Web 2.0 Expo SF 2010: Eric Ries, "The Lean Startup: Innovation Through Experimentation. ..."

Summary

Eric Ries, author of 'Startup Lessons Learned', emphasizes the importance of avoiding waste in entrepreneurship, particularly the misuse of time and resources on products that fail to meet customer needs. He introduces the concept of the 'Lean Startup', advocating for a new management approach that embraces uncertainty and iterative learning. Ries discusses the 'pivot', a strategic shift based on validated learning, and criticizes traditional product development methods for their inefficiency in startups. He concludes by addressing misconceptions about the Lean Startup, asserting its applicability to any business facing uncertainty and its commitment to testing entrepreneurial visions against reality.

Takeaways

• 🕊️ Entrepreneurship is a noble calling that combines the ability to change the world, create lasting value, and improve customers' lives.
• 📉 The traditional startup and product development processes often fail to deliver successful outcomes, wasting time and resources on ideas that don't resonate with customers.
• 🚫 The speaker advocates for a halt to 'faith-based initiatives' in startups, urging for more rigorous testing of assumptions before investing time and energy.
• 🔄 The concept of 'pivoting' is introduced as a strategic change made by entrepreneurs when they encounter difficulties, adjusting their strategy while keeping one foot grounded in learned experiences.
• 📈 The Lean Startup methodology emphasizes validated learning over traditional milestones and schedules, focusing on progress that confirms value creation for customers.
• 🛠️ The speaker defines a startup as a human institution designed to create something new under extreme uncertainty, highlighting the need for a new management science tailored to these conditions.
• 🔄 The 'build-measure-learn' feedback loop is central to the Lean Startup approach, providing a heuristic for evaluating processes and changes within a startup.
• 📚 The traditional 'waterfall' product development methodology is critiqued for its inefficacy in situations of extreme uncertainty, where a more agile approach is necessary.
• 💡 The Lean Startup movement has grown beyond Silicon Valley and web 2.0, applicable to any business facing uncertainty about customer needs.
• 💼 Contrary to misconceptions, the Lean Startup approach is not just for small or cheap startups; it's for any organization looking to innovate and grow effectively.
• 🌟 The incorporation of data and feedback into the entrepreneurial process is not about replacing vision with data, but about ensuring that visions are grounded in reality and tested for feasibility.

Q & A

What is the main message Eric Ries wants to convey in his talk?

Eric Ries emphasizes the importance of avoiding waste in the startup industry by building products that people actually want and applying a more rigorous approach to entrepreneurship.

What does Eric Ries mean by 'stop wasting people's time'?

He is urging entrepreneurs and industry professionals to avoid investing time and resources into ideas and products that may not be viable or desired by customers.

What is the significance of the 'Lean Startup' hashtag mentioned by Eric Ries?

The hashtag '#LeanStartup' represents a movement and methodology that focuses on efficient entrepreneurship, minimizing waste, and maximizing validated learning through a rapid feedback loop.

What does Eric Ries consider the midterm report card of Web 2.0 companies?

The midterm report card is a visual representation showing the logos of Web 2.0 companies from 2006, with red X's marking those that failed and green circles indicating those that succeeded, either through IPO or acquisition.

How does Eric Ries define success for startups beyond financial gain?

He suggests that success should also be measured by whether a startup lives up to the talent, passion, time, and energy invested by its founders and employees.

What is the definition of a startup according to Eric Ries?

A startup is defined as a human institution designed to create something new under conditions of extreme uncertainty.

What is the concept of 'pivoting' in the context of startups?

Pivoting is a strategic change made by startups when they encounter difficulty, involving one foot rooted in learned experiences while systematically altering one other aspect at a time.

What is the fundamental feedback loop that powers all startups according to Eric Ries?

The fundamental feedback loop is the 'build-measure-learn' cycle, which involves turning vision into action, revealing the truth about the vision, and iterating based on the findings.

How does Eric Ries differentiate between achieving failure and validated learning?

Achieving failure occurs when a plan is successfully executed but leads to an undesirable outcome. Validated learning, on the other hand, involves making progress by testing assumptions and learning from customer feedback, even if the initial idea was flawed.

What are some common misunderstandings about the Lean Startup movement that Eric Ries addresses?

