Summary: The Lean Startup  Eric Ries, Must Read Summaries
Must Read Summaries

Summary: The Lean Startup Eric Ries

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This ebook offers a summary of the book “The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” by Eric Ries.

Why do so many startups fail? The business myth says: A lone entrepreneur – beavering away in a lab or a garage somewhere – through hard work, grit and sheer perseverance develops a great product which then becomes a blockbuster hit. That sounds appealing but the reality is most startups tend to burn through their resources and then disappear because they never get around to seeing what their potential customers think of what they're developing. They worry about the product first and assume customer demand will be there automatically.

To succeed with a startup, you've got to manage it differently. Instead of developing a business plan, find ways to accelerate your learning and validate customers demand. The best way to do this is to build a prototype (with minimal features) and sell it to some early adopters. Then change the product repeatedly – daily if necessary – and keep supplying your customers with the new and improved versions. Listen to their feedback and use those ideas to make a better version and then get more feedback on that. Keep iterating until you get a fully featured product which your customers love.

In other words, go through the BuildMeasureLearn loop as often as you can. If you make validated learning the real aim of your startup, you stand a better chance of success. Focus on what customers want, utilize an extremely fast cycle time and take a scientific approach to making decisions. That's the essence of the Lean Startup approach.

ERIC RIES is an entrepreneur and blog author. He is a cofounder and chief technology officer of IMVU, a virtual community developer. He is also a frequent keynote speaker and is currently entrepreneurinresidence at Harvard Business School. The Lean Startup methodology has been written about in the New York Times, the Wall Street Journal, the Harvard Business Review and the Huffington Post.
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real life, being an entrepreneur is more of an exercise in management skills than anything else. Any startup is a portfolio of activities, all happening simultaneously. At any time:
New customers are being acquired.
Existing customers are being supported.
Never forget that learning is the true measure of progress for a startup. The aim of any startup should be first and foremost to use scientific experimentation to discover how to build a sustainable business. Anything else is a bonus.
Standard accounting won’t work here because startups are too unpredictable for forecasts and milestones to be accurate. Instead, you need innovation accounting.
Innovation accounting involves three steps:
You use a minimum viable product to establish a baseline on where you now are
You attempt to fine-tune so you move towards your ideal outcome
You make the judgment call whether you should persevere or pivot in a new direction
The good thing about innovation accounting is it aligns with the three learning milestones every startup needs to know:
Are our business plan assumptions correct?
To establish a baseline, some companies have a single prototype, others have multiple prototypes which gets compared while a third approach is to perform a smoke test – have customers order from a brochure and only build if there are enough pre-orders. All of these approaches work because they allow business plan assumptions to be validated.

What will be our key drivers of growth?
Once you have that baseline, you can then test how changes will affect growth by running experiments. You can learn what you need to do to grow the business.

Is our business model sustainable?
If your real-world baseline is near break-even, you will be able to tell you’ll get there with a little more fine-tuning and improvement. If your real-world results are far below expectations, that’s a good sign you should pivot and try something different.
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