Lessons from The Lean Startup*
The two things that bother me most about the startup industry are (a) some people call it an industry, and (b) it consists of 90% hype and unfounded assumptions. The Lean Startup delivers a refreshing slap in the face by showing that starting and growing a business is a very scientific process that requires more perspiration than inspiration.
Below are my most significant take-outs and quotes. It is not a summary of the book.
Early adopters are different from mainstream customers
Early adopters are usually in desperate need of your product/service, they are willing to help you improve it, they are forgiving, and don’t require anything more than a utilitarian and even ugly Minimum Viable Product (MVP). Resist the temptation to impress them with anything more than that because you will not be adding value to them. Some bells and whistles can follow once you have learnt from your early customers.
Understand why you are growing
“There are many value-destroying kinds of growth that should be avoided. An example would be a business that grows through continuous fund-raising from investors and lots of paid advertising but does not develop a value-creating product. Such businesses are engaged in what I call success theater, using the appearance of growth to make it seem that they are successful.”
“What differentiates 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.”
Vanity Metrics are a slow poison
Actionable metrics are way more valuable than vanity metrics (topline revenue, new signups, social media activity, website visits, etc.) which make entrepreneurs feel good about themselves but trick them into believing that they are creating value for their customers and shareholders.
“For a report to be considered actionable, it must demonstrate clear cause and effect. Otherwise, it is a vanity metric.”
When numbers go up, most people ascribe the improvement to their recent actions — whatever those actions were. But when things go wrong, it is always someone else’s fault. This happens when people can’t accurately measure the impact of their actions on outcomes.
“When cause and effect is clearly understood, people are better able to learn from their actions.”
Hockey stick curves are only good if the fundamentals of the business make sense in the long run. In short, the cost of acquiring customers must not exceed the overall revenue generated by customers over their lifetimes.
The ability to learn is a core competitive advantage
“The ability to learn faster from customers is the essential competitive advantage that startups must possess.”
I am convinced that the most accurate learning happens when customers pay you for your product/service. Research, planning and talking — even with actual customers — cannot accurately predict customer behaviour when they need to part with their hard-earned cash.
At the root of every seemingly technical problem lies a human problem
Ask “Why?” 5 times and you’ll see.
Where did all the problems go?
“In the twenty-first century, we face a new set of problems that Taylor could not have imagined. Our productive capacity greatly exceeds our ability to know what to build. … The big question of our time is not Can it be built? but Should it be built?”
Validated learning is probably the surest way to find the answer to “Should it be built?” while unfounded assumptions are the opposite.
In closing, here’s a picture:
*The Lean Startup was written by Eric Ries in 2011 (http://theleanstartup.com/)
