The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

by Eric Ries

the Lean Startup: the application of lean thinking to the process of innovation.

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.

A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.

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 more concrete, more accurate, and faster than market forecasting or classical business planning. It is the principal antidote to the lethal problem of achieving failure: successfully executing a plan that leads nowhere.

Lean thinking defines value as providing benefit to the customer; anything else is waste.

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.

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.

This is true startup productivity: systematically figuring out the right things to build.

The more pertinent questions are “Should this product be built?” and “Can we build a sustainable business around this set of products and services?”

This Build-Measure-Learn feedback loop is at the core of the Lean Startup model.

we need to focus our energies on minimizing the total time through this feedback loop.

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. The minimum viable product lacks many features that may prove essential later on. However, in some ways, creating a MVP requires extra work: we must be able to measure its impact. For example, it is inadequate to build a prototype that is evaluated solely for internal quality by engineers and designers. We also need to get it in front of potential customers to gauge their reactions. We may even need to try selling them the prototype, as we’ll soon see.

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.

As you consider building your own minimum viable product, let this simple rule suffice: remove any feature, process, or effort that does not contribute directly to the learning you seek.

Successful entrepreneurs do not give up at the first sign of trouble, nor do they persevere the plane right into the ground. Instead, they possess a unique combination of perseverance and flexibility.

Energy invested in success theater is energy that could have been used to help build a sustainable business.

the failure of the “launch it and see what happens” approach should now be evident: you will always succeed—in seeing what happens. Except in rare cases, the early results will be ambiguous, and you won’t know whether to pivot or persevere, whether to change direction or stay the course.

The critical first question for any lean transformation is: which activities create value and which are a form of waste?

Recall from Chapter 3 that value in a startup is not the creation of stuff, but rather validated learning about how to build a sustainable business. What products do customers really want? How will our business grow? Who is our customer? Which customers should we listen to and which should we ignore? These are the questions that need answering as quickly as possible to maximize a startup’s chances of success. That is what creates value for a startup.

Why does stuffing one envelope at a time get the job done faster even though it seems like it would be slower? Because our intuition doesn’t take into account the extra time required to sort, stack, and move around the large piles of half-complete envelopes when it’s done the other way.

Even if the amount of time that each process took was exactly the same, the small batch production approach still would be superior, and for even more counterintuitive reasons. For example, imagine that the letters didn’t fit in the envelopes. With the large-batch approach, we wouldn’t find that out until nearly the end.

The small-batch approach produces a finished product every few seconds, whereas the large-batch approach must deliver all the products at once, at the end.

The biggest advantage of working in small batches is that quality problems can be identified much sooner. This is the origin of Toyota’s famous andon cord, which allows any worker to ask for help as soon as they notice any problem, such as a defect in a physical part, stopping the entire production line if it cannot be corrected immediately. This is another very counterintuitive practice. An assembly line works best when it is functioning smoothly, rolling car after car off the end of the line. The andon cord can interrupt this careful flow as the line is halted repeatedly. However, the benefits of finding and fixing problems faster outweigh this cost. This process of continuously driving out defects has been a win-win for Toyota and its customers.

Almost every Lean Startup technique we’ve discussed so far works its magic in two ways: by converting push methods to pull and reducing batch size. Both have the net effect of reducing WIP.

It’s easy to answer: if you are asking, you’re not there yet.