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Eric Ries | The Startup Way
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Entrepreneurship guru and author of “The Lean Startup" presents his highly-anticipated follow-up, “The Startup Way.” Buy a copy here: http://www.strandbooks.com/index.cfm?fuseaction=search.results&includeOutOfStock=1&searchString=eric+ries+startup+way Having turned his attention to reinventing the modern company, Ries has now written the new framework based on five key principles used in successful startups. Drawing from his extensive work history with multinational companies such as GE, Amazon, Facebook, Airbnb, Toyota, and more, Eric creates the essential roadmap to help organizations find long-term growth through continuous transformation. Eric Ries’ New York Times bestseller “The Lean Startup,” has sold over one million copies and has been translated into more than thirty languages. He is the creator of the Lean Startup methodology, which has become a global movement in business, practiced by individuals and companies around the world. He appears in conversation with Beth Comstock, Vice Chair of General Electric. Recorded October 18, 2017
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The Lean Startup Basics
Eric Ries introduces the foundational concepts of 'The Lean Startup,' explaining its origins in software engineering and the importance of a disciplined, customer-centric approach to entrepreneurship. He emphasizes the need for startups to pivot strategically and treat entrepreneurship as a management discipline, aiming for continuous improvement.
"so I'm sure we have a lot of people here who know Lean Startup when did the Lean Startup book come out 2011 so just over six years ago so maybe just set for the few people in here who maybe haven't re..."
The Birth of a Movement
Ries recounts the early days of 'The Lean Startup' movement and his initial meeting with Beth Comstock at GE. He discusses the challenges of instilling entrepreneurial practices in large corporations and how the movement gained traction within GE, highlighting the significance of corporate executives' interest in innovation.
"true to a start-ups vision you're gonna have to change strategy from time to time and it's useful to have a conceptual framework for doing that and tried to get to the moment of what we call a pivot s..."
Navigating Corporate Skepticism
In this segment, Ries reflects on the skepticism he faced from corporate executives at GE when introducing Lean Startup principles. He shares how he addressed their concerns by framing the initiative as an experiment, emphasizing the value of learning through uncertainty and collaboration.
"I find Eric and say hey we're trying to be more entrepreneurial in GE and you go [Laughter] what's funny like I I mean you know first of all you know Beth is an amazing executive and has like must be ..."
The Pilot Project at GE
Ries describes the pilot project initiated at GE, focusing on a complex engineering challenge that had been stalled for years. He explains how the project was selected to demonstrate the effectiveness of Lean Startup methodologies in a corporate environment, aiming to break down bureaucratic barriers to innovation.
"yeah yeah so nobody's bringing in coaches and yeah might be a coach we didn't know you would kick off a movement inside of our company I mean either believe me it was that no master plan and I think t..."
Defining Entrepreneurship
Ries provides his formal definition of a startup as a human institution designed to create something new under conditions of extreme uncertainty. He discusses the implications of this definition for understanding entrepreneurship across various industries and the importance of adaptability in uncertain environments.
"masterful way to show change and Eric had this incredible style of saying to people I can help you get here faster better we adopted Lean Startup we of course having to brand it ourselves called it fa..."
Engaging Corporate Executives
In this segment, Ries shares his experience engaging with GE executives during a pivotal meeting. He highlights the importance of addressing skepticism and fostering an open dialogue about innovation, illustrating how he navigated the corporate culture to promote Lean Startup principles.
"remember that that room first of all you know it was best meeting like best little segment of the meeting to have me there which I feel like you know you were all kind of I don't know limb yourself to..."
The Series X Engine Project
Ries details the Series X engine project at GE, chosen for its complexity and the need for innovation. He discusses the challenges faced by the team and the significance of this project as a test case for applying Lean Startup methodologies in a traditional corporate setting.
"room so I was very helpful to have that context of you know hey why aren't any and he was so smart about like his wisdom really I always admire which is he was really smart about it he didn't say all ..."
Challenging Revenue Forecasts
In this segment, Ries critiques the unrealistic revenue forecasts presented by the GE team for the Series X engine project. He emphasizes the importance of questioning assumptions and the need for realistic planning in innovation efforts, drawing parallels to common practices in Silicon Valley.
"project was called the series X engine it's a reciprocating diesel platform ran if you know what a reciprocating Diesel platform is yeah okay excellent yeah me neither I had no idea I was like what is..."
