General

Notes from Eric Ries’ Lean Startup Event in Boston

Thursday, January 27, 2011
Microsoft NERD
  • “Most of you are entrepreneurs, which means most of you are going to fail.”
    • we’re wasting time by pouring smart people into ventures set to fail.
    • remember when Web 2.0 was still cool?
  • we have to get better about talking candidly about failure
  • waterfall methodology/traditional product management
    • all entrepreneurship is difficult to manage, so we manage it by a metaphor
    • why doesn’t waterfall work?
      • we successfully can execute the plan, but we don’t know if the plan is good
      • metaphor: drive at the right speed, on schedule, but we drive off a cliff
    • three “shadow beliefs” that we don’t really know
      • #1: “we know what customers want”
      • #2: “we can accurately predict the future”
      • #3: “advancing the plan means progress”
        • if we’re building something nobody wants, who cares if it’s high-quality? is it progress to advance the plan, or do your job, if the plan is failure?
    • main idea against waterfall/traditional product management: “If we’re building something nobody wants, what does it matter if we accomplish it?”
  • Lean Revolution
    • in Japan, started the lean manufacturing mantra
      • old mantra is wrong
      • if we go lean, we can drive waste out of the process
    • Ries picked up Agile Product Development
      • despite the name, agile still has its roots inside larger companies
      • Agile works when the problem is known, solution unknown
        • (this doesn’t work in startups)
  • we need a iterative, waste-free customer-based way
    • Lean Startups’ unit of progress: validated learning
    • Eric Ries at IMVU: his really good idea (interoperability with instant messaging + 3d avatar system), used 6 months to build the product, which actually turned out to not be a good idea
    • had to throw it out and pivot – all of the code was thrown away
      • he built something that nobody wanted, so it was of no use
    • If my goal in the last 6 months was to learn this important bit about customers, why did we need 6 months? we would have learned the same from less code. or… even any code?
      • we could have basically learned the same with a fake landing code with a spec. we would have known people didn’t want the product because we didn’t get any clickthroughs on a landing page
    • job #1 in startup: do whatever it makes to make the company successful period.
      • need new vocabulary for what entrepreneurs “do”
  • entrepreneurship is management
    • institution-building: the coordinated building of something
    • we’re prejudiced about “management” – we need something called Entrepreneurial Management
      • design and build institutions under situations of high uncertainty
  • THE PIVOT
    • Eric Ries apologies for the overhypedness of this word.
    • What do successful startups have in common?
      • they know the process on how to tell good function from bad function
      • systematically re-evaluation of your startup until you achieve product-market fit (PMF)
      • what is runway? it’s how many pivots you have left
      • pivots powered by learning
      • lean startups are all about speed.
        • if you have fast cycle times to tweak until you achieve product-market fit, you can get to PMF faster than others – speed
    • startup: catalyst for ideas -> code
      • customers interacting with code: qualitative and qualitative data
    • Apple found a balance: don’t overinvest into something that doesn’t matter, but put in just enough to get to the next pivot (more learning)
  • Lean startup principles
    • 1. entrepreneurs are EVERYWHERE
      • EVERYWHERE
        • “we can find entrepreneurs everywhere we seek out uncertainty”
        • no “safe industries” – “waves of destruction” went through industries
      • innovation accounting
        • the most boring topic in entrepreneurship
        • today: accounting -> accounting where money goes
        • not what it was made for – accounting was invented to drive accountability for managers
        • it’s a mathematical model for management
        • at GM, they had mathematical models – accounting was meant to separate what managers did versus the random environmental factors that happened
          • (if a manager exceeded their sales estimate by 10%, but it was a 10% better year for cars all year, they’re at parity, not exceeded)
        • we need a new accounting paradigm for entrepreneurs
          • actionable metrics, not vanity metrics
          • not what happened in the past but the future
        • test of value in the startup: customers engage in a voluntary exchange with the startup
          • time, attention, referrals,
          • Facebook: viral growth, value component, because there was customer engagement and interaction
      • need an accounting paradigm for entrepreneurs to demonstrate quantitatively that we’ve done validated learning – real experiment
        • we can affect customer actions through our own actions
        • actionable metrics: our own actions affect customer actions (mark’s notes: this is repeatable)
        • vanity metrics: random environmental events, press spikes, etc. (mark’s notes: this isn’t repeatable)
    • how do we know when to pivot?
      • we know when to pivot when our product experiment efforts don’t really move the needle
      • we can make excellent decisions 3 years ago, but if our current experiment efforts aren’t doing anything, there is a problem
    • the automobile revolution: 500 other companies before Henry Ford that failed because they didn’t have the right process that Ford had
    • when we pivot, we DON’T pivot the VISION, we PIVOT the STRATEGY
  • should a feature be in your MVP?
    • good rule of thumb: no
  • http://lean.st/LeanStartupBos

