The Lean Startup

How constant innovation creates radically successful businesses — Eric Ries

A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.

For every success, there are far too many failures. What makes these failures particularly painful is not just the economic damage to all involved, they are also a colossal waste of our civilisation’s most precious resource: the time, passion and skill of it’s people. The Lean Startup Movement is dedicated to prevent these failures.

The book also attempts to achieve a fine balance too between a pure startup and one that’s home grown inside a large Org. Some notes to myself from this book follows.

VISION — START

Building a startup is an exercise in institution building; thus it necessarily involves management. 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. It is also the case that traditional management principles are ill suited to handle the chaos and uncertainty that startups must face.

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. The Lean Startup is a new way of looking at development of innovative new products that emphasise fast iteration and customer insight, a huge vision, and great ambition, all at the same time.

Too many startup business plans look more like they are planning to launch a rocket ship than drive a car. They prescribe the steps to take and the results to expect in excruciating detail such that even tiny errors in assumptions can lead to catastrophic outcomes.

Instead of making complex plans that are based on a lot of assumptions, you can make constant adjustments with a steering wheel called the Build-Measure-Learn feedback loop. Through this process of steering, we can learn when and if it’s time to make a sharp turn called a pivot or whether we should persevere along our current path.

Startups also have a true north. A vision. To achieve that vision, they employ a strategy (business model, road map, point of view about partners and competitors, ideas about who the customer will be). The product is the end result of this strategy.

Products change constantly through the process of optimisation — aka tuning the engine. Less frequently, the strategy may have to change (pivot). However, the overarching vision rarely changes.


VISION — LEARN

Most important question for an entrepreneur? Whether my company was making progress toward creating a successful business. What if we are building something nobody wanted? What if the only thing I know for sure is that I had kept people busy and spent money that day!! Unfortunately, “learning” is the oldest excuse in the book for a failure of execution. It is cold comfort to employees following an entrepreneur into the unknown. To the investors.

Yet, the most vital function is learning. We must learn which elements of our strategy are working to realise our vision and which are just crazy. We must learn what customers really want, not what they say they want or what they think they should want. In the Lean Startup model, we are rehabilitating learning with a concept called validated learning.

This is not after-the-fact rationalisation 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. It is the process of demonstrating empirically that a team has discovered valuable truths about a startup’s present and future prospects. It is more concrete, more accurate, and faster than market forecasting or classical business planning. It is the principal antidote to a lethal problem — successfully executing a plan that leads nowhere.

VALUE vs WASTE

Which of our efforts are value-creating and which are wasteful? Agile development methodologies have their origins in this lean thinking. They were designed to eliminate waste too. Yet these methods can lead you down a road in which majority of a team’s efforts are wasted. Why?

Lean thinking defines value as providing benefit to the customer; anything else is waste. In a manufacturing business, customers don’t care how a product is assembled, only that it works correctly. But in a startup, who the customer is and what the customer might find valuable are unknown, part of the very uncertainty. Startups need a new definition of value.

Lean Startup

Lean Startup is not a collection of individual tactics. It is a principled approach to new product development.

The way forward is to learn to see every startup in any industry as a grand experiment. The question is not “Can this product be built?” In the modern economy, almost any product that can be imagined can be built. The more pertinent questions are “Should this product be build?” and “Can we build a sustainable business around this set of products and services? To answer those questions, we need a method for systematically breaking down a business plan into its component parts and testing each part empirically.

In other words, we need a scientific method. In the Lean Startup model, every product, every feature, every marketing campaign — everything a startup does — is understood to be an experiment designed to achieve validated learning.


VISION: EXPERIMENT

Many startups struggle to answer these questions:

  • Which customer opinions should we listen to, if any?
  • How should we prioritise?
  • Which features are essential to the product’s success?
  • What might be changed safely, and what might anger customers?
  • What should we work on next?

These questions are difficult if ‘lets ship the product and see what happens’ approach is followed. The ‘Just do it’ school of entrepreneurship!!

Alchemy to Science

A true experiment follows the scientific method. It begins with a clear hypothesis that makes predictions about what is supposed to happen. It then tests those predictions empirically. Just as scientific experimentation is informed by theory, startup experimentation is guided by the startup’s vision.

