achieving failure

actionable metric

analysis paralysis

build-measure-learn

business

business architecture pivot

channel pivot

cohort analysis

cross-functionality

customer

customer archetype

customer need pivot

customer segment pivot

early adopter

engine of growth

engine of growth pivot

entrepreneur

entrepreneurship

experimenting

feedback

five blames

five whys

genchi gembutsu

growth

innovation

innovation accounting

Japan

lean startup

lean startup method

lean thinking

leap of faith

minimum viable product | MVP

paid engine of growth

pivot | entrepreneurship

platform pivot

product

product - market fit

product development

runway (entrepreneurship)

segment pivot

single-piece flow

small-batch approach

split testing

startup

strategy

success theater

survival

sustainability

sustainable growth

technology pivot

uncertainty

validated learning

value

value capture pivot

vanity metric

viral engine

viral growth

zoom-in pivot

zoom-out pivot

nationality

American

occupation / innovator as

is the idea of successfully executing a flawed plan, often due to not pursuing validated learning and experimentation to determine if one is on the right path.

When the product finally shipped, the results were terrible. It took customers four to five times longer to reconcile their banking transactions than it had with the older version. In the end, Greg's team had failed to deliver on the customer need they were trying to address (despite building the product to specifications) and because the next release had to go through the same waterfall process, it took the team nine months to fix. This is a classic case of 'achieving failure' successfully executing a flawed plan.

is a statistic that ties to specific and repeatable tasks you can improve and to the goals of your business.

Actionable metrics: Stats that tie to specific and repeatable tasks you can improve and to the goals of your business.

is, in business, the endless refining of plans which may be sound in principle, but, being untested, are ultimately often grounded in incorrect facts about customer behavior.

Other entrepreneurs can fall victim to analysis paralysis, endlessly refining their plans. In this case, talking to customers, reading research reports, and whiteboard strategizing are all equally unhelpful. The problem with most entrepreneurs' plans is generally not that they don't follow sound strategic principles but that the facts upon which they are based are wrong. Unfortunately, most of these errors cannot be detected at the whiteboard because they depend on the subtle interactions between products and customers. If too much analysis is dangerous but none can lead to failure, how do entrepreneurs know when to stop analyzing and start building' The answer is a concept called the minimum viable product, the subject of Chapter 6.

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. Thus, it is not the customer, but rather our hypothesis about the customer, that pulls work from product development and other functions. Any other work is waste.

is a pivot whereby a startup switches business architectures (I.E between high margin, low volume (complex systems model) or low margin, high volume (volume operations model).

is a recognition that the same basic solution could be delivered through a different channel with greater effectiveness, for example, abandoning a previously complex sales process to 'sell direct' to its end users.

is analysis based on the simple idea of looking past total revenue and total number of customers and instead focusing on the performance of each group of customers (i.e. The performance of new customers within each month).

Although it sounds complex, it is based on a simple premise. Instead of looking at cumulative totals or gross numbers such as total revenue and total number of customers, one looks at the performance of each group of customers that comes into contact with the product independently. Each group is called a cohort. The graph shows the conversion rates to IMVU of new customers who joined in each indicated month. Each conversion rate shows the percentage of customer who registered in that month who subsequently went on to take the indicated action. Thus, among all the customers who joined IMVU in February 2005, about 60 percent of them logged in to our product at least one time.

is, in a start-up, (in contrast to an 'approval structure') the full-time representation from every functional department in the company that will be involved in the creation or launch of their early products.

I strongly recommend that startup teams be completely cross-functional, that is, have full-time representation from every functional department in the company that will be involved in the creation or launch of their early products. They have to be able to build and ship actual functioning products and services, not just prototypes. Handoffs and approvals slow down the Build-Measureprototypes. Handoffs and approvals slow down the BuildMeasure-Learn feedback loop and inhibit both learning and accountability. Startups require that they be kept to an absolute minimum. Of course, this level of development autonomy is liable to raise fears in a parent organization. Alleviating those fears is a major goal of the method recommended below.

is often unaware of what they want. As such, a startup is concerned with running experiments that will help us learn how to build a sustainable business.

