SXSWi 2012: The Lean Startup: The Science of Entrepreneurship

Speaker: Eric Reis, Author of The Lean Startup (@ericreis)

This was a fantastic talk by the author of the best-seller “The Lean Startup” – Eric Reis. I wanted to attend this session as wanted to learn how concepts from lean startups could be applied to the UX process, as per the thoughts of Jeff Gotthelf on “Lean UX” at last year’s SXSW.

I haven’t read the book yet, and I’m sure a lot of what was mentioned at this talk is in the book. But this talk made me want to read it. My notes on the talk below – I have yet to find the slidedeck for this one, but there are similar slidedecks up on Slideshare.

The Startup Journey: The Movie

The greatest startup movie of all time is not “The Social Network”, but rather, “Ghostbusters” – according to Reis. It has all the elements of the startup story.

But the most important part of the story is the photo montage in the movie. Where the movie glosses over these details because it’s “the boring stuff” – this is the part we need to get better at.

A startup is an experiment.

But the biggest question of our time is not “What can we build?” but rather “What should we build?”.

Because realistically, we can probably build anything we want. But we need to stop wasting people’s time. We need to stop building the wrong things.

The reality is: MOST STARTUPS FAIL.
Most of Ries’ startups have failed. It comes with the territory. Failure is a necessary part of entrepreneurship.

Who to blame: Frederick Taylor and “scientific management”.

This kind of management relies on planning and forecasting. But it only works if you have a long and stable system to base the forecasting off.

These tools of management are failing us. We need a new toolkit of entrepreneurial management from which startups can work.

The Pivot

Successful founders when they run into difficulties, are able to keep one foot anchored
while changing one other thing.

Startups need to reduce the time between pivots in order to make the most of the money we have left. A pivot allows you to increase the runway without needing more money.

Achieving failure = successfully executing a bad design.
Many companies do this. What is the point of finishing a product that nobody wants?

Ries is inspired by ideas from lean manufacturing. Lean manufacturing is about eliminating waste in companies.
In these models, the customer is the most important part of the production line.

However, Entrepreneurs don’t often know who the customer is.
They have hypotheses of who the customer is.

So what do they do? They need to go through cycles of validated learning, where they can learn if the idea is brilliant or crazy.

The question should be:

Does it help me learn faster? Learning is our primary unit of progress.

Entrepreneurs need to learn faster, build faster, measure faster.

Innovation Accounting

Ries is inspired by the book: The Toyota Way, because Toyota is driven by their commitment to long term thinking.

Accountability is one of the most important aspects of startups.

The process:
1. Establish the baseline
2. Tune the baseline
3. Pivot or persevere

We need to build a minimum viable product. Find out if the uptake is 0%. Establish the baseline.
Because if your uptake is 0, all your other projected numbers will be 0. You need to find out if the uptake is 0 as soon as possible.

Try to get the baseline numbers to move up by tuning the engine.

Then find out whether you should pivot or persevere.
Schedule a meeting every six weeks to discuss whether you should pivot or persevere. This way, you can work backwards to figure out what information you need to bring for that meeting.

Entrepreneurs need to move away from vanity metrics to actionable metrics.

Remember that a pivot is a change in strategy NOT a change in vision.
We test to find out how consumers BEHAVE. And use this to refine the vision.

Another book mentioned worth reading is: The Founder’s Dilemma

A single MVP won’t tell you anything. It requires a series of experiments to find out what is going on.

Build test learn is NOT optimization. The question is: Is our strategy GOOD? Does it change customer behaviour? We care about engagement. About change in customer behaviour. A good design is one that changes customer behaviour for the better.

Sketchnotes from Oglivy

Unofficial audio via Lanyrd