[ed. Didn't this used to be called Vaporware?]
Scott Cook is conducting an experiment. “It’s the corporate-counseling version of speed dating,” says the spectacled cofounder of Intuit, the finance software giant. He’s gathered his troops in a brightly lit conference room, where members of four Intuit departments are seated in front of 300 colleagues—plus 1,500 more watching via webcast—to hash out some business predicaments. Each team will take five minutes to present its problem. Then special guest Eric Ries will come up with a solution.
Arun Muthukumaran, a group manager of Intuit Payment Solutions, kicks off the proceedings. He describes a feature that could dramatically increase the number of small businesses that sign up for the company’s payment services. But implementation would burn up 20 employees’ time for a month. What if customers don’t bite?
Ries, dressed casually in a blazer, pastel shirt, and black denim, suggests a test: Rather than building the service and trying it out on customers, create a sign-up page that merely promises to deliver this groundbreaking capability. Then present it to some prospective clients. Compare their enrollment rate with that of a control group shown the usual sign-up page. The results will give the team the confidence either to proceed or toss the idea into the circular file. No one would actually get the new feature yet, of course, because it hasn’t been built.
“I guess we could piss off a few customers instead of thousands,” Muthukumaran says. Laughter ripples through the crowd.
Ries glances at his watch. “It’s 4:18 pm on Monday,” he says with a puckish grin. “On Wednesday at 4:18 pm, I expect an email telling me how it went.” The team members exchange glances that are equal parts bemusement and worry: They make software, not concepts. They build code through painstaking cycles of design, programming, and testing. Customers depend on their products and trust their brand. And this guy expects them to offer a feature that doesn’t even exist? Nevertheless, the rest of Intuit’s employees are exhilarated. The room breaks into fervent applause.
It’s something Ries is getting used to. At age 33, he is Silicon Valley’s latest guru. In the four years since he first posted his theories about running startups on an anonymous blog, his campaign to replace the typical product development approach—build it and they will come—with a system based on experimentation has become a juggernaut. Ries’ book The Lean Startup, published last summer, has sold 90,000 copies in the US. His blog, Startup Lessons Learned, has 75,000 subscribers, and his annual conference attracts 400 entrepreneurs, each paying more than $500. Harvard Business School has incorporated his ideas into its entrepreneurship curriculum, and an army of followers are propagating his principles through their own books, events, and apps. Whiz kids looking for investors pepper their PowerPoint decks with Lean Startup lingo, which has become so pervasive that TechCrunch announced a ban on Ries’ term pivot. Tech darlings like Dropbox, Groupon, and Zappos serve as Lean Startup poster children, and now the philosophy is reaching established companies, including GE and, this afternoon, Intuit.
Back in the presentation hall, Ries walks his audience through the tenets of his philosophy. The core motivation is simple, and a single slide sums it up: “Stop wasting people’s time.” Entrepreneurs and their managers, minions, advisers, and investors routinely pour their lives into products nobody wants. The business landscape is littered with the wreckage of nascent companies built at monumental effort and expense that imploded on contact with the market. (Paging Webvan! 3DO! Iridium!) Unlike an established company, a startup (or a new division within an established company) doesn’t know who its customers are or what products they need. Its prime directive is to discover a sustainable business model before running out of funding.
The key to this discovery, Ries proposes, is the scientific method: the business equivalent of clinical trials. Assumptions must be tested rigorously, Ries says—and here he rolls out one of those increasingly ubiquitous Lean Startup phrases—on a minimum viable product, or MVP. This is a simplified offering that reveals how real customers, not cloistered focus groups, respond. It may be a functional product or, like the Intuit team’s sign-up page, a come-on designed to elicit a reaction. Once tallied, customer responses produce actionable metrics, as opposed to popular vanity metrics, which create the illusion of success but yield little useful information about what customers want. By repeatedly cycling or iterating through a build-measure-learn loop—a method Ries calls validated learning—the Lean Startup develops a verified perspective that enables it to identify and fine-tune the mechanism that will keep the company growing, aka its engine of growth. Or, failing that, it can pivot to a new strategy. This, Ries insists, is the quickest, most efficient route to product/market fit (a phrase adopted from Silicon Valley kingpin Marc Andreessen), defined as the moment when a product achieves resonance with customers.
Never mind that this approach is a mashup of ideas culled from programming, marketing, manufacturing, and business strategy, leavened with hard-won insights that have circulated among Silicon Valley veterans for years. Ries makes no effort to hide his sources, and his presentation preempts his critics’ complaints. “Lean,” he explains, does not mean cheap; it means eliminating waste by testing ideas first. And it doesn’t mean small, but rather that companies shouldn’t ramp up personnel and facilities until they’ve validated their business model. His philosophy is not just for Internet and app companies—that’s just where it started. Reacting to customer behavior is not incompatible with creating breakthrough products like the iPhone, Ries says, which in the popular imagination sprang fully formed from the mind of Steve Jobs.
