[PDF]The Lean Startup Erick Ries

ERIC RIES


Acclaim for THE LEAN STARTUP


“The Lean Startup isn’t just about how to create a more successful
entrepreneurial business; it’s about what we can learn from those
businesses to improve virtually everything we do. I imagine Lean
Startup principles applied to government programs, to health care,
and to solving the world’s great problems. It’s ultimately an answer
to the question How can we learn more quickly what works and
discard what doesn’t?”


—Tim O’Reilly, CEO, O’Reilly Media


“Eric Ries unravels the mysteries of entrepreneurship and reveals
that magic and genius are not the necessary ingredients for success
but instead proposes a scientific process that can be learned and
replicated. Whether you are a startup entrepreneur or corporate
entrepreneur, there are important lessons here for you on your
quest toward the new and unknown.”


—Tim Brown, CEO, IDEO


“The road map for innovation for the twenty-first century. The ideas
in The Lean Startup will help create the next industrial revolution.”


—Steve Blank, lecturer, Stanford University,
UC Berkeley Hass Business School


“Every founding team should stop for forty-eight hours and read
The Lean Startup. Seriously, stop and read this book now.”


—Scott Case, CEO, Startup America Partnership


“The key lesson of this book is that startups happen in the present
—that messy place between the past and the future where nothing
happens according to PowerPoint. Ries’s ‘read and react’ approach
to this sport, his relentless focus on validated learning, the never-
ending anxiety of hovering between ‘persevere’ and ‘pivot,’ all bear
witness to his appreciation for the dynamics of entrepreneurship.”


—Geoffrey Moore, author, Crossing the Chasm


“If you are an entrepreneur, read this book. If you are thinking
about becoming an entrepreneur, read this book. If you are just
curious about entrepreneurship, read this book. Starting Lean is
today’s best practice for innovators. Do yourself a favor and read
this book.”


—Randy Komisar, founding director of TiVo and author of the
bestselling The Monk and the Riddle


“How do you apply the fifty-year-old ideas of Lean to the fast-
paced, high-uncertainty world of startups? This book provides a
brilliant, well-documented, and practical answer. It is sure to

become a management classic.”
—Don Reinertsen, author, The Principles of Product Development
Flow


“What would happen if businesses were built from the ground up
to learn what their customers really wanted? The Lean Startup is
the foundation for reimagining almost everything about how work
works. Don’t let the word startup in the title confuse you. This is a
cookbook for entrepreneurs in organizations of all sizes.”


—Roy Bahat, president, IGN Entertainment


“The Lean Startup is a foundational must-read for founders,
enabling them to reduce product failures by bringing structure and
science to what is usually informal and an art. It provides
actionable ways to avoid product-learning mistakes, rigorously
evaluate early signals from the market through validated learning,
and decide whether to persevere or to pivot, all challenges that
heighten the chance of entrepreneurial failure.”


—Noam Wasserman, professor, Harvard Business School


“One of the best and most insightful new books on
entrepreneurship and management I’ve ever read. Should be


required reading not only for the entrepreneurs that I work with,
but for my friends and colleagues in various industries who have
inevitably grappled with many of the challenges that The Lean
Startup addresses.”


—Eugene J. Huang, partner, True North Venture Partner


“In business, a ‘lean’ enterprise is sustainable efficiency in action.
Eric Ries’s revolutionary Lean Startup method will help bring your
new business idea to an end result that is successful and sustainable.
You'll find innovative steps and strategies for creating and
managing your own startup while learning from the real-life
successes and collapses of others. This book is a must-read for
entrepreneurs who are truly ready to start something great!”


—Ken Blanchard, coauthor of The One Minute Manager®
and The One Minute Entrepreneur


The


LEAN
OTARTUP


How Today's Entrepreneurs Use Continuous Innovation
lo Create Radically Successful Businesses


Eric Ries


CROWN
BUSINESS.
‘New York


Copyright © 2011 by Eric Ries
All rights reserved.


Published in the United States by Crown Business, an imprint of the Crown Publishing
Group, a division of Random House, Inc., New York. www.crownpublishing.com


CROWN BUSINESS is a trademark and CROWN and the Rising Sun colophon are


registered trademarks of Random House, Inc.


Library of Congress Cataloging-in-Publication Data
Ries, Eric, 1978-

The lean startup / Eric Ries. — 1st ed.

p. cm.