Break it Down

The first step would be to break down the grand vision into its component parts. The two most important assumptions entrepreneurs make are what I call the value hypothesis and the growth hypothesis.

The value hypothesis tests whether a product or service really delivers value to customers once they are using it. Growth hypothesis tests how new customers will discover a product or service.

An Experiment is a Product

In the Lean Startup model, an experiment is more than just a theoretical inquiry; it is also a first product. You use a process of identifying risks and assumptions before building anything and then testing those assumptions experimentally.

Author provides many case studies to explain Lean Startup Model. Snaptax at Intuit (also to make the point that Startups can happen in a 7000 strong Org too), his own work at IMVU, Zappos and Village Laundry Service MVPs. They are essential reading to understanding his insights!

STEER: HOW VISION LEADS TO STEERING

At its heart, a startup is a catalyst that transforms ideas into products. As customers interact with those products, they generate feedback and data. The feedback is both qualitative (such as what they like and don’t like) and quantitative (such as how many people use it and find it valuable).

The products a startup builds are really experiments; the learning about how to build a sustainable business is the outcome of these experiments. For startups, that information is much more valuable that dollars, awards, or mentions in the press, because it can influence and reshape the next set of ideas.

This three-step process is:

This is the core of the Lean Startup Model.

We need to focus on minimising the total time through this feedback loop. This is the essence of steering a startup.

To apply the scientific method to a startup, we need to identify which hypothesis to test. The riskiest elements of a startup’s plan, the path on which everything depends, the leap-of-faith assumptions. The two most important assumptions being the value and growth hypothesis. These give rise to tuning variables that control a startup’s engine of growth. Each iteration of a startup is an attempt to rev this engine to see if it will turn. Once it is running, the process repeats, shifting into higher and higher gears.

Once clear of these leap-of-faith assumptions, the first step is to enter the Build phase as quickly as possible with a MVP (Minimum Viable Product). MVP is that version of the product that enables a full turn of the BML loop with a minimum amount of effort and the least amount of development time.

When we enter the Measure phase, the biggest challenge will be determining whether the product development efforts are leading to real progress. The method I recommend is called Innovation Accounting, a quantitative approach that allows us to see whether our engine-tuning efforts are bearing fruit. It also allows us to create learning milestones. Actionable metrics help to analyse customer behaviour in ways that support innovation accounting. This is in contrast to vanity metrics!

Finally, and most important, there’s the pivot. Upon completing the BML loop, we confront the most difficult question any entrepreneur faces: whether to pivot the original strategy or persevere. If we’ve discovered that one of our hypotheses is false, it is time to make a major change to a new strategic hypothesis.


STEER: LEAP

STRATEGY IS BASED ON ASSUMPTIONS

Every business plan begins with a set of assumptions. The goal of a startup’s early efforts should be to test them as quickly as possible.

Analogs and Antilogs

In “Getting to Plan B”, Randy Komisar discusses the concept of leap of faith in great detail, using framework of “analogs” and “antilogs” to plot strategy. He explains the using iPod as an example.

Analogs — Walkman. Apple never had to ask if people will listen to music in public place using earphones. Sony did not have this answer when they launched. Most leaps of faith take the form of an argument by analogy. They usually make business seem less risky. They are used to persuade investors, employees or partners to sign on.

Antilog — Napster. Apple had to face the fact that although people were willing to download music, they were not willing to pay for it.

Out of these analogs and antilogs come a series of unanswered questions. Successful entrepreneurs had the foresight, the ability, and the tools to discover which parts of their plans were working brilliantly and which are misguided, and adapt their strategies accordingly.

Value and Growth

Some startups are engaged in what I call success theatre using the appearance of growth to make it seem they are successful. One of the goals of innovation accounting is to help differentiate these false startups from true innovators.

Genchi Gembutsu

One of the most important phrases in lean manufacturing, this means “go and see for yourself” so the business decisions are based on deep first hand knowledge.

Startups need extensive contact with potential customers to understand them, so get out of your chair and get to know them.

Craft a customer archetype, a brief document that seeks to humanise the proposed target customer. This archetype is an essential guide for product development and ensures that the daily prioritisation decisions that every product team must make are aligned with the customer to whom the company aims to appeal.

