THE LEAN STARTUP SUMMARY
"The process of creating a plan, setting milestones and delegating tasks to employees will not work with the start up because they don’t truly know what their customers want, which approaches are best and what will be sustainable." - Eric Ries
Back in 2004, Eric Ries was working on a startup called IMVU and Steve Blank was an investor and advisor for them.?Steve had a methodology he called “Customer Development.” This was later released in a book called?The Four Steps to the Epiphany.?Eric combined Steve’s framework, the manufacturing practices of Toyota from Japan and Agile software development in what became The Lean Startup.?You can go to the The Lean Startup website by?clicking here.
?This book is widely regarded as “industry standard” best practices for startups.?Easily considered one of the classics, it is arguably the first book you should read.?It outlines basic principles anyone starting a startup should indisputably know.?In fact, it outlines principles anyone trying to iteratively grow any business should know.??
?I use the outline below to look up and reread parts of the book as necessary.?Hopefully you’ll find it as useful as I have.??
The book is divided into three parts:
Vision
Initially we try to create learning milestones into the internal vision.?Startup MUST
Start ups need to be managed differently from established companies
The process of creating a plan, setting milestones and delegating tasks to employees will not work with the start up because they don’t truly know what their customers want, which approaches are best and what will be sustainable. They must constantly adopt and stay flexible with their plan
The purpose of a start up is to find a sustainable business model
You must find a way to acquire customers and earn money serving them.?On the work today and in the future as well.?How do you turn their desires into constant revenue??IMPORTANT: The faster a startup finds its way to a sustainable business the likelier it is to succeed.
Find your sustainable business model through validated learning
This means finding the right product for the right people and understand how to sell to them as opposed to having a great plan from the start.?Do not use questionnaires. Talk to real customers and realistic environment. See if people will actually buy your product.?Founders often use dummy websites?to do this and then say “out of stock” when you try to order.
The leap of faith assumptions: test your value and growth hypothesis
To test your value hypothesis you must find early adopters in brace your product The growth hypothesis is that it will appeal to more than the initial small group of early adopters In the case Facebook, more than half of registered users logged in at least once a day (value).?
This is the DAU, better known as Daily Active Users, the North Star Metric (NSM) used by?Facebook. At colleges where it was introduced, 75% of students signed up within the first month available (growth).
Steer
Strategy is based on assumptions that need to be tested.
Develop a Minimal Viable Product (MVP) to test your idea in the market
The dummy website idea mentioned above is one example of this. Dropbox used a video as a proof of concept (POC).?You must find out as quickly as possible whether there is any demand for your product.
Page 107 is his quality principle in an MVP:?“If we do not know who the customer is we do not know what quality is.”
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?Chapter 7 is Measure on page 114.
?He calls this innovation accounting. That simply means you’re using metrics to reveal the true direction of your company instead of just showing that you were growing.
?Page 121. He talks about buying five dollars of Google ad-words per day which gives you just enough user tests to collect data. You’re not trying to move the product, you’re just trying to collect user data.
?Page 130. He talks about actionable metrics versus vanity metrics. Not sure if he invented the term actionable metrics.
?Page 143. The value of the three “A”s of metrics.
Build, measure and learn (BML) as fast and as often as possible.
These are called BML loops.?By collecting quantitative data from the experiment, you measure interest in the product how many people click the purchase button how long did they say on the site etc.
Use split-tests to optimize your product
Valuable features either help the company attract more customers or increase its revenue.?One way to do this is to create two versions of the product: one with the feature and one without and see which is more appealing.
?Page 123. Cohort analysis.??He said this is tracking the performance of each group of customers that comes into contact with the product independently it’s called a cohort.??In his example, this is simply a sales funnel checked by month. Tracking registered but didn’t login and what percentage logged in and what percentage had a conversation and what percentage had a bunch of conversations and how many actually ended up paying, etc.?
?Page 126. Optimization versus learning.
Vanity metrics are often flattering but misleading and do not help you find a sustainable business model
Page 128. Vanity metrics: a word of caution.
?He shows a graph that depicts a total increase in number of exposures and active users.
GRKKT: This doesn’t reflect churn rate, but he doesn’t say that. Obviously if your conversion rates are improving, that’s one metric. If your churn rate is improving, that’s another metric. I think his main point is that just showing Gross isn’t enough.
Vanity Metrics: Media attention or Facebook fans. How many all-nighters you’ve pulled or how many hours you’ve worked.?Only thing that pays the bills are actually users.
?Page 138. Shows a Kanban work diagram how to move stories through the pipeline as validated learning.?This is for once you have active product development going on.
?Page 153. Land of the Living Dead.?This is when you have some traction to monetize, but are not sustainable or aren’t growing as fast as you or your investors would like.?You don’t know whether to close the startup or keep pivoting.?You’re stuck.?The book offers an example solution to an example problem.
To find the right business model for your company you usually have to pivot
A pivot can include redefining core value proposition of your product, choosing a different customer segment or changing your main sales channel.?He uses the following examples:
Page 150 for zoom-in pivot story. Pair down the product to just one feature.?
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2 年Ben Arritt Awesome, thanks for sharing!