My hope all along was to find ways to eliminate the tremendous waste I saw all around me: startups that built products nobody wanted, new products pulled from the shelves, countless dreams unrealized. (Location 162)

Note: Dont build products nobody wants

my definition of a startup: a human institution designed to create new products and services under conditions of extreme uncertainty. (Location 178)

Tags: startup

Note: .startup

Validated learning. Startups exist not just to make stuff, make money, or even serve customers. They exist to learn how to build a sustainable business. This learning can be validated scientifically by running frequent experiments that allow entrepreneurs to test each element of their vision. (Location 183)

Tags: startup

Note: .startup run experiments and learn

The Lean Startup asks people to start measuring their productivity differently. Because startups often accidentally build something nobody wants, it doesn’t matter much if they do it on time and on budget. The goal of a startup is to figure out the right thing to build—the thing customers want and will pay for—as quickly as possible. (Location 270)

Tags: startup

Note: .startup is goal is to figure out the right thing to build asap

Startups also have a true north, a destination in mind: creating a thriving and world-changing business. I call that a startup’s vision. (Location 306)

We must learn what customers really want, not what they say they want or what we think they should want. We must discover whether we are on a path that will lead to growing a sustainable business. (Location 494)

Note: We must learn what customers actually want and build a sustainable business model

I had committed the biggest waste of all: building a product that our customers refused to use. (Location 612)

Note: Dont build products customers dont use

I’ve come to believe that learning is the essential unit of progress for startups. The effort that is not absolutely necessary for learning what customers want can be eliminated. I call this validated learning because it is always demonstrated by positive improvements in the startup’s core metrics. As we’ve seen, it’s easy to kid yourself about what you think customers want. It’s also easy to learn things that are completely irrelevant. Thus, validated learning is backed up by empirical data collected from real customers. (Location 646)

Zero invites imagination, but small numbers invite questions about whether large numbers will ever materialize. Everyone knows (or thinks he or she knows) stories of products that achieved breakthrough success overnight. As long as nothing has been released and no data have been collected, it is still possible to imagine overnight success in the future. Small numbers pour cold water on that hope. (Location 690)

These are some of the questions teams struggle to answer if they have followed the “let’s just ship a product and see what happens” plan. I call this the “just do it” school of entrepreneurship after Nike’s famous slogan.1 Unfortunately, if the plan is to see what happens, a team is guaranteed to succeed—at seeing what happens—but won’t necessarily gain validated learning. This is one of the most important lessons of the scientific method: if you cannot fail, you cannot learn. (Location 736)

The two most important assumptions entrepreneurs make are what I call the value hypothesis and the growth hypothesis. The value hypothesis tests whether a product or service really delivers value to customers once they are using it. ... For the growth hypothesis, which tests how new customers will discover a product or service, we can do a similar analysis. Once the program is up and running, how will it spread among the employees, from initial early adopters to mass adoption throughout the company? (Location 800)

My suggestion was drawn straight from the principles of this chapter: treat the CFPB as an experiment, identify the elements of the plan that are assumptions rather than facts, and figure out ways to test them. Using these insights, we could build a minimum viable product and have the agency up and running—on a micro scale—long before the official plan was set in motion. (Location 913)

Note: Identity assumptions early amd test them

At its heart, a startup is a catalyst that transforms ideas into products. As customers interact with those products, they generate feedback and data. The feedback is both qualitative (such as what they like and don’t like) and quantitative (such as how many people use it and find it valuable). (Location 957)

Note: A startup turns ideas to products

To apply the scientific method to a startup, we need to identify which hypotheses to test. I call the riskiest elements of a startup’s plan, the parts on which everything depends, leap-of-faith assumptions. The two most important assumptions are the value hypothesis and the growth hypothesis. These give rise to tuning variables that control a startup’s engine of growth. Each iteration of a startup is an attempt to rev this engine to see if it will turn. Once it is running, the process repeats, shifting into higher and higher gears. (Location 974)