Techniques — interaction design or design thinking are helpful. Ironic — many of these approaches are highly experimental and iterative. Yet the way design agencies are compensated — their work culminates in a monolithic work to their client. For startups, this is an unworkable model. Lean UX is attempting to address this?


STEER: TEST

A MVP helps entrepreneurs start the process of learning as quickly as possible. Its goal is to test fundamental business hypothesis.

First Products Aren’t Meant to be Perfect

Early adopters use their imagination to fill in what a product is missing. Additional features or polish beyond what early adopters demand is a form of waste. This is hard truth for many entrepreneurs to accept. That world changing product is polished, slick, and ready for prime time!

MVP’s range in complexity from extremely simple smoke tests (little more than an advertisement) to actual early prototypes complete with problems and missing features. Deciding exactly how complex an MVP needs to be requires judgement. Just remember: simplify!

Video MVP: Read the Dropbox case study in the book. Concierge MVP: See Food on the Table example in the book.

Role of Quality and Design in MVP

Best professionals and craftspeople alike aspire to build quality products: it is a point of pride. Discussions on quality presuppose that the company already knows what attributes of the product the customer will perceive as worthwhile. In a startup, this is a risky assumption to make. Often we are not even sure who the customer is.

If we do not know who the customer is, we do not know what quality is!

Even a “low-quality” MVP can act in service of building a great high-quality product. MVPs require the courage to put one’s assumptions to the test.

We must be willing to set aside our traditional professional standards to start the process of validated learning as soon as possible. But this does not mean operating in a sloppy or undisciplined way. Defects can slow down the BML feedback loop! They actually interfere with our ability to learn.

As you consider building your MVP, remove any feature, process, or effort that does not contribute directly to the learning you seek.

Speed Bumps in Building an MVP

Most common are legal issues, fears about competitors, branding risks and he impact on morale. Patent protection.

Stealing the idea? If a competitor can out-execute a startup once the idea is known, the startup is doomed anyway.


STEER: MEASURE

A startup’s job is to (1) rigorously measure where it is right now, confronting the hard truths that assessment reveals, and then (2) devise experiments to learn how to move the real numbers closer to the ideal reflected in the business plan.

Entrepreneurs tend to be optimistic by nature. We want to keep believing in our ideas even when the writing is on the wall. This is why the myth of perseverance is so dangerous.

Accounting May Seem Dull But Can Change Your Life

Accounting was the key to success of all modern corporations. Unfortunately, standard accounting is not helpful in evaluating entrepreneurs. Startups are too unpredictable for forecasts and milestones to be accurate. They need a new kind of accounting geared specifically to disruptive innovation. That’s what innovation accounting is.

Cohort Analysis

This is one of the most important tools of startup analytics. It is based on a simple premise. Instead of looking at cumulative totals or gross numbers such as total revenue and total no of customers, one looks at the performance of each group of customers that comes into contact with the product independently. Each group is called a cohort.

Such graphs can show some clear trends. And bring forth the right questions.

Optimisation Versus Learning

Engineers, designers, and marketers are all skilled at optimisation. Incremental benefit for incremental effort. However, this does not work the same way for startups. If you are building the wrong thing, optimising the product or its marketing will not yield significant results. A startup has to measure progress against a higher bar: evidence that a sustainable business can be built around its products or services.

The downward cycle: Product Dev Team valiantly trying to build product according to specifications it is receiving. When good results are not forthcoming, leaders give specifications in greater detail. Planning process slows down, batch size increases, and feedback is delayed.

Learning milestones prevent this negative spiral by emphasising a more likely possibility — executing with discipline.

Actionable Metrics vs Vanity Metrics

Vanity metrics give the rosiest picture possible. Alternative is the kind of metrics we use to judge our business and our learning milestones — the actionable metrics.

A Note on Agile

Ask the Founder (aka PO): How confident are you that you are making the right decisions in terms of establishing priorities? Like most startup founders, he might be looking at available data and making the best educated guess he could. But this can leave a lot of room for ambiguity and doubt. Product may improve every day but do they matter to customers? Is the founder clinging to his vision no matter what?