Some common misunderstandings include the belief that lean means cheap, that the Lean Startup is only for web 2.0 consumer software companies, that it's for small bootstrap startups, and that it seeks to replace vision with data.

How does Eric Ries view the role of vision in the entrepreneurial process?

He believes that vision is crucial for entrepreneurship, and that incorporating data and feedback is not about replacing vision but about testing essential assumptions to see what is truly possible and to avoid wasting time.

Outlines

00:00

🚀 The Waste of Time in Startups

Eric Ries, the author of the 'Startup Lessons Learned' blog, opens his talk by urging the audience to stop wasting time in startup ventures. He acknowledges the high failure rate of startups and presents a visual comparison of the web 2.0 companies from 2006 to 2009, highlighting the many that have failed. Ries argues that even the 'successful' companies, defined by IPOs or acquisitions, may not have lived up to the potential and effort invested by their founders and employees. He extends this concern beyond startups to new product introductions in various sectors, suggesting that the industry is not taking enough risk by building products that no one wants, which he sees as a preventable condition. Ries emphasizes the importance of entrepreneurship in driving change and creating value but calls for a more rigorous approach to avoid wasting resources on undesired products.

05:02

🔄 Embracing the Pivot in Entrepreneurship

Ries introduces the concept of 'the pivot,' a term that has gained popularity in the entrepreneurial lexicon. He explains that a pivot involves maintaining a core vision while systematically changing one element at a time in response to difficulties. Successful entrepreneurs, according to Ries, do not necessarily have better ideas but rather a superior process that allows for a zig-zag path to success. The Lean Startup methodology, inspired by lean manufacturing, emphasizes validated learning over traditional milestones and schedules. Ries contrasts the waterfall methodology, which he criticizes for its linear approach and potential to lead to 'achieving failure,' with agile product development, which focuses on eliminating waste. However, he notes that neither methodology fully addresses the challenges faced by startups operating in conditions of extreme uncertainty, where both the problem and solution are unknown.

10:04

🛠️ The Build-Measure-Learn Feedback Loop

Eric Ries recounts his experience with IMVU, a company he co-founded, and the realization that the first version of their product was a failure despite six months of development. This led to the concept of the 'build-measure-learn' feedback loop, which is central to the Lean Startup approach. The loop involves turning vision into action, measuring the results, and learning from the outcomes to iterate. Ries suggests that startups should focus on minimizing the time spent in this loop to increase their chances of success. He also discusses the importance of validated learning, which is about understanding customer needs and preferences, rather than just executing a plan or following traditional management practices that may not be suitable for startups.

15:05

🌐 Misconceptions and the Future of Lean Startup

In the final paragraph, Ries addresses common misconceptions about the Lean Startup movement. He clarifies that 'lean' is not about being cheap but about increasing speed through validated learning. He also dispels the notion that the Lean Startup is only for web 2.0 or consumer software companies, stating that it is applicable to any business facing uncertainty about customer preferences. Ries emphasizes that the goal of startups is not to be small or bootstrapped but to create institutions capable of growth and impact. He concludes by rejecting the idea that data should replace vision in entrepreneurship, arguing that data should be used to test and validate assumptions that are essential to achieving a vision, thereby preventing the waste of time and resources.

Keywords

💡Lean Startup

The 'Lean Startup' is a methodology developed by Eric Ries that focuses on creating and managing startups in a way that emphasizes validated learning, scientific experimentation, and iterative product releases. It is central to the video's theme, advocating for a more efficient and less wasteful approach to entrepreneurship. The term is introduced by the speaker as the hashtag #LeanStartup and is used throughout the script to describe the movement and philosophy he is promoting.

💡Pivot

In the context of the Lean Startup methodology, a 'pivot' refers to a strategic change made by a startup in response to validated learning or data received from the market. It is a fundamental concept in the video, illustrating the idea of adapting and adjusting the business model or product offering based on customer feedback and market needs, rather than sticking rigidly to an initial plan.

💡Validated Learning

Validated learning is a core principle of the Lean Startup approach, which emphasizes the importance of learning from customers and data to validate assumptions about the product or business model. The term is used in the script to highlight the need for startups to move beyond mere forward motion and instead focus on making measurable progress that confirms or refutes their hypotheses about the market.

