Entrepreneurship

Eric Ries and The Lean Startup

 

By Philip Levinson

On Wednesday, September 21, Eric Ries, an HBS entrepreneur-in-residence and author of the just-released book THE LEAN STARTUP, spoke at HBS and told would-be entrepreneurs to think fast. The author of the popular Startup Lessons Learned blog and co-founder of IMVU preaches the benefits of speed.

How important is moving quickly, according to Ries?  The entire last one-third section of his new book is entitled “Accelerate.”  He says this is no accident given the state of today’s economy.

“Disruption and uncertainty are the rules now, not the exception,” says Ries. “And so we need management tools designed to confront those uncertainties.”

A Yale engineering graduate with an unabashed enthusiasm for start-ups, Ries is right at home talking with would-be entrepreneurs, having launched a number of companies himself, including IMVU, which he says reached $50 million in annualized revenues this year.

Just as he talks about his successes, he is equally willing to discuss his entrepreneurial failures as lessons for his followers replica watches.  He wastes no time with his new book, describing on page 1 his experience with his first company, Catalyst Recruiting, founded while an undergrad at Yale.  “Despite a promising idea,” he writes, “we were nevertheless doomed from day one, because we did not know the process we would use to turn our product insights into a great company.”

Now, Ries emphasizes the importance of iteration throughout his writings and speeches.  “Treat everything you do with the product as an experiment,” he says.  “The biggest problem in entrepreneurship is extreme uncertainty, so therefore our unit of progress is learning what’s going to work.”

To achieve this, Ries talks about taking a small-batch, iterative approach. He discourages, grander-scale approaches that may seem more efficient but actually may turn out to be wasted “if it turns out that the customer doesn’t want the product we’re building.”

The list of successful companies who have taken their cues from the “Lean Startup” methodology includes both small and large companies.  Ries cites Intuit, Groupon, Instagram and Dropbox as recent examples.

Ries talks and writes about the successful launch of Dropbox, the über-fast-growing file-sharing company founded by MIT graduates Drew Houston and Arash Ferdowsi“What is so cool is that they built a minimum viable product that was just a video. It described the product as it was going to work when it was done. And when they launched that video, they got thousands of people signed up on their waiting list, begging to get the product. That was confirmation that people really wanted it.”

While launching with less and not more may sound a bit counterintuitive, it is the key to the “continuous deployment” method Ries preaches.  He cites his work at IMVU as an example.  “At IMVU, one of the big questions we faced is, ‘Do customers even have this problem?’ And we can find that out with a simple web page in only days instead of months.”

With his recent success and popularity in the business community, Ries is thrilled to be working with HBS as an entrepreneur-in-residence, although he says, “When I tell people in Silicon Valley that I’m an entrepreneuring resident at HBS, I get a lot of eye rolls. There’s a pretty strong anti-MBA bias in certain segments of the entrepreneurship community…they have a stereotype that they’re uncreative.”

But this is a stereotype Ries is working to change.  He works closely at HBS with Mike Roberts, Executive Director of the Arthur Rock Center for Entrepreneurship, and Professor Tom Eisenmann, as well as with the Startup Tribe (recently profiled in The Harbus here: Startup Tribe).  Ries pushes HBS students to understand the principles of The Lean Startup even if they’re not going to start a company or go to work for an early-stage company themselves.  “I think it’s important for MBAs to understand entrepreneurship, even if they are themselves not going to be entrepreneurs someday,” he says. “The ones who are not are still going to be managing entrepreneurs, investing in entrepreneurs, and buying entrepreneurs’ companies one day.”

Along these lines, Ries says that large companies can benefit greatly from the doing-more-with-less approach.  He speaks of giving teams “islands of freedom” where they can experiment freely and report back with learnings.  “I really like the story of Intuit and their launch of SnapTax,” says Ries of the 8,000-employee software company.  “SnapTax allows you to file your tax return in the United States on your cell phone. It’s just exactly the kind of cool type of innovation you would expect from a startup, but it just so happens was built inside of Intuit. They only had five people working on it in the beginning. It was like they worked at a start up for Intuit.”

Ries points to other Dos and Don’ts for entrepreneurs and start-ups:

Don’t

Don’t have a big PR launch: Ries says, “Entrepreneurs want to have a big PR launch way too soon. I’m constantly having to beg entrepreneurs not to do that because there’s no learning value from the launch. If we have a product that people don’t like, and a hundred people in a row tell us it’s no good, what’s the learning value of the hundred and first person who says it sucks?  None!  What about the millionth person?  What a waste!  So that’s a huge distraction that most teams get wrong.”

Don’t organize your startup company in functional departments: “This is a big no-no. Most of us were trained in functional departments, and we commit the startup dollhouse fallacy, which is to think that a startup is just a shrunken-down big company.  But it’s not.  It’s a really different piece, and it requires a really different management paradigm to work, and that paradigm has to involved strong, cross-functional teams.”

Don’t write a business plan: “You can only take accurate forecasts when you have a long and stable operating history. And who really feels like the world is getting more stable. So we need to use completely different tools for entrepreneurship.”

Do

Treat everything you do with the product as an experiment: Ries says, “The startup is an experiment, so it is designed to teach us how to build a sustainable business.”

Build a minimum viable product: Ries says, “A minimum viable product is that version of the product that allows us to start the learning process as quickly as possible. It’s really hard to cut features when you’re thinking about your grand vision.”

Pivot when you make a mistake: Ries says “A pivot is a change in strategy without a change in vision. And the tip is to schedule the pivot meeting ahead of time.”

Most of all, Ries is a big fan of launching, and not a fan of business plan-writing.  “I suggest entrepreneurs just get started making things. We call it build, measure, learn.”  Ries hopes to see a number of future HBS entrepreneurs build their way to the top.

Eric Ries’s visit to HBS:

The Rock Center & Harvard i-lab present: Eric Ries

Rock Center Entrepreneur-in-Residence Eric Ries is the creator of the Lean Startup methodology and the author of the popular entrepreneurship blog Startup Lessons Learned

Eric’s new book, “The Lean Startup” is now available at the HBS Coop (Spangler Center) or on Amazon.com.

September 20, 2011

About Author

PhilipLevinson


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