What do the words entrepreneur and startup mean anyway?
The words entrepreneur and startup have become one of the most widely used words among millennials who are passionate about the new century’s opportunities for democratized methods of doing business. What do those words refer?
Entrepreneurship according to Eric Ries is a “human institution designed to create new products and services under conditions of extreme uncertainty.” This uncertainty in the information economy where Millenials desire customization of services that caters to their daily pursuits requires a new type of management.
Ries argues in his book The Lean Startup that startups exist to learn how to build a sustainable business instead of just produce stuff. By building, measuring, and learning as a core process to their growth and success, startups steer away from the traditional management model of releasing a product into the market before knowing how the customers will use it and instead incorporate the users in the creation process which welcomes a feedback loop that eases in reiteration towards optimum results. The roles of employees at companies are therefore shifting from being experts in their fields to becoming well-rounded entrepreneurs who are open for learning in order to meet customer needs, whether they are manufacturers or senior managers.
We are currently living in an era of entrepreneurial renaissance and while many startups emerge every day, most of them fail and their products and energies go to waste. This chaos is what The Lean Startupaims to resolve by providing tools and techniques that facilitate the internal work processes in startups. While the traditional management model uses numbers as a unit for measuring progress and blames failure on inadequate plans or bad execution, Ries presents a new measure called Validated Learning that resolves the paint points of the uncertainty that surrounding innovations. The concept of validated learning replaces the ‘our product failed but we learnt so much’ with ‘our product succeeded and we learnt so much.’ The main vision of a startup must stay the same, however the strategy may change to accept pivoting into an optimal product. Instead of venturing into the unknown, entrepreneurs must be able to predict and test their innovation, which may provide cold comfort for employees and investors who can bet on the success of this user-centric methodology.
Intuit tests over five hundred different changes in a ten week tax season. With an immense amount of learning that they acquire, they are able to transform from politicians who aim to sell their idea and want to defend it into entrepreneurs who run and learn along the way. Productivity is therefore not about how much stuff a startup is producing but about how much validated learning it is getting for the efforts put into the innovation process. Learning then pays off and failure is merely feedback for reiteration. In this new management model, experimentation is key and a ‘just do it’ attitude is a must. Eric Von Hippel explains in his book Democratizing Innovation that with advanced technologies at anybody’s hands and with open-source platforms people’s needs have grown niche and customer segmentation is a trend continuing to grow. A one size fits all product of standardized features the way we had it in the pass no longer lives up to customer expectations and leaves many unsatisfied. Anyone may innovate now and this capability has been the backbone for the entrepreneurship renaissance that we see today.
If you are ready to experiment and learn, and find yourself looking to innovate and create a business, these are a couple of must-have books to have in your library.
Eric Von Hippel Democratizing Innovation (Crown Publishing Group, 2011).
Eric Ries The Lean Startup (The MIT Press 2005).
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