Reframing the Problem
Ries shares a pivotal moment in a workshop where he and his team began to reframe their approach to a complex project. By focusing on a single use case instead of multiple applications, they discovered a faster path to market, reducing the timeline from five years to just eighteen months.
"workshop and over the course of a couple of hours we turned to ask ourselves like what are the leap of faith assumptions that have to be true for this project to be to be successful and what would it ..."
The Eureka Moment
This segment captures the excitement of a breakthrough in the workshop as Ries and his team realize that by narrowing their focus, they can significantly accelerate the development process. The discussion leads to identifying a specific customer need, showcasing the power of targeted innovation.
"yeah like that was me and it wasn't a technical challenge which it was and I remember the other engineers was like it was like I'm we were playing like name that tune was like what you could do in 18 ..."
The Dilemma of Scale
Ries addresses the tension between pursuing a large-scale revenue goal and the practicality of starting small. He recounts a critical moment when a VP questioned the value of selling a single engine to one customer, prompting a deeper discussion about market validation and the importance of testing assumptions.
"and then finally one of the VP's who was just not at all having a good time who shall remain nameless although Beth and I remember well it's just across the hall and he was like sorry I'm sorry time o..."
Transforming Corporate Mindsets
In this segment, Ries discusses how the conversation shifted from skepticism to a collaborative exploration of possibilities. He emphasizes the need for corporate leaders to embrace a learning mindset and the importance of validating commercial assumptions before committing to large-scale projects.
"last day at GE for sure except that Beth and some of her colleagues were like waited wait await a second didn't we just say a minute ago that we don't know if this plan is gonna work and we're not sur..."
The Modern Company Framework
Ries outlines the characteristics of a modern company, emphasizing the need to harness the creativity of all employees. He contrasts traditional corporate structures with more agile, innovative approaches that allow for rapid testing and implementation of new ideas.
"a movement inside we did thousands of these kinds of projects everything from you know handheld ultrasound to help midwives and in India to - how do you do better ERP systems it really became a way to..."
Entrepreneurship as a Corporate Function
In this segment, Ries advocates for recognizing entrepreneurship as a vital function within corporate structures. He discusses how successful companies integrate entrepreneurial thinking into their operations, enabling them to adapt and innovate in a rapidly changing market.
"have the same matrix management the same is saying that and but but and like but what like but we're cool and we have beanbag chairs and whatever like what's the plan structurally to make sure that yo..."
The Missing Function in Corporations
Ries concludes by highlighting the lack of dedicated roles for innovation in many companies. He stresses the importance of having leaders who understand and prioritize innovation, ensuring that new ideas are not just an afterthought but a core part of the corporate strategy.
"know I'd be hey not with Beth in the morning and then I would be with like a totally scrappy hot startup in the afternoon and we'd be having the same conversation and like geez more than hundred years..."
Embracing Failure as a Learning Tool
In this segment, Ries addresses the fear of failure prevalent in corporate environments. He argues that organizations should celebrate productive failures as learning opportunities rather than punishments, thereby encouraging a culture of experimentation and growth.
"day job and like put on the side they also supposed to do innovation too you're like that's not very serious or they say it's everybody's job there's no function for that everyone's supposed to think ..."
Career Equity and Innovation
Ries introduces the concept of 'career equity' and its impact on innovation within organizations. He explains how employees' perceptions of their career prospects can hinder their willingness to experiment and take risks, emphasizing the need for a supportive environment that values learning from failures.
"tolerance for ambiguity let's talk a little bit about failure I don't know who here likes to fail okay but a modern company an entrepreneur has to be okay with failure how how have you learned through..."
Redefining Productive Failure
Ries discusses how to redefine failure in a corporate context by focusing on productive failures that lead to valuable insights. He shares examples of how organizations can shift their mindset to view failed experiments as opportunities for saving resources and refining strategies.
"as valid in a start-up big company nonprofit government agency like everybody has a career aspiration and they have a perception of their probability of success at that and in most organizations if yo..."
The Lean Startup Approach to Efficiency
In this segment, Ries explains how the Lean Startup methodology can lead to greater efficiency and productivity in organizations. He emphasizes the importance of maximizing learning per dollar spent and eliminating bureaucratic inefficiencies to foster innovation and growth.
