Authors@Google: Eric Ries "The Lean Startup"
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0:00 - 0:01>>Thomas Sharon: Hi everyone. Thanks for coming. My name is Thomas Sharon. I'm a UX Researcher
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0:01 - 0:01here.
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0:01 - 0:10And without further ado, I would like to introduce you to Eric Ries, the founder of the Lean
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0:10 - 0:15Startup movement. And thank you for coming.
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0:15 - 0:16[applause]
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0:16 - 0:26>>Eric Ries: See, I don't know. It's hard to know when you have an audience you don't
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0:26 - 0:26know.
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0:26 - 0:28It's hard to know what to say.
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0:28 - 0:33So, some of you maybe know the blog, Startup Lessons Learned. Anybody? Quick show of hands.
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0:33 - 0:36OK, good. We have true new people. So, thank you. Thank you for coming to check it out.
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0:36 - 0:42So my name is Eric Ries. I don't really want your undivided attention. So keep your laptops
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0:42 - 0:46on. That's fine. And in fact, if everyone do me a favor and take your phones out of
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0:46 - 0:47your pockets.
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0:47 - 0:50I mean, I'm sorry. I know I'm not supposed to have this one, but if can turn them on.
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0:50 - 0:54No, I'm not joking around. Out of the pockets, please. 'Cause this is gonna be a talk. You
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0:54 - 0:57might get bored and you might wanna tweet amongst yourselves.
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0:57 - 1:00Or I don't know, whatever special internal tools you guys use. Whatever it is, please
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1:00 - 1:04feel free. All I ask is that you use the Lean Startup hash tag, at least if you're on Twitter.
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1:04 - 1:10Okay. Is that fair? I won't tell anybody. Don't worry.
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1:10 - 1:14I'm in New York because I'm writing a book. So one of things you do when you're writing
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1:14 - 1:18a book is you have to go to tell as many people as possible that this book is coming out.
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1:18 - 1:21It'll come out in the fall. I thank you in advance for preordering it. You can do so
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1:21 - 1:22at lean.st.
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1:22 - 1:27That's my life now is as a professional expert selling books, which is a far cry from how
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1:27 - 1:30I started, which is as a programmer writing code.
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1:30 - 1:33So I'm one of those people that grew up writing code. I used to write code for a living, which
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1:33 - 1:36is a job I knew really well and understood. I was pretty good at it.
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1:36 - 1:39And then, I started doing startups and I started to have to manage people who wrote code for
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1:39 - 1:42a living. I knew that slightly less well.
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1:42 - 1:45And then I was managing people who managed people who write code for a living.
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1:45 - 1:49And now, I am this professional expert. And so I advise people who manage people who manage
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1:49 - 1:54people who write code. So I've become very far removed from the actual work of product
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1:54 - 1:54development.
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1:54 - 2:00But that journey has taken me from just writing code to doing this because I actually think
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2:00 - 2:07the way that we organize new product development is basically wrong. And that most of the energy
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2:07 - 2:11that we are investing into what is called 'entrepreneurship', when it's two guys in
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2:11 - 2:16a garage, or 'disruptive innovation' or something else buzzwordy when it's done inside a big
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2:16 - 2:20company, is wasting a lot of people's time. And I think we can do something about it.
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2:20 - 2:23So that's what I wanted to talk to you guys about. Thanks for coming.
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2:23 - 2:27So anyway, and this book, of course, will be available in stores everywhere in the fall.
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2:27 - 2:33So, if you read the book, you will learn five principles of the Lean Startup. And we'll
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2:33 - 2:34go through them today.
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2:34 - 2:38And I wanna invite you to ask questions either on Twitter, if you're not feeling that courageous,
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2:38 - 2:42or interrupt me at any time or we'll have time at the end. All right?
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2:42 - 2:45So, entrepreneurs are everywhere. The first thing is, especially in an audience like this,
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2:45 - 2:49I wanna be clear, that entrepreneurship is not just about two guys in a garage eating
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2:49 - 2:53Ramen noodles. In fact, what makes you an entrepreneur is not what kind of noodles you
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2:53 - 2:55eat, but the context in which you operate.
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2:55 - 2:58And as I've been travelling around talking about Lean Startup, what I have learned is
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2:58 - 3:02that there are entrepreneurs in all kinds of places you wouldn't necessarily expect.
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3:02 - 3:09And we have a lot more in common than people realize, because entrepreneurship is management.
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3:09 - 3:12But not the kind of general management we're teaching MBAs and that we have studied for
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3:12 - 3:17the last hundred years, something fundamentally different. It is management of a kind of work
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3:17 - 3:22that is measured by validated learning, rather than just making stuff.
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3:22 - 3:25We accelerate that learning through something called the 'build-measure-learn feedback loop'.
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3:25 - 3:29And then we measure and hold entrepreneurs accountable using a new accounting system
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3:29 - 3:31called 'innovation accounting'.
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3:31 - 3:36Now, I apologize. You came to a very, I'm sure, you saw the signs up here like, "Ooh,
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3:36 - 3:39an exciting talk about entrepreneurship and startups and that's gonna be cool." And what
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3:39 - 3:39did you get?
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3:39 - 3:45You got management and accounting, which are perhaps the two most boring topics on Earth.
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3:45 - 3:49So if anybody wants to leave now, I won't be offended. It's OK.
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3:49 - 3:55Because the truth is, what do people know about entrepreneurship? I feel like -- who
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3:55 - 4:00saw 'The Social Network'? OK. Right. I feel like that's probably the best modern example
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4:00 - 4:02of the entrepreneurship story we're all used to.
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4:02 - 4:07And you see this in magazines and you see it in 'The Social Network'. I noticed last
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4:07 - 4:11night that the story, 'Ghostbusters' -- remember 'Ghostbusters', the movie? It's an entrepreneurship
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4:11 - 4:15story. They start a business. They, Dave, everything’s the same. It's like the same
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4:15 - 4:18plot structure as 'The Social Network', believe it or not, except it has a Stay Puft Marshmallow
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4:18 - 4:19Man, which is awesome.
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4:19 - 4:25In these entrepreneurship stories, what happens? It's a story in three parts.
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4:25 - 4:31Act One: The plucky protagonist, his character, his character flaws and how he came up with
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4:31 - 4:33his amazing idea.
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4:33 - 4:38Act Two: What I call the photo montage. It's usually about two minutes long. It goes from
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4:38 - 4:41"they finally get the thing to work". Then they're writing on whiteboards and drinking
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4:41 - 4:46some beer, pounding on some keyboards. And then they get their first customer. And then
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4:46 - 4:49that's pretty much it. No dialogue or anything in the photo montage.
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4:49 - 4:52And then Act Three: Now that we're on the cover of magazines, how do we divide up the
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4:52 - 4:56spoils? And who's in charge? And who's in Who's Who? And how do we deal with the EPA
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4:56 - 4:59and all that stuff? For fans of 'Ghostbusters'.
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4:59 - 5:04What I think is really interesting about these stories about entrepreneurship is that 95
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5:04 - 5:08percent of the time of the movie is spent in Acts One and Act Three, even though in
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5:08 - 5:13real life, all of the important work of entrepreneurship happens during the photo montage. But the
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5:13 - 5:17problem is, for a story-telling point of view, the photo montage, even though it has no dialogue
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5:17 - 5:21and only lasts two minutes, is it's unspeakably boring.
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5:21 - 5:25What do we do as entrepreneurs that actually makes a difference? We spend our time trying
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5:25 - 5:30to figure out which customers to listen to and who to ignore, how to product-prioritize
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5:30 - 5:31product features.
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5:31 - 5:34I mean you guys, how many product prioritization meetings do you go to? It's not exactly the
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5:34 - 5:36stuff of movies. It's unbelievably boring.
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5:36 - 5:40And how do we hold people accountable? How do we measure to figure out if we're actually
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5:40 - 5:44making progress or building something that nobody wants? See, watching somebody pretend
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5:44 - 5:48like they don't have anxiety that their vision is wrong, is not very good for movies. But
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5:48 - 5:52that's what most entrepreneurs do.
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5:52 - 5:54And so, we're gonna have to talk about stuff like management and accounting, 'cause it's
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5:54 - 5:58time to go inside the photo montage and try to figure out what can we do to make the actual
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5:58 - 6:03work of entrepreneurship more effective. So, entrepreneurs are everywhere.
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6:03 - 6:08My goal, my mission in doing this whole Lean Startup thing has been to try to put the practice
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6:08 - 6:13of entrepreneurship on a more rigorous footing. And so, I started out with a definition. Here's
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6:13 - 6:19mine: What is a startup? "A human institution designed to create something new under conditions
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6:19 - 6:20of extreme uncertainty."
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6:20 - 6:24So I think the most important part of this definition, and for our purposes today, a
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6:24 - 6:28very important part of our discussion is what it excludes. It doesn't say anything about
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6:28 - 6:32what the size of your company is. It could be five people, 5,000, or 50,000. It really
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6:32 - 6:33doesn't matter.
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6:33 - 6:37It doesn't matter what sector of the economy you work in. It really doesn't even matter
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6:37 - 6:38what industry you're in.
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6:38 - 6:42If you fundamentally are operating with extreme uncertainty about who is your customer, what
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6:42 - 6:46product do they actually want, and how do we build a sustainable business, then you
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6:46 - 6:49are an entrepreneur. And when I work with large companies, one of the things I have
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6:49 - 6:54been trying to do, is to get them to adopt entrepreneurship as a job title.
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6:54 - 6:59Entrepreneurship is a career. When you become an entrepreneur, you are no longer an engineer.
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6:59 - 7:03You are no longer a marketer. You are no longer a UX designer. Whatever it is you used to
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7:03 - 7:08do, all of a sudden now, you have a different job title and you've entered a new career
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7:08 - 7:08path.
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7:08 - 7:12But unfortunately, we don't get the memo that tells you that. So, it can be a little bit
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7:12 - 7:13confusing.
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7:13 - 7:20That's all a fancy way of saying a startup is an experiment. What I mean by "experiment"
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7:20 - 7:24is not just like let's ship it and see what happens, OK? That's not science. If you just
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7:24 - 7:28put some compounds in a beaker and heat it up, you might look like you're doing science.
