The Startup Way
The Startup Way

The Startup Way

The five key principles behind the Startup Way philosophy are: 1. CONTINUOUS INNOVATION: Too many leaders are searching for that one key innovation. But long-term growth requires something different: a method for finding new breakthroughs repeatedly, drawing on the creativity and talent of every level of the organization. 2. STARTUP AS ATOMIC UNIT OF WORK: In order to create cycles of continuous innovation and unlock new sources of growth, companies need to have teams that can experiment to find them. These teams are internal startups, and they require a distinct organizational structure to support them. 3. THE MISSING FUNCTION: If you add startups to an organization’s ecosystem, they must be managed in ways that confound traditional techniques. Most organizations are missing a core discipline—entrepreneurship—that is just as vital to their future success as marketing or finance. 4. THE SECOND FOUNDING: Making this kind of profound change to an organization’s structure is like founding the company all over again, whether it’s five or a hundred years old. 5. CONTINUOUS TRANSFORMATION: All of this requires the development of a new organizational capability: the ability to rewrite the organization’s DNA in response to new and diverse challenges. It would be a shame to transform only once. When a company has figured out how to transform, it can—and should—be prepared to do it many more times in the future. (Location 249)

Note: to innovate in a company you must have a diatinct unit which have the autonomy and freedom to focus efforts on innovation

Over and over again, I see people who desperately want to fulfill a long-term vision for the company, to leave a legacy of meaningful change behind. And yet they are continually frustrated by the short-term demands of our current business systems. All it takes is a few bad quarters for investors to demand change, and for the internal politics of a company to create massive upheaval, all the way to the top. (Location 314)

Note: people have long term visions but are then hampered by the demands of investors and a focus on quarterly profits

“There are many ways of thinking about this, but the reality is that Amazon is a collection of several businesses and initiatives,” Bezos said that year. “It’s kind of like we built this lemonade stand twenty years ago, and the lemonade stand has become very profitable over time, but we also decided to use our skills and the assets we’ve acquired to open a hamburger stand, a hot dog stand—we’re investing in new initiatives.” (Location 528)

Note: amazon is a colection of businesses,nice metaphor - lemonade stand and then branch into hot dog and burger stands

A modern company is one that has both halves, both systems. It has a capacity to produce products with great reliability and quality, but also to discover what new products to produce. (Location 585)

Note: modern companies need to be able to 1) Discover new products to create and 2) Create them to a high quality

A MODERN COMPANY has a new tool in its arsenal: the internal startup, filled with a small number of passionate believers dedicated to one project at a time. Like Amazon’s famous “two-pizza team”—no larger than you can feed with two pizzas—these small teams are able to experiment rapidly and scale their impact. Their ethos: “Think big. Start small. Scale fast.” (Location 614)

Note: you should be able to feed your team with two pizzas. if you need more your team is too large

Modern companies need something more than just another innovation lab. They need something more than R&D and prototyping, something distinct from the secretive skunkworks projects of old. They need the ability to consistently and reliably make bets on high-risk, high-reward projects without having to bet the whole company. And they need to find, train, and retain the kinds of leaders who can pull this off. After witnessing and working with many companies, large and small, grappling with this, I believe we should simply call this function “entrepreneurship.” (Location 676)

Note: modern companies need n entrepreneurship function - like finance,legal, HR etc

In order for an organization to take advantage of the latent entrepreneurial talent within it, it has to invest in making the broad pool of its employee base aware of the possibilities of entrepreneurship as a career path. It needs to embrace the notion that meritocracy means that good ideas truly can originate at any level of the organization, not only among white-collar employees or people from certain backgrounds. I have seen evidence of it on the factory floor as well as in the executive suite. The organization must eradicate the many forms of bias that prevent people from bringing their ideas forward or from having their ideas taken seriously. It must invest in systems and processes so that employees know what to do the moment a brainstorm strikes. And, since most ideas are actually bad, it must give employees the platforms for experimentation to discover this on their own. (Location 784)

Note: businesses need to accept tht good ideas an come from any part of the organisation