Agile is an efficient system of development from the point of view of the developers. It allows them to stay focused on creating features and technical designs. An attempt to introduce the need to learn into the process could undermine productivity.

As they say in systems theory, that which optimises one part of the system necessarily undermines the system as a whole.

Is progress being measured by vanity metrics?

But a disciplined team can experiment with its own working style and draw meaningful conclusions!

Cohorts and Split Tests

Instead of vanity metrics, switch to cohort-based metrics, and instead of looking for cause-and-effect relationships after the fact, launch each new feature as a true split-test experiment.

Although split testing often is thought of as a marketing-specific practice, Lean Startups incorporate it directly into product development.

Kanban (Capacity Constraint)

An idea: User stories are not considered complete until they led to validated learning. Four states: In PBL, actively being built, Done, Being Validated.

Validated — knowing whether the story was a good idea to have been done in the first place.

Also, based on Kanban rule, once a bucket becomes full, it cannot accept more stories. Only when a story has been validated can it be removed from the kanban board. If the validation fails and it turns out the story is a bad idea, the relevant feature is removed from the product.

A solid process lays the foundation for a healthy culture, one where ideas are evaluated by merit and not by job title.

Value of The Three A’s

Three A’s of Metrics: Actionable, Accessible, and Auditable.

Actionable: Must demonstrate clear cause an effect. Otherwise, it is a vanity metric. Vanity metrics wreak havoc because they prey on a weakness of the human mind. When numbers go up, people think the improvement was caused by their actions, by whatever they were working on at that time. Unfortunately, when numbers go down, it results in very different reactions. Actionable metrics are the antidote to this problem. When cause and effect are clearly understood, people are better able to learn from their actions. Human beings are innately talented learners when given a clear and objective assessment.

Accessible: All too often, reports are not understood by employees and managers who are supposed to use them to guide their decision making. Neither do they work with Data Warehousing team to work on the complexity. Antidote is to make reports as simple as possible. This is why cohort analysis reports are a gold standard of learning metrics.

Idea: Let reporting data and infrastructure be part of the product itself!

Auditable: Blaming the messenger, the data, or? That’s why “auditable” is so essential. Make sure mechanisms that generate the reports are not too complex. Draw them directly from master data.


STEER: PIVOT OR PERSEVERE

Pivot — a structural course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth. However, it is not clinical. There is no way to remove the human element — vision, intuition, judgement — from the practice of entrepreneurship.

Companies that cannot bring themselves to pivot to a new direction on the basis of feedback from the marketplace can get stuck in the land of the living dead, neither growing enough nor dying, consuming resources and commitment from team and other stakeholders.

Startup productivity is not about cranking out more widgets or features. Successful pivots put us on a path toward growing a sustainable business.

A Startup’s Runway — No of Pivots It Can Still Make

Runway the startup has left — amount of time remaining in which a startup much either achieve lift-off or fail. May be defined based on monthly burn rate and working capital.

Cutting costs is a usual approach. But if that reduces speed of BML loop, that only helps startup go out of business more slowly.

The true measure of runway is how many pivots a startup has left: the number of opportunities it has to make a fundamental change to its business strategy. This also suggests: get to each pivot faster. This must be the overarching goal.

Pivots Require Courage

First, Vanity metrics can allow entrepreneurs to form false conclusions and live in their own private reality. Second, when the entrepreneur has an unclear hypothesis, it’s almost impossible to experience complete failure, and without this, there is usually no impetus to embark on the radical change a pivot requires. Third, many entrepreneurs are afraid. Acknowledging failure can lead to dangerously low morale.

Most entrepreneurs biggest fear is not that their vision will prove to be wrong. More terrifying is the thought that the vision might be deemed wrong without having been given a real chance to prove itself. This fear drives much of the resistance to the MVP, split testing, and other techniques to test hypotheses. Ironically, it becomes often too late to pivot because funding dries out. To avoid this fate, entrepreneurs need to face their fears and be willing to fail, often in a public way.

Pivot or Persevere Meeting

The decision to pivot requires a clear-eyed and objective mind-set. Tell-tale signs of pivot- decreasing effectiveness of product experiments and the general feeling that product development should be more productive. Whenever you see those symptoms, consider a pivot.