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7:28 - 7:33But unless you have a hypothesis that you're trying to test, you have theory, it suggests
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7:33 - 7:38which experiments are gonna help you and then you make specific predictions, then, fundamentally,
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7:38 - 7:40you're not conducting an experiment.
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7:40 - 7:44And we mean, in a Lean Startup model, "experiment" in the scientific sense. We're trying to create
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7:44 - 7:50a science of entrepreneurship that will help us to stop waste people's time, because that's
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7:50 - 7:53what we're doing on an industrial scale.
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7:53 - 7:57And you guys know. Anyone's who's worked on new products knows that most of them are doomed
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7:57 - 8:01to failure. And when you get at the end of that product -- I mean as an engineer, I kept
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8:01 - 8:05having over and over again the experience of working on amazing technology that is today
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8:05 - 8:10sitting on a shelf or worse, that fundamentally nobody is using. And I kept looking for more
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8:10 - 8:15and more technical solutions to that problem. I thought, "If we could just get the right
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8:15 - 8:18development methodology, if we just had the right amount of unit tests or the right this
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8:18 - 8:21or the right that, then we could stop that happening."
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8:21 - 8:26But the biggest waste that product development faces today is not building things inefficiently,
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8:26 - 8:32but building things very efficiently that nobody wants. And I brought a demonstration.
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8:32 - 8:36We all know that most startups fail. Who remembers Web 2.0? Remember Web 2.0 when that was really
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8:36 - 8:42cool? At the height of Web 2.0, 2006, a graphic designer put together this graphic. Have you
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8:42 - 8:46seen this before? This was the like the logos of all the incredible Web 2.0 companies that
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8:46 - 8:48were gonna change the world.
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8:48 - 8:53And in just three years, in 2009, a different graphic designer was feeling a slightly different
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8:53 - 9:00set of emotions when they put together this graphic. Our three year report card in Web
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9:00 - 9:062.0. I mean, the blood red Xs, these are all companies that are just dead. I think for
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9:06 - 9:11our purposes today though, a much more important part of that chart to look at are the green
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9:11 - 9:15circles. I won't point at any of them in particular, but some of those green circles are supposed
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9:15 - 9:19to be the success stories of Web 2.0. But for this chart, what that means is there are
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9:19 - 9:23companies that were acquired by a larger company, including this one.
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9:23 - 9:24And listen, I'm all for people making money.
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9:24 - 9:27So when a company gets acquired by another company, usually investors and the founders
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9:27 - 9:32make some money and that's all good. But my question is which of these companies are actually
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9:32 - 9:37success stories? Success stories by the higher definition, not of "did anybody make money?"
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9:37 - 9:43But rather, which of these companies succeeded in living up to the aspirations, dreams, time,
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9:43 - 9:48talent, and energy of the founders and their investors? And more importantly, their employees.
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9:48 - 9:54See, look, we all know that when big companies buy startups, at least half the time, they
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9:54 - 9:59die afterwards. So we buy something for hundreds of millions of dollars. And then we wind up
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9:59 - 10:02selling it three years later for tens of millions of dollars.
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10:02 - 10:06That's not supposed to happen. In general management, that doesn't happen. When you
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10:06 - 10:11buy an asset, it depreciates in a predictable way. But when big companies buy startups,
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10:11 - 10:14it doesn't happen exactly like it’s supposed to.
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10:14 - 10:20And I think the problems that corp-dev departments have when deciding how to buy startups and
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10:20 - 10:24which startups to buy and then how to integrate them into the parent company, are the exact
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10:24 - 10:28same problems that internal innovators who are trying to create brand new startups inside
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10:28 - 10:32big companies have. And they're the exact same problems that venture-backed entrepreneurs
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10:32 - 10:34have with their investors.
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10:34 - 10:40All of us lack a theory of entrepreneurship to guide our behavior and so we're falling
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10:40 - 10:45back on tools and methods that are not appropriate to entrepreneurship. That's my belief. So,
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10:45 - 10:46I don't think it has to be this way.
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10:46 - 10:51See, it's one thing if startups were failing because they were taking too much risk. If
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10:51 - 10:55one of these companies was working on teleportation and then it turned out to be too hard -- we
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10:55 - 10:58couldn't quite get the technology for quantum entanglement like we thought -- I accept that
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10:58 - 11:00kind of failure; that happens.
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11:00 - 11:05But I chose Web 2.0 for my demonstration, especially for you guys. You know. There's
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11:05 - 11:10not a single company on this chart where you would say, "Boy, I wonder if that can be built."
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11:10 - 11:13Right? "Geez, I wonder if that new social network -- is it possible to build it?" We
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11:13 - 11:20all know. Software companies, we can build anything we can imagine. Think about that
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11:20 - 11:20for a second.
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11:20 - 11:24The dominant question of our time is not can it be built, but should it be built. And the
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11:24 - 11:30issue is can we build a sustainable business around a particular product? So, the future
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11:30 - 11:36of our society, our economic growth in the future, the GDP growth of industrialized countries
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11:36 - 11:40in the future is going to be dependent on the quality and character of our collective
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11:40 - 11:44imaginations, which I think is a very strange place to be.
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11:44 - 11:48That is really different than the kinds of economic problems that general management
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11:48 - 11:54was designed to solve in the 20th Century. Now, most of my startups have failed. So I
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11:54 - 11:57know that's not how you're supposed start one of these talks, like, "Hi. I'm a professional
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11:57 - 12:01expert and I have had more failures than successes. So you can be just like me if you'll follow
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12:01 - 12:02my advice."
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12:02 - 12:06So, I'm sorry about that. But those of you who spend any time around entrepreneurship
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12:06 - 12:10know the truth that where there's startups, there's a lot of failure. And it has to be
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12:10 - 12:15somebody's fault in a talk like this and obviously it shouldn't be my fault 'cause I'm the expert.
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12:15 - 12:20And preferably, it should be the fault of someone who's dead so that they can't argue.
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12:20 - 12:21So I chose this guy.
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12:21 - 12:22[laughter]
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12:22 - 12:26This is Frederick Winslow Taylor. He died in 1915, which is very handy for the purpose
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12:26 - 12:30of this talk because it means he can't talk back. So, sorry, Fred.
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12:30 - 12:34Fred Taylor invented something called "scientific management" in the early 20th Century, which
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12:34 - 12:40today, we call "management". See, people don't really remember Fred Taylor.
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12:40 - 12:43And those who've studied scientific management in school probably remember him for some of
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12:43 - 12:47his outdated and really ridiculous ideas, like time and motion studies or the idea that
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12:47 - 12:51a worker is basically just an automaton and should be told what to do. The reason we don't
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12:51 - 12:55give Fred Taylor the credit he deserves is because he invented things that to us are
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12:55 - 13:01so obvious, we can't imagine them ever having been invented. It doesn't make sense.
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13:01 - 13:06Like, everybody knows that work should be done as efficiently as possible, right? And
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13:06 - 13:09that we should treat work like a system and that we should have managers organize that
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13:09 - 13:11system. That's just plain common sense.
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13:11 - 13:16And my favorite, Fred Taylor, invented something called "The Task and Bonus System", which
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13:16 - 13:20we just call "tasks". The idea was if you want to do a large project, the best thing
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13:20 - 13:25to do is decompose that project into a series of individual tasks, assign those tasks to
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13:25 - 13:29functional specialists. And everyone just does their part knowing that if everybody
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13:29 - 13:33does their part well and everybody else does their part, the whole will actually work out
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13:33 - 13:34like the manager said.
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13:34 - 13:40And here's the best part. If you do your task particularly well, better than expected, you
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13:40 - 13:47should be paid a bonus rather than being penalized. What could be more obvious? Except in the
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13:47 - 13:5219th Century, the way work was organized is that if you did your task better than expected,
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13:52 - 13:53you were penalized.
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13:53 - 13:53[pause]
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13:53 - 13:57Why? Because that showed a lack of integrity. You obviously could have done it better before.
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13:57 - 14:00But you didn't. So that proves that you're a liar.
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14:00 - 14:05It gets worse. Not only are you a liar, but what about all your compatriots, your coworkers,
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14:05 - 14:10who do the same task the old, slow way? They're liars, too. All of you have been lying this
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14:10 - 14:12whole time and you should all be penalized.
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14:12 - 14:17Imagine working in a factory where if you can come up with a better way to do your repetitive
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14:17 - 14:22job, not only would you be penalized, so would all your coworkers. Can you imagine the culture
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14:22 - 14:26that would grow up around such a thing? That everybody is working really hard to make sure
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14:26 - 14:31that nobody ever does anything in any way better because then we'll all be in trouble.
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14:31 - 14:34That phenomenon was so widespread in the 19th Century, they had a name for it. They called
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14:34 - 14:39it "soldiering". That all the workers were intentionally soldiering on, trying to do
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14:39 - 14:45work as slow as possible so that nobody would get in trouble. Now, we laugh when we think
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14:45 - 14:51about that kind of thing happening in a factory. Because to us, the way that we manage physical
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14:51 - 14:55products, and just all regular general management, is light years beyond what was possible in
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14:55 - 14:57Fred Taylor's day.
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14:57 - 15:02But they also believed something else that I think maybe you'll find a little bit familiar.
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15:02 - 15:07They had this idea that what basically was the great man theory of work. That fundamentally,
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15:07 - 15:12the job of managers was to select the best possible person. Of course, this is the early
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15:12 - 15:1320th Century.
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15:13 - 15:17So a great man of upstanding character with good integrity, the right attributes, put
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15:17 - 15:21them in the job and fundamentally leave them alone. Because if you just trust a great man
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15:21 - 15:25to figure out what needs to get done, they would figure it out.
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15:25 - 15:30Does that sound familiar? We still manage knowledge work and innovation work that exact
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15:30 - 15:34same way. We still believe in the great man theory of entrepreneurship and we believe
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15:34 - 15:36it especially about the great man software developers.
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15:36 - 15:41And yet, when we look back on this time, decades from now, I think we're gonna laugh at the
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15:41 - 15:45kinds of things that we do when we need to develop new products. It will seem as antique
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15:45 - 15:51to our future selves as Fred Taylor feels to us. Because I think that entrepreneurship
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15:51 - 15:55is management. It's just a different kind of management than the general management
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15:55 - 15:58that has been practiced since Fred Taylor's day.
