The Lean Startup by Eric Ries: Summary and Notes 

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One sentence summary: Startups need to develop products not with a customer in mind but with the customer as part of the process. 

Alternative one-sentence summary: A startup’s goal is to manage uncertainty through experimentation and constant re-evaluation of priorities. Growth requires a process of continuous innovation and adaptation.

One paragraph summary: The main message from The Lean Startup is that a company’s long-term growth strategy is to build an innovation factory that uses The Lean Startup ideas. What most businesses lack is a principled approach to product development. To get ahead, startups need to start experimenting as soon as possible and apply the lessons learned as part of their product development process. 

Alternative one-paragraph summary: What separates successful startups from failures is the ability to figure out what works and what doesn’t and then adapting accordingly. The way to do this is through constant experimentation, or what’s called validated learning. After all, the goal of a startup is to manage uncertainty. The Lean Startup by Eric Ries will show you how.

Favorite quote from the author:

“The only way to win is to learn faster than anyone else.”

If you are an avid reader of business books like me, The Lean Startup will impress you. Eric Ries shares his experience as a startup founder and later business consultant on what it takes to make a startup successful. 

Ries was part of the founders of IMVU, an online metaverse and social networking site with over 7 million monthly users. It was during his time at IMVU that he honed his craft. He has also worked with countless startups to solve problems at various stages of their development. The lessons from these experiences make Ries a thought powerhouse on how to navigate the startup journey. Currently, he is an entrepreneur-in-residence at Harvard Business School.

My initial reaction to reading the book was, wait a minute, I’m reading Hacking Growth all over again? The two books share uncanny similarities, but it goes to show how widely shared the Lean Startup ideas are in startup circles. What you will find different with The Lean Startup, however, is the approach. Ries offers a distilled formula to success which we shall be discussing in a few paragraphs.

Aside from sharing helpful tips on the business development process, the book also gives entrepreneurs lots of personal advice. For instance, Eric says that successful entrepreneurs don’t give up at the first sign of trouble. He will be the first to tell you that an entrepreneur’s life is grueling, and to survive, you must be willing to ride the rough patches and not just the good ones. At the same time, you must develop a knack for knowing when things are not going your way. Great entrepreneurs, he says, have a unique combination of perseverance and flexibility and know when it’s time to pivot.

What is the secret behind a successful startup? According to Ries, it all comes down to how good the entrepreneur is at practicing the Lean philosophy. Lean or the Toyota system is a business development process that was first pioneered in Japan, and its goal is to reduce waste in the production and business development processes. What Ries does in his book is to adopt this philosophy and apply it to startups. While you might think every startup is different and there is no way a single system will work for all of them, the countless examples in the book will prove you wrong again and again.

All businesses and not just startups face the same problem: how to create a sustainable business. Initially, a startup has to figure out the right product, market it and earn the customers’ trust, and no matter the type of business, the process will always be the same.

Main Takeaway Lessons

The book has many great ideas, but the following lessons stood out for me:

It is the boring stuff that matters

Distinguish between what creates value and what creates waste

What separates winners in the startup battles is foresight and the ability to adapt accordingly

Start with a minimum viable product

Know when to pivot: There is a fine balance between perseverance and adaptability.

Lesson 1: It is the boring stuff that matters.

This is not like the biggest takeaway, but it needs to be out there. Even Peak, the book that popularized the idea of deliberate practice, says the same thing. It is the boring stuff that matters, and the person who is willing to put in the hours and do mundane work is the one who ends up winning.The book has many great ideas, but the following lessons stood out for me:

Think of your favorite football player or violinist; they spend a lifetime doing the same routine over and over again. It is enough to drive some people crazy. Entrepreneurs, especially startup founders, find themselves in a similar situation. Their routine? To test out ideas, continually innovate, and adapt. 

Eric is quick to remind you that failure and learning go hand in hand, and as an entrepreneur, you need to develop a high tolerance for both. It can be depressing seeing the market reject your ideas, but if you can persevere, learn from your mistakes, and pivot at the right time, a sack of gold will be waiting for you at the finish line.

Lesson 2: Distinguish between what creates value and what creates waste

Businesses exist to serve one purpose, and that is to create value for the customer. As Eric explains, there is a world of difference between what it takes to create the product and what the customer wants. Customers don’t care how their products are made, and thus as an entrepreneur, your focus should not be on product development, engineering, or such things. It should be on value creation. Sometimes, it is best to let the customer lead the way.