💡Waterfall Methodology

The 'waterfall methodology' is a traditional approach to software development where progress is seen as a linear sequence of stages, from concept to delivery. In the video, it is criticized for its lack of flexibility and adaptability, which can lead to 'achieving failure'—a situation where a plan is executed perfectly but leads to an unsuccessful outcome because the initial assumptions were incorrect.

💡Agile Product Development

Agile product development is an iterative approach to building software that emphasizes flexibility, collaboration, and customer feedback. It is mentioned in the script as an improvement over the waterfall methodology, particularly when the problem is known but the solution is not. However, the speaker also points out that even agile methodologies may not be sufficient for startups facing extreme uncertainty.

💡Entrepreneurship

Entrepreneurship is the process of designing, launching, and running a new business, which involves taking on various risks to create value. The term is used throughout the script to discuss the challenges and opportunities inherent in starting a business, as well as the need for a new approach to management that is better suited to the conditions of uncertainty that entrepreneurs face.

💡Innovation

Innovation in the video refers to the creation of new products, services, or methods that disrupt existing markets or industries. It is a key aspect of entrepreneurship and is discussed in the context of the need for startups to create something new under conditions of extreme uncertainty, rather than simply iterating on existing ideas.

💡Experiment

An experiment, in the context of the Lean Startup, is the process of testing hypotheses about the product, market, or business model through the build-measure-learn feedback loop. The term is used to emphasize that startups are not just creating products but also testing and validating their fundamental assumptions about the business.

💡Vision

Vision in the video is the创业者s' mental image or concept of the future they wish to create or the problem they aim to solve. It is a driving force behind entrepreneurship, and the speaker argues that incorporating data and feedback into the entrepreneurial process does not replace vision but rather refines and validates it.

💡Waste

Waste in the context of the Lean Startup refers to any activity or resource that does not contribute to validated learning or the creation of value for the customer. The script discusses the importance of eliminating waste in the entrepreneurial process, particularly in the form of building products that no one wants or spending time on activities that do not lead to learning or progress.

💡Feedback Loop

The 'feedback loop' is a concept in the Lean Startup that describes the continuous process of building a product, measuring its impact, learning from the results, and iterating based on what was learned. It is the fundamental mechanism by which startups can reduce waste and increase their chances of success by ensuring that each cycle of work leads to validated learning.

Highlights

Eric Ries introduces the concept of Lean Startup and emphasizes the importance of not wasting time by building products no one wants.

He presents a visual comparison of Web 2.0 companies from 2006 to 2009, illustrating the high failure rate and questioning the success of those that 'survived'.

Ries challenges the industry to redefine success beyond mere financial gain and to consider the value of the time and energy invested by founders and employees.

He argues that the current approach to entrepreneurship is not taking enough risk by building products based on untested assumptions.

Ries defines a startup as a human institution designed to create something new under extreme uncertainty, applicable across various industries and company sizes.

He introduces the concept of the 'pivot' as a strategic change made after gathering validated learning, distinguishing it from a simple change of direction.

Ries explains that successful entrepreneurs have a superior process, characterized by a zig-zag path from idea to success, rather than better ideas.

He advocates for reducing the time between pivots to increase the odds of success before running out of resources.

Ries critiques the traditional waterfall methodology for product development, highlighting its inefficiency in situations of extreme uncertainty.

He discusses the agile product development approach and its limitations when applied to startups facing unknown problems and solutions.

Ries introduces 'validated learning' as a new definition of progress, emphasizing the importance of learning from customers to avoid building unwanted products.

He shares his experience with IMVU, where building a product no one wanted led to the realization of the importance of validated learning.

Ries presents the 'build-measure-learn' feedback loop as the fundamental process that powers all startups, emphasizing the need to minimize time through this loop.

He addresses common misunderstandings about Lean Startup, clarifying that it is not just for web companies, not about being cheap, and not about replacing vision with data.

Ries emphasizes that Lean Startup is about creating a sustainable organization capable of delivering a series of products and services.

He concludes by stating that the Lean Startup movement aims to stop wasting people's time by putting entrepreneurship on a more rigorous footing.