1. New business enterprises. 2. Consumers’ preferences. 3. Organizational
effectiveness. I. Title.

HD62.5.R545 2011

658.1’1—dc22 2011012100


eISBN: 978-0-307-88791-7


Book design by Lauren Dong
Illustrations by Fred Haynes
Jacket design by Marcus Gosling


v3.1


For Tara


Contents


Cover

Title Page
Copyright
Dedication
Introduction


Part One VISION
1. Start
2. Define
3. Learn
4. Experiment


Part Two STEER
5. Leap
6. Test
7. Measure
8. Pivot (or Persevere)


Part Three ACCELERATE
9. Batch
10. Grow
11. Adapt
12. Innovate
13. Epilogue: Waste Not
14. Join the Movement


Endnotes
Disclosures





Introduction


top me if you’ve heard this one before. Brilliant college kids
Ssitting in a dorm are inventing the future. Heedless of boundaries,

possessed of new technology and youthful enthusiasm, they build
a new company from scratch. Their early success allows them to
raise money and bring an amazing new product to market. They
hire their friends, assemble a superstar team, and dare the world to
stop them.

Ten years and several startups ago, that was me, building my first
company. I particularly remember a moment from back then: the
moment I realized my company was going to fail. My cofounder
and I were at our wits’ end. The dot-com bubble had burst, and we
had spent all our money. We tried desperately to raise more
capital, and we could not. It was like a breakup scene from a
Hollywood movie: it was raining, and we were arguing in the
street. We couldn’t even agree on where to walk next, and so we
parted in anger, heading in opposite directions. As a metaphor for
our company’s failure, this image of the two of us, lost in the rain
and drifting apart, is perfect.

It remains a painful memory. The company limped along for
months afterward, but our situation was hopeless. At the time, it
had seemed we were doing everything right: we had a great
product, a brilliant team, amazing technology, and the right idea at
the right time. And we really were on to something. We were
building a way for college kids to create online profiles for the
purpose of sharing ... with employers. Oops. But despite a
promising idea, we were nonetheless doomed from day one,
because we did not know the process we would need to use to turn


our product insights into a great company.

If you’ve never experienced a failure like this, it is hard to
describe the feeling. It’s as if the world were falling out from under
you. You realize you’ve been duped. The stories in the magazines
are lies: hard work and perseverance don’t lead to success. Even
worse, the many, many, many promises you’ve made to employees,
friends, and family are not going to come true. Everyone who
thought you were foolish for stepping out on your own will be
proven right.

It wasn’t supposed to turn out that way. In magazines and
newspapers, in blockbuster movies, and on countless blogs, we hear
the mantra of the successful entrepreneurs: through determination,
brilliance, great timing, and—above all—a great product, you too
can achieve fame and fortune.

There is a mythmaking industry hard at work to sell us that story,
but I have come to believe that the story is false, the product of
selection bias and after-the-fact rationalization. In fact, having
worked with hundreds of entrepreneurs, I have seen firsthand how
often a promising start leads to failure. The grim reality is that most
startups fail. Most new products are not successful. Most new
ventures do not live up to their potential.

Yet the story of perseverance, creative genius, and hard work
persists. Why is it so popular? I think there is something deeply
appealing about this modern-day rags-to-riches story. It makes
success seem inevitable if you just have the right stuff. It means that
the mundane details, the boring stuff, the small individual choices
don’t matter. If we build it, they will come. When we fail, as so
many of us do, we have a ready-made excuse: we didn’t have the
right stuff. We weren’t visionary enough or weren’t in the right
place at the right time.

After more than ten years as an entrepreneur, I came to reject
that line of thinking. I have learned from both my own successes
and failures and those of many others that it’s the boring stuff that
matters the most. Startup success is not a consequence of good
genes or being in the right place at the right time. Startup success
can be engineered bv following the right process. which means it


— oF


can be learned, which means it can be taught.

Entrepreneurship is a kind of management. No, you didn’t read
that wrong. We have wildly divergent associations with these two
words, entrepreneurship and management. Lately, it seems that one
is cool, innovative, and exciting and the other is dull, serious, and
bland. It is time to look past these preconceptions.