Reducing waste is a big part of the lean philosophy. For startups, it involves many things. Ries recalls a time when his engineering effort went to waste because customers didn’t like the initial product they had built at IMVU. He observes that if they had begun the process by considering what the customer wants or by ruthlessly testing their business hypothesis, this would not have happened.

The only way to reduce waste is to start the learning process as soon as possible. Ries puts it best when he says that any features, process, or effort that does not contribute to learning should be considered waste.

Lesson 3: What separates winners in the startup battles is foresight and the ability to adapt accordingly

Startups with the tools and the ability to figure out which parts of their plan work brilliantly and which don’t will always have the edge as long as they adapt accordingly. When you are a startup, you have to deal with the fact that what the customer finds valuable is often unknown. In such a situation, your goal is to systematically figure out the right things to build.

Ries emphasizes the need to continually test your ideas in a process that’s called validated learning. In The Lean Startup literature, validated learning is putting into practice any new knowledge and measuring the results to validate the effects. The purpose is to find if there is value or not. To achieve this, you’ve got to test each part empirically and run as many experiments as necessary. 

Everything that a startup does is designed to achieve validated learning.

An example you will find in the book is that of Yuji Yokaya who travelled over 50,000 miles across Canada, the US, and Mexico on a rented minivan. The goal? To find out what customers were looking for when they shopped for a similar-sized car. Yokaya was applying what’s called genchi gembtsu or do-it-yourself strategy. Yokaya went on to create a minivan with a 60% sales increase because he understood what the customer wanted.

Scott Cook, the founder of Inuit of the largest tax firms in the US, also employed a similar approach. He started by calling random people and asking them how they did their tax returns to test his hunch that computers could simply the tax return process. He was right and set out to build his service.

The test yourself strategy is, however, not without its drawbacks. Eric cautions that customers also don’t know what they want, and reading too much from their opinions might lead to a product that nobody wants.

Established companies have an edge here because their only role is to sustain innovation, but startups have to create something new. Thus they are more often than not in unchartered territory. 

How do you know what you are doing is working? The key is to perform innovative accounting. Innovative accounting is part of the spiraling cycle of Build-Measure-Learn that seeks to immediately put into practice any knowledge and validate the learning.

The loop looks something like this:

The loop allows you to ask questions at every stage of development.

Lesson 4: Start with a minimum viable product

The benefit of a minimum viable product (MVP) is that it allows the entrepreneur to start learning as fast as possible. Companies that started as minimum viable products include Groupon and Food on the Table.

An MVP will let you test business fundamentals as early as possible. It is a pathway to knowing what works and what doesn't. If you face an MVP situation, don't stress too much about the quality because some folks will willingly test and buy your product. These are called early adopters, and they were critical to Google and other big tech companies’ early successes. Remember, it is better to scale something that's working than something that might work in the future.

Lesson 5: Know When to Pivot: There is a delicate balance between perseverance and adaptability

If you are using the right metrics, you will know when it is time to pivot. Most entrepreneurs have bought into the myth of persevering until the end. The point of the matter is you don’t have to if there is evidence showing that things are not working the way you expect them to. Adaptability and accepting reality are some of the greatest strengths of an entrepreneur. Many startups begin with a product concept but end up with an entirely different thing. Why? Because only by experimenting can a startup know what the market really needs.

Here is an excellent quote by Ries:

“Startup productivity is not about cranking out more widgets or features. It is about aligning our efforts with a business and product that are working to create value and drive growth. In other words, success pivots put us on a path toward growing a sustainable business.”

Some entrepreneurs will take it personally when a product fails or needs to pivot. There is no need for that as it all part of the process of creating a successful startup. Examples of pivots include customer need pivot, platform pivot, business architecture pivot, value capture pivot, engine growth pivot, channel pivot, and technology pivot.

Wrap Up

The Lean Startup is an excellent book on business strategy and life in general. It goes right into the heart of the business development process and lays out the one thing that matters — the right methodology. While its ideas relate to businesses, you can also apply them in life, especially if you are looking to optimize in a particular area.

Who would I recommend the Book To?

Anyone interested in the business process and startups in general, the book is a necessary tool for any entrepreneur. You should read it.

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