Ries provides a heuristic for evaluating any process in a startup: does it minimize the total time through the build-measure-learn feedback loop?

Transcripts

I would like to start today I'm Eric

Ries by the way I write the blog startup

lessons learned which hopefully will

show on here look the hashtag is Lean

Startup if you would thank you I would

like to ask all of us a simple thing

which is to stop wasting people's time

and here's what I mean we all know that

startups fail we're accustomed to that I

thought I brought up bring a

demonstration this is web 2.0 circa 2006

when our enthusiasm was at its peak a

graphic designer put together this

patchwork quilt of logos and that I also

brought what I consider to be our

midterm report card it looks like this

this is web 2.0 circa 2009 you can

already see the blood-red X's of all the

companies that are no longer with us and

yet the designer also made an

interesting choice to mark with green

circles the supposed successes of web

2.0 those are the companies that have

gone IPO or were acquired which means

they were acquired and which is another

way of saying those are the companies

where somebody made money and I'm all

for people making money but my question

for today is how many of these suppose

its successes succeeded in living up to

the raw talent passion time and energy

that the founders and employees poured

into them and I think by that higher

standard of success we're not doing very

well as an industry and in case you

think I'm just picking on startups the

same statistics hold true in new product

introductions in the enterprise in the

supermarket it's true of corporate IT

projects and I don't think it's because

we're taking too much risk on the

contrary I think we're taking not enough

risk because we are building products

that fundamentally nobody wants and that

is a preventable condition now that is

what we caught when I say stop wasting

people's time that's what I mean we are

building faith-based initiatives and

that's not a good idea we are taking

untested unvalidated assumptions and we

are pouring people's time and energy

into them now let's do you think I'm

being negative about entrepreneurship

you should know I think entrepreneurship

is awesome and

this thing we call software internet web

2.0 is changing the face of work in this

world software is imagination made

tangible and because of that it has

nonlinear effects in every industry it

infects and that causes disruption chaos

lowering of barriers and stress for our

friends who are in established

businesses but tremendous opportunity

for entrepreneurs everywhere and in the

last year as I have traveled the world

talking about this thing called the Lean

Startup I have gotten to see that there

are now more practicing entrepreneurs on

this earth than have ever been in the

history of the world and those

entrepreneurs are not necessarily going

to make any money let's be honest

entrepreneurship is not a good way to

make money I'm sorry if there's some of

you for whom that's bad news

but entrepreneurship is a noble calling

it combines uniquely among careers three

simultaneous things the ability to

change the world for the better the

ability to create lasting value and also

make customers lives better all at the

same time and yet it is these very

entrepreneurs who are wasting people's

time building something that nobody

wants and I think in order to stop that

from happening we have to put the

practice of entrepreneurship on a more

rigorous footing and the first step is

to begin with a definition so here's

mine a startup is a human institution

designed to create something new under

conditions of extreme uncertainty notice

I didn't say anything about what

industry you're in or what sector of the

economy or even the size of company you

work at in my travels I have gotten to

meet many very talented involuntary

entrepreneurs who tried to take a safe

job at a safe company in a safe industry

but then discovered there's no such

thing in this world so anyone who's

trying to create disruptive innovation

under conditions of uncertainty is an

entrepreneur that's not a metaphor and

that's just a fancy way of saying a

start-up is an experiment an experiment

not just in can we build a product but

should we build it and more importantly

can we build an organization a

sustainable organization to support that

series of products and services and the

funny thing about that definition is it

means that entrepreneurship is

management huh

because when we think of management we

most of us have a very

century view of what that looks like we

think of general management as was

practiced in the 20th century the

general management that powers the

supply chains that let's face it keep us

all alive but I believe we need a new

management science entrepreneurial

management not better or worse than

general management but different geared

specifically to the principles of

extreme uncertainty that is the soil in

which all entrepreneurs live and the

first of those management principles I

want to talk about is this thing called

the pivot a pivot is a word that's gone

a little bit mainstream this year it's

entered the zeitgeist I knew when I saw

this in the New Yorker I don't know if

you can read this it says I'm not

leaving you I'm pivoting to a new man so

sorry about that but that cartoon

actually has a certain wisdom to it

because what entrepreneurs do when they

have a vision and encounter difficulty

is they don't just give up on the vision