STRATEGY IS BASED ON ASSUMPTIONS Every business plan begins with a set of assumptions. It lays out a strategy that takes those assumptions as a given and proceeds to show how to achieve the company’s vision. Because the assumptions haven’t been proved to be true (they are assumptions, after all) and in fact are often erroneous, the goal of a startup’s early efforts should be to test them as quickly as possible. (Location 1026)

Note: All plans are based on assumptions. You should test those assumptions as soon as possible

What differentiates the success stories from the failures is that the successful entrepreneurs had the foresight, the ability, and the tools to discover which parts of their plans were working brilliantly and which were misguided, and adapt their strategies accordingly. (Location 1077)

As Steve Blank has been teaching entrepreneurs for years, the facts that we need to gather about customers, markets, suppliers, and channels exist only “outside the building.” Startups need extensive contact with potential customers to understand them, so get out of your chair and get to know them. (Location 1129)

Tags: startup

Note: You need to get out of the building and come into contact with customers

Early adopters use their imagination to fill in what a product is missing. They prefer that state of affairs, because what they care about above all is being the first to use or adopt a new product or technology. In consumer products, it’s often the thrill of being the first one on the block to show off a new basketball shoe, music player, or cool phone. In enterprise products, it’s often about gaining a competitive advantage by taking a risk with something new that competitors don’t have yet. Early adopters are suspicious of something that is too polished: if it’s ready for everyone to adopt, how much advantage can one get by being early? As a result, additional features or polish beyond what early adopters demand is a form of wasted resources and time. (Location 1207)

Note: Early adopters dont need a polished product

In a Wizard of Oz test, customers believe they are interacting with the actual product, but behind the scenes human beings are doing the work. Like the concierge MVP, this approach is incredibly inefficient. Imagine a service that allowed customers to ask questions of human researchers—for free—and expect a real-time response. Such a service (at scale) would lose money, but it is easy to build on a micro scale. (Location 1361)

If we do not know who the customer is, we do not know what quality is. (Location 1380)

MVPs require the courage to put one’s assumptions to the test. If customers react the way we expect, we can take that as confirmation that our assumptions are correct. If we release a poorly designed product and customers (even early adopters) cannot figure out how to use it, that will confirm our need to invest in superior design. But we must always ask: what if they don’t care about design in the same way we do? (Location 1406)

As you consider building your own minimum viable product, let this simple rule suffice: remove any feature, process, or effort that does not contribute directly to the learning you seek. (Location 1415)

the most common objection I have heard over the years to building an MVP is fear of competitors—especially large established companies—stealing a startup’s ideas. If only it were so easy to have a good idea stolen! Part of the special challenge of being a startup is the near impossibility of having your idea, company, or product be noticed by anyone, let alone a competitor. (Location 1427)

Note: Its very unlikely people will steal your idea

startup’s job is to (1) rigorously measure where it is right now, confronting the hard truths that assessment reveals, and then (2) devise experiments to learn how to move the real numbers closer to the ideal reflected in the business plan. (Location 1472)

When one is choosing among the many assumptions in a business plan, it makes sense to test the riskiest assumptions first. If you can’t find a way to mitigate these risks toward the ideal that is required for a sustainable business, there is no point in testing the others. For example, a media business that is selling advertising has two basic assumptions that take the form of questions: Can it capture the attention of a defined customer segment on an ongoing basis? and can it sell that attention to advertisers? In a business in which the advertising rates for a particular customer segment are well known, the far riskier assumption is the ability to capture attention. Therefore, the first experiments should involve content production rather than advertising sales. Perhaps the company will produce a pilot episode or issue to see how customers engage. (Location 1534)

