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August 26, 2012 Posted by Victor in Frameworks & Tools, General, Ideas

Book review: The Lean Startup: How Constant Innovation Creates Radically Successful Businesses by Eric Ries

    Eric Ries decided that it was time to change the complete system of entrepreneurship with the help of brand new business strategies. This book, however, offers a set of new and simple methods that can be used to improve government programs too.

In an era when established companies struggle with innovation this study proves to be a lifeboat. Moreover, Ries proposes a method that can be learned by everyone regardless of age and profession. This book offers useful tips for active and future entrepreneurs as well as people who are interested in this field of activity.

   According to the author,  there's a difference between entrepreneurs and startups. Entrepreneurs are the whole group of startups regardless of company size and industry or sector. On the other hand, startups are human institutions designed to envision and create services or brand new products “under conditions of extreme uncertainty”. In order to come up with a new set of concepts and strategies, Ries studied lean manufacturing.

Readers have the chance to find out more about the author's career at IMVU a company that served as the best subject to test all the important strategies included in the Lean Startup plan. People interested in this revolutionary program have the chance to read about The Lean Startup Method Five Principles that include the fact that: entrepreneurs are everywhere, entrepreneurship is actually management, validated learning is essential, using the Build-Measure-Learn method is the key to success and that innovation accounting is the ultimate strategy used by startups to measure progress.

     The book becomes really comprehensible due to its simple and well-defined structure. The 3 parts that make up the study have the following titles: Vision, Steer and Accelerate. The author leads readers through the complete Lean Startup plan and helps them understand the basics of this innovative and world-changing movement. The chapters reveal the fact that using scientific experimentation (hypothesis and testing) is the secret to build up a sustainable and successful business. The new innovation accounting program is different from the traditional accounting used by entrepreneurs in the past. Ries presents the three basic steps that help startups achieve success with their ideas. According to the author using an MVP (minimum viable product), “tuning the engine from the baseline to the ideal” and pivoting or persevering is the scheme that stands at the basis of the innovation accounting plan.

    Lean thinking and lean manufacturing used at the Toyota company changed the author’s attitude towards business plans and methods that helped companies grow and develop in the shortest time. Relying on the creativity of workers, shrinking the batch sizes and accelerating the cycle times are the most important tactics used by successful businesses in order to satisfy the needs of customers and keep the pace with technological development.

     Ries compares the act of developing a business to the ritual of driving. According to him, startups should not predict failure but instead, should keep an eye on their destination. Moreover, startups similarly to automobiles have the engine of growth that stimulates them to build up a world-changing and prosperous business. Readers are provided with a long list of success stories like that of SnapTax (Intuit company) or Dropbox. Another idea presented by Ries is that, eliminating waste is the ultimate solution to guarantee the success of a service or product. The expert claims that “values provide benefits to customers, anything else is waste”.

     Validated learning is also essential to understand the needs of customers and collect valuable empirical data. In this part of the book we find out more about the Build-Measure-Learn startup feedback loop which is at the core of the whole Lean Startup model. Ries learned this model from the Toyota, company that promotes the concept of “genchi gembutsu” or “go and see for yourself”. Reports and predictions can't offer real feedback for startups. Instead, they have to know their customers and should measure the progress of the business with real metrics that are: auditable, actionable and accessible and not vanity metrics which don't reflect the real progress of a thriving company.

  Furthermore, Ries also observed that on the basis of feedback different companies can either change directions and make a few important pivots or they decide to persevere. When results are not good enough startups must make the decision to pivot. The author also enlists the various types of pivots, entrepreneurs often make like the : zoom-in-pivot, zoom-out-pivot, the customer segment pivot etc.

   Eric Ries presents practical techniques used in lean manufacturing in order to help startups accelerate the speed of achieving validated learning and problem solving. One of the most revolutionary and highly-recommended strategies used by Toyota was The System of Five Whys. According to innovators such as Shigeo Shingo and Taiichi Ohno this technique helps managers solve problems systematically. Before finding the root of a problem, startups should ask “why?” at least 5 times. Moreover, this strategy acts as a 'natural speed regulator' that allows various manufacturing teams to focus on quality instead of the speed of production.

   The author states that lean thinking led to the ultimate success of Toyota, on the automobile market and helped the company become the world's largest automaker in 2008.  Using different metrics (that reflect the needs of customers) and innovation accounting allows startups to build a business that can face the most difficult challenges.

   In the final chapter Eric Ries emphasizes the importance of adopting disruptive technologies in order to contribute to the growth of the company. The epilogue entitled “Waste Not” presents the historical background of the Lean Startup plan and a few useful suggestions for the future directions of the movement.

 

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