The Lean StartUp - 5 Leap

The author describes the assumptions that a startup has in the early stages as leaps of faith. Simply because they have not been tested yet and the founders are merely assuming that customers will find their unique product/service valuable. 

Subsequently, it is emphasised that it is not just about being in the right place at the right time. Henry Ford, the legendary founder of the automaker Ford, had substantial competition which was also at the right place, at the right time. Likewise, Facebook had competitors with a headstart in the social networks business and yet those competitors also failed despite being at the right place and the right time like Facebook. The difference is the fact that the successful companies figured out the way to conduct validated learning in order to determine which components of their assumptions were working and which were not. They would, then, pivot and change their strategies.

Correspondingly, entrepreneurs should also identify their startup's value and growth. To clarify, Eric Ries points out that a startup can create value for consumers or it could destroy value. This is because the definition of startups, as we saw in previous Chapters, also includes not-for-profit charities and government agencies and these could most potentially create value. An example of value-destroying is the company Lehman Brothers, which conducted fraudulent activities. 

Gary Vaynerchuk believes that the more value a company creates for its customers, the more that company will be successful. 

In terms of growth, Ries recognises that a startup ought to know the reasons why they are growing and it should not be because they have been continuously raising funds by investors but their revenue, over time, does not match that growth. This makes their growth artificial.

Similarly, in the book Intelligent Investor (which will also be summarised in this blog), the author emphasises that companies such as Tyco are bound for failure. This is an example of artificial growth, as Tyco was giving the perception of growing rapidly because of the acquisition of businesses, but in fact, it could not sustain its own business because their revenue and customers were not increasing.     

A very interesting piece of advice given by Ries is the Japanese term 'genchi gembutsu', which is used by the management team of Toyota. This in English translates to 'go and see for yourself.' 

This is true about business and whatever you come across in life, since you can never truly know or understand unless you 'go and see for yourself'. 

This notion, then, seems to follow the next principle given in the book, 'get out of the building.' Appropriately, unless you 'get out of the building' and actually ask the customers about the product, it is difficult to truly understand their needs. 

However, it is critically important that a startup and entrepreneurs avoid 'analysis paralysis'. Even though it is the point of this book to get entrepreneurs to get feedback from their customers with a Lean methodology and hence, analyse the needs of their customers, there is a line to this. Entrepreneurs should not go to the other extreme of too much analysis and consequently, hurt their execution.