"that we figure out a new strategy that worked better than the one we had before that's ultimately saving the company a lot of money so you remember this project we had a cheat it was a new health care..."
Kickstarter as a Learning Tool
Ries shares his experience using Kickstarter to test ideas for his book, illustrating how the platform served as a valuable tool for gathering feedback and learning from potential customers. He emphasizes the importance of community engagement in the development process.
"scale because not only are you just eliminating a lot of unproductive work I mean think about how many corporate reviews you've ever sat it in your life where for the 10 people in the meeting we had t..."
Taking Action: Experimentation in Practice
Ries encourages leaders to take immediate action by running experiments in their organizations. He stresses the importance of starting small and learning quickly, advocating for a hands-on approach to implementing the principles of the Lean Startup methodology.
"the norm I became obsessed absolutely startup was published with what is the author's moral responsibility for the things that people misunderstand about your writing because you know that was like a ..."
Avoiding the Guru Trap
In this segment, Eric Ries expresses his reluctance to be seen as a guru, emphasizing that individuals must make the startup ideas their own. He discusses the importance of personal experimentation and learning, rather than relying solely on external guidance. This perspective encourages self-discovery in the entrepreneurial journey.
"would end each of those workshop training sessions with really urging the executives to put this into practice like soon before they forgot and before they kind of lost the inspiration that you would ..."
Transforming Mindsets for Innovation
Ries discusses the need for a mindset shift in organizations to embrace experimentation and innovation. He suggests forming accountability partnerships to encourage ongoing learning and experimentation. This segment highlights the importance of fostering a culture that values rapid iteration and learning.
"whatever your enthusiasm or your skepticism and just run an experiment to reveal that the theory is correct or not that's that's all we can do and if we're gonna claim as a movement to be a scientific..."
Breaking Down Silos in Organizations
Eric Ries addresses the challenges of silos within organizations that hinder collaboration and innovation. He advocates for cross-functional teams and a common vocabulary to facilitate communication and progress. This segment underscores the necessity of uniting different departments to achieve collective goals.
"don't let it be somebody else's problem like as much as my publisher would love for me to tell you make buy one for your whole company and make everybody read it like don't do that first do it later b..."
Design Thinking vs. Lean Startup
In response to a question, Ries explores the intersection of Lean Startup methodology and design thinking. He acknowledges the iterative processes in various functions and emphasizes the need for a unified approach to innovation across departments. This segment clarifies the relationship between different methodologies in business.
"microphone we're gonna start on this side here Thank You Alyssa Ness it's wonderful to be here I was a billion years ago when the Lean Startup had just come out in DC and I have forever called you sta..."
The Common Language of Business
Ries discusses the importance of a common language in business to facilitate understanding and collaboration. He critiques the jargon used in different functions and advocates for a focus on financial metrics to measure progress. This segment highlights the need for clarity in communication to drive innovation.
"in on a secret sometimes when I do corporate meetings they're functionally segregated so I'll have like a room full of designers or a room full of Engineers or like you know it's just a supply chain p..."
Impact Over Cash Flow
In this segment, Ries argues that startups should focus on impact rather than immediate cash flow. He explains how future impact can be a valuable metric for both for-profit and non-profit organizations. This perspective encourages entrepreneurs to think long-term about their contributions to society.
"enterprise-wide level and the answer in all these organizations is no we are not in fact if you take the God's eye view of most corporations and like zoom out way out visualize the silos of the compan..."
Valuation and Future Impact
Ries elaborates on how startup valuations are determined by a combination of asset value and the probability of future impact. He emphasizes the importance of demonstrating potential outcomes to secure funding and resources. This segment provides insights into the financial aspects of startup growth.
"like and then they're like okay we're completely done let us I've worked on agile teams on a sort of God where you print the gold master CD and hand it to the operations team to boy so the first time ..."
Engaging the Next Generation of Entrepreneurs
In this concluding segment, Ries addresses the importance of making Lean Startup principles accessible to younger audiences. He discusses the need for innovative formats beyond traditional books to engage and inspire the next generation of entrepreneurs. This segment highlights the ongoing evolution of entrepreneurial education.
"call it innovation accounting other G finance guys rose like please add this disclaimer not innovative accounting that you go to prison for so like you do note Asterix not innovative accounting that's..."