“no business plan survives first contact with customers,”12 as Steve Blank says (paraphrasing Prussian military strategist Helmuth von Moltke). Or, if you prefer General Eisenhower: “Plans are useless, but planning is indispensable.” (Location 1042)

Every modern startup possesses a metrics dashboard that the team and board revisit on a regular cadence (schedule). The even more recent trend is to post real-time versions of this dashboard up around the office, on large flat-screen monitors that are visible to everyone. This is part of the transparency that startups tend to favor and that many large enterprises find frightening. But as a coordinating device, it’s extremely helpful. There can be no question about how well the company is doing when everyone shares the same set of facts. (Location 1052)

Tags: measuring

Note: have a dashboard of key metrics visible and measure improovements

Without a vision you cannot pivot. The accuracy of that statement is baked into the very definition of pivot: A pivot is a change in strategy without a change in vision. The vision is the part of the team’s mission that is nonnegotiable. It’s what you’d rather go out of business for than compromise on. It’s the essential resistance against which teams can push in order to find unusual breakthrough strategies. (We’ll go over this in more detail in Chapter (Location 1171)

HOW THE LEAN STARTUP WORKS Here is an overview of the basics of the Lean Startup method. We’ll get into each one, and each specialized term, in greater detail. 1. Identify the beliefs about what must be true in order for the startup to succeed. We call these leap-of-faith assumptions. 2. Create an experiment to test those assumptions as quickly and inexpensively as possible. We call this initial effort a minimum viable product. 3. Think like a scientist. Treat each experiment as an opportunity to learn what’s working and what’s not. We call this “unit of progress” for startups validated learning. 4. Take the learning from each experiment and start the loop over again. This cycle of iteration is called the build-measure-learn feedback loop. 5. On a regular schedule (cadence), make a decision about whether to make a change in strategy (pivot) or stay the course (persevere). (Location 1217)

When testing leap-of-faith assumptions, it’s tempting to ask customers directly what they want, either through individual customer interviews, a focus group, or a survey. Many of us were taught to do this kind of market research. But there’s a problem with this approach: people often think they know what they want, but it turns out that they’re wrong.1 That’s why the College Scorecard team went out to the Washington Mall not with a survey but with a prototype product. They could observe what customers actually did with it. The reason to run experiments is to discover customers’ revealed preferences through their behavior. In other words, don’t ask customers what they want. Design experiments that allow you to observe it. (Location 1270)

Tags: customer focused

Note: dont ask customers what they want via survey. design experiments to observe tbheir behaviourr

we all tend to gravitate toward the comfortable—the areas we know most about that feel the safest. When we go where we are least comfortable, it’s usually the area in which we don’t know as much as is necessary in order to find success, and the learning gained from testing those assumptions is all the more important. (Location 1321)

Note: question assumptions you are least sure of

Among its leap-of-faith assumptions, a startup has two that are fundamental: the value hypothesis,4 which tests whether a product or service really delights customers once they begin using it; and the growth hypothesis, which tests how, given some customers, it’s possible to get more. (Location 1327)

An MVP is an early version of a new product that allows a team to collect the maximum amount of validated learning (learning based on real data gathering rather than guesses about the future) about customers. Ideally, this learning will maximize the number of LOFAs tested while minimizing cost, time, and effort. (Location 1348)

Minimum Viable Products are optimized for learning, not for scaling. This is one of the hardest things to convey to people who’ve spent their lives building to build, not building to learn.” (Location 1364)

e-commerce company will insist that what matters is customer purchases and their attendant conversion rates. Consumer products, from apps to toys, require a product that customers love and use regularly. There is not one universally correct behavior that is most important to measure. However, what all of these behaviors have in common is an exchange of value. Value can be anything scarce a potential customer is willing to give up in exchange for access to the product: sometimes that’s money, but it can also be things like time, energy, reputation, or detailed feedback. (Location 1424)

Rather than be told what to build, the team is asked to figure out why customers haven’t already built the call centers themselves. The process starts with an exercise called PRFAQ, a technique used to test an idea through contact with customers to get the answer to that initial question. In the PRFAQ, the team writes a press release (similar to the Amazon process) and FAQ document for the customer, including information like the product launch date and cost (or at least a good estimate). Then the team sits down with customers who’ve been given the release to get feedback. (Location 1466)