Note: Test the riskiest assumption first

We tracked the “funnel metrics” behaviors that were critical to our engine of growth: customer registration, the download of our application, trial, repeat usage, and purchase. To have enough data to learn, we needed just enough customers using our product to get real numbers for each behavior. We allocated a budget of five dollars per day: enough to buy clicks on the then-new Google AdWords system. In those days, the minimum you could bid for a click was 5 cents, but there was no overall minimum to your spending. Thus, we could afford to open an account and get started even though we had very little money.1 Five dollars bought us a hundred clicks—every day. From a marketing point of view this was not very significant, but for learning it was priceless. Every single day we were able to measure our product’s performance with a brand new set of customers. Also, each time we revised the product, we got a brand new report card on how we were doing the very next day. (Location 1563)

“Whether you’re studying for the SAT or you’re studying for algebra, you study in one of three ways. You spend some time with experts, you spend some time on your own, and you spend some time with your peers. (Location 1683)

the grand bargain of agile development: engineers agree to adapt the product to the business’s constantly changing requirements but are not responsible for the quality of those business decisions. (Location 1733)

The decision to pivot is emotionally charged for any startup and has to be addressed in a structured way. One way to mitigate this challenge is to schedule the meeting in advance. I recommend that every startup have a regular “pivot or persevere” meeting. In my experience, less than a few weeks between meetings is too often and more than a few months is too infrequent. However, each startup needs to find its own pace. (Location 2145)

Note: Schedule regular pivot or persevere sessions

Remember that the rationale for building low-quality MVPs is that developing any features beyond what early adopters require is a form of waste. However, the logic of this takes you only so far. Once you have found success with early adopters, you want to sell to mainstream customers. Mainstream customers have different requirements and are much more demanding. The kind of pivot we needed is called a customer segment pivot. In this pivot, the company realizes that the product it’s building solves a real problem for real customers but that they are not the customers it originally planned to serve. In other words, the product hypothesis is confirmed only partially. (This chapter described such a pivot in the Votizen story, above.) (Location 2229)

The word pivot sometimes is used incorrectly as a synonym for change. A pivot is a special kind of change designed to test a new fundamental hypothesis about the product, business model, and engine of growth. (Location 2266)

Note: A pivot is a change designed to test a fundamental hypothesis

Customer Need Pivot As a result of getting to know customers extremely well, it sometimes becomes clear that the problem we’re trying to solve for them is not very important. However, because of this customer intimacy, we often discover other related problems that are important and can be solved by our team. In many cases, these related problems may require little more than repositioning the existing product. In other cases, it may require a completely new product. Again, this a case where the product hypothesis is partially confirmed; the target customer has a problem worth solving, just not the one that was originally anticipated. (Location 2275)

Engine of Growth Pivot As we’ll see in Chapter 10, there are three primary engines of growth that power startups: the viral, sticky, and paid growth models. In this type of pivot, a company changes its growth strategy to seek faster or more profitable growth. Commonly but not always, the engine of growth also requires a change in the way value is captured. (Location 2296)

Channel Pivot In traditional sales terminology, the mechanism by which a company delivers its product to customers is called the sales channel or distribution channel. For example, consumer packaged goods are sold in a grocery store, cars are sold in dealerships, and much enterprise software is sold (with extensive customization) by consulting and professional services firms. Often, the requirements of the channel determine the price, features, and competitive landscape of a product. A channel pivot is a recognition that the same basic solution could be delivered through a different channel with greater effectiveness. Whenever a company abandons a previously complex sales process to “sell direct” to its end users, a channel pivot is in progress. It is precisely because of its destructive effect on sales channels that the Internet has had such a disruptive influence in industries that previously required complex sales and distribution channels, such as newspaper, magazine, and book publishing. (Location 2299)

Recall from Chapter 3 that value in a startup is not the creation of stuff, but rather validated learning about how to build a sustainable business. What products do customers really want? How will our business grow? Who is our customer? Which customers should we listen to and which should we ignore? These are the questions that need answering as quickly as possible to maximize a (Location 2350)