Innovating Against the Odds
Eric Ries shares a personal story about the challenges of advocating for innovation within a corporate structure. He emphasizes the importance of overcoming the fear of failure and being willing to push for change, even when it feels risky. This segment encourages entrepreneurs to embrace their ideas and advocate for them within their organizations.
"how have you thought about making the lean startup not in book form so all my friends and everyone I hang out with all of my generation can learn about kids these days you know I I'm gonna ask you thi..."
Lessons from Immigrant Entrepreneurs
Ries draws parallels between the experiences of immigrant entrepreneurs and the principles of the Lean Startup. He discusses how the urgency to innovate and find product-market fit is similar to the challenges faced by those starting with limited resources. This segment highlights the resilience and creativity that arise from necessity.
"fine there's a bunch of like comedy routines and stuff on you to do you go find some pretty cool stuff on YouTube but like I would turn it around to you I would say if you think that's something that ..."
The Role of Funding in Innovation
In this segment, Ries explores the dual nature of funding in entrepreneurship, discussing how both under-funding and over-funding can hinder innovation. He shares insights on how a scarcity mindset can drive focus and creativity, ultimately leading to better outcomes for startups.
"genius is the fact that they do have the comfort of you know friends and family rounds or investment funding yeah so and so bootstrapping to some extent is you know maybe advantageous in an ironic kin..."
Transforming Corporate Culture
Ries recounts a story of a software engineer who successfully advocated for a shift to continuous deployment within a large corporation. This narrative illustrates how one person's initiative can lead to significant cultural and operational changes, emphasizing the importance of leadership support in fostering innovation.
"we're very grateful for but there's also something about how over funding can be as lethal as under funding we see that in corporate settings name honey project we've over funded over the years you se..."
Overcoming Fear in the Workplace
Ries discusses the importance of overcoming the fear of being fired when advocating for innovative ideas in a corporate setting. He encourages individuals to stand firm in their beliefs and to focus on what they want to be remembered for, fostering a culture of innovation and accountability.
"hear often from immigrant communities and from people in developing countries who've read lean startup has been translating all these crazy languages sometimes they feel like they their culture their ..."
The Entrepreneurial Mindset
In this concluding segment, Ries reflects on the qualities that define an entrepreneur, including resilience and the willingness to challenge the status quo. He shares personal anecdotes about his journey and encourages others to embrace their entrepreneurial spirit, regardless of their circumstances.
"of these people right so like I hear it from people who feel like what do you have to lose just go to the most senior person you have any kind of relationship with and say listen I work at this compan..."
Overcoming the Fear of Being Fired
Eric Ries shares a personal story about overcoming the fear of being fired while advocating for innovative practices in a corporate environment. He emphasizes the importance of standing firm in one's beliefs and values, even in the face of potential backlash. This segment highlights the significance of fighting for what you believe in and how it can shape your professional identity.
"you too and I don't know that I necessarily would wish that on you I don't know you that well so so do be careful I hope most companies wouldn't fire you for asking that I mean I think you'd have to t..."
Predictors of Success in Corporate Innovation
In this segment, Eric Ries discusses the predictors of success when implementing innovative ideas within organizations. He contrasts the effectiveness of loose company cultures with disciplined, top-down approaches, sharing insights from his experiences with various companies. Ries emphasizes the importance of commitment from leadership and the need for a structured environment to foster innovation.
"I'm gonna try to get fired for that forget it like I'm gonna just I'm gonna stand for the things that I believe as strong as I possibly can and not be rude about it but also not compromise like I'm th..."
The Importance of Leadership Commitment
Eric Ries elaborates on the critical role of leadership in driving innovation within companies. He stresses that leaders must be willing to change their own behaviors to inspire change in others. This segment underscores the necessity of introspection among executives and the impact of their actions on fostering a culture of innovation.
"kind of just tell that it's not gonna work I love that question you're being you're being very modest this guy's a pretty successful entrepreneur under his own right so I used two thoughts a what I us..."
Introducing the Long-Term Stock Exchange
Eric Ries introduces the concept of the Long-Term Stock Exchange (LTSE), a new governance paradigm aimed at reducing short-term pressures on public companies. He discusses the need for a capital market system that supports long-term thinking and innovation. This segment outlines the vision behind LTSE and its potential to transform how companies operate in the public sphere.
"wouldn't do it all the way so like when we first started talking I was like you're gonna have to change HR policies and the corporate values and compensation and promotion I remember several meetings ..."