Decision to pivot is emotionally charged and has to be addressed in a structured way. Schedule the meeting in advance. Better yet to have a regular “pivot or persevere” meeting. Between Few weeks to few months. Outside advisors will help! Dev Team must bring a complete report. So does the business leadership — detailed accounts of their conversations with current and potential customers.

A Catalog of Pivots

The word pivot sometimes is used incorrectly as a synonym for change. A pivot is a special kind of change designed to test a new fundamental hypothesis about the product, business model, and engine of growth.

Zoom-in Pivot: What previously was considered a single feature in a product becomes the whole product.

Zoom-out Pivot: Sometimes a single feature is insufficient to support a whole product. In this type of pivot, what was considered the whole product becomes a single feature of a much larger product.

Customer Segment Pivot: The company realises that the product it is building solves a real problem for real customers but they are not the type of customers it originally planned to serve. In other words, the product hypothesis is partially confirmed, solving the right problem, but for a different customer than originally anticipated.

Customer Need Pivot: As a result of getting to know the customers extremely well, it sometimes becomes clear that the problem we’re trying to solve for them is not very important. However, because of this customer intimacy, we often discover other related problems that are important and can be solved by the team.

Platform Pivot: A change from an application to a platform or vice versa.

Business Architecture Pivot: High margin, low volume or low margin, high volume? B2B or B2C?

Value Capture Pivot: Capturing value is an intrinsic part of the product hypothesis. Often, changes to the way a company captures value can have far reaching consequences for the rest of the business, product, and marketing strategies.

Engine of Growth Pivot: Three primary engines — viral, sticky, and paid growth models. In this model, a company changes its growth strategy to see faster or more profitable growth. May also require a change in the way value is captured.

Channel Pivot: Mechanism in which a company delivers its products to customers is called sales channel or distribution channel. Often, requirements of the channel determine the price, features, and competitive landscape of a product. A channel pivot is a recognition that the same basic solution could be delivered though a different channel with greater effectiveness.

Technology Pivot: Company discovers a way to achieve the same solution by using a completely different technology.

A Pivot Is A Strategic Hypothesis

The ability to pivot is no substitute for sound strategic thinking. A pivot is better understood as a new strategic hypothesis that will require a new MVP to test.

Pivots are a permanent fact of life for any growing business. Even after a company achieves initial success, it must continue to pivot.


ACCELERATE: BATCH

Author refers to Lean Thinking book and highlights the lessons from stuffing envelops into letters demonstration to explain the “single-piece flow” in lean manufacturing and the surprising power of small batches. This demonstration continues to be a powerful mode to bring forth the Lean Mindset.

The small-batch approach produces a finished product every few seconds, whereas the large batch approach must deliver all the products at once, at the end. Imagine what this might look like if the time horizon was hours, days, or weeks. What if it turns out that the customer have decided they don’t want the product? Which process would allow a company to find this out sooner?

Lean Manufacturing: You do not ask workers to work faster, but you reimagine and restructure the work that needs to be done.

Because of smaller batch sizes, Toyota was able to produce a greater diversity of products. The biggest advantage of working in small batches is that quality problems can be identified much sooner. This is the origin of Toyota’s famous andon cord, which allows any worker to ask for help as soon as they notice any problem, stopping the entire production line if it cannot be corrected immediately. This is another counter intuitive practice. However, the benefits of finding and fixing problems faster outweigh this cost. This is the root of Toyota’s high quality and low costs.

SMALL BATCHES IN ENTREPRENEURSHIP

Working in small batches ensures that a startup can minimise the expenditure of time, money, and effort that ultimately turns out to have been wasted.

In many companies, large batches are still the rule. Product managers figure out features. Product designers then figure out look and feel. Designs are passed to Engineering. Then to QA.

Small batches environment? Instead of separate departments, engineers and designers would work together side by side on one feature at a time. The team would be able to immediately assess the impact of their work, evaluate its effect on customers, and decide what to do next.

Andon Cord in a Software Team!

  • Defective change is removed immediately and automatically
  • Everyone on the relevant team is notified of the problem
  • Team is blocked from introducing any further changes
  • Until the root cause is found and fixed.