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15:58 - 16:04So, we need to create a different paradigm for management that's not better than general
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16:04 - 16:10management. It's not worse than. It's simply a parallel discipline specifically for entrepreneurship.
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16:10 - 16:11And so, here's my attempt.
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16:11 - 16:16The first concept in the entrepreneurial management toolbox is this thing we call the "pivot".
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16:16 - 16:21Who's tired of hearing about pivots already? Anybody? OK, I apologize. In Silicon Valley,
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16:21 - 16:25everybody's hand is up, by the way. This word has become ridiculously overused. Believe
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16:25 - 16:30it or not, I saw this just the other day in the New Yorker magazine. Can you read this
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16:30 - 16:34caption? "I'm not leaving you. I’m pivoting to another man."
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16:34 - 16:35[laughter]
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16:35 - 16:40So this word started in Lean Startup and then it became this monster of an overused, overhyped
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16:40 - 16:45concept. Typical for Silicon Valley. We went from not knowing what the concept was to being
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16:45 - 16:49tired of hearing it and claiming that it's overhyped, without having passed through the
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16:49 - 16:52intervening stage of ever learning how to use it correctly. That's just – that's how
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16:52 - 16:56we operate with the hype-cycle in Silicon Valley. So, I'm sorry about that. I really
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16:56 - 16:57didn't intend.
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16:57 - 17:02But you can't understand anything about entrepreneurship unless you have a word for this concept, because
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17:02 - 17:07it is the universal constant of all successful startups. If you can get the real story of
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17:07 - 17:11what actually happened in the early stages of a company, you will find out that successful
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17:11 - 17:16startup founders do not, do not, have better ideas than the failed ones. Contrary to what
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17:16 - 17:21you see in the movies, most startup founders of successful companies had ludicrously bad
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17:21 - 17:23ideas at the beginning.
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17:23 - 17:27And what's amazing about the successful startup founders is not that they just persevered
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17:27 - 17:32indefinitely, but that they had this funny combination that when they run into difficulty,
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17:32 - 17:36it's not just that they gave up ship and went home. Neither did they persevere the plane
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17:36 - 17:37straight into the ground.
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17:37 - 17:42They do this thing we call the "pivot". By analogy to basketball, one foot firmly rooted
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17:42 - 17:46in what we've learned, changing one other thing about the business at a time. And the
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17:46 - 17:50premise of the Lean Startup is as follows: If we can reduce the time between pivots,
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17:50 - 17:54we can increase our odds of success before we run out of money.
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17:54 - 17:58See, the way you think about startup runway, is not how many months of burn do I have left?
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17:58 - 18:03It's fundamentally how many opportunities to pivot do I have left? And sure, we can
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18:03 - 18:05extend the runway by raising more money.
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18:05 - 18:10But we can also extend the runway by figuring out how to pivot sooner. And every day we
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18:10 - 18:15shave off that time is a magical extension of our runway by a proportional amount. Does
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18:15 - 18:19that make sense? OK, I'm getting at least a few nods. That's good.
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18:19 - 18:24So, to increase the odds of success, we need to figure out how can we pivot sooner. We
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18:24 - 18:30need to bring our focus to a validated learning. Anyone know this? This is the waterfall methodology
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18:30 - 18:32of software development. It's traditional in one of these talks when you're gonna beat
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18:32 - 18:38up on methodologies to call one the "waterfall methodology". So this is mine.
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18:38 - 18:41This is just Fred Taylor's idea as applied to software development. When I was trained
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18:41 - 18:46as an engineer in Silicon Valley, I was taught this as the manufacturing metaphor of software
-
18:46 - 18:49development. You can imagine, incidentally, how pissed off I was when I found out that
-
18:49 - 18:53they don't use this in manufacturing anymore. This is way obsolete.
-
18:53 - 18:56So it's not clear to me what our excuse is in software development for copying an obsolete
-
18:56 - 18:59model of manufacturing. But I understand why it’s so appealing.
-
18:59 - 19:04The idea is that since software is so intangible, we like to imagine our work travelling on
-
19:04 - 19:07an assembly line, a virtual assembly line, from department to department. And if everybody
-
19:07 - 19:12does their part and trusts everybody else to do their part, everything works out fine.
-
19:12 - 19:16It's entertaining to beat up on the waterfall methodology because it has such a bad track
-
19:16 - 19:21record. But it’s important to understand that waterfall works as long as the solution
-
19:21 - 19:26and the problem are both relatively well understood. So if we were building something that is fundamentally
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19:26 - 19:29similar as things we have built in the past, this works great.
-
19:29 - 19:33If you're building a video game sequel, amen. If you're building the next iteration of a
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19:33 - 19:38product that zillions of people already use, that's fine. But entrepreneurship doesn't
-
19:38 - 19:41deal with those circumstances. So it's basically a waste of time.
-
19:41 - 19:46Now, when you do waterfall, you have this problem I call "achieving failure" where you
-
19:46 - 19:52successfully build the wrong thing and you boast about how good you are at doing it.
-
19:52 - 19:56My question is, if you go to a startup board meeting, or a milestone review meeting for
-
19:56 - 20:01most new products, what do we talk about? Milestones, right. We are on track. We're
-
20:01 - 20:04building features we said we were gonna build. We talk about our gross numbers like – hey,
-
20:04 - 20:06we have this many customers just like we said.
-
20:06 - 20:09I remember being in a company once that was looking, had a plan. They said we were gonna
-
20:09 - 20:13have this nice hockey stick-shaped growth. And we're on the nice, long flat part, and
-
20:13 - 20:16everything's going according to plan. Sounds a little familiar, maybe.
-
20:16 - 20:20And you're going to court like, the plan is genius. Like, nobody is using our product
-
20:20 - 20:23as expected, as expected. But next week, it should turn up.
-
20:23 - 20:27And how do you know if you were on the long, flat part and you're gonna just, or you're
-
20:27 - 20:30on the hockey stick and you're gonna just coast indefinitely? I believe we can actually
-
20:30 - 20:33answer those questions quantitatively. We'll get to that.
-
20:33 - 20:37So, to me, we are bragging about how we're building a product that nobody wants. But
-
20:37 - 20:41we're doing it on time and on budget. As if, I have this image of a general manager driving
-
20:41 - 20:45a car off a cliff and while they're driving their like, "But I'm getting great gas mileage,"
-
20:45 - 20:50right off the cliff. That's what startup failures mostly look like.
-
20:50 - 20:54And I think that's true in big companies, too. Not that I would presume to talk about
-
20:54 - 20:57you. But in other companies I've seen, for sure. So, in manufacturing, they abandoned
-
20:57 - 21:02that linear way of working. That's why we call it Lean Startup by analogy to lean manufacturing.
-
21:02 - 21:07These are two other unfortunately deceased men who made this possible. Deming is famous
-
21:07 - 21:11for having said, "The customer is the most important part of the production line." By
-
21:11 - 21:17which he meant everything that we do should be gauged to be decided by whether the customer
-
21:17 - 21:18cares that we do it.
-
21:18 - 21:22So if the thing is of high quality in the customer's eyes, that matters. But if we're
-
21:22 - 21:25doing a lot of internal transport, with the meetings that we have, the specifications,
-
21:25 - 21:29the customer doesn't care about any of that internal stuff. So let's try to eliminate
-
21:29 - 21:29it.
-
21:29 - 21:32When these ideas were handed down to me as a Silicon Valley engineer, they looked like
-
21:32 - 21:37this. There's our very own guru of extreme programming, Kent Beck. You guys know Agile
-
21:37 - 21:41very well, so I won't bother getting into it.
-
21:41 - 21:46Suffice to say that all Agile methodologies have their origins inside the IT departments
-
21:46 - 21:51of big companies. Every single one. And there's a reason for that. They are designed for situations
-
21:51 - 21:55where it is the problem that's known, but the solution is unknown. And so, by building
-
21:55 - 21:59something that is well-understood iteratively, we can increase the odds that the project
-
21:59 - 21:59will be successful.
-
21:59 - 22:05So, the classic -- Chrysler Corporation needs a new payroll system. Agile to the rescue.
-
22:05 - 22:09But this isn't the world that we live in as startups either. If the customer is the most
-
22:09 - 22:13important part of the assembly line, what do we do if we don't know who the customer
-
22:13 - 22:18is? That in whose eyes should we judge our work? In extreme programming, which customer
-
22:18 - 22:21should we sit down next to the engineers to tell them what to do?
-
22:21 - 22:26The assumption of Agile and all previous management approaches is that there is somebody who can
-
22:26 - 22:32give us an authoritative, definitive answer to design questions. And in entrepreneurship,
-
22:32 - 22:33that assumption breaks down.
-
22:33 - 22:39We are working on products where nobody knows what the customer wants. At best, we have
-
22:39 - 22:45a theory, a hypothesis, a plan, a hope. And so, this is what Lean Startup looks like.
-
22:45 - 22:48Now, at Lean Startup we have our own guru, Steve Blank. He's still alive, but I put him
-
22:48 - 22:50in sepia tones just to be consistent.
-
22:50 - 22:51[laughter]
-
22:51 - 22:54Steve invented something called "customer development", which is an iterative process
-
22:54 - 22:58of trying to figure out who your customer is, which we can merge in parallel with Agile
-
22:58 - 23:03development to this company-wide feedback loop of learning and discovery. This changes
-
23:03 - 23:08the unit of progress from making stuff to validated learning.
-
23:08 - 23:13Let me try to illustrate what I mean. I created a company called IMVU in 2004. We make a 3-D
-
23:13 - 23:19avatar instant messaging technology. And at that time, we wanted to be the next AOL back
-
23:19 - 23:25when that was still cool. And we wanted to take over the hot, new social technology of
-
23:25 - 23:26IM. We really thought that was the wave of the future.
-
23:26 - 23:31Whoops. And here was our plan. See, everybody knows that instant messaging is a network
-
23:31 - 23:35effects business, right? So, therefore, if you wanna get someone to switch from their
-
23:35 - 23:39IM network to yours, it's kind of a pain 'cause they'd have to bring all their friends with
-
23:39 - 23:40them. So there's high switching costs.