Tags: startup

Note: .startup

The small-batch approach produces a finished product every few seconds, whereas the large-batch approach must deliver all the products at once, at the end. Imagine what this might look like if the time horizon was hours, days, or weeks. What if it turns out that the customers have decided they don’t want the product? Which process would allow a company to find this out sooner? (Location 2399)

Think back to the example of envelope stuffing. What if it turns out that the customer doesn’t want the product we’re building? Although this is never good news for an entrepreneur, finding out sooner is much better than finding out later. Working in small batches ensures that a startup can minimize the expenditure of time, money, and effort that ultimately turns out to have been wasted. (Location 2433)

Remember that although we write the feedback loop as Build-Measure-Learn because the activities happen in that order, our planning really works in the reverse order: we figure out what we need to learn and then work backwards to see what product will work as an experiment to get that learning. (Location 2619)

Sustainable growth is characterized by one simple rule: New customers come from the actions of past customers. ... Word of mouth. Embedded in most products is a natural level of growth that is caused by satisfied customers’ enthusiasm for the product. ... As a side effect of product usage. Fashion or status, such as luxury goods products, drive awareness of themselves whenever they are used. ... Through funded advertising. Most businesses employ advertising to entice new customers to use their products. For this to be a source of sustainable growth, the advertising must be paid for out of revenue, not one-time sources such as investment capital. ... Through repeat purchase or use. Some products are designed to be purchased repeatedly either through a subscription plan (a cable company) or through voluntary repurchases (groceries or lightbulbs). (Location 2688)

one of the most famous viral success stories is a company called Hotmail. In 1996, Sabeer Bhatia and Jack Smith launched a new web-based e-mail service that offered customers free accounts. At first, growth was sluggish; with only a small seed investment from the venture capital firm Draper Fisher Jurvetson, the Hotmail team could not afford an extensive marketing campaign. But everything changed when they made one small tweak to the product. They added to the bottom of every single e-mail the message “P.S. Get your free e-mail at Hotmail” along with a clickable link. Within weeks, that small product change produced massive results. Within six months, Bhatia and Smith had signed up more than 1 million new customers. Five weeks later, they hit the 2 million mark. Eighteen months after launching the service, with 12 million subscribers, they sold the company to Microsoft for $400 million. (Location 2755)

Companies that rely on the viral engine of growth must focus on increasing the viral coefficient more than anything else, because even tiny changes in this number will cause dramatic changes in their future prospects. A consequence of this is that many viral products do not charge customers directly but rely on indirect sources of revenue such as advertising. This is the case because viral products cannot afford to have any friction impede the process of signing customers up and recruiting their friends. This can make testing the value hypothesis for viral products especially challenging. (Location 2776)

Over time, any source of customer acquisition will tend to have its CPA bid up by this competition. If everyone in an industry makes the same amount of money on each sale, they all will wind up paying most of their marginal profit to the source of acquisition. Thus, the ability to grow in the long term by using the paid engine requires a differentiated ability to monetize a certain set of customers. (Location 2831)

We saw an example of speed regulation in Chapter 9 with the use of the andon cord in systems such as continuous deployment. It is epitomized in the paradoxical Toyota proverb, “Stop production so that production never has to stop.” The key to the andon cord is that it brings work to a stop as soon as an uncorrectable quality problem surfaces—which forces it to be investigated. (Location 2948)

If you are causing (or missing) quality problems now, the resulting defects will slow you down later. Defects cause a lot of rework, low morale, and customer complaints, all of which slow progress and eat away at valuable resources. (Location 2952)

Note: Do not let quality slip now, the effects compound downstream

recommend several tactics for escaping the Five Blames. The first is to make sure that everyone affected by the problem is in the room during the analysis of the root cause. The meeting should include anyone who discovered or diagnosed the problem, including customer service representatives who fielded the calls, if possible. It should include anyone who tried to fix the symptom as well as anyone who worked on the subsystems or features involved. If the problem was escalated to senior management, the decision makers who were involved in the escalation should be present as well. This may make for a crowded room, but it’s essential. (Location 3046)