As was mentioned earlier, this is not the way the Lean Startup model works, because customers often don't know what they want. Our goal in building products is to be able to run experiments that will help us learn how to build a sustainable business. Thus, the right way to think about the product development process in a Lean Startup is that it is responding to pull requests in the form of experiments that need to be run.

is a basic, coarse, provisional attempt to clarify one's potential customer and what problems they have. It is a fluid hypothesis... not a fact.

The goal of such early contact with customers is not to gain definitive answers. Instead, it is to clarify at a basic, coarse level that we understand our potential customer and what problems they have. With that understanding, we can craft a customer archetype, a brief document that seeks to humanize the proposed target customer. This archetype is an essential guide for product development and ensures that the daily prioritization decisions that every product team must make are aligned with the customer to whom the company aims to appeal. . . . techniques under the banner of Lean User Experience (Lean UX). They recognize that the customer archetype is a hypothesis, not a fact. The customer profile should be considered provisional until the strategy has shown via validated learning that we can serve this type of customer in a sustainable way. [Eric Ries. the lean startup

is a pivot whereby the target customer has a problem worth solving (which can be solved), just not the one that was originally anticipated.

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 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. A famous example is the chain Potbelly Sandwich Shop, which today has over two hundred stores. It began as an antique store in 1977... the owners started to sell sandwiches as a way to bolster traffic to their stores. Pretty soon they had pivoted their way into an entirely different line of business.

is a pivot whereby 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.

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.) A customer segment pivot is an especially tricky pivot to execute because, as we learned the hard way at IMVU, the very actions that made us successful with early adopters were diametrically opposed to the actions we'd have to master to be successful with mainstream customers.

is one who uses their imagination to fill in what a product is missing. They are even suspicious of something that is too polished, since it indicates minimal advantage in being early.

Early adopters use their imagination to fill in 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 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, 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. [Ries, Eric. The Lean Start-up

is a source of sustainable growth power feedback loops. Each is like a combustion engine, turning over and over. The faster the loop turns, the faster the company will grow.

These sources of sustainable growth power feedback loops that I have termed engines of growth. Each is like a combustion engine, turning over and over. The faster the loop turns, the faster the company will grow. Each engine has an intrinsic set of metrics that determine how fast a company can grow when using it.

is capable of being defined quantitatively, each has a unique set of metrics that can be used to evaluate whether a startup is on the verge of achieving product/market fit.

I believe the concept of the engine of growth can put the idea of product/market fit in a more rigorous footing. Since each engine of growth can be defined quantitatively, each has a unique set of metrics that can be used to evaluate whether a startup is on the verge of achieving product/market fit.

is designed to give startups a relatively small set of metrics on which to focus their energies and help them stay focused on the metrics that matter.

Engines of growth are designed to give startups a relatively small set of metrics on which to focus their energies. As one of my mentors, the venture capital investor Shawn Carolan, put it, 'Startups don't starve... they drown.' There are always a zillion new ideas about how to make the product better floating around, but the hard truth is that most of those ideas make a difference only at the margins. They are mere optimizations. Startups have to focus on the big experiments that lead to validated learning. The engines of growth framework helps them stay focused on the metrics that matter.

is the mechanism that startups use to achieve sustainable growth.

The engine of growth is the mechanism that startups use to achieve sustainable growth. I use the word sustainable to exclude all one-time activities that generate a surge of customers but have no longterm impact, such as a single advertisement or a publicity stunt that might be used to jump-start growth but could not sustain that growth for the long term. Sustainable growth is characterized by one simple rule: New customers come from the actions of past customers.

is a pivot whereby a company changes its growth strategy (i.e. Viral, sticky, or paid) to seek faster or more profitable growth.

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.

is anyone who works in a startup insofar as a startup is any human institution designed to create new products and services under conditions of extreme uncertainty.

Entrepreneurship is a kind of management. No, you didn't read that wrong. We have wildly divergent associations with these two words, entrepreneurship and management. Lately, it seems that one is cool, innovative, and exciting and the other is dull, serious, and bland. It is time to look past these preconceptions.

Eric RiesThinkers

Eric Ries