-
23:40 - 23:45And therefore, IM isn't an industry characterized by high barriers to entry. That's the MBA
-
23:45 - 23:48analysis of the instant messaging market. And we spent a lot of time figuring that out
-
23:48 - 23:49at the whiteboard.
-
23:49 - 23:54And we said, "Ah, we need a strategy. A strategy for avoiding that problem and here it is.
-
23:54 - 23:58We'll create an instant messaging add-on that interoperates with all of the existing networks
-
23:58 - 24:03and can bring 3-D avatar technology to your IM client. So we take your boring 2-D IM and
-
24:03 - 24:05make it 3-D. Wow."
-
24:05 - 24:09This is before 'Avatar' and the current 3-D craze. So we thought we were on to a real
-
24:09 - 24:15trend. And so, here's the reason we got so excited about that strategy. It would be inherently
-
24:15 - 24:19viral. Because when you would decide you wanna go 3D, you would have to be IM’ing with
-
24:19 - 24:22somebody and they would automatically get a text link inserted into the chat stream
-
24:22 - 24:27that they could just one-click, pick-up boom, IMVU installs. Now you're both in 3D.
-
24:27 - 24:32Doesn't this seem like a good idea? Well, we met with investors at that time. The strategy
-
24:32 - 24:36part of it, they're like, "That does sound very promising." And when I tell the stories
-
24:36 - 24:38to MBAs now, I get a lot of nods, like "That is good stuff. I don't know what the hell
-
24:38 - 24:42this guy's been talking about until now, but this I understand. This is strategy."
-
24:42 - 24:45And the strategy actually is very good, except for the tiniest, tiniest problem, which is
-
24:45 - 24:50that every single thing I just said is false. Customers actually don't have high switching
-
24:50 - 24:54costs for IM. Their network effects are way overblown and our customers refused to invite
-
24:54 - 24:56their friends. It was a total deal breaker.
-
24:56 - 25:00We'd have customers come in an in-person usability test. We're paying them to be there. And we'd
-
25:00 - 25:05be like, "OK, download our instant messaging add-on." The customer would be like, “What
-
25:05 - 25:09is that?" "An instant messaging add-on. It interoperates with all your IM." And you gotta
-
25:09 - 25:13picture of a 16- year old like, "What? Is it an IM client?" And we're like, "No, no.
-
25:13 - 25:16You won't have to run a whole other IM client." They're like, "Why not?" Like, "Oh, it would
-
25:16 - 25:20be so complicated to download." They're like, "Dude, I have like seven IM clients. What's
-
25:20 - 25:22the big deal?" And we're like, "There are seven IM clients?"
-
25:22 - 25:22[laughter]
-
25:22 - 25:24So that was problem number one.
-
25:24 - 25:27We're like, "Listen, we are paying you to be here. So how about you download this thing?
-
25:27 - 25:32OK?" "All right. Fine." "Download the thing." OK. "Customize your avatar." They love this
-
25:32 - 25:36part. "Like, ooh, that's really cool, interactive like that." Great. "OK, now you customize
-
25:36 - 25:41your avatar. Invite one of your friends." "No way." "Why not?" "I don't know if this
-
25:41 - 25:45thing is cool, yet and I'm not gonna invite my friends to something that turns out to
-
25:45 - 25:45be lame."
-
25:45 - 25:48See, I know people who are selling like business software are used to the concept of "mission
-
25:48 - 25:52critical". We didn't understand that in our business, mission critical, like the law of
-
25:52 - 25:55commandments of mission critical software, one of them needs to be like, "Do not make
-
25:55 - 25:59teenager look lame in front of their friends." Total deal breaker.
-
25:59 - 26:02They wouldn't do it. We were like, "We're paying you to be in this usability test."
-
26:02 - 26:05And it's just like, "I'm not doing it. You can keep your money. I will not. It's not
-
26:05 - 26:10worth it to me." And they kept saying things like, "Let me use it with -- let me try it
-
26:10 - 26:14out first. And if it's cool, then I'll invite one of my friends." And we were like, "Oh,
-
26:14 - 26:16OK." We're from the video game industry.
-
26:16 - 26:22So we knew what that meant. That meant single-player mode. So we built another version of the product,
-
26:22 - 26:27single-player mode. Allowed you to -- we had another teenager come in for a usability test.
-
26:27 - 26:29"Hey, download this instant messaging add-on." "I don't know. What the hell is that?" "Just
-
26:29 - 26:32do it." "OK." "Customize your avatar." "Oh, that's cool." "OK, try it by yourself."
-
26:32 - 26:35And they could check out the avatar, dress it up, do the moves and the whole thing. Learn
-
26:35 - 26:40how to use the chat bubbles. And then we're like, "OK, now invite one of your friends."
-
26:40 - 26:45Teenager, "No way." "Why not?" "This thing is lame." And we're like, "But we told you
-
26:45 - 26:46it was gonna be so lame."
-
26:46 - 26:49I mean, we're supposed to be listening to customers, but they don't know what the hell
-
26:49 - 26:52they want. And they told us to build this thing and we're like, "It'll be so cool once
-
26:52 - 26:57you invite some of your friends." And they're like, "Listen, old man. I'm not doing it."
-
26:57 - 26:57[laughter]
-
26:57 - 26:59And we were really devastated. Okay.
-
26:59 - 27:02So anyway, long story short, this was a total deal breaker. This strategy is completely
-
27:02 - 27:09flawed in every respect because it’s based on empirically incorrect facts.
-
27:09 - 27:12Now, we wound up having to pivot the company and we created our own instant messaging network
-
27:12 - 27:15and it all turned out fine. But I'd like you, if you would, just for a minute to sympathize
-
27:15 - 27:20with me personally. OK? Because I was the engineer. I was the CTO of this company.
-
27:20 - 27:25It was my job to write the software to do instant messaging interoperability. So I wrote,
-
27:25 - 27:31I don't know, 25 thousand lines of code or something. I did it all Agile, refactored,
-
27:31 - 27:35really elegantly structured if I do say so myself. Good unit test coverage, the whole
-
27:35 - 27:39shebang. And all of my code got thrown out.
-
27:39 - 27:39[pause]
-
27:39 - 27:44The good code got thrown out and the bad code got thrown out. The well-factored code got
-
27:44 - 27:47thrown out. The stuff I was proud to show my mom and the stuff that I wouldn't want
-
27:47 - 27:49anyone to see at all was equally thrown out.
-
27:49 - 27:54Because a [ ] of quality is if you don't know who the customer is then you don't know what
-
27:54 - 27:58quality means. So failure is a great equalizer of quality. It all had to be thrown out.
-
27:58 - 28:03And I was really depressed. Because you gotta understand, we had spent six months killing
-
28:03 - 28:07ourselves to build this product. And we had spent I don't know how many hours of my life
-
28:07 - 28:12that I can never get back arguing with each other about the following. Which bugs did
-
28:12 - 28:16we absolutely, positively have to fix. And which ones could we live without? Sound familiar?
-
28:16 - 28:21Which features just had to be in version one or which ones could we just maybe could maybe
-
28:21 - 28:25postpone to a different release? That's what we spent all of our time doing.
-
28:25 - 28:29And yet, we had this problem, which was that customers would not download our product.
-
28:29 - 28:33Like, this product sucked. It was really buggy. It would crash your computer. I was really
-
28:33 - 28:36embarrassed to have shipped it. And we almost didn't ship it, I was so embarrassed.
-
28:36 - 28:41But then, I was actually relieved cause nobody found out how bad it was because nobody would
-
28:41 - 28:47use it. And I was like, "Wait, something is not right here. Why am I relieved that nobody's
-
28:47 - 28:49using the product? That doesn't seem right."
-
28:49 - 28:54And long story short, my cofounders dragged me, kicking and screaming, to the realization
-
28:54 - 28:57it was time to pivot. We had to throw that code away. And we created a standalone IM
-
28:57 - 28:59network and we were much more successful, la di da.
-
28:59 - 29:03But here's the thing. I had to make myself feel better somehow because I was like, "Gosh.
-
29:03 - 29:07Would the company have been just as well off if I had spent the last six months on a beach
-
29:07 - 29:11somewhere, having nice drinks and doing nothing?"
-
29:11 - 29:15And I was, "Did I even need to be here given that all the work that I did was thrown away?"
-
29:15 - 29:20Anyone feel like that's true? Anyone know what the excuse I used was to make myself
-
29:20 - 29:20feel better?
-
29:20 - 29:23You can shout it out. It's OK. I guess, yeah.
-
29:23 - 29:24>>audience 1: You built a team.
-
29:24 - 29:25>>Eric Ries: What's that?
-
29:25 - 29:26>>audience 1: You built the team.
-
29:26 - 29:29>>Eric Ries: We had the team at the beginning. What did they need me for? Why was it worth
-
29:29 - 29:32having done this exercise in the first place? What's that?
-
29:32 - 29:32[audience 2]: You learned something.
-
29:32 - 29:34>>Eric Ries: Because I learned something. Thank you. The last excuse in the book. If
-
29:34 - 29:38you've utterly failed to execute, you can always claim to have had a good learning experience.
-
29:38 - 29:41At least you learned something. I mean, I don't tell you guys.
-
29:41 - 29:45In general management, you claim to have learned something, you're likely to be fired. A general
-
29:45 - 29:47manager who learned something -- one of two things is true. Either they didn't make a
-
29:47 - 29:52very good plan, in which case, definitely should be fired. Or even worse, they made
-
29:52 - 29:56a really good plan and failed to execute it. I'd definitely fire that guy.
-
29:56 - 30:00So, I think it’s natural that we have a little bit of an aversion to wanna just say
-
30:00 - 30:04that we learned anything because that is very dangerous. But in entrepreneurship, failure
-
30:04 - 30:09is, not only is failure an option, it's practically the only option. It's what happens when reality
-
30:09 - 30:10intervenes with our plans.
-
30:10 - 30:11>>audience 2: So, what did you learn?
-
30:11 - 30:17>>Eric Ries: So here's what we learned specifically. We learned the hard way, that customers did
-
30:17 - 30:21not wanna use our product to connect with their existing friends. They wanted to use
-
30:21 - 30:24it to make new friends.
