Even with modern product management, too many companies, especially tech companies, were still struggling to make it to market, to be able to survive on it and then scale it.
Eric Ries was one of the first people to recognize this problem and try to frame it.
One of his first ventures, Catalyst Recruiting, failed because Eric and his colleagues did not understand the wants of their target customers. They also focused too much time and energy on the initial product launch.
Even the company There.com where he worked afterwards, that had all the resources, good R&D and early adopters, had problems understanding the consumer needs. Their vision was too specific and it left no room to research and discover what the consumer wants and needs.
Although the loss of money was enormously different, Ries concluded that the failures of these two companies shared similarities: both were working forward from the technology instead of working backward from the business results they were trying to achieve.
And they weren’t the only ones.
After several entrepreneurial ventures of his own, where he was fortunate enough to experiment with different methodologies, he founded IMVU where he continued this practise. He had good fortune to have some of the greatest mentors in Silicon Valley at that time, one of whom was Steve Blank, angel investor and UC Berkeley professor that developed Customer Development methodology. Steve insisted that all IMVU executives take his entrepreneurship class at UC Berkeley.
Ries applied Blank’s customer development methodology and integrated it with some of the ideas he was already using from lean manufacturing, agile software development and design thinking.
What came out of it was a new approach to creating continuous innovation. He named it the Lean Startup.
The lean startup methodology was first proposed in 2008. by Eric Ries and then published in the form of The Lean Startup book in 2011.
Eric in his book identifies 2 major problems of failing startups.
Usual indicators of success that were used in previous eras don’t work for startups. There is no good plan, solid strategy and thorough market research for a startup.
Startups operate with too much uncertainty. They don’t yet know who their customers are or what their product should be. So it gets harder to predict the future than it was in some previous times.
Planning and estimating only works when it’s based on a stable history and static environment.
Startups don’t have either.
Second problem is that seeing traditional management fail to solve the first problem described, some entrepreneurs and investors have started “Just Do It” school of startups.
This school believes if management is the problem, then chaos is the solution. Unfortunately, this doesn’t work either. Even though startups are disruptive, chaotic and innovative, they still need to be managed.
The five basic principles of Lean Startup that are addressing all the issues Eric noticed through his experience and in his surroundings are (quoted from the book)
1. Entrepreneurs are everywhere.
You don’t have to work in a garage to be in a startup. The concept of entrepreneurship includes anyone who works within the definition of a startup: a human institution designed to create new products and services under conditions of extreme uncertainty. That means entrepreneurs are everywhere and the Lean Startup approach can work in any size company, even a very large enterprise, in any sector or industry.
2. Entrepreneurship is management
A startup is an institution, not just a product, and so it requires a new kind of management specifically geared to its context of extreme uncertainty. In fact, as I will agrue later, I believe “entrepreneuer” should be considered a job title in all modern companies that depend on innovation for their fututre growth.
3. Validated learning
Startups exist not just to make stuf, make money, or even serve customers. They exist to learn how to build a sustainable business. This learning can be validated scientifficaly by running frequent experiments that allow entrepreneurs to test each element of their vision.
The fundamental activity of a straup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere. All successful startup processes should be geared to accelerate that feedback loop.
5. Innovation accounting
To improve entrepreneurial outcomes and hold innovators accountable, we need to focus on the boring stuff: how to measure progress, how to set up milestones, and how to prioritize work. This requires a new kind of accounting designed for startups – and the people who hold them accountable.
In our next article, let’s dive into
Build-Measure-Learn cycle that describes the process needed for Product
Discovery, the first phase of product development.