Note: create the press release annd faq docs for an idea, show to customers an iscuss before you build anything

their main takeaways. This is what stood out for them: “Our stock price is stuck at the low end of the range because we can’t get the markets to give us credit for future growth. Even if we have a good year, or an individual breakthrough product, it’s hard to convince analysts that it was anything more than a fluke. They think our innovation story is—frankly—bullshit. What Intuit has done has not just changed their growth trajectory but proved to the markets that this growth is driven by a comprehensible process. That means that, over time, they’ve been able to convince the markets that their growth is no fluke.” I believe this is the promise of working in a new way: new sources of growth and a system for continually finding them that can be explained to investors, employees, and the outside world. (Location 1806)

Note: there is a great advantage in undertaking an organisational innovation transformtion and being abble to explain the process change. the markets will see that new innovativive prooducts are not a fluke

management and technological practices that by now should sound familiar: small teams, rapid iteration, accountability metrics, and a culture of transparency without fear of recrimination. (Location 1866)

Start with a limited number of projects and build from there in order to create a comprehensive set of cases, stories, and results to show how the new method works in this particular organization. (Location 2054)

Note: when introducing the startup way methodology start with small multidiscipline teams

GE made an early key decision that was a big driver of FastWorks’s later success. The CEO appointed a cross-functional team of senior executives to oversee the initiative. Comprising the top executives across each of the core disciplines of engineering, marketing, HR, IT, and finance,3 this team served as a kind of steering committee. (Later we would formally organize it as a growth board.) Appointing the right people to be in charge of the effort is critical. (Location 2089)

Note: appoint senior execs from each function to a growth board, they act as steering committee

“We have realized that unless you are involving the business unit in terms of being a sponsor or a stakeholder from the very beginning, it’s not going to work as well, because they don’t feel like the product is theirs,” says Jurado Apruzzese. (Location 2176)

Note: involve the business from the beginnin so that they feel the product is theirs when complete

Every experiment should have: A clear falsifiable hypothesis. Without a clear vision of what is supposed to happen, we can’t judge success or failure. And if you cannot fail, you cannot learn. An obvious next action. Build-measure-learn is a cycle, which means every experiment should lead directly to a follow-on action. One experiment is never enough to draw the necessary conclusions. Only a series of experiments can reveal the truth. Strict risk containment. What’s the worst that can happen? is usually a question we ask flippantly. But here we really need to know the answer—and make sure we can live with it. The goal isn’t to prevent anything bad from happening. It’s to make sure, by modifying the experiment, that whatever that bad thing is isn’t disastrous. Risk containment strategies include restricting the number of customers who are exposed; not putting the corporate brand on the MVP; not compromising safety or compliance (even better, having a compliance expert on the team); giving the customer a more-than-money-back guarantee; offering to pay extra penalties for non-performance. Commit to always making it right for the customer, no matter the cost (remember, you won’t have very many customers at first). A tie between what is measured and at least one LOFA. If we’re not using an experiment to test an assumption, it’s not giving us useful information. (Location 2236)

March of 2013, Kresse and Vinuth Rai, director of the Toyota InfoTechnology Center, began a series of experiments designed to discover and develop state-of-the-art technology for an Internet-connected car. Their first step was to test an assumption: They ran an ad on Craigslist under the heading “Do you hate your commute?,” inviting people to come into the research center and complain about their current driving experience. Within an hour, three hundred people had responded. “It was an immediate and very overwhelming response,” Kresse remembers. “We didn’t build anything until we heard the main pain points customers were expressing. It was, I think, the first time we were getting this raw data from users. It felt so good, because we had been operating mostly in a lablike environment where the setting is very sterile. That’s not very conducive for someone to give you an honest response, so this was pretty refreshing.” (Location 2249)

Note: toyota put an ad on craigslist to recruit customers and undertake research for an internet connected car

