Eric Ries is an entrepreneur and the author of the New York Times bestseller The Lean Startup: How today’s entrepreneurs use continuous innovation to create radically successful Business. In this interview with LMJ editor Callum Bentley, Eric explains the difficulties and rewards of applying lean to startups, changing the mind-set of seasoned professionals and embracing the
ideas of youthful entrepreneurs.
Lean Management Journal: The idea of applying lean practices to a company which may not even exist yet seems to throw forth a number of diffi cult challenges. Can you explain some of the major hurdles a startup might encounter when trying to make itself lean?
Eric Ries: The number one problem is that fundamentally, lean and agile are basically taking a product specification and building it efficiently. So if you look at the seven wastes of manufacturing and look at the actual practice of agile in real life, we can take for granted that somebody somewhere knows what product to build, and our job is to implement that product efficiently, effectively and quickly. The core problem in a startup situation is that that belief is oft en wrong. Nobody knows what product to build. Or if we do know, we’re very confident and often very wrong.
I have met a lot of people who have had the same experience of building a product that the customers don’t want, but are doing it very efficiently. And that’s nothing to be proud of. Sure, it was delivered on time and on budget, and there were no transportation costs, but that was because there was no customer to deliver the product to.
The reason it is such an issue is because this is not a problem that traditional product
development has – except when the uncertainty gets cranked up. But during periods of stability, when companies are growing and surviving they build new products all the time, but they are products that are derived from past successful products. They fundamentally have the same business model, the same customer, the same distribution channels and the same rough pricing, and you can have decades of success doing that. Look at a company like Toyota. By specialising and making cars during a period when the auto industry was relatively stable, these kinds of questions wouldn’t nearly come up as often. Whereas when companies of any size move into domains of high uncertainty, all of a sudden the success rate of new ideas plummets and requires a different kind of management tool to deal with it.
LMJ: Is it a necessity for people looking to get their business off the ground to seek advice from those who have done it before, or should they just put their heads down and experience it for themselves?
ER: I would often have arguments with people in startups – when I was an employee, a founder and an advisor – where I would be advocating these more unorthodox product development approaches. Things like continuous deployment where a product is put into production multiple times a day – forget weekly, monthly or annually – but more quick deployment, much more scientific AB approaches, etc. People would argue with me and say; “how do I know that those techniques are going to be successful?”
I would try to explain to them those principles, the history of manufacturing, batch size and all of the theoretical constructs, and they would say; “Who says that this is a good idea?” “What expert or authority can you point to?” “What successful companies have done this?” And there were people from the agile world like Steve Blank and Kent Beck, and while it’s not exactly what these guys were doing, it was based on their line of thinking, but it didn’t matter what I said. All people wanted to hear was who the expert was that said this is the right way to go. So I said to myself that someday I would be able to provide the “says who” answer for people like me who want to have this argument.
It’s not a very good answer that some random guy in Silicon Valley says to do it. I never thought it should make any sense, I just thought; “hey, we’re a startup and we should be able to do what we want”, but that’s not actually how people make decisions. People want to know who lorded over this to reassure them that what they are doing makes sense.
LMJ: In your career, you have experienced both failure and success. How important is it for entrepreneurs to experience failure in order for them to succeed?
ER: I think at all costs avoid failure. When you’re doing something that’s extremely uncertain, what are the odds that it will be successful on the first try? The general impulse, which is in such parallel to the old lean manufacturing days, is the core impulse people have that when things are not going well, or if you’re nervous about how things are going, you want to slow down, increase batch size, go in the cave and think harder and try and keep things under control. What happens is people are afraid of failure and that causes them to build the product for three, four or five years before releasing it to the public, which means they don’t get feedback from those customers. Even if they do focus groups, if they talk to customers anecdotally, that’s not the same as putting your hypothesis to the test in a scientific way. So it leads to really bad outcomes.
The failure that I’ve had in my career, I don’t regret. I wish they’d been successful and I regret that I had the wrong idea, the wrong product or the wrong execution. But what I fundamentally regret is not that we failed, but that our failures were so expensive. Because we put all our eggs in one basket. We were going to take a swing at this idea and we were either going to hit a home run or strike out, but that’s the only outcomes we were looking
for. At the time we thought that that was maximising our chance at success. But now we realise that was not the case.
LMJ: What one piece of advice would you give to a potential entrepreneur looking to get their business off the ground?
ER: The thing I wish people had told me was a startup is an experiment. People sometimes debate whether you should take a scientific approach or not. But a startup is an experiment whether you admit it or not. Once you admit that it’s an experiment, you can ask; “have I really engineered the startup process to get the answer to this experiment at the right cost structure?” And that really opens up looking at radically cheaper and faster ways of testing the hypothesis.
LMJ: You’ve worked with both young and seasoned entrepreneurs. How do their mind-sets differ and is one more likely to succeed than the other?
ER: There’s a misconception that you have to be young to be an entrepreneur. But there’s statistical data from people who have studied entrepreneurship that doesn’t seem to bear that out. I was certainly very young when I started out, but I really think it isn’t about age, it’s more about what we call beginner’s mind. It’s about approaching a problem in a new way and having the humility to realise that on one hand you need to learn as much as possible while not letting that paralyse you with fear or uncertainty. But on the other hand, saying; “I do have a vision of what I think is a unique perspective and how the world should be, and my goal is to learn what I have to do to make that vision a reality.” Anyone who has that mind-set can be a great entrepreneur. The challenge with people who have had a lot of training and a lot of career experience is they sometimes get lured into the sense that they are an expert. I have this problem and a lot of other people have this problem that once you’ve mastered the domain of knowledge, you think you know how it works. But actually there’s no such thing as “how it works”, there is only “how it worked at that time and in that context”. I remember I used to hire only veterans of the software industry to work for me in my software company when I was only a kid. They were much older than me; they knew more. They would often say to me; “listen, this is not how software development is done. You need to have this and that and you need to slow down.” They would always have advice for me. And I would say; “listen, you work for me, and you’re going to have to give this a try, because we believe we’ve found a new way of working in the context we live in today. And all I ask is that you try it for yourself and see if you like it. If you try it and you find it doesn’t work as well as I claim, then we’ll learn from that experience.” But you have to try it and you have to have an open mind to ensure
that it works.
LMJ: It must have been difficult to tell seasoned professionals what to do.
ER: I was just too stupid to know better. I didn’t understand that it was something risky. I was oblivious to the fact that what I was doing was unusual, that was just what I believed was right and it was what everyone else was doing. I really tried hard to take people’s criticism seriously. So when it was me on the line to deliver, I would really research what these people were saying, try to figure out the points that they were making and figure out if what they were saying made sense or if there was a better way of doing things. It forced me to really get serious about what it was that I actually believed. There’s no such thing as a universally correct practice. I didn’t know it at the time, but looking back, having those people around me – pushing me with scepticism – it was a lot of extra work. It would have been a lot easier to compromise and do it some hybrid way and not think about it so hard to have the answer.