-
30:24 - 30:28That doesn't seem like a very big deal. I mean, it's all a very modest change in semantics.
-
30:28 - 30:32But from a code and product point of view, that is a radically different product. It
-
30:32 - 30:35required a very different experience. And we didn't throw out every line of code. But
-
30:35 - 30:37we had to throw out a lot.
-
30:37 - 30:41The pivot was quite dramatic. And I made myself feel better with this whole learning story
-
30:41 - 30:44until I asked myself the following question. I mean, literally, I was up nights once I
-
30:44 - 30:45had this question asked to me.
-
30:45 - 30:49Which was, "Wait a minute. If my goal of the last six months was to learn this important
-
30:49 - 30:55thing about customers, why did it take six months? How come the word 'learning' is only
-
30:55 - 30:59coming up now after we failed and we need an excuse? We never used the word 'learning',
-
30:59 - 31:05not one time during those six months. All we ever did was argue about features and bugs."
-
31:05 - 31:08And then I was like, "But would we have had the same learning if we'd built a slightly
-
31:08 - 31:13different first product?" Like, for example, did we have to support all seven IM networks?
-
31:13 - 31:16What if we'd supported only three? Would the learning value have been the same? Sure. Customers
-
31:16 - 31:20won't download, so who cares? What if we'd supported only one network? Learning values
-
31:20 - 31:24the same. Now, that's a lot of code between seven networks and one, that's a lot less
-
31:24 - 31:26code that needed to be written.
-
31:26 - 31:29But this is the thought that literally made me sick to my stomach. I'd say, "Wait a minute.
-
31:29 - 31:34What if we had just created a single web page and in three hours created a photo mockup
-
31:34 - 31:39of what the product was going to look like and said, 'Hey, download this amazing 3D avatar
-
31:39 - 31:43instant messaging add-on.' And had a big download button. Would we even have had to create the
-
31:43 - 31:48second page where we admit that we didn't build the product, or would a 404 have been
-
31:48 - 31:54adequate?" Come on, it's the 404, obviously. Because nobody would download the product.
-
31:54 - 31:59It was a deal breaker. Nobody wanted it. That meant that we didn't even need page two.
-
31:59 - 32:03And that was really upsetting to me, personally. Why? Because I look at my business card and
-
32:03 - 32:08what did it say? It said a lot of things, but all I saw was "guy who writes code." My
-
32:08 - 32:10job is to make features.
-
32:10 - 32:15So if I went home at the end of the day and I write good code, I had a good day. And now,
-
32:15 - 32:20but if my goal is to learn this thing about customers, and I can do it without code, is
-
32:20 - 32:21that my job?
-
32:21 - 32:24Is it possible that something I could do in three hours is just as meritorious as something
-
32:24 - 32:28that requires 25,000 lines of code? It didn't seem right.
-
32:28 - 32:33But I think that's actually true. Fundamentally, startups exist to learn how to build a sustainable
-
32:33 - 32:37business. We call it "validated learning" 'cause we have to back up that learning quantitatively.
-
32:37 - 32:39Any old idiot can tell a good story.
-
32:39 - 32:45But we need a system for rigorously assessing, "Are we actually learning how to build a sustainable
-
32:45 - 32:50business?" And everything else is a complete and total waste of time, including our precious
-
32:50 - 32:51code.
-
32:51 - 32:55Now, in the lean manufacturing revolution, the first question they had to teach people
-
32:55 - 32:58to ask was "what is the difference between value and waste"?
-
32:58 - 33:02And in a factory, this is actually relatively straightforward. Value is the stuff that we
-
33:02 - 33:06make. The customers want. And waste is everything else. But if our unit of progress is gonna
-
33:06 - 33:10be learning, then our unit of value has become intangible and now we have an issue. Which
-
33:10 - 33:15is -- OK, we can eliminate all the stuff that we do that doesn't contribute to learning.
-
33:15 - 33:20So, we have this concept in Lean Startup called "minimum viable product", which is, what really
-
33:20 - 33:24needs to be in that first version? And now we have a good answer. Only what is necessary
-
33:24 - 33:30to learn whether our plan is correct or not. Everything else is extraneous.
-
33:30 - 33:34But that's still a little bit vague. And so the next step in lean manufacturing was to
-
33:34 - 33:39focus on cycle time. And so what that looks like is this. Very simple heuristic. This
-
33:39 - 33:43is the flux capacitor of Lean Startup.
-
33:43 - 33:47All we are as a software startup is a catalyst that turns ideas into code. When customers
-
33:47 - 33:51interact with that code, they create data which we can choose to measure quantitatively
-
33:51 - 33:55and qualitatively. And then if we want, we can learn impacting our next set of ideas.
-
33:55 - 33:59This, we can use to put the concept of the pivot on a more rigorous foundation.
-
33:59 - 34:05A pivot is one major turn through this feedback loop. And the heuristic for any kind of startup
-
34:05 - 34:09advice that anyone wants to give you is really simple. Does it minimize total time through
-
34:09 - 34:09this loop?
-
34:09 - 34:13So I don't know about you, I go to a lot of startup talks, I read a lot of startup blogs.
-
34:13 - 34:18All the advice is like this. "You know, it's really important to have great design. Design
-
34:18 - 34:22always wins. Except craigslist didn't have very good design and neither did EBay. So
-
34:22 - 34:25sometimes it's fine to have no design. But make sure its very scalable, cause you don't
-
34:25 - 34:29want to be the next Friendster. Except that Facebook wasn't very scalable and it was fine.
-
34:29 - 34:32So make sure you have good design and design doesn't matter. It's scalable, but not too
-
34:32 - 34:33scalable."
-
34:33 - 34:35It's not very helpful advice and if you go down the list, it's like make sure you raise
-
34:35 - 34:39plenty of money, but not too much money. Make sure you have the right kind of people, but
-
34:39 - 34:43not those other kind of people, but actually, sometimes those other kind of people are fine.
-
34:43 - 34:47And we focus on all this contradictory stuff 'cause for any particular piece of advice,
-
34:47 - 34:50I can find you somebody who followed that advice and then made a lot of money. I can
-
34:50 - 34:53also find you somebody who didn't follow that advice and made a lot of money. I can find
-
34:53 - 34:56you people who followed that advice and made no money and people who didn't follow that
-
34:56 - 35:00advice. I can find you all four quadrants of a logical possibilities chart.
-
35:00 - 35:05So, how do we know what advice to take and what not? I think this is the heuristic you
-
35:05 - 35:09wanna use. If it gets us through this feedback loop on a sustainable basis faster, it's a
-
35:09 - 35:11good idea. And if not, not.
-
35:11 - 35:17There's a lot more, of course, to Lean Startup. There's a zillion things on this graph. You
-
35:17 - 35:21can read them all on my blog, Startup Lessons Learned. Of course, you can buy a certain
-
35:21 - 35:24book. I've heard it's coming out in the fall. It's really good.
-
35:24 - 35:28All of these techniques, like continuous deployment, where we put software into production, like
-
35:28 - 35:3450 times a day on average. So, 20 minutes from the main trunk to production, no branches.
-
35:34 - 35:38Things like net promoter score where we can evaluate in real time using a tracking survey,
-
35:38 - 35:42what customers really think about our product. Everything you know about usability tests,
-
35:42 - 35:45five whys, which is drawn from the Toyota production system.
-
35:45 - 35:49Each of these techniques has -- they operate at one stage of the feedback loop, but they
-
35:49 - 35:54have the net effect of minimizing total time. That's what the Lean Startup is about.
-
35:54 - 36:00But I wanna mention one more really boring topic called "innovation accounting". See,
-
36:00 - 36:05we've forgotten what accounting was designed for. I mean, we think of accounting as that
-
36:05 - 36:09thing that the really boring people do to keep track of where the money goes, right?
-
36:09 - 36:11That's pretty much what it is. It's just a ledger that says, "Where did all the money
-
36:11 - 36:12go?"
-
36:12 - 36:18But accounting was invented for a very different reason. It was invented to drive accountability
-
36:18 - 36:22across departments. Because if you wanna have a large company with many different divisions,
-
36:22 - 36:26you have to be able to hold the managers of those divisions accountable to some things
-
36:26 - 36:30so that you know that they did a good job. General Motors, which invented most of our
-
36:30 - 36:33modern management paraphernalia, had this concept.
-
36:33 - 36:36When I first read this concept, I literally laughed out loud; I couldn't believe it. It
-
36:36 - 36:42was called the Standard Volume. It was the ideal number of cars that General Motors should
-
36:42 - 36:48sell, division by division, in an ideal year. And they actually had the math, and staff,
-
36:48 - 36:53the macroeconomic staff to figure out, given all the macroeconomic data available, how
-
36:53 - 36:57to translate the standard year into our coming actual year.
-
36:57 - 37:00So they could go division by division and tell each manager, "Given that we're in a
-
37:00 - 37:05recession, or the economy is booming, you should sell this number of Oldsmobiles. And
-
37:05 - 37:10therefore, if you sell more than the standard number, you get a bonus. And if not, you failed."
-
37:10 - 37:13And it's not fair if you didn't have that concept, then if it's a good year, all the
-
37:13 - 37:16managers seem like they're doing well. And in a recession, everyone seems like they're
-
37:16 - 37:19doing badly. You can't tell which manager actually made a difference.
-
37:19 - 37:22Now when I read that concept, I laughed out loud because I was like, "Wait a minute. Are
-
37:22 - 37:26you telling me there was a time when people could make forecasts about what was going
-
37:26 - 37:29to happen in the future, and then it actually happened?"
-
37:29 - 37:33I don't know about you. I have never in my whole life seen a forecast of anything that
-
37:33 - 37:38turned out to be remotely accurate. No startup I have ever worked for has had a roadmap that
-
37:38 - 37:41turned out to be remotely true. I have never seen a company say how many customers they
-
37:41 - 37:44would have in the future and then deliver. Never seen it.
-
37:44 - 37:47So to me, the idea of the standard volume is ridiculous. But I understand when you have
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37:47 - 37:51a sufficiently large company and you have a sufficiently long operating history, you
-
37:51 - 37:54can do this. Maybe this sounds a little bit familiar.