“The simpler your metrics, the simpler your goals,” Smith says. “If everyone can understand it without a manual, people start getting better at a faster rate.” (Location 2351)

After looking at other companies that had embraced the principles Semper and Goldstein wanted to articulate—faster, simpler, more customer driven—the team began drafting. They weren’t looking to replicate anyone else’s ideas but to educate themselves on what was possible. (Location 2463)

Note: faster.simpler.more customer driven

Most people in product development are familiar with what management consultant Geoffrey Moore called the “technology adoption life cycle,” outlined in his book Crossing the Chasm. The “chasm” is the recurring problem that between visionary early adoption and pragmatic mainstream acceptance there’s an abyss that can be spanned only by a shift in the way a product is marketed and sold. The issue isn’t just that the product isn’t polished enough but that mainstream customers seek a like-minded reference in order to make the leap to purchase it. (Location 2537)

Note: there is gap between early adoptors and the mainstream. the mainstream need to see simarily minded people using the product before they adopt

The executive sponsors mentioned in Chapter 6 were invaluable at this stage for this very reason. Just having someone from each division who participated in the training and could say, “I believe in this,” made a big difference. These testimonials were much more important than anything an outside consultant could say. It wasn’t only the sponsors who were able to push the transformation, either. By this time, there were enough senior leaders who took seriously their roles in helping FastWorks spread. (Location 2549)

Note: internal sponsors and champions are key to providing testimonials and encouraging the mainstream to adopt

My mother always said, when you’re interviewing for jobs, pick the company where the highest-ranking person talked to you. That’s how you know they’re actually invested in what you’ll be doing. (Location 2724)

Tags: career

Every organization is different. Every industry is different. Every person is different. Success at using these methods should be judged by outcomes: the culture of the team, the way the team treats customers, and the impact it has in the world. (Location 2750)

If there is one piece of advice that the Lean Startup movement is known for above all, it’s the importance of getting customers involved early and often. Our most famous slogan is probably Steve Blank’s Get out of the building.3 If someone presented a plan like this one at a Lean Startup Meetup, they’d probably be booed off the stage. And yet, when I coach teams, “Talk to customers” is a piece of advice I almost never give. Founders are stubborn. Most either think they’ve already spent enough time speaking with customers or they’ve already decided it’s not worthwhile. (Location 2768)

Note: get out of the building and go talk to customers

Techstars’s Mentor Manifesto Techstars, a tech accelerator program, takes its coaching role so seriously that it published its own manifesto5 to lay out “what entrepreneurs can and should demand from their mentors” and “what mentors should consider if they want to build effective relationships with the entrepreneurs they’re working with.” Be Socratic. Expect nothing in return (you’ll be delighted with what you do get back). Be authentic/practice what you preach. Be direct. Tell the truth, however hard. Listen, too. The best mentor relationships eventually become two-way. Be responsive. Adopt at least one company every single year. Experience counts. Clearly separate opinion from fact. Hold information in confidence. Clearly commit to mentor or do not. Either is fine. Know what you don’t know. Say “I don’t know” when you don’t know. “I don’t know” is preferable to bravado. Guide, don’t control. Teams must make their own decisions. Guide but never tell them what to do. Understand that it’s their company, not yours. Accept and communicate with other mentors who get involved. Be optimistic. Provide specific actionable advice; don’t be vague. Be challenging/robust but never destructive. Have empathy. Remember that startups are hard. (Location 2848)

The coaches focus on three areas: leadership practices, collaboration practices, and technical practices. (Location 2861)

Note: ibm coachingfocuses on three principls. leadership.collaboration.technical.

an innovation program lead, says the goal is to train coaches for three areas: innovation (design thinking and agile prototyping), business (sales and marketing), and technical. (Location 2871)

