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Nature, to Be Commanded, Must Be Obeyed

August 01, 2014

Lean Startup Notes - Part 1: Theory

I have pre-ordered the The Lean Startup but then I haven’t opened its cover except to skim through a few random sentences now and then. I have finished it during my summer vacation. These are my short notes from the book. They are quite terse and mostly for my own reference. But take a look anyway, you might find these concepts interesting. In any case, I strongly recommend the book.

Entrepreneurship is Management

  • Overarching theme of Lean Startup is the contrast between just do it school of entrepreneurship and the scientific, objective method of validated learning.
  • “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 – If you cannot fail, you cannot learn.” – Eric Ries
  • Techniques described in the book is all about startup specific management, managing learning, managing innovation.
  • I think there are three levels of enlightenment:
    1. Gut feelings / because I say so.
    2. Making decisions based on subjective/qualitative indicators.
    3. Making decisions based on objective/quantitative measurements.
  • Speaking of scientific measurements, statistical significance is important to assign the appropriate amount of confidence to our measurements.

2 Basic Hypotheses of Startups

  • What Lean Startups are trying to learn are leap of faith assumptions made. Conventional businesses need not operate on such assumptions.
  • 2 most important leap-of-faith questions startups must to answer are:
    • Value hypothesis: “The value hypothesis tests whether a product or service really delivers value to the customers once they are using it.”
    • Growth hypothesis: “The growth hypothesis tests how new customers will discover a product or service.”
  • Just being able to identify assumptions and communicate them openly with the team goes a long way.
  • Trade-offs between local performance optimizations of specialized teams and unified goals of cross-functional teams are mentioned in the book multiple times.

Learn-Build-Measure Loop

  • There are actually two loops.
    1. Pivot or persevere loop:
      • Establish baseline. (MVP)
      • Optimize.
      • Pivot or persevere.
    2. Feedback loop of learning that mostly covers the optimize step of the outer loop:
      • Use ideas to build the product.
      • Measure the product to get data.
      • Use data to learn and come up with new ideas.
      • The goal is to minimize the full cycle.
      • In practice you start with what you want to learn and design what you will measure before building.
  • Failing fast is widely misunderstood. You do not want to fail. You want to succeed. The emphasis is on fast, not fail. If you are going to fail you want to it to happen sooner than later.
  • Three A’s: Actionable, Accessible, Auditable. (actionable metrics)
    • “For a report to be considered actionable, it must demonstrate clear cause and effect. Otherwise, it is a vanity metric.”

If you have any questions, suggestions or corrections feel free to drop me a line.