Summary: A significant contribution of ideas about how to improve capital efficiency in startups and more deeply engage employees and customers to create tighter learning and feedback loops.
Intended Audience: Entrepreneurs and entrepreneurs-at-heart. And anyone interested in helping their organization learn faster. And probably you.
Why You Should Read It: This is one of the two books I wished I had when I began with startups years ago (Do More Faster
is the other). Eric Ries applies lean manufacturing concepts to startup organizations to demonstrate how many costly and fatal mistakes can be avoided by applying learning models as early as possible.
Critically, you must establish tight feedback loops to test your assumptions and validate learning though Build-Measure-Learn cycles. Once you hypothesize what you need to learn, you must figure out how to measure if you have learned it, and only then can you build the minimum viable product (MVP) that will allow you to measure this. In this initial state of uncertainty during innovation, this is a highly effective way to determine at a minimal cost if you are moving to the right solution to the right problem for actual customers.
The book presents key metrics to determine if you are making progress and points out many measurement errors (“vanity metrics”) that companies make that can obscure their real progress and possibly mislead them about their true state. Later chapters describe what to do when your validated learning takes you to dead ends (“pivot”, which has now entered the mainstream) and how to scale the organization once you are pointed in the right direction. If you are in an area of innovation, ignore this book at your own risk.
- Startups need to minimize the time it takes to execute the Build-Measure-Learn loop. Reducing this time is a very efficient way to preserve the capital that you need to discover what problem your company is solving and for whom.
- The traditional definition of startup runway (“number of months remaining at the current capital burn rate”) only tells part of the picture. An alternate and possibly more meaningful interpretation is the number of times you can pivot before running out of money.
- Two of the greatest risks to a startup are unvalidated value propositions (“can we get someone to pay for this?”) and unvalidated growth propositions (“can we scale this?”). Especially in early stages, significant effort must be placed in generating validated learning about these assumptions.
Recommended?: Absolutely. A very important book to reframe what it means to be a startup.