Let me tell you a second startup story. It’s 2004, and a group of
founders have just started a new company. Their previous company
had failed very publicly. Their credibility is at an all-time low. They
have a huge vision: to change the way people communicate by
using a new technology called avatars (remember, this was before
James Cameron’s blockbuster movie). They are following a
visionary named Will Harvey, who paints a compelling picture:
people connecting with their friends, hanging out online, using
avatars to give them a combination of intimate connection and safe
anonymity. Even better, instead of having to build all the clothing,
furniture, and accessories these avatars would need to accessorize
their digital lives, the customers would be enlisted to build those
things and sell them to one another.

The engineering challenge before them is immense: creating
virtual worlds, user-generated content, an online commerce engine,
micropayments, and—last but not least—the three-dimensional
avatar technology that can run on anyone’s PC.

Pm in this second story, too. Pm a cofounder and chief technology
officer of this company, which is called IMVU. At this point in our
careers, my cofounders and I are determined to make new mistakes.
We do everything wrong: instead of spending years perfecting our
technology, we build a minimum viable product, an early product
that is terrible, full of bugs and crash-your-computer-yes-really
stability problems. Then we ship it to customers way before it’s
ready. And we charge money for it. After securing initial customers,
we change the product constantly—much too fast by traditional
standards—shipping new versions of our product dozens of times
every single day.

We really did have customers in those early days—true visionary
earlv adopters—and we often talked to them and asked for their


feedback. But we emphatically did not do what they said. We
viewed their input as only one source of information about our
product and overall vision. In fact, we were much more likely to
run experiments on our customers than we were to cater to their
whims.

Traditional business thinking says that this approach shouldn’t
work, but it does, and you don’t have to take my word for it. As
you'll see throughout this book, the approach we pioneered at
IMVU has become the basis for a new movement of entrepreneurs
around the world. It builds on many previous management and
product development ideas, including lean manufacturing, design
thinking, customer development, and agile development. It
represents a new approach to creating continuous innovation. It’s
called the Lean Startup.

Despite the volumes written on business strategy, the key
attributes of business leaders, and ways to identify the next big
thing, innovators still struggle to bring their ideas to life. This was
the frustration that led us to try a radical new approach at IMVU,
one characterized by an extremely fast cycle time, a focus on what
customers want (without asking them), and a scientific approach to
making decisions.


ORIGINS OF THE LEAN STARTUP


I am one of those people who grew up programming computers,
and so my journey to thinking about entrepreneurship and
management has taken a circuitous path. I have always worked on
the product development side of my industry; my partners and
bosses were managers or marketers, and my peers worked in
engineering and operations. Throughout my career, I kept having
the experience of working incredibly hard on products that
ultimately failed in the marketplace.

At first, largely because of my background, I viewed these as
technical problems that required technical solutions: better
architecture. a better engineering process. better discipline. focus. or


product vision. These supposed fixes led to still more failure. So I
read everything I could get my hands on and was blessed to have
had some of the top minds in Silicon Valley as my mentors. By the
time I became a cofounder of IMVU, I was hungry for new ideas
about how to build a company.

I was fortunate to have cofounders who were willing to
experiment with new approaches. They were fed up—as I was—by
the failure of traditional thinking. Also, we were lucky to have
Steve Blank as an investor and adviser. Back in 2004, Steve had just
begun preaching a new idea: the business and marketing functions
of a startup should be considered as important as engineering and
product development and therefore deserve an equally rigorous
methodology to guide them. He called that methodology Customer
Development, and it offered insight and guidance to my daily work
as an entrepreneur.

Meanwhile, I was building IMVU’s product development team,
using some of the unorthodox methods I mentioned earlier.
Measured against the traditional theories of product development I
had been trained on in my career, these methods did not make
sense, yet I could see firsthand that they were working. I struggled
to explain the practices to new employees, investors, and the
founders of other companies. We lacked a common language for
describing them and concrete principles for understanding them.

I began to search outside entrepreneurship for ideas that could
help me make sense of my experience. I began to study other
industries, especially manufacturing, from which most modern
theories of management derive. I studied lean manufacturing, a
process that originated in Japan with the Toyota Production
System, a completely new way of thinking about the manufacturing
of physical goods. I found that by applying ideas from lean
manufacturing to my own entrepreneurial challenges—with a few
tweaks and changes—I had the beginnings of a framework for
making sense of them.

This line of thought evolved into the Lean Startup: the
application of lean thinking to the process of innovation.
>>>