he may just be trying to milk one good idea (validated learning) to fill in an entire book.
No good business book is complete without eye-opening case studies.
Ries’ case studies highlight both small startups and established companies. The case studies also prioritize process over results. There were many case studies of companies that had not met their max potential at the time of writing, but Ries still included those stories to show how they are on the path to success by following his framework.
Ries’ Technical Background
Ries does not shy away from focusing on his primary perspective as a Software Engineer rather than a business type. As a result of his Software background, Ries naturally ends up offering advice and case studies that are most applicable to software-oriented startup ideas. However, Ries addresses his software bias upfront, and always tries his best to re-conceptualize his points at a higher level with non-software examples. For example, Ries explains all the wonderful benefits of small batch sizes when developing a product, which is really easy to do for software products because of the existing Continuous Deployment practices in the software industry. Then, Ries explains how startups creating non-software products can also strive for small batches and fast deployment; he recommends CAD Software to quickly design products and rapid prototyping tools like 3D printing to quickly create the designed product in a batch size of 1.
As a Software Engineer myself, I found it easy to relate to Ries’ dilemma about being an active member in figuring out the right product to build (even if it is outside of our technical world) while also masterfully doing the technical execution that we are recruited for. Taking more ownership of the strategic direction of a startup as a technical founder was one of my biggest personal takeaways from this book.
4 out of 5 stars.
The process-oriented perspective I gained from The Lean Startup in addition to its page-turning nature creates a high gained-knowledge:time ratio that makes it worth the read.