How was the book?

This book is one of a kind although the first 30-40 pages were a bit dreary. The book is more or less the kind of content that you would expect to find from a startup book. After the first 40 pages the content became really interesting, even super-interesting. The book created some kind of flow that sucked me into the pages. I nearly read 150 pages in a single stroke.

What are the key learnings of the book? 

Mårten Mickos simplified the current startup way-of-working with two words. He said that we should ”test and measure”. The Lean Startup is about testing, measuring and building.

The goal of the book is to advocate a scientific and lean approach to the creation of startups and even developing corporations. The Lean Startup methods goal is to ”learn how to build a sustainable business as quickly as possible.” The need to find out sooner than later what works and what does not work.  

About the Lean Startup Method

The Lean Startup Method idea is that the different teams in a startup are accountable for the validated learning via innovation accounting, well-defined financial model and engine of growth. Speed and quality are allies in the pursuit of the customer’s long-term benefit. A startup is a portfolio of activities or a human institution designed to create a new product / service under conditions of extreme uncertainty. What happens when organizations start using the Lean Startup approach? They will stop wasting people’s time.

The Lean Startup method is simply. The recipe is:

1.  Entrepreneurs are everywhere

2.  Entrepreneurship is management

3.  Validated learning

4.  Build-Measure-Learn

5.  Innovation accounting

Building a startup is like ”commuting to home, you don’t give up because there is a detour in the road or you made a wrong turn. You remain focused on getting to your destination”. Startups vision is ”creating a thriving and world-changing business”. Engine of growth is a feedback loop that keeps the startups wheels rolling.

Try and measure, try and measure and then validate learnings. The Lean Startup model is all about validating learning. Learning is one of the measures of progress for a startup. 

”The goal of every startup experiment is to discover how to build a sustainable business around that vision.” The product is the end-result of the strategy. Startups strategy is that ”startups deploy strategy which includes”:

•     A business model,

•     A product road map

•     Partners

•     Competitors (?)

•     Ideas about customers

Build-Measure-Learn feedback loop:

·       Build

o  Product

·       Measure

o  Data

·       Learn

o  Ideas

·       Build

o  Product

·       Measure

o  etc….

What to do in Build phase?

•     As quickly as possible aim to build a minimum viable product (MVP).

What to do in Measure phase?

•     Innovation accounting offers a quantitative way to measure that are the efforts ”bearing fruit”.

What to do in Learn phase?

•     Set learning milestones.

About the era of Entrepreneurial Renaissance

We are living in the era of Entrepreneurial Renaissance. ”The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere.” So why shouldn’t corporations do that also? Entrepreneurs could also be intrapreneurs working within a corporation. Their task would be to build learning milestones within the company and measure the progress. Intrapreneurs have to choose between island of freedom or island of isolation? Or both.

Central question in lean manufacturing or in agile software development is ”which of our efforts are value-creating and which are wasteful?” Learn to see the waste. Lean thinking provides benefit for the customer; anything else is waste. Ask yourself ”what keeps me awake at night? How much less could have we done. And remember to pivot based on your experience.”

About business operations

A good business plan has:

•     Clearly identified facts (brutal facts).

•     What is needed is to do some empirical testing.

Analysis paralysis. Your are too eager to execute and have no time for analysis. Or your are analysing, but not talking with the potential customers. How to break this analysis paralysis? Enter MVP (minimum viable product) as quickly as possible.

With MVP you will test your business hypothesis. Dropbox used a video narrated by the founder as the MVP. It increased the beta waiting list from 5000 people to 75000 people.

How innovation accounting works?

1.                       Use MVP to collect real data about the company to track progress.

2.                       Iterate MVP to get closer to ideal.

3.                       Pivot or persevere.

Use milestones to track progress and tune the engine. Use smoke test (possibility to pre-order a product) and measure the interest in the market place to try the product. Like Tesla has done with the Model 3. Combine funnel and cohort analysis to analyse and express the progress of MVP.

About pivot and persevere

”When to pivot or when to persevere?” is the question. What is pivoting? It is a structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth. Low-quality MVP might be a good solution, because developing features for early adopters beyond their requirements might be waste. Mainstream customers are more demanding. #LEAN

Pivots in different flavors:

•     Zoom-in pivot

•     Zoom-out pivot

•     Customer segment pivot

•     Customer need pivot

•     Platform pivot

•     Business architecture pivot

•     Value capture pivot

•     Engine of growth pivot

•     Channel pivot

•     Technology pivot

About growth

Sustainable growth rule is that new customers come from the actions of past customers. Four primary ways that past customers drive sustainable growth:

1.  Word of mouth

2.  As a side effect of product usage.

3.  Through funded advertising.

4.  Through repeat purchase or use.

About engine of growth

Three engines of growth:

1.  The Sticky Engine of Growth means low churn rate and high retention rate.

2.  The Viral Engine of Growth i.e. Social networks or Tupperware. Growth happens as a side effect of customers using the product. For example Hotmail and ”P.S. Get your free e-mail at Hotmail” and a clickable link.

3.  The Paid Engine of Growth is about all paid services that helps the company grow.

You can use all engines of growth simultaneously or just one depending on the situation, but typically successful startups focus on one engine of growth.

About the Five Why-method

Ask five time why to get to the bottom of root cause. That way you might be able to prevent ”most problematic symptoms”. The method was developed by Taiichi Ohno as part of the Toyota Production System. This way you will evaluate technical and human error of the situation. Startup teams should go through the Five Why’s when they encounter problems. And then you can prevent the Five Blames. When deploying Five Whys gather everybody into a room and avoid anybody being blamed as the scapegoat. Start with a small problem so that the team get’s use to it. Overtime more larger problems can be solved with Five Whys, because people are used to it. Five Whys is a great way to facilitate learning and it will lead to an adaptive organization. Use also the spirit of Genchi Gembutsu (Go and See what the user is doing).

About innovation and experimentation

How to nurture innovation?

•     Scare but secure resources.

•     Independent development authority.

•     A personal stake in the outcome.

Create a platform for experimentation and ground rules to autonomous startup teams within a corporation:

•     How to protect the parent organization?

•     How to hold entrepreneurial managers accountable?

•     How to reintegrate an innovation back into the parent organization (if successful)?

About a company and lean

Four phases of a company:

1.  Startup phase lead by the entrepreneur

2.  Challenge of scale

3.  Operational excellence and a new manager

4.  Top-line growth.

An example of lean and way-of-working:

•     Single peace envelope flow works, because of the power of small batches.

•     And small batches helps to identify quality problems sooner.

About Leap-of-faith

Key learning in building the Leap-of-faith assumptions is the value and growth hypothesis. For example why Facebook raised so much VC money?

1.  Value hypothesis: The time that active FB users spent on the site. Customers found that FB was useful to them.

2.  Growth hypothesis: Penetration rate in the early campus market.

Value and growth hypothesis are the most important LEAP-OF-FAITH questions any startup will face. Turn the Leap-of-faith assumptions (value + growth hypothesis) into a quantitative financial model and your business will survive.

How should we change according to the book?

Three key points:

1.  Build – Measure – Learn

2.  Use MVP as early as possible.

3.  Stop wasting time.

What should I personally do? 

Early MVP’s rule the world.

Summary

The book in six words – Go and See to learn about your customers.