You can call it Continuous Deployment.

It is epitomised in the proverb — Stop production so that production never has to stop.

Small Batches in Education

If you are a Teacher, although you may teach concepts in small batches, one day at a time, your overall curriculum cannot change very often. You can try a new curriculum at most once a year. This is the large-batch system of education.

In School of One, students have daily play-lists of their learning tasks that are attuned to each student’s learning needs, based on that student’s readiness and learning style. There are assessments built into each activity so that data can be fed back to the teacher to choose appropriate tasks for the next playlist.

Large Batch Death Spiral

Small batches pose a challenge to managers steeped in traditional notions of productivity and progress, because they believe that functional specialisation is more efficient for expert workers.

In large batch systems, few products are actually built the way they are designed. One can expect to redo work even up to 5 to 6 times.

Pull, Don’t Push

Each step in the line pulls the parts it needs from the previous step. This is the Toyota Just-in-Time production method. Companies using this shift to WIP Inventory. The magical shrinkage of WIP Inventory is where Lean gets its name.

Startups struggle to see their WIP inventory. Easy for a factory as pile ups cannot be missed. All the work that goes into designing the MVP is — until the moment that product is shipped — is just WIP inventory. Incomplete designs, not yet validated assumptions, and most business plans are WIP.

In manufacturing. pull is used to make sure production processes are tuned to customer demand. But in a Lean Startup, pull is not just applying pull to what customer wants. Customers may often don’t know what they want. The right way to think about the product development process in a Lean Startup is that it is responding to pull requests in the form of experiments that need to be run.

The TPS is probably the most advanced system of management in the world. Even more impressive, Toyota has built the most advanced learning Org in history. It has demonstrated an ability to unleash the creativity of its employees, achieve consistent growth, and produce innovative new products relentlessly over the course of nearly a century. This is the kind of longterm success to which entrepreneurs should aspire.

The Lean Startup work only if we are able to build an organisation as adaptable and fast as the challenges it faces. This requires tackling the human challenges inherent in this new way of working.


ACCELERATE: GROW

How to jump-start growth? Where does growth come from? Sustainable? Not the one-time activities that generate a surge but no long-term impact!

One simple rule for sustainable growth: New customers come from the actions of past customers. By word of mouth. As a side effect of product usage. Through funded ads. Through repeat purchase or use.

The Three Engines of Growth

The engines of growth framework can help startups stay focused on the metrics that matter. And not vanity metrics!

  • Sticky engine of growth
  • Viral engine of growth
  • Paid engine of growth

Technically, more than one engine of growth can operate in a business at a time. However, successful startups usually focus on just one engine of growth, specialising in everything that is required to make it work.

Sticky Engine of Growth

Like customers sticking to a Pepsi or Coke. Companies using the sticky engine of growth track their attrition or churn rate very carefully. (Churn Rate — fraction of customers in any period who fail to remain engaged with the company’s product).

Rule is simple — if rate of new customer acquisition exceeds the churn rate, the product will grow. No of customers, revenue per customer cannot be very helpful here.

Viral Engine of Growth

Social networks. Tupperware and it’s famous house parties. Hotmail (achieved with a simple “P.S. Get your free e-mail at Hotmail’ as a clickable link along with all e-mails).

This engine of growth is powered by a Viral loop. It’s speed is determined by a single mathematical term called viral co-efficient. Higher the VC, faster the product will spread. VC measures how many new customers will use a product as a consequence of each new customer who signs up.

If it is 0.1, one in every ten customers will recruit one of his or her friends. 0.1 is not a sustainable loop! By contrast, VC > 1 will grow exponentially, because each person who signs up will bring, on average, more than one other person with him or her.

Companies that rely on viral engine of growth must focus on increasing the VC more than anything else because even tiny change in this number will cause dramatic changes in their future prospects.

Paid Engine of Growth

This engine of growth is powered by a feedback loop. Measure? LTV — Lifetime value.


ACCELERATE: ADAPT

Adaptive Org — one that automatically adjusts its process and performance to current conditions.

To focus on speed alone would be destructive. Startups require built-in speed regulators. Example of a speed regulator — use of andon cord in systems such as continuous deployment.