Note: When doing 5 whys have all those involved with the issue in the room

I ask teams to adopt these simple rules: Be tolerant of all mistakes the first time. Never allow the same mistake to be made twice. (Location 3069)

Tags: mistakes

Note: .mistakes tolerant first time.dont let it happen twice

Whenever something goes wrong, ask yourself: How could I prevent myself from being in this situation ever again? (Location 3088)

To introduce Five Whys to an organization, it is necessary to hold Five Whys sessions as new problems come up. Since baggage issues are endemic, they naturally come up as part of the Five Whys analysis and you can take that opportunity to fix them incrementally. If they don’t come up organically, maybe they’re not as big as they seem. Everyone who is connected to a problem needs to be at the Five Whys session. Many organizations face the temptation to save time by sparing busy people from the root cause analysis. This is a false economy, as IGN discovered the hard way. At the beginning of each Five Whys session, take a few minutes to explain what the process is for and how it works for the benefit of those who are new to it. If possible, use an example of a successful Five Whys session from the past. If you’re brand new, you can use my earlier example about the manager who doesn’t believe in training. IGN learned that, whenever possible, it helps to use something that has personal meaning for the team. (Location 3126)

This is a classic case of “achieving failure”—successfully executing a flawed plan. (Location 3205)

external, in my experience startup teams require three structural attributes: scarce but secure resources, independent authority to develop their business, and a personal stake in the outcome. (Location 3298)

Tags: startup

Note: .startup

We often frame internal innovation challenges by asking, How can we protect the internal startup from the parent organization? I would like to reframe and reverse the question: How can we protect the parent organization from the startup? In my experience, people defend themselves when they feel threatened, and no innovation can flourish if defensiveness is given free rein. (Location 3388)

Creating an Innovation Sandbox ... My suggested solution is to create a sandbox for innovation that will contain the impact of the new innovation but not constrain the methods of the startup team. It works as follows: Any team can create a true split-test experiment that affects only the sandboxed parts of the product or service (for a multipart product) or only certain customer segments or territories (for a new product). However: One team must see the whole experiment through from end to end. No experiment can run longer than a specified amount of time (usually a few weeks for simple feature experiments, longer for more disruptive innovations). No experiment can affect more than a specified number of customers (usually expressed as a percentage of the company’s total mainstream customer base). Every experiment has to be evaluated on the basis of a single standard report of five to ten (no more) actionable metrics. Every team that works inside the sandbox and every product that is built must use the same metrics to evaluate success. Any team that creates an experiment must monitor the metrics and customer reactions (support calls, social media reaction, forum threads, etc.) while the experiment is in progress and abort it if something catastrophic happens. (Location 3403)

As Peter Drucker said, “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.” (Location 3577)

What would an organization look like if all of its employees were armed with Lean Startup organizational superpowers? For one thing, everyone would insist that assumptions be stated explicitly and tested rigorously not as a stalling tactic or a form of make-work but out of a genuine desire to discover the truth that underlies every project’s vision. We would not waste time on endless arguments between the defenders of quality and the cowboys of reckless advance; instead, we would recognize that speed and quality are allies in the pursuit of the customer’s long-term benefit. We would race to test our vision but not to abandon it. We would look to eliminate waste not to build quality castles in the sky but in the service of agility and breakthrough business results. We would respond to failures and setbacks with honesty and learning, not with recriminations and blame. More than that, we would shun the impulse to slow down, increase batch size, and indulge in the curse of prevention. Instead, we would achieve speed by bypassing the excess work that does not lead to learning. We would dedicate ourselves to the creation of new institutions with a long-term mission to build sustainable value and change the world for the better. Most of all, we would stop wasting people’s time. (Location 3703)

The Principles of Product Development Flow: Second Generation Lean Product Development by Donald G. Reinertsen. (Location 3771)

Tags: toread

Note: .toread