-
37:54 - 37:59So, if we're using accounting to drive accountability, but all of our accounting depends on having
-
37:59 - 38:03a long operating history and a lot of customers, how do we drive accountability if there's
-
38:03 - 38:04no customers yet?
-
38:04 - 38:10If the CFO of a company, hypothetically speaking, gives a certain team a bunch of money and
-
38:10 - 38:14sends them off to some remote location to do their work, like to Australia or something.
-
38:14 - 38:20And then they hang out in Australia or whatever. And then a year later, they say, "What are
-
38:20 - 38:25your results?" And the team says, "They're not very good, but we're on the brink of success."
-
38:25 - 38:29How is the manager who gave them all that money supposed to know if A: They are in fact
-
38:29 - 38:32on the brink of a success or they're just on the flat part of the hockey stick, or if
-
38:32 - 38:36they've just been goofing off for a year? Or more likely, if they're just executing
-
38:36 - 38:37a bad plan.
-
38:37 - 38:41And at what kind of milestone should we hold them accountable to if we can't hold them
-
38:41 - 38:45accountable to the gross numbers of customers? 'Cause that's fundamentally not fair. If we're
-
38:45 - 38:48focusing on the gross numbers, incidentally, we might decide we're gonna do a lot of publicity
-
38:48 - 38:52and PR and be like, "This thing is gonna be amazing," to drive customer awareness.
-
38:52 - 38:56But we all know if you happen to find yourself on such a team, that that early awareness
-
38:56 - 39:00is fundamentally lethal. But it's not fair to just say, "Well, just let them do whatever
-
39:00 - 39:04and hope for the best." You guys know exactly how that turns out. So, what is the solution?
-
39:04 - 39:08I think we can answer that question now with something I call "innovation accounting".
-
39:08 - 39:08Here it is.
-
39:08 - 39:13Instead of focusing on product milestones and gross numbers, we have three learning
-
39:13 - 39:18milestones we can focus on. We have to take our attention away from the vanity metrics.
-
39:18 - 39:22Vanity metrics are the numbers you put in a press release to make your competitors feel
-
39:22 - 39:26bad. Like the total number of pages on the internet that you've indexed. I happen to
-
39:26 - 39:26like that one a lot.
-
39:26 - 39:30There was a time when we had a big index, number of in pages indexed battle. And it's
-
39:30 - 39:33like, "We have four billion and you only have two billion." But like, what does that actually
-
39:33 - 39:36tell you about the quality of somebody's business? Absolutely nothing.
-
39:36 - 39:40They could be four billion really dumb pages. It could be one guy's website who's just really
-
39:40 - 39:44excited about the number four billion. Or, it could be four billion people who each have
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39:44 - 39:44one crappy website.
-
39:44 - 39:48If you read "TechCrunch", you're gonna see a zillion stories about "This company has
-
39:48 - 39:53sent 400 messages through their platform." But is that 400 million people who are all
-
39:53 - 39:56about to turn out, or one very excited customer? We don't know.
-
39:56 - 40:00We used to have a competitor in IMVU that would report on the gross GDP of the value
-
40:00 - 40:04of their whole user to user economy. And my CEO would sometimes come to me and be like,
-
40:04 - 40:08"These guys have a four hundred million dollar GDP. What's our GDP?" I was like, "What does
-
40:08 - 40:14that even mean in our context? If two users exchange some virtual currency, is that part
-
40:14 - 40:17of the GDP? I don't know." It's a completely meaningless number, but it sure made us feel
-
40:17 - 40:17bad.
-
40:17 - 40:21I'm all for vanity metrics and press releases. Go to town. That's fine for making your competitors
-
40:21 - 40:22feel bad.
-
40:22 - 40:27But what happens when we use those numbers to guide our own business? Is that "when the
-
40:27 - 40:31numbers go up, it's always because of what I was working on"? Everyone thinks I made
-
40:31 - 40:34this feature last week and now the numbers went up. So obviously it's due to me. Of course,
-
40:34 - 40:38the people in marketing feel like it's 'cause their new marketing campaign, etc. What happens
-
40:38 - 40:40when the numbers go down?
-
40:40 - 40:44Anyone ever been in that meeting? Oh, it's seasonal effects. Did anyone ever hear seasonal
-
40:44 - 40:47effects used to describe numbers going up? Never in my career. It's always like, if it's
-
40:47 - 40:50going up, it's features. If it's down, it's seasonal effects, or worse, those idiots in
-
40:50 - 40:51marketing.
-
40:51 - 40:56And over time, each us lives in our own private reality where the stuff I do makes numbers
-
40:56 - 40:59go up and the stuff that those guys do make numbers go down. So is it any wonder that
-
40:59 - 41:00we think each other are idiots?
-
41:00 - 41:04Now, expand that organization larger and larger and larger as people are in ever more permanent
-
41:04 - 41:08silos, speaking their own language, living in their own private reality. Is there any
-
41:08 - 41:10wonder that they have trouble working together?
-
41:10 - 41:16Maybe that sounds a little bit familiar. Okay. Just checking. So instead of that, we're gonna
-
41:16 - 41:20use actionable metrics, which are about per customer behaviors, things that can be measured
-
41:20 - 41:21at microscale.
-
41:21 - 41:25And the first thing we're gonna do is establish the baseline. So now we can put the purpose
-
41:25 - 41:29of the minimum viable product on a much more rigorous setting. Somewhere in our business
-
41:29 - 41:32plan, there is a model that says, "Hey, if customers behave in this way, then we’ll
-
41:32 - 41:36have zillions of them over time." And we can't get into all the details on how to build those
-
41:36 - 41:39models. Of course, there's a great book coming out. You can learn all about it.
-
41:39 - 41:43In the meantime, what we wanna do is just figure out what are the real numbers for each
-
41:43 - 41:47of those inputs at microscale? That's what the minimum viable product is for. So, if
-
41:47 - 41:51there's some number, some spreadsheet somewhere, that says, "Hey, ten percent of customers
-
41:51 - 41:55who come to our website should register for our product." Then we should have a big banner
-
41:55 - 42:00in our office somewhere that's like, "We must have ten percent conversion or we die." And
-
42:00 - 42:03then, we each have a minimum viable product as soon as possible to find out what that
-
42:03 - 42:04number is today.
-
42:04 - 42:09And most likely, when you do that experiment, the baseline will be horrible. Like, it'll
-
42:09 - 42:13only be one percent and it's supposed to be ten percent. And like, oh my God. In general
-
42:13 - 42:16management, that provokes a crisis cause now we failed and uh-oh. There's this thing called
-
42:16 - 42:20the "audacity of zero", which is how much easier it is to raise money and get people
-
42:20 - 42:24excited when you have no results. Or having zero dollars of revenue in a startup is a
-
42:24 - 42:28great time to raise money. Having one dollar of revenue is a disaster. 'Cause with zero,
-
42:28 - 42:31it's like, "Well, why is it zero?" "'Cause we haven't launched." So, obviously it should
-
42:31 - 42:33be zero. Everyone's like, "Oh, that makes sense."
-
42:33 - 42:36God forbid you have one dollar of revenue, 'cause then they'd say, "Why is it only one
-
42:36 - 42:39dollar? I thought this thing was gonna be an overnight success and now you're proving
-
42:39 - 42:43to me that it isn't." So with zero you can always be an overnight success. With any other
-
42:43 - 42:44number you're screwed.
-
42:44 - 42:48But we need to change that. We need to say, "Finding out the truth of where we are right
-
42:48 - 42:53now is progress. It's a milestone that we should celebrate." And then we do step two,
-
42:53 - 42:57which is we tune the engine. We make product development changes that are not designed
-
42:57 - 43:02to drive huge gross numbers, but to make those conversion numbers go from the horrible baseline
-
43:02 - 43:03to the ideal in our business plan.
-
43:03 - 43:09And whenever I've done this with teams, I've only ever seen two cases. Case one, it's supposed
-
43:09 - 43:13to be one percent. It's one percent but it's gotta be ten percent. So, a few iterations
-
43:13 - 43:17in, it's one percent, three percent, six percent, six and a half percent, seven and a half percent.
-
43:17 - 43:22Now, it's not ten percent yet. So the model isn't exactly working, but you can say, "Are
-
43:22 - 43:26we gonna get there?" Yeah, probably. Each thing that we do seems to drive the number
-
43:26 - 43:29up a little bit. We seem to be heading in the right direction. We're split testing to
-
43:29 - 43:33make sure that the changes we're making are in fact driving the change. It's all good.
-
43:33 - 43:38Here's situation number two. It's one percent, three percent, three and a half percent, 3.75
-
43:38 - 43:44percent, 3.8 percent, 3.81 percent. Now, the numbers are going up every time. So it's not
-
43:44 - 43:46like the numbers are going down. It's not like it's zero. But you might ask yourself
-
43:46 - 43:50a question four, five, six months into hitting that asymptote. Are we ever gonna beat ten
-
43:50 - 43:53percent? I think it's safe to conclude the answer is no.
-
43:53 - 43:58Of course, theoretically, it is possible. The next iteration will be that magic one
-
43:58 - 44:01more feature that gets you to ten percent. But in reality, that's not the case.
-
44:01 - 44:06When the team gets to the point where hitting that diminishing returns, everybody knows
-
44:06 - 44:11you're not gonna make it and you enter the land of death march. So instead, I recommend
-
44:11 - 44:16we do three. We schedule the meeting in advance. That three months from now, six, whatever
-
44:16 - 44:20it is, we're gonna have a meeting to decide whether to pivot or persevere.
-
44:20 - 44:25And by that meeting, we will have the data about whether our efforts to tune the engine
-
44:25 - 44:29are working or hitting diminishing returns. And so, we have all these concepts in entrepreneurship,
-
44:29 - 44:33like product market fit, that are very vague. This system allows us to put those concepts
-
44:33 - 44:39on a much more quantitative basis. We can't turn whether to pivot into a formula.
-
44:39 - 44:43I can't tell you what to do. I still rely on human judgment, just like science does.
-
44:43 - 44:48But if we make specific predictions, if we use innovation accounting as our accountability
-
44:48 - 44:54model, then we can be training our judgment to get better over time, just like in science.
-
44:54 - 44:59So, don't do product development astrology. Do product development science. I left a bunch
-
44:59 - 45:02of questions unanswered 'cause we only have a short time together. Like, how do you know
-
45:02 - 45:03specifically when to pivot?