This is one of the most important discoveries of the lean manufacturing movement: you cannot trade quality for time. If you are causing (or missing) quality problems now, the resulting defects will slow you down later. Defects cause a lot of rework, low morale, and customer complaints, all of which slow progress and eat away at valuable resources.

Shortcuts taken in product quality, design, or infrastructure today may wind up slowing a company down tomorrow.

Wisdom Of the Five Whys

To accelerate, Lean Startups need a process that provides a natural feedback loop. When you’re going too fast, you cause more problems. Adaptive processes force you to slow down and invest in preventing the kind of problems that are currently wasting time. As those preventive efforts pay off, you naturally speed up again.

Built on the investigative method of asking the question “Why?” five times, the core of the Five Whys is to tie investments directly to the prevention of the most problematic symptoms.

For example, most problems that at first appear to be individual mistakes can be traced back to problems in training or the playbook.

Hear’s how to use Five Whys: consistently make a proportional investment at each of the five levels of the hierarchy. Investment should be smaller when the symptom is minor and larger when the symptom is more painful. We don’t make large investments in prevention unless we’re coping with large problems.

Ex: if 5 Whys yielded — Fix the server, change the sub-system to make it less error prone, educate the engineer, have a conversation with the engineer’s manager. Where will you invest? Proportion of investment?

Five Whys approach acts as a natural speed regulator. Startup teams should go through the Five Whys whenever they encounter any kind of failure, including technical faults, failures to achieve business results, or unexpected changes in customer behavior.

Five Whys is a powerful organisational technique. Coupled with working in small batches, it provides the foundation a company needs to respond quickly to problems as they appear, without over investing or over engineering.

Curse of the Five Blames

When the Five Whys approach goes awry, it it the Five Blames. It can become a means for venting frustrations and calling out colleagues for systemic failures.

Tactics to escape Five Blames?

  • Make sure that everyone affected by the problem is in the room during the analysis of the root cause
  • Most senior people in the room should repeat this mantra: if a mistake happens, shame on us for making it so easy to make that mistake. In Five Whys analysis, we want to have a systems-level view as much as possible
  • Five Why’s require an environment of mutual trust and empowerment. Be tolerant of all mistakes the first time. Never allow the same mistake to be made twice
  • Remember — most mistakes are caused by flawed systems, not bad people
  • Be prepared — unpleasant facts about your Org may turn up — especially in the beginning
  • It is essential that someone with sufficient authority be present to insist that the process be followed, that its recommendations be implemented, and to act as a referee if disagreements flare up. Building an adaptive Org requires executive leadership to sponsor and support the process
  • It is better to start with a narrowly targeted class of symptoms. Ex: problems with internal testing tools — that did not affect customers directly. It may be tempting to start with something large and important but it is also where the pressure with be greatest. When the stakes are high, the Five Whys can devolve into Five Blames quickly. It is better to give the team a chance to learn how to do the process first and then expand into higher stakes areas later.
  • Appoint a Five Whys Master. He are she is the primary change agent. People in this position can assess how well the meetings are going and whether the prevention investments that are being made are paying off.
  • To introduce Five Whys in a Org, it is necessary to hold Five Whys sessions as new problems come up. Don’t send your baggage through the Five Whys process.
  • At the beginning of each session, take a few minutes to explain what the process is for and how it works for the benefit of those who are new to it.

A good Five Whys session has two outputs, learning and doing.


ACCELERATE: INNOVATE

Startups can manage existing lines of business and explore new business models. Even large companies can innovate if only they are willing to change their management philosophy.


Resources and Author Suggestions

Books

  • The Four Steps to the Epiphany
  • Entrepreneur’s Guide to Customer Development
  • Running Lean
  • Innovator’s Dilemma and Innovator’s Solutions are classics
  • Innovator’s Prescription (Healthcare) and Disrupting Class (Education)
  • Crossing the Chasm and Inside the Tornado and Dealing with Darwin
  • The Principles of Product Development Flow
  • The Toyota Way
  • Lean Thinking: Banish Waste and Create Wealth
  • Extreme Programming Explained
  • Out of the Crisis
  • Getting to Plan B

Blogs/Rest