but they don't just persevere the plane

right into the ground either they keep

one foot firmly rooted in what they've

learned so far

while systematically changing one other

thing at a time

and that's why successful entrepreneurs

do not have better ideas than

unsuccessful entrepreneurs they have

superior process and they have this kind

of zig zaggy path from initial idea to

eventual success which only in

retrospect looks nice and linear or

unfortunately when you read about it in

the press and the premise of the Lean

Startup is actually very simple if we

can reduce the time between pivots we

can increase our odds of success before

we run out of money because what matters

in any entrepreneurial situation from

the garage to the enterprise is not how

much money do I have left but how many

pivots do I have left

so if we're going to stop wasting

people's time we have to learn to pivot

faster and yet the fastest way to

iterate is just to go around and around

in a circle that's not helpful either we

have to know how do we know if we're

making progress or just engaged in

forward motion and that is the enduring

conundrum of entrepreneurship knowing if

I'm making progress the Lean Startup

takes its inspiration and his principles

from lean manufacturing that confronted

the same question how do we tell the

difference between value creating

activities and waste as I mentioned at

the top many startups are actually

building something that nobody

and if you're building something that

nobody wants what does it matter if

you're on budget and on time or on

schedule why are we using milestones and

schedules to manage something which

fundamentally is uncertain and has many

cases a fatal problem at the root

instead we need a new definition of

progress what I call validated learning

and I'll share with you how I came to

that conclusion this is how I was taught

to do product development as a software

engineer in Silicon Valley it's called a

waterfall methodology I'm sure many of

you have tried this I was taught this as

the as the manufacturing metaphor for

software development and you can imagine

how pissed I was when I found out that

they don't even use it for manufacturing

anymore

so what's our excuse for tuning into

software development it's ridiculous and

the waterfall methodology is easy to

pick on because we've had quite a lot of

time to study it but it's important to

remember that the waterfall methodology

does work when you're in a situation of

the known problem known solution that

it's when you're making something that

is very similar to something you have

made in the past you can't have this

linear sense of progress through a

pre-existing plan that's why the unit of

progress of waterfall is advancing to

the next stage as long as we're doing

what we said we were going to do we

consider that success even if what we

said we were gonna do was stupid and

that is what leads to this problem we

call achieving failure when you

successfully execute the plan but the

plan takes you right off a cliff

now the last 10 years have been about

this thing called agile product

development and I've shown here this is

extreme programming which is my personal

favorite of the agile methodologies and

agile has the important insight that if

we change our unit of progress to a line

of working code we can stop achieving

failure and this point of view works

when the problem is known it's the

solution that is unknown which is often

the case in corporate IT projects where

agile has had its biggest impact so if

we create specification documents that

nobody reads or documentation that goes

stale or create software with bugs that

then have to be reworked all that

constitutes waste and agile is a way of

eliminating that waste

unfortunately startups don't live in

this world either they live in this

world the unknown problem and unknown

solution if we're gonna sit a customer

an in-house customer with the engineers

what if we don't know who the customer

is yet what if we don't know what

problem we're trying to solve yet

there's a lot on this diagram I can't go

into today you can learn more on my blog

I just want to focus in on this idea of

the unit of progress called validated

learning and I'll just tell you a story

I will found that a company called IMVU

and the very first version of that

product took us six months to build and

I was the CTO of the company it was my

job to be responsible for the technical

architecture and I don't want to mince

words the first version of this product

sucked ok it was every bit as likely to

crash your computer as it was to give

you your delightful consumer 3d avatar

experience and I was personally

embarrassed to ship it I was like oh God

people are gonna use it and think you

know we don't know what quality software

is I had this image of a journalist

writing this article you know idiots

launch software don't know about quality

but turned out I needing to have worried

some of you already know the punchline

cuz you've done this too because of

course nobody used the software we

couldn't even get people to download it

so they couldn't even discover how buggy

it was and it was my co-founders who had

to drag me kicking and screaming to the

realization that we'd actually built the

wrong product we had once again built

something that nobody wanted and let's

face it I was depressed because I was

the guy who had written I don't know

forty thousand lines of code to build

that initial prototype almost all of

which had to get thrown out the good

