Book Summary: The Lean Startup By Eric Ries

About the author: The Yale graduate, Eric Reis, is a successful entrepreneur and the author of the NY Time bestseller The Lean Startup. Reis career background includes his experience at IMVU, an online video game and website, where he directed the company as the CTO. He’s most well known for his lean startup methodology which he used to successfully advise VCs and other startups. Reis became an entrepreneur-in-residence at Harvard Business School, and continued to share his teachings through publications.

Summary:Reis has cultivated a systematic way for startups which usually face tremendous uncertainty to make structured progress through adapting to the changing environment in a non-wasteful manner. The author describes the methodology in 3 major parts: Vision, Steer, and Accelerate.

Vision: The author describes the chaos and uncertainty that innovative startup leaders face. Unlike large established firms, these smaller startups are unsure of future markets, challenges, competitions etc. Therefore, Reis emphasizes customer feedback in creating products that aren’t ‘perfect’, but products that customers actually want. The rudimentary steps of entrepreneurial focus is improved by changing from Vision -> Strategy -> Product to Vision -> Pivoting Strategy after feedback -> Optimizing the Product. This improved process is as a result introduced as the Lean Startup approach.

Reis believes in a loop of doing detailed experiments and comparing predictions with results. Specifically, Rei is interested in two things, the value it brings the customer and how the customer hears about the product.

Steer: Reis goes deeper into the details of the feedback loop, and introduces the Build-Measure-Learn (BML) model. The BML model includes the minimum viable product (MVP), rudimentary version of the product that receives feedback from a small batch of customers. Once the feedback is received, leaders can save time and resources to decide to pivot to a more effective strategy that optimizes a new improved product.This method establishes new baselines every loop. Reis also mentions how startups can do split test by testing different groups of customers with multiple differentiated products. When deciding a new approach to improve the product, Reis says management should have “pivot or preserve” meetings. Leadership in the startup can decide whether they want to focus on specific function to encompass the entire product, or encorporate more functions to improve upon the existing product, describing the strategies as “zoom in” and “zoom out”. Other pivot strategies include the platform, business architect, value capture, engine of growth, channel and technology pivots.

Accelerate:This portion of the methodology emphasizes the speed and efficiency as well as the sustainable growth of the frequent feedback loop. Reis notes describes the growth hypothesis of the product, and what growth engines are the most efficient in increasing and sustaining customers. Companies can rely on aspects that increase the engagement rate of their customers, utilize viral aspect of spreading product, or pay to get the product advertised traditionally. To regulate the speed of the adapting the new product, prevent loss of quality, and provide selective focus to the problem, Reis notes the 5 Whys. Leadership should ask 5 consecutive whys and dive deep to the root of the problem or inefficiency. Innovation for the companies will face an array of challenges, so it’s important for companies to tailor their own approach versus blindly following an outlined model from a predecessor. Aspect such as the market, a division’s parent company attitude, funding, talent etc will all determine a unique and optimized strategy.

In Depth:

One interesting aspect I found from my personal experience in looking at blockchain startups is that many projects lack this model. While most of these companies are in an infancy stage, they focus on a proof of work as a sometimes the sole criteria for investment. Some projects have designed test networks on the blockchain before devoting additional resources, however, projects tend to test themselves rather than having users test them. These projects sacrifice the feedback from users in order to prevent competitors from copy their code. In fact, the speculative nature of the industry has lead to once abundance of capital for these projects, creating an ambition yet unrefined approach to development.

Another example of a similar approach is the vertical integration model Zara has used to become one of the most profitable clothing companies. The frequent product cycles allows the company to adapt to changing trends, while its competitors lag behind due to their longer product cycles.

Reis’ work is extremely applicable to the journey ahead on Tech Trek. I believe that this methodology has become quite prevalent in startups, so I look forward in seeing actual examples of the Lean Startup approach from some of the startups we visit.

Recommendations:

I would recommend this book to anyone who’s interested in startups as it provides an insight on a very efficient model of developing and optimizing a quality product. While some new readers may find the examples a bit outdated, I think it’s important to note that Reis draws his methodology from a history of manufacturing success, which has proven to outlast time.

One thought on “Book Summary: The Lean Startup By Eric Ries

  1. Great post! I haven’t had a chance to read this book yet, but it sounds really interesting. I think that the part where you discussed how “the rudimentary steps of entrepreneurial focus is improved by changing from Vision -> Strategy -> Product to Vision -> Pivoting Strategy after feedback -> Optimizing the Product” was pretty accurate. Sometimes people can get so caught up in an idea that they hesitate to pivot even after receiving feedback. However, startups that make it big rarely look the same as the idea that they originally pitched.

    Like

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