-
45:03 - 45:07What's the relationship between our vision, our strategy and our product? What exactly
-
45:07 - 45:12should we measure in each of the engines of growth? How is it that products grow? How
-
45:12 - 45:15do we know if we're on that hockey stick, or on the long, flat part forever? How do
-
45:15 - 45:17we test if we're creating value?
-
45:17 - 45:21What specific features should be in the MVP? Can we go faster? The answers to these questions
-
45:21 - 45:24and so many more are in the new book coming out in the fall, called "The Lean Startup".
-
45:24 - 45:27You can, of course, preorder it at lean.st.
-
45:27 - 45:31Thank you very, very much for doing so. I'll just give you my contact information. Please
-
45:31 - 45:35be in touch if I can be helpful in any way. We have a brand new website, which is itself
-
45:35 - 45:38a minimum viable product about theleanstartup.com. Please check it out. We would love your feedback.
-
45:38 - 45:42And you are all officially invited to the Startup Lessons Learned conference, which
-
45:42 - 45:46is gonna be May 23rd in San Francisco, but we also simulcast. Last year, we were in 50
-
45:46 - 45:46cities.
-
45:46 - 45:50So presumably we'll be in New York, too. I hope if you can make it, you will drop me
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45:50 - 45:56a line. And if this proves in any way helpful, I hope you'll email me and tell me about it.
-
45:56 - 45:58Thank you all very much.
-
45:58 - 45:58[applause]
-
45:58 - 46:05So we have time for a few questions? OK, let her rip. If I stumped all of Google, I'm gonna
-
46:05 - 46:08be pretty proud of myself. That's going right on Twitter.
-
46:08 - 46:09[pause]
-
46:09 - 46:10Sweet.
-
46:10 - 46:12[pause]
-
46:12 - 46:23>>Female Audience Member #1: So, I just wanted to touch on something that you mentioned is
-
46:23 - 46:25reviewed too many times; the pivot.
-
46:25 - 46:26>>Eric Ries: Uh-huh.
-
46:26 - 46:31>>Female Audience Member #1: I have trouble understanding exactly how much work to put
-
46:31 - 46:37in for the first pivot. I think the second and the third might be a little bit more,
-
46:37 - 46:42OK, maybe not. [laughs] But just starting off, like how much work should you really
-
46:42 - 46:44put in for that first pivot?
-
46:44 - 46:48>>Eric Ries: There's no way to answer that question in general, honestly.
-
46:48 - 46:54You have to put yourself into a position where the team will know if it's working or not
-
46:54 - 46:59working. And the problem is that most teams have a plan, which is basically to ship it
-
46:59 - 46:59and see what happens.
-
46:59 - 47:03And the problem with ship it and see what happens, you can feel like you're being very
-
47:03 - 47:09agile, but you're guaranteed to succeed at seeing what happens. And so, you'll therefore
-
47:09 - 47:12always feel like it was worth doing and you'll feel like you're on the right track no matter
-
47:12 - 47:13what.
-
47:13 - 47:16The only way to get yourself into a position where you have to pivot is to make specific,
-
47:16 - 47:21concrete predictions ahead of time that if they turn out to be wrong, will actually call
-
47:21 - 47:22your theory into doubt.
-
47:22 - 47:26And the issue is that we all know that most projections for new products are complete
-
47:26 - 47:30BS. You have to tell the CFO, or whoever, that you're gonna have a zillion trillion
-
47:30 - 47:34customers in year five. Otherwise you won't get the money to do your project.
-
47:34 - 47:37But we know that we just made those projections up. So when they don't prove to be correct,
-
47:37 - 47:40we're like, "Well, that doesn't prove that our vision is wrong. It just proves that it
-
47:40 - 47:44took longer than we expected." So, yeah, the hockey stick is still gonna happen, but it's
-
47:44 - 47:44taking longer.
-
47:44 - 47:49If we do innovation accounting and we make very specific per customer behavior predictions
-
47:49 - 47:54-- like one thing we'll often have people do is sell the magic version of their product
-
47:54 - 47:55on a landing page somewhere.
-
47:55 - 47:59And it's like, don't even say what the product, like how it works. Just say the benefit that
-
47:59 - 48:02it gives you and see if you can get people to sign up. If people won't sign up for the
-
48:02 - 48:05magic, they're certainly not going to sign up for your product, 'cause magic is always
-
48:05 - 48:06better.
-
48:06 - 48:10And if magic isn't even good enough, if the conversion rate on magic is too low, then
-
48:10 - 48:13you already know that you have a problem. Not that that means that therefore give up,
-
48:13 - 48:18go home. It just means there isn't already enough latent demand for what you're doing.
-
48:18 - 48:22And so you're gonna be in a different kind of market then maybe you expected. Does that
-
48:22 - 48:27help? So the minimum viable product truly is the minimum, the least amount required,
-
48:27 - 48:32to get that first information. It's not, "Oh, if it doesn't turn out into an overnight success,
-
48:32 - 48:33we give up."
-
48:33 - 48:36And if you release that pressure to get it right the first time, like, I feel like a
-
48:36 - 48:40lot of us feel like we have to do this circus act to make it seem like we could predict
-
48:40 - 48:45the future. Like, one of those brilliant visionary, the next Steve Jobs. Not even Steve Jobs is
-
48:45 - 48:47as good as Steve Jobs. That's a story that we've all been told.
-
48:47 - 48:52And every company I've worked with internally, there are these genius heroes who always seem
-
48:52 - 48:55to be able to get it right on the first try and everyone else is trying to emulate. But
-
48:55 - 48:58when you meet the hero, you're like, "How do you do it?" If they're being honest with
-
48:58 - 49:01you, they're like, "I actually don't know."
-
49:01 - 49:04Or, "Actually that's not how it happened and it wasn't as easy as everybody thinks. Now
-
49:04 - 49:10I feel incredible pressure to replicate that success again." And so, you can imagine the
-
49:10 - 49:14negotiation that happens with the superstar over their next project. They don't ever want
-
49:14 - 49:17to be in a position where they do something and it doesn't work, or they'll have to quit
-
49:17 - 49:17and go to convince some other company they're a superstar.
-
49:17 - 49:17I hear that happened recently. Anyway. Is that helpful?
-
49:17 - 49:17>>Female Audience Member #1: Yeah.
-
49:17 - 49:17>>Eric Ries: OK. Any other questions?
-
49:17 - 49:17[pause]
-
49:17 - 49:18>>Male Audience Member #4: So most of the rapid feedback you're talking about seems
-
49:18 - 49:28to be very applicable to consumer applications where the cost of trying something in the
-
49:28 - 49:37amount of time it takes to try something is pretty low. I will or will not sign up for
-
49:37 - 49:40Twitter or Facebook or whatever the next thing is.
-
49:40 - 49:43>>Eric Ries: Yeah.
-
49:43 - 49:51>>Male Audience Member #4: How does it apply if it's a bigger thing? If it's an enterprise
-
49:51 - 49:55sale or if it's a bigger commitment, do you just basically take the same process, but
-
49:55 - 50:00the time scale is longer because the commitment process is longer for each step?
-
50:00 - 50:05>>Eric Ries: Yes. I mean, that's the short answer. I mean, the long answer is my background's
-
50:05 - 50:10in consumer internet. So I talk that way just naturally about large sample sizes and split
-
50:10 - 50:13tests. Just the way that I, I can't help it. That's my whole career.
-
50:13 - 50:17What's funny is that Steve Blank, who I mentioned earlier, has a great book called "The Four
-
50:17 - 50:21Steps to the Epiphany", that I hope you all read. When he talks, his background is in
-
50:21 - 50:24enterprise software. He gets this question too, all the time. Except when he gets the
-
50:24 - 50:26question, people say, "Well, of course, this will work in enterprise software. But how
-
50:26 - 50:28will it work on consumer internet?"
-
50:28 - 50:32Because we just assume that the tactics that have worked in one industry don't work in
-
50:32 - 50:36another. So the answer is truly, it's the principles that matter, not the tactics.
-
50:36 - 50:41And so, the principle of the build-measure-learn feedback loop is cross-industry. So for example,
-
50:41 - 50:44in consumer internet, because we're used to having large numbers of customers, we do all
-
50:44 - 50:50this analytic stuff as a crutch. It's actually, it's actually -- it's because we have it worse
-
50:50 - 50:51than the enterprise people.
-
50:51 - 50:54When you have a lot of customers, you can't get to know any of them particularly well.
-
50:54 - 50:59In fact, you just have, you have to rely on archetypes and summaries and assumptions.
-
50:59 - 51:02When you have a small number of customers, it's a huge asset because you can know each
-
51:02 - 51:05of them extremely well and the experiments that you do can have much higher fidelity.
-
51:05 - 51:09So like, physicists don't get to ask electrons what they're thinking about doing. They're
-
51:09 - 51:11not available for comment.
-
51:11 - 51:14But when you're studying something that can actually interact with you, it's a whole different,
-
51:14 - 51:18whole different ballgame. Question over here? Yeah.
-
51:18 - 51:22>>Male Audience Member #5: What product should Google be pivoting on right now?
-
51:22 - 51:23>>Eric Ries: What? What product should Google be pivoting on right now? Listen, I would
-
51:23 - 51:26never presume to tell Google anything about that. I mean, look.
-
51:26 - 51:27>>Male Audience Member #5: You were invited.
-
51:27 - 51:28>>Eric Ries: What's that?
-
51:28 - 51:28>>Male Audience Member #5: You were invited.
-
51:28 - 51:32>>Eric Ries: I was invited. But look, but seriously. Like, the outside expert doesn't
-
51:32 - 51:38know anything. You guys know your business way better than I do. And you know what products
-
51:38 - 51:41need to be pivoted. You know. You don't need me to tell you.
-
51:41 - 51:45The better question is, how on Earth are we gonna get to pivot them? Because we're stuck
-
51:45 - 51:50in a management and accountability framework where pivoting is failure is a problem. So
-
51:50 - 51:56for example, a certain Google product that I know especially well because it was competing
-
51:56 - 52:04with something that I was working on at the time, I won't get into too much detail.
