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

by Eric Ries

This school believes that if management is the problem, chaos is the answer. Unfortunately, as I can attest firsthand, this doesn’t work either.

The Lean Startup movement seeks to ensure that those of us who long to build the next big thing will have the tools we need to change the world.

Entrepreneurs have been trying to fit the square peg of their unique problems into the round hole of general management for decades.

As a result, many entrepreneurs take a “just do it” attitude, avoiding all forms of management, process, and discipline. Unfortunately, this approach leads to chaos more often than it does to success.

To cite but one example, one often hears commentators lament the loss of manufacturing jobs in the United States over the previous two decades, but one rarely hears about a corresponding loss of manufacturing capability. That’s because total manufacturing output in the United States is increasing (by 15 percent in the last decade) even as jobs continue to be lost

We are living through an unprecedented worldwide entrepreneurial renaissance, but this opportunity is laced with peril.

When people are used to evaluating their productivity locally, they feel that a good day is one in which they did their job well all day.

The Lean Startup asks people to start measuring their productivity differently.

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.

Startups have a similar engine that I call the engine of growth.

They had “achieved failure”—successfully, faithfully, and rigorously executing a plan that turned out to have been utterly flawed.

The Lean Startup method, in contrast, is designed to teach you how to drive a startup.

Instead of making complex plans that are based on a lot of assumptions, you can make constant adjustments with a steering wheel called ...

Startups also have a true north, a destination in mind: creating a thriving and world-changing business. I call that a startup’s vision. To achieve that vision, startups employ a strategy,

The product is the end result of this strategy (see the chart on this page). Products change constantly through the process of optimization, what I call tuning the engine.

Less frequently, the strategy may have to change (called a pivot).

However, the overarching vision ra...

In real life, a startup is a portfolio of activities.

Even the smallest startup faces the challenge of supporting existing customers while trying to innovate.

Even the most established company faces the imperative to invest in innovation lest it become obsolete.

Mark has all the entrepreneurial prerequisites nailed—proper team structure, good personnel, a strong vision for the future, and an appetite for risk taking—and so it finally occurred to me to ask why he was coming to me for advice.

He said, “It’s as if we have all of the raw materials: kindling, wood, paper, flint, even some sparks. But where’s the fire?”

What Mark was missing was a process for converting the raw materials of innovation into real-world breakthrough successes.

Mark is an entrepreneur just like a Silicon Valley high-tech founder with a garage startup.

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.

have come to believe that intrapreneurs have much more in common with the rest of the community of entrepreneurs than most people believe.

Thus, when I use the term entrepreneur, I am referring to the whole startup ecosystem regardless of company size,...

Anyone who is creating a new product or business under conditions of extreme uncertainty is an entrepreneur whether he or she knows it or not

A startup is greater than the sum of its parts; it is an acutely human enterprise.

I prefer to use the broadest definition of product, one that encompasses any source of value for the people who become customers.

Usually, companies like Intuit fall into the trap described in Clayton Christensten’s The Innovator’s Dilemma: they are very good at creating incremental improvements to existing products and serving existing customers, which Christensen called sustaining innovation, but struggle to create breakthrough new products—disruptive innovation—that can create new sustainable sources of growth.

What allowed the SnapTax team to innovate was not their genes, destiny, or astrological signs but a process deliberately facilitated by Intuit’s senior management.

Innovation is a bottoms-up, decentralized, and unpredictable thing, but that doesn’t mean it cannot be managed.

This is the kind of entrepreneurial success we’re used to hearing about: a ragtag team of underdogs who eventually achieve fame, acclaim, and significant riches.

the prevailing management paradigm he and his company had been practicing was inadequate to the problem of continuous innovation in the modern economy.

“Boy, the amount of learning they get is just immense now. And what it does is develop entrepreneurs, because when you have only one test, you don’t have entrepreneurs, you have politicians, because you have to sell. Out of a hundred good ideas, you’ve got to sell your idea.

I believe a company’s only sustainable path to long-term economic growth is to build an “innovation factory” that uses Lean Startup techniques to create disruptive innovations on a continuous basis.

Brad explained to me how they hold themselves accountable for their new innovation efforts by measuring two things: the number of customers using products that didn’t exist three years ago and the percentage of revenue coming from offerings that did not exist three years ago.

Under the old model, it took an average of 5.5 years for a successful new product to start generating $50 million in revenue.

Brad explained to me, “We’ve generated $50 million in offerings that did not exist twelve months ago in the last year. Now it’s not one particular offering. It’s a combin...

Leadership requires creating conditions that enable employees to do the kinds of experimentation that entrepreneurship requires.

“Developing these experimentation systems is the responsibility of senior management; they have to be put in by the leadership. It’s moving leaders from playing Caesar with their thumbs up and down on every idea to—instead—putting in the culture and the systems so that teams can move and innovate at the speed of the experimentation system.”

As an entrepreneur, nothing plagued me more than the question of whether my company was making progress toward creating a successful business.

After many years as an entrepreneur, I started to worry about measuring progress in this way. What if we found ourselves building something that nobody wanted? In that case what did it matter if we did it on time and on budget?

Yet if the fundamental goal of entrepreneurship is to engage in organization building under conditions of extreme uncertainty, its most vital function is learning.

We must learn the truth about which elements of our strategy are working to realize our vision and which are just crazy.

We must learn what customers really want, not what they say they want or what we think they should want. We must discover whether we are on a path that w...

Validated learning is not after-the-fact rationalization or a good story designed to hide failure. It is a rigorous method for demonstrating progress when one is embedded in the soil of extreme uncertainty in which startups grow.

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.

Like most communication networks, IM is thought to follow 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.