code and the bad code alike failure is a

great equalizer of quality and then I

said wait are you telling me I would

have contributed just as much value to

this company if I had spent the last six

months on a beach on vacation as I did

killing myself to get this part of type

out I said no no that's not true because

if we hadn't written all this code we

wouldn't have learned this important

thing about customers so then I felt

better and then I had this dark thought

that plagued me which was but if my goal

of the last six months was to learn this

important thing about customers did I

really need 40,000 lines of code to do

it is there no way I could have had the

same learning with 20,000 lines of code

or 10,000 and then I was like wait what

if I had just asked some customers if

they would like to download this product

after all 0% of them did what I have

learned the same amount in one week as I

did in six months

that led me to this this is the kind of

the flux capacitor of the Lean Startup

if you will this is the fundamental

feedback loop that powers all startups

the build measure learn feedback loop we

take vision we turn it into action

through that action we reveal the truth

about our vision and we iterate and from

this diagram I can give you a heuristic

for evaluating any process or managerial

or architecture change in a start-up

situation which is does it minimize the

total time through this feedback loop or

does it sub optimize by helping us do

only our narrow job function well most

of the management practices that kill

startups violate that simple rule and

with this diagram I can now put the

concept of a pivot on a more rigorous

footing because I can say a pivot is one

full turn through this feedback loop now

there's a lot more to the lean startup

it looks like this these are all the

specific tactics and techniques that we

teach you can learn about this online if

you're interested what all of these

techniques have in common is my belief

that they operate at one specific stage

of the feedback loop but they have the

effect of minimizing total time to the

feedback loop in other words they help

us stop wasting people's time and before

I close I want to share one last thing

this is actually a full circle moment

for me I first talked about the Lean

Startup in public one year ago at the

web 2.0 Expo right here in San Francisco

and since that time what began as a

movement of high-tech entrepreneurs in

Silicon Valley to increase our odds of

success has really blossomed into

something much bigger a movement that I

believe it's dedicated to stop wasting

people's time you may be familiar with

this this is the Gartner hype cycle the

Lean Startup has reached almost the top

of a peak of inflated expectations and

I'm sad to say that I think we're coming

on the trough of disillusionment pretty

soon so I apologize for the hype that's

not my goal and because of the hype

there have been some misunderstandings

about the Lean Startup that have become

somewhat prevalent I actually believe

being misunderstood is a big step up

from being ignored so thank you and I

want to address those misunderstandings

because each of them reveals a deeper

truth about what we're trying to do with

this movement and so I thought I just

talk about them briefly the first is

that lean means cheap and people who

feel this way really don't understand

that lean has a specific word a specific

meaning in a business context lean is

about speed

speed through that fundamental feedback

loop not bodies in motion but validated

learning about customers these startups

actually accelerate as they scale

instead of grinding to that bureaucratic

halt who were more familiar with the

second myth is that Lean Startup is just

for web 2.0 internet consumer software

companies that's my background so that's

an understandable understanding but

there are quite a few other theorists

Steve Blank dave McClure Sean Ellis who

come from different backgrounds who have

been part of this movement and I think

we're starting to get the word out as I

said at the top any business that faces

uncertainty about what customers will

want can benefit from these techniques

the third myth is that lean started

somehow small bootstrap startups they

may either they lack ambition or they

take pride in being cheap but our goal

remember is to create a human

institution that can grow that can

change the world that can have an impact

and in fact as our friends in the

venture community are starting to learn

when we actually understand what

customers actually want instead of just

what we hope or think they want we

actually have the ability to deploy

large amounts of capital more

effectively than in traditional models

and last this is the most pernicious

that somehow by incorporating data or

feedback into our entrepreneurial

process we seek to replace vision with

data and as I said right at the

beginning entrepreneurship fundamentally

is about vision about a vision of the

world as it might be and what I think is

odd is that if we really believe those

visions if we really believe the world

needs to change in an urgent way that I

don't understand how we can afford to be

engaged in a faith-based initiative I

don't understand that if we have

assumptions that are essential to the

success of that vision we owe it to

ourselves we owe it to the world to test

them against reality to see what

actually is possible and of course to

stop wasting people's time so here's how

to get in touch thank you all very much

thank you

[Applause]