-
52:04 - 52:08One of our cofounders at IMVU went to work on this product for Google. So, you're Google
-
52:08 - 52:12people. You can talk about this. So they had a lot of inside information about what we
-
52:12 - 52:16were doing available to them. And at first, we were really nervous because it meant that
-
52:16 - 52:18we were gonna face competition from Google.
-
52:18 - 52:24Here's what happened. Google spent two years working on that product. Spent, I can't imagine
-
52:24 - 52:28how much money developing it. And when it finally came out, they launched it with a
-
52:28 - 52:32big bang, put the Google brand right on it. And then when some things didn't go as expected
-
52:32 - 52:37and it turned out to be an embarrassment, like, it got pulled and killed.
-
52:37 - 52:40And the whole time, we were like, "What is going on over there?" 'Cause we were iterating
-
52:40 - 52:43and changing constantly over that whole two year period. By the time they launched the
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52:43 - 52:47product, we felt like they'd launched a product that did what our product did two years ago.
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52:47 - 52:52And by giving it the big launch hype, putting the Google stamp on it, the inevitable problems,
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52:52 - 52:56the same problems we had had when we launched, but we were able to pivot because we had a
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52:56 - 52:58pathetically small number of customers and no one had ever heard of us.
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52:58 - 53:02That's a huge asset. It's actually a relief. 'Cause it means you can screw up. Nobody knows.
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53:02 - 53:07Nobody cares. Obscurity is a benefit. By putting the Google name on it, by claiming it was
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53:07 - 53:10the next big thing, Google put that team, I assume, in a position where there was no
-
53:10 - 53:14way for them to pivot. It became an embarrassment to corporate, or somebody, and the thing got
-
53:14 - 53:15pulled.
-
53:15 - 53:19Now, [pause] that product could have pivoted. It was a really good product. It had a lot
-
53:19 - 53:23of really good things about it. There was no physical reason why it couldn't pivot.
-
53:23 - 53:28But two million dollars, two years and millions of dollars in, with all these expectations
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53:28 - 53:33and the Google name, I can't imagine the pressure they were under. I felt bad.
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53:33 - 53:37So, the right question is, what could Google have done to build that same product and put
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53:37 - 53:42it in a position where it could have pivoted? I actually think that leadership in today's
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53:42 - 53:47economy means creating platforms for experimentation for your teams.
-
53:47 - 53:51I borrow that phrase from Scott Cooks, founder of Intuit, who's been a big doctor of Lean
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53:51 - 53:52Startup.
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53:52 - 53:55So if you want to be a general manager in a big company like Google and you want Google
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53:55 - 54:00to be more entrepreneurial, my point of view is it's on you, not on your team, on you to
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54:00 - 54:03give them a safe sandbox for experimentation.
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54:03 - 54:08So for a risky new product, do not, I would never put the Google brand name on it. For
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54:08 - 54:09shame.
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54:09 - 54:13And I would never talk to the press about it at all, if you can avoid it. And I would
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54:13 - 54:17try to have it have as small a number of customers as humanly possible while still doing that
-
54:17 - 54:19innovation accounting.
-
54:19 - 54:23Then, teams will pivot just fine. Nothing wrong with Googlers. It's a management problem.
-
54:23 - 54:24In my humble opinion. Yes.
-
54:24 - 54:26>>Male Audience Member #6: So let me follow up with that directly.
-
54:26 - 54:26>>Eric Ries: OK.
-
54:26 - 54:34>>Male Audience Member #6: Let's say you write a new mobile application and you post it to
-
54:34 - 54:34the--
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54:34 - 54:35>>Eric Ries: Hypothetically speaking.
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54:35 - 54:39>>Male Audience Member #6: Yeah, yeah. The app store or the market. If you do that at
-
54:39 - 54:42Google, with the Google name in a blog post, you'll get a hundred thousand downloads no
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54:42 - 54:43matter what it is.
-
54:43 - 54:44>>Eric Ries: Yeah.
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54:44 - 54:47>>Male Audience Member #6: It can be almost anything. But it's true. And by virtue of
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54:47 - 54:50that, you are now, when people browse to categories, shopping, personal finance?
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54:50 - 54:52>>Eric Ries: You'll be number one.
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54:52 - 54:55>>Male Audience member #6: you will be up there. You will have that visibility and those
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54:55 - 54:57will lead to clicks and you will be featured.
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54:57 - 55:01And you will jump start in a way that you can't do if you're nobody and you put up an
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55:01 - 55:03app out there. You may very well just be in the noise and you'll never break out of that
-
55:03 - 55:06no matter how great the product is.
-
55:06 - 55:08>>Eric Ries: Right.
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55:08 - 55:11>>Male Audience Member #6: So, I mean having done this twice--
-
55:11 - 55:14>>Eric Ries: Entrepreneurs never ask hypothetical questions, by the way. So I understand.
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55:14 - 55:18>>Male Audience Member #6: Yeah. Yeah. So I can tell you there's real value. I mean,
-
55:18 - 55:20I know the successes that I've had are in large part because of having that name attached
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55:20 - 55:20to it.
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55:20 - 55:26And that initial jumpfrog, the initial leapfrog made up for, was market that I couldn't have
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55:26 - 55:27bought.
-
55:27 - 55:34>>Eric Ries: Yeah, look, you get free marketing, but so what? Free marketing is worth so much
-
55:34 - 55:38less than we think. Like, yes, that accelerated your process of success, but only because
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55:38 - 55:40you had the right product and it worked for your customers.
-
55:40 - 55:45So putting rocket fuel into a rocket that has problems with it is not a good idea, right?
-
55:45 - 55:49You accelerate too fast. The thing blows up. Now, sometimes you achieve liftoff because
-
55:49 - 55:53you actually do have the right product.
-
55:53 - 55:57But marketing, marketing dollars are not as hard to come by as they used to be. The really
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55:57 - 56:01great products today have an engine of growth that allows them to grow organically anyway.
-
56:01 - 56:05So, yes. Google has huge advantages of putting their brand name on it. It can get you a lot
-
56:05 - 56:09of downloads. But also, there's a huge liability about that because--
-
56:09 - 56:13>>Male Audience Member #6: Well, that's a good question then. So why is it not OK for
-
56:13 - 56:15Google to fail? Why not take risks and just fall on your face?
-
56:15 - 56:16>>Eric Ries: Listen.
-
56:16 - 56:17>>Male Audience Member #6: and admit it quickly and move on?
-
56:17 - 56:21>>Eric Ries: If it was me, I would be celebrating failures and I would make those people heroes.
-
56:21 - 56:24If it was up to me, but that's the culture that I live in now.
-
56:24 - 56:28But see, failure is not what we want to celebrate. We wanna celebrate successful pivots away
-
56:28 - 56:31from failure. And that's challenging because it's easy.
-
56:31 - 56:37If you're charismatic, you can get resources for anything and you can ship stuff and get
-
56:37 - 56:40people to use it and then you can engage in a ton of what I call "Success Theater", to
-
56:40 - 56:45try to make it seem like you're a big success. And so, those people tend to get the celebrations,
-
56:45 - 56:50whether they actually add any value or not. They're like a cancer on most organizations,
-
56:50 - 56:52in my opinion.
-
56:52 - 56:55But what do we do instead? We don't want to celebrate those people. We don't wanna just
-
56:55 - 56:59celebrate people who fail because they accomplished nothing. So we have to have a system for evaluating
-
56:59 - 57:03which failures were actually instructive and then we have to celebrate the learning and
-
57:03 - 57:06what the learning turned into in the next try.
-
57:06 - 57:10So yeah, if Google corporate was fine with people failing and having the Google name
-
57:10 - 57:13be associated with nasty stuff, that'd be fine. But I just think that's unrealistic.
-
57:13 - 57:15I mean, I wouldn't be that comfortable.
-
57:15 - 57:18If I was Google, I would be launching those things under a different brand name altogether.
-
57:18 - 57:23I wouldn't tell anybody that they're made by Google until they're actually proven to
-
57:23 - 57:23be viable.
-
57:23 - 57:27How do you think Apple does it. The stuff that we all consume and wait in line for,
-
57:27 - 57:31we're the first people -- the first person who buys an iPad at the Apple store is the
-
57:31 - 57:33first person to have used the iPad? Come on. That's my humble opinion. Helpful?
-
57:33 - 57:36>>Male Audience Member #6: I didn't follow the last line.
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57:36 - 57:41>>Eric Ries: Then maybe I shouldn’t have said it.
-
57:41 - 57:41[laughter]
-
57:41 - 57:46Cancel that. I do think giving teams a platform for experimentation, having clear analytics
-
57:46 - 57:51for testing whether they're making progress or not, and celebrating pivots is the answer.
-
57:51 - 57:52Whatever Apple does, who knows?
-
57:52 - 57:53>>Thomas Sharon: All right. Last question.
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57:53 - 57:54>>Eric Ries: Make it count.
-
57:54 - 57:59>>Thomas Sharon: Or this was the last question.
-
57:59 - 58:06>>Eric Ries: Too much pressure? It's a Google-branded official question. It's going on the internet.
-
58:06 - 58:06[pause]
-
58:06 - 58:07>>Thomas Sharon: All right then.
-
58:07 - 58:07>>Eric Ries: Ok, thank you all very much. I appreciate it.
-
58:07 -[applause]
- Title:
- Authors@Google: Eric Ries "The Lean Startup"
- Description:
-
Google hosts Eric Ries author of, "The Lean Startup"
The Lean Startup movement is taking hold in companies both new and established to help entrepreneurs and managers do one important thing: make better, faster business decisions. Vastly better, faster business decisions. Bringing principles from lean manufacturing and agile development to the process of innovation, the Lean Startup helps companies succeed in a business landscape riddled with risk. This book shows you how.
Eric is the author of the popular blog Startup Lessons Learned and the creator of the Lean Startup methodology. He co-founded and served as CTO of IMVU, his third startup, which has today has over 40 million users and 2009 revenue over $22 million. An entrepreneur in residence at Harvard Business School and a frequent speaker at business events, he advises startups on business and product strategy using the Lean Startup approach.
http://theleanstartup.com/
Order the book here:
http://lean.st/orders/new - Video Language:
- English
- Duration:
- 58:09
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