Note: cisco train in

My proposal was simple: create a one-page guidance document that laid out, in plain English, a series of parameters within which innovation teams would be pre-cleared to work. 1. If you’re doing a tiny MVP experiment with fewer than X customers possibly affected, total liability of Y, and a cost of Z, you’re pre-approved. 2. If the experiment is a success and you want do a “scaling MVP” of a little bit greater complexity and bigger numbers for X, Y, and Z, it’s deemed approved in advance as long as: (a) it’s built on an initial MVP and (b) you have managerial sign-off. 3. If you want to exceed these guidelines for something larger or more complex, you need to discuss it with legal. Here’s the hotline to call … You probably won’t be surprised to learn that the first version of this one-page document that the legal team created was … ten pages long. (Location 3072)

Tags: enterprise innovation

Note: one pager of exception parameters for legal approval

the app. Too complicated? Nope. Their test had failed not because the technological tool was bad, but because the behaviors and environment needed to deploy it effectively weren’t there. Employees said they wanted to give upward and collegial feedback, but when it came to actually doing so, they were too uncomfortable. There was no history of this kind of exchange at GE, and they had no idea how their colleagues would react to it, so they took the safest option, which was to do nothing at all. The pivot, once the team embraced it (with the mantra “Let’s not fight the pivot”), was to focus on the behaviors and culture needed to make the tool useful, rather than expect the tool to create those behaviors. “That particular learning helped us to transition from technology as the center of our performance approach to using technology as simply an enabler of the approach,” (Location 3299)

Note: technology is simply an enabler

As a result, in 2008, the supply chain at the hospital made the switch to what they call the “two-bin system.” Two bins are set up full of each necessary item. When the first bin is empty, a second full bin behind it is pulled forward. At that point an order, relying on a bar code attached to each bin, is automatically placed with the vendor for replacement supplies. (Location 3438)

Note: Use two bin system to reorder supplies

we had addressed two important parts of the startup valuation formula: our probability of future success and the presumed magnitude of future success. (Location 3562)

What is needed in a startup project is a new way of interpreting early results, one that solves this basic repeated dilemma that all innovation teams face. In fact, once we get the right framework in place, teams can use my favorite reply to these frequent critics: “You say we have too small a sample size. Excellent. We’re glad you agree our budget should be increased. Let’s scale up the experiment and get a larger sample.” This works because the criticism implicitly grants the premise that the early results are promising. (Location 3567)

Note: agree the sammple size is too small and a larger budget is needed

Innovation Accounting (IA) is a way of evaluating progress when all the metrics typically used in an established company (revenue, customers, ROI, market share) are effectively zero. (Location 3626)

When we calculate the net present value (NPV) of potential future earnings, we are assessing the magnitude of possible success—but not the probability. (Location 3643)

Instead, teams would do better—and companies, too—if more were looking at the actual drivers of growth and trying to understand how, over time, these drivers could help make a business successful. Innovation accounting allows us to track this sort of progress and eventually translate what we learn into a language that finance departments can understand. (Location 3663)

Note: teams should look at the drivers of growth rather than roi

Per-customer learning metrics include: Conversion rates (such as the percentage of customers who try a free trial of a product who subsequently become paying customers). Revenue per customer (the amount of money customers pay for a product on average). Lifetime value per customer (the amount of money the company accrues from an average customer over the entire “life” of his or her relationship with the company). Retention rate (what percentage of customers are still using the product after a certain amount of time). Cost per customer (how much it costs to serve a customer on average). Referral rate (what percentage of existing customers refer new customers to the product, and on average how many referrals they make per unit of time). Channel adoption (what percentage of the relevant distribution channels carry the product). (Location 3668)

Tags: startup metrics

Note: look at the figures per customer.

Level 2 value hypothesis indicator should measure a behavior like repeat purchase, retention, willingness to pay a premium price, or referral. (Location 3719)

However, the ironclad rule of the growth board has to be: The money is yours, but you cannot get a penny more if you do not show validated learning. That is why this is an advanced technique. Most teams simply won’t believe this rule until they see it enforced. (Location 3882)

Note: internal startups must be able to do whater they like with the money they receive

It is a truism that the winners write the history books. The winners from Silicon Valley—the VCs and the entrepreneurs—wrote the story lines that justified the rewards they took. (Location 4227)

Note: winners write the history books

Startups are, in a very crude sense, made up of three ingredients: products, capital, and labor. (Location 4249)