Talks at Google - Eric Ries On The Lean Startup

Lean Startup
Management
MGT 1022
DA 1
Talks at Google: Eric Ries on the Lean Startup
By Archit Arun
(18BEC0637)
In his talk at Google, Eric Ries elaborates on how the entrepreneurial ecosystem is
developing and how the new wave of entrepreneurs will have to adapt and develop
their skill sets and strategies to succeed in today’s consumer landscape.
He first goes on to talk about how startups and entrepreneurs no longer have to
conform to the stereotypical image of entrepreneurs and startups we see in the
movies and pop culture. To illustrate his point, he uses the example of how startups
are shown in movies like ‘The Social Network’ where the protagonist works out of
a garage. But nowadays entrepreneurs are not limited to this kind of process. You
don’t need to own a business to be an entrepreneur. The definition of that word is
morphing, as technology puts the fundamental tools for managing and organizing a
business into anyone’s hands. You can be an entrepreneur from within a corporate
organization, or while still in high school–it’s become a way of life more than an
approach to business.
He then moves on to how entrepreneurship is basically management. He talks

about Fred Taylor and the system he developed known as ‘scientific management’.
He came up with the"The Task and Bonus System", which we just call "tasks". The
idea was if you want to do a large project, the best thing to do is decompose that
project into a series of individual tasks, assign those tasks to functional specialists.
And everyone just does their part knowing that if everybody does their part well
and everybody else does their part, the whole will actually work out as the manager
said.
Startups also require management. It's just a different kind of management than the
general management that has been practiced since Fred Taylor's day. So, we need
to create a different paradigm for management that's not better than general
management. It's not worse than. It's simply a parallel discipline specifically for
entrepreneurship.
An important aspect of this kind of entrepreneurial management is the ‘pivot’.By

analogy to basketball, one foot firmly rooted in what we've learned, changing one
other thing about the business at a time. It is the universal constant of all successful
startups. If you can get the real story of what actually happened in the early stages
of a company, you will find out that successful startup founders do not have better
ideas than the failed ones.
Contrary to what you see in the movies, most startup founders of successful
companies had ludicrously bad ideas at the beginning. And what's is common
among the successful startup founders is not that they just persevered indefinitely,
but that they had this funny combination that when they run into difficulty, it's not
just that they gave up ship and went home. Neither did they persevere the plane
straight into the ground. They ‘pivoted’.
And therein lies the premise of the Lean Startup; If we can reduce the time
between pivots, we can increase our odds of success before we run out of money.
So in the life of a startup, it isn’t how much more time the company has left that’s
important. What’s really important is how many more opportunities for a ‘pivot’
does the company have?
To ensure the least amount of time to be wasted between pivots, he then moves on
to the significance of validated learning in the Lean Startup. He brings up the
example of a software development methodology referred to as the Waterfall
Methodology. It is basically Fred Taylor’s system applied to software
development. The idea is that since the software is so intangible, we like to
imagine our work traveling on an assembly line, a virtual assembly line, from
department to department. And if everybody does their part and trusts everybody
else to do their part, everything works out fine.
But the issue with implementing this system in entrepreneurial management is that
the system only works smoothly when the entire workflow is well defined but in
case of a startup, everything is unpredictable. So if you implement the Waterfall
methodology, you end up ‘achieving’ failure and this just goes on indefinitely
without any actual results.
Since startups function on limited time and budget, a system of validated learning
is required. But here, a more efficient determining factor is the customer’s
feedback. Eric Ries talks about how "customer development", which is an iterative
process of trying to figure out who your customer is, which we can merge in
parallel with agile development to this company-wide feedback loop of learning
and discovery can be used to determine who the customer is and to find out their
needs.
He elaborates on this with a real-life example of a company he actually worked on

called IMVU, a 3-D avatar instant messaging technology. They wanted to take
over the hot, new social technology of instant messaging. But they didn’t wait and
consider what the customer’s needs actually were. So they ended up developing a
product which, even though it was technically impressive, didn’t appeal to the
target demographic. So they ended having to start from scratch to adapt to the
customer’s requirements. So they finally ended up with a product that the customer
wanted at the end but they also wasted a ton of resources and time.
So that’s where he puts up the concept of the ‘minimal viable product’ or what
actually needs o be included in the initial prototype which the customer reviews at
first. It should only involve what is necessary to learn whether our plan is correct
or not This goes through rigorous evaluation through tests and user feedback to
collect data on how targeted users accept the product. If it works, then they learn
from the feedback and make it better in an iterative process.
Finally, he talks about the concept of ‘Innovative Accounting’. Lean startups have
to keep detailed records of tests and analysis to figure out what works best. They
gauge progress on the amount learned about the innovation rather than the amount
of new work created. So basically we have to use actionable metrics, which are
about per customer behaviors, things that can be measured at the microscale. To do
so, we have to establish the baseline. So now we can put the purpose of the
minimum viable product in a much more rigorous setting. Now if we make specific
predictions, if we use innovation accounting as our accountability model, then we
can be training our judgment to get better over time, just like in science.
He concludes his talk with a Q&A session with the audience where he covers how
much effort we have to put in before the first pivot. He says that the only way to
get yourself into a position where you have to pivot is to make specific, concrete
predictions ahead of time that if they turn out to be wrong, will actually call your
theory into doubt. He also elaborates more on the build-measure-learn feedback
loop with respect to the process of taking the rapid feedback and implementing it.

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Lean Startup

He then moves on to how entrepreneurship is basically management. He talks

An important aspect of this kind of entrepreneurial management is the ‘pivot’.By

He elaborates on this with a real-life example of a company he actually worked on

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