Guest post by Brian Wu. Brian is currently a fifth year student at the University of Southern California pursuing his PhD in integrative biology and disease while performing exercise physiology research in relation to rehabilitation.
Eric Ries @ericries is best recognized for pioneering the Lean Startup movement, a new-business strategy which maximizes a company's potential by allocating and improvising their resources as efficiently as possible. When Crown Business published Eric's first book, The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Business, it became an instant standard blueprint and bestseller for entrepreneurs and startups around the world. Eric is also a leading Silicon Valley and business blogger. He hosts sold out conferences and advises the Lean Startup Machine workshop series which is now in over 20 cities.
Recently, Eric spoke as the keynote speaker for the IBM SmartCamp Finals and imparted many truths for entrepreneurs in his brief speech.
Of the many points addressed by Eric, some of which can be found in this article, one major point lies in how entrepreneurs are truly everywhere. Today they can arise from fortune 500 companies to a person with an idea while combing the internet.
The key point that Eric made at the talk and is highlighted in his book “The Learn Startup” is what separates the successful entrepreneurs from the everyday dreamers. Those that dream of a successful million dollar startup and see the news and media stories on these companies often fail to understand the countless failures and hardships associated with ultimate success. Eric summed it up as “when you get it right, you don’t get a gold star, you get to stay alive until the next problem.”
Eric then discusses the 3 main points that are required of successful entrepreneurs: management, validated learning, and innovative accounting.
The first point is management. In the traditional world of business, managers were given goals, and if those goals were missed, they were fired. Today in entrepreneurship, this cannot be a viable message. If someone fails, it’s not because of incompetence but because as Eric says “they are stupid.” However, this stupidity should not be taken as a downfall but rather a point where management can correct the problem. Management needs to play the role of constantly learning and navigating unchartered paths. No true entrepreneur usually has an idea of how to start. It’s the ability to overcome failures and continue to chart a path towards the founder’s vision. Eric states it is inevitable to execute the infamous “pivot” but ultimately that is what must be done in conditions of “extreme uncertainty.”
All of which directly leads to Eric’s second point that validated learning is crucial and whoever learns the fastest wins. In essence, “whoever can reduce the time between pivots will increase their odds of success before running out of money.” Such practical advice lies as the core of someone who has worked with hundreds of startups. Eric understands that those who can learn, use their resources effectively, and maximize their opportunities, will be the ones that can undergo the most pivots and extend valuable runway time. Those that follow these rules are the lean startups, not ones who will avoid spending money on office space or fancy business plans. Ultimately, Eric states succinctly, those who succeed are those who “run their experiment better.”
The last point Eric brought up is the idea of innovative accounting. Such an idea follows the previous two principles: how can critical startup questions be answered at the lowest cost? For instance, will customers buy our product? Is it better to ask some customers if they would buy a product for $99.99 or do we spend lots of money and time to develop a product, prototype it, and then market it—only to find no one wants it. In other words, how does a company determine their minimal viable product and arrive there at the lowest cost. Entrepreneurs that can allocate resources to answering these feedback questions as soon as possible will continually learn and manage effectively, successfully creating a feedback loop that results in continuous innovation.
For more information, please see startuplessonslearned.com and his book on these principles.