QUESTIONTIME!

  • #1: Jason Evanish: how do you keep your engineers having faith in the process when so much is done without them initially for mvps? #leanstartups cc @msmamet
    • keep them calm
    • abandon the crutch of the reality distortion field to keep them calm
    • dishonest to do that ^ — accept uncertainty
  • #2: questioning the usage of the word “movement”
    • it’s not religion, it’s science
    • ……. still going
    • used to think VCs are the way to evangelize to entrepreneurs
      • (though they want to advance their portfolio)
  • #3: How do you test a product people aren’t actively searching for?
    • when does it work?
      • solves an acute problem
      • … that customers know they have
      • … that customers know the name of the problem
    • what if it doesn’t work?
      • need another way
      • outbound advertising to inbound learning
        • IMVU: adjacent markets
        • “world of warcraft chat”, etc.
        • didn’t want to know anything but: what are the differences in conversion rates across channels?
          • they found out who the customer wants
      • dropbox’s video: an MVP on Digg and etc
      • Ries works with MBAs. why?
        • process/discipline oriented
        • predisposed to learn a new management paradigm, since they’ve already done that
        • entrepreneurs are a bit sloppy about it
      • we need to know what exactly is making things go up or down – reject vanity metrics
  • #4: innovation accounting: know what to measure? consistent across all startups?
    • the right things to measure are clear and consistent across all startups (but only at a high level of abstraction)
      • measure two things:
        • value test: does it make value?
        • if yes, does it have an engine of growth that is working?
      • driving metaphor
        • engine: constant revolutions
        • driver: build-measure-learn
          • you can’t build a list of step-by-step actions of how to drive a car to a destination (with every action, turn on steering wheel, etc.), because you respond to the environment
          • however, that’s how we do product development, right now — build a plan, execute on that plan, without responding to the environment
        • compulsive behavior with Facebook, like photo tags (viral)
      • sticky growth: engine of growth that is addictive
    • engines are all feedback loops: they have compunding effects
      • we can have hockey-stick improvements but we don’t know what is driving it
      • that is what we’re trying to prevent – control over the actions that really make change and results
  • #5: advice for getting to market first if your product is easily replicated?
    • exercise
      • take your second best idea.
      • try to get somebody to steal it.
      • contact a product manager and try to get them to implement it in their next version.
    • <over-repeated>ideas have no value</over-repeated>
    • you have to go through the process of REFINING a good idea
    • first-mover advantage: extremely rare in reality
  • #6: how to get this into a company that isn’t really built on lean startups?
    • work is a system, and systems are perfect at what they do today
      • what is the organizational change process we want to do?
      • implementing cold-turkey lean startup methodologies won’t work
    • find one areas where there is a stress/pain point in the company
      • there are a community of people that might be trying to solve the problem
      • try an experiment – lean startups are a science
    • can’t have high expectations – have to measure the actions with validated learning
  • #7: how does lean startups affect the world of sales force?
    • four steps to the epiphany – Steve Blank
    • sales people aren’t really paid at listening – they don’t take no for an answer
      • entrepreneurs: no is powerful: we want to figure out why
      • Mark’s notes: to sales people, no is a dead end. to entrepreneurs, no isn’t a roadblock or a dead end, it’s an opportunity for validated learning to take place – why did they say no?
    • entrepreneurs should start out doing their own sales for validated learning