Right or wrong, the Lean Startup has a kind of inexorable logic, and Ries’ recommendations come as a bracing slap in the face to would-be tech moguls: Test your ideas before you bet the bank on them. Don’t listen to what focus groups say; watch what your customers do. Start with a modest offering and build on the aspects of it that prove valuable. Expect to get it wrong, and stay flexible (and solvent) enough to try again and again until you get it right.
by Ted Greenwald, Wired | Read more:
Photo: Eric Ogden
Arun Muthukumaran, a group manager of Intuit Payment Solutions, kicks off the proceedings. He describes a feature that could dramatically increase the number of small businesses that sign up for the company’s payment services. But implementation would burn up 20 employees’ time for a month. What if customers don’t bite?
Ries, dressed casually in a blazer, pastel shirt, and black denim, suggests a test: Rather than building the service and trying it out on customers, create a sign-up page that merely promises to deliver this groundbreaking capability. Then present it to some prospective clients. Compare their enrollment rate with that of a control group shown the usual sign-up page. The results will give the team the confidence either to proceed or toss the idea into the circular file. No one would actually get the new feature yet, of course, because it hasn’t been built.
“I guess we could piss off a few customers instead of thousands,” Muthukumaran says. Laughter ripples through the crowd.
Ries glances at his watch. “It’s 4:18 pm on Monday,” he says with a puckish grin. “On Wednesday at 4:18 pm, I expect an email telling me how it went.” The team members exchange glances that are equal parts bemusement and worry: They make software, not concepts. They build code through painstaking cycles of design, programming, and testing. Customers depend on their products and trust their brand. And this guy expects them to offer a feature that doesn’t even exist? Nevertheless, the rest of Intuit’s employees are exhilarated. The room breaks into fervent applause.
It’s something Ries is getting used to. At age 33, he is Silicon Valley’s latest guru. In the four years since he first posted his theories about running startups on an anonymous blog, his campaign to replace the typical product development approach—build it and they will come—with a system based on experimentation has become a juggernaut. Ries’ book The Lean Startup, published last summer, has sold 90,000 copies in the US. His blog, Startup Lessons Learned, has 75,000 subscribers, and his annual conference attracts 400 entrepreneurs, each paying more than $500. Harvard Business School has incorporated his ideas into its entrepreneurship curriculum, and an army of followers are propagating his principles through their own books, events, and apps. Whiz kids looking for investors pepper their PowerPoint decks with Lean Startup lingo, which has become so pervasive that TechCrunch announced a ban on Ries’ term pivot. Tech darlings like Dropbox, Groupon, and Zappos serve as Lean Startup poster children, and now the philosophy is reaching established companies, including GE and, this afternoon, Intuit.
Back in the presentation hall, Ries walks his audience through the tenets of his philosophy. The core motivation is simple, and a single slide sums it up: “Stop wasting people’s time.” Entrepreneurs and their managers, minions, advisers, and investors routinely pour their lives into products nobody wants. The business landscape is littered with the wreckage of nascent companies built at monumental effort and expense that imploded on contact with the market. (Paging Webvan! 3DO! Iridium!) Unlike an established company, a startup (or a new division within an established company) doesn’t know who its customers are or what products they need. Its prime directive is to discover a sustainable business model before running out of funding.
The key to this discovery, Ries proposes, is the scientific method: the business equivalent of clinical trials. Assumptions must be tested rigorously, Ries says—and here he rolls out one of those increasingly ubiquitous Lean Startup phrases—on a minimum viable product, or MVP. This is a simplified offering that reveals how real customers, not cloistered focus groups, respond. It may be a functional product or, like the Intuit team’s sign-up page, a come-on designed to elicit a reaction. Once tallied, customer responses produce actionable metrics, as opposed to popular vanity metrics, which create the illusion of success but yield little useful information about what customers want. By repeatedly cycling or iterating through a build-measure-learn loop—a method Ries calls validated learning—the Lean Startup develops a verified perspective that enables it to identify and fine-tune the mechanism that will keep the company growing, aka its engine of growth. Or, failing that, it can pivot to a new strategy. This, Ries insists, is the quickest, most efficient route to product/market fit (a phrase adopted from Silicon Valley kingpin Marc Andreessen), defined as the moment when a product achieves resonance with customers.
Never mind that this approach is a mashup of ideas culled from programming, marketing, manufacturing, and business strategy, leavened with hard-won insights that have circulated among Silicon Valley veterans for years. Ries makes no effort to hide his sources, and his presentation preempts his critics’ complaints. “Lean,” he explains, does not mean cheap; it means eliminating waste by testing ideas first. And it doesn’t mean small, but rather that companies shouldn’t ramp up personnel and facilities until they’ve validated their business model. His philosophy is not just for Internet and app companies—that’s just where it started. Reacting to customer behavior is not incompatible with creating breakthrough products like the iPhone, Ries says, which in the popular imagination sprang fully formed from the mind of Steve Jobs.
Right or wrong, the Lean Startup has a kind of inexorable logic, and Ries’ recommendations come as a bracing slap in the face to would-be tech moguls: Test your ideas before you bet the bank on them. Don’t listen to what focus groups say; watch what your customers do. Start with a modest offering and build on the aspects of it that prove valuable. Expect to get it wrong, and stay flexible (and solvent) enough to try again and again until you get it right.
by Ted Greenwald, Wired | Read more:
Photo: Eric Ogden
