Thursday, September 22, 2011

The Lean Startup

Last night, I attended a talk by Eric Ries at the Rotman School of Management, here in Toronto.  Ries is the author of The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.  Ries is an engaging speaker and presented a number of down-to-earth ideas about how to be successful at a start-up.  They mirror ideas I teach in my course, so of course I thought he was brilliant.

I had a hint that I was going to like what he would say when early in his talk he said that he was a fan of Christensen's concepts of disruptive innovation and Jobs to be Done.  Any fan of Christensen is a buddy of mine!

Students recall concepts better when there's a catchy phrase that captures the idea and I really liked some of Ries' sound bites and will integrate them into my Innovation course.

If you're building something customers don't want, why be proud of being on time and on budget?   

The Jobs to be Done concept says that customers hire products to do a job for them.  If customers don't want to hire your product, then nothing else matters.  You need to find out - in the quickest and cheapest way - whether customers want to hire your product.

Ries gave an example of a company that developed - at considerable expense and pain - a software app that you could download.  When they launched, people could go to a web page, read about the product, and hit the red button if they wanted to download.  Nobody hit the red button.  This was a valuable lesson: they had built a product that people didn't wanted to hire.

The question was - did they need to actually build the software to learn that lesson?  Could they have built that web page with the red button, and a second landing page for people who hit the red button, which said something like 'oops - still in production'.  For zero effort they could have learned that virtually  nobody landed on that second page.  Back to the drawing board. 

Customers Don't Know What They Want

Henry Ford is famously quoted as saying "If I'd asked people what they wanted, I would have built a faster horse".  This is a critical problem in innovation that is customer-driven: people who are already using a certain product to do a job for them seldom are able to break out of that framework and think of how the problem could be solved in a completely different way.  I call this 'solving solutions'.  A better approach than asking them is to observe them doing the jobs they normally do and think of how you could improve that task.  Then give them an experimental product and observe their behaviour in using it.

Pivot - a change in strategy without a change in vision

When you're introducing a new product or starting a new company, you can almost guarantee that your initial strategy is wrong.  So, your job as a startup is to experiment continuously and to figure out when you have the right strategy. Ries calls these changes in strategy pivots.  I'm a basketball fan and I love this expression - a basketball player pivots when s/he finds the way to the basket blocked and pivots to continue to the basket, just on a different path.  And the player keeps one foot firmly planted during a pivot, suggesting that the strategy is continuously grounded in what went before.  What a lovely graphic image.

 Pivot? or Persevere?

Timing is everything, and I've been pulling my thoughts together for a whole session on timing in my next courses.  Ries added a nice sound bit to my repertoire for these sessions.  His question of whether to pivot or to persevere is a fundamental one - and the ability to figure out which approach is correct is key attribute of a good innovator.

The great advantage small companies have over big companies is their agility, the ability to pivot to a new strategy based on what they learned from initial reaction to their products.  Is it possible that small companies also have less cultural resistance to the pivot?  They may have fewer people invested in the current strategy and this may make it easier to pivot.  On the other, a passionate founder may be very invested in a particular strategy and resist a pivot.  It's hard to fight the founder.

Invest in Agility, not Prevention

A common challenge to an innovation is around scalability.  What if this product is wildly successful and we're not able to scale to meet demad.  So, to prevent this possible calamity (we should be so lucky), some companies will invest considerable resources to make sure a product is scalable from the outset.  And they'll often invest before they even verify if the product is something that customers want to hire.  This is quite typical in a big company where there's concern that a failure in a new product can besmirch the reputation of the whole company.

Ries' advice is to invest in agility, not prevention.  Make sure everything about the process of getting a product to market is flexible, enabling scaling at quick notice. 

After listening to Ries' talk, I am definitely going to read The Lean Startup - and that's the whole point of a book tour, isn't it?

One of my former students in part way through the book.  He is most taken by Ries' definition of waste.  Until you figure out what people want, execution that doesn't contribute to that search is waste.  Thanks Neil.

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