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Watch Eric Ries Discuss "The Lean Startup"
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Entrepreneur Eric Ries spoke in Toronto at the Rotman School of Management as part of his book tour for "The Lean Startup." Ries was introduced by Rypple co-CEO Daniel Debow as part of Rotman's Startup Expert Speaker Series. The presentation and Q & A took place Sept. 19, 2011.
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Introduction to Eric Ries
Daniel Debow introduces Eric Ries, highlighting his background as an entrepreneur and author of 'The Lean Startup.' Debow emphasizes the significance of Ries's work in entrepreneurship and innovation, setting the stage for the discussion on the Lean Startup methodology.
"so uh for those of you who don't know me I'm Daniel deau I'm the co-ceo of Ripple um I did my MBA and a JD JD here at the University of Toronto and at the rman school uh I'm a friend of the dean of th..."
A Conversation Over Slides
Eric Ries expresses his desire to engage in a conversation rather than deliver a traditional presentation. He invites the audience to ask questions throughout the talk, emphasizing the importance of interaction and learning from the diverse audience present.
"that we have as much time as possible to hear Eric I'll keep this really brief Eric is an entrepreneur and the author of a popular blog called startup Lessons Learned he co-founded and served as the C..."
Embracing Continuous Partial Attention
Ries encourages the audience to use their mobile devices during the talk, promoting the idea of continuous partial attention. He highlights the global conversation around the Lean Startup movement and invites attendees to participate actively by tweeting with the Lean Startup hashtag.
"wanted to try an experiment tonight which as a professional expert is kind of risky which is to say to hell with the slides because I'm I'm kind of getting tired of the stump speech and I thought you ..."
The Stakes of Entrepreneurship
Ries discusses the challenges of product launches and the common dread associated with new updates. He emphasizes the need for a rigorous approach to entrepreneurship and innovation, arguing that many efforts in product development often feel futile and unrecognized.
"cuz if you're not connected to the internet I don't understand is that even living I don't really understand why you want to do that yeah nobody can get on the internet but there there students can ge..."
The Iceberg of Entrepreneurship Knowledge
Ries reflects on the limited understanding of entrepreneurship, suggesting that current practices are just the tip of the iceberg. He draws parallels between past management practices and today's approaches, indicating that future generations will view current methods as primitive.
"the practice of Entrepreneurship and Innovation and try to put it on a more rigorous a more s scientific Foundation that's our goal and what is known today about entrepreneurship I think is just the t..."
The Reality of Startup Life
Ries shares his personal experiences with startups, contrasting the glamorous portrayal of entrepreneurship in media with the often harsh realities. He recounts his early ventures and the disillusionment that came from not achieving the expected success.
"having the really exciting experience some of you may be familiar with of building an amazing new technology that nobody's using and so it's sitting on a shelf but it really is technically as excellen..."
Lessons from 'The Social Network'
Drawing from the film 'The Social Network,' Ries discusses the misconceptions about entrepreneurship. He highlights the unrealistic expectations set by media portrayals and the importance of understanding the true nature of startup challenges.
"our understanding of what entrepreneurship was was just what you see in the movies if you've seen The Social Network you know the you know the story really well it's Act One the Plucky protagonists th..."
Waiting for Zuul: A Startup Metaphor
Ries uses the metaphor of waiting for Zuul from 'Ghostbusters' to illustrate the unrealistic hope many entrepreneurs have for sudden success. He emphasizes that real-life entrepreneurship often leads to failure rather than the dramatic success depicted in films.
"dot dot dot step three cover of magazines and we really believed that was going to happen and when it didn't I felt really betrayed I was like well how come we work so hard and in the movies uh the Pl..."
The Myth of the Entrepreneurial Journey
Ries critiques the narrative structure of entrepreneurial success stories, pointing out that many fail to capture the tedious and often boring reality of the startup process. He stresses the importance of recognizing the hard work and failures that precede success.
"most of the entrepreneurs I know incidentally are busy waiting for Zuul that was me I figured well things get difficult we get down to our last dollar that's when everything will start to work out and..."
The Boring Truth About Startups
Ries argues that entrepreneurship should be viewed as a rigorous and often tedious process rather than a glamorous endeavor. He aims to shift the perception of entrepreneurship to focus on management and accounting as critical components of success.
"that was my experience too and the reason I believe is that we are following this threea play as if it was a business plan rather than a myth designed to sell movies and magazines why is it that the p..."
Defining a Startup
Ries presents his definition of a startup as a human institution designed to create something new under conditions of extreme uncertainty. He emphasizes that this definition applies across various sectors, challenging traditional notions of what constitutes a startup.
"montage and it's boring okay right now we're living in this moment especially in the states where entrepreneurship is cool all of a sudden and you know everyone wants to do it and it's in the popular ..."
Entrepreneurship Beyond Startups
Ries discusses how the principles of entrepreneurship can apply to individuals within larger organizations. He shares experiences of managers who, despite working in established companies, embody the entrepreneurial spirit and face similar challenges of innovation and adaptation.
"so in theory these principles these Lean Startup principles should be applicable even to entrepreneurs who work inside big companies or government or nonprofits and I was nervous because I had no idea..."
The Importance of Entrepreneurial Management
Ries introduces the concept of entrepreneurial management, which focuses on managing uncertainty. He contrasts this with traditional management practices, emphasizing the need for new tools and frameworks to support innovation in uncertain environments.
"all the entrepreneurial prerequisites nailed if you read a book like the innovator's Dilemma or the innovator Solution by Klay Christensen one of my heroes it will tell you all of the prerequisite str..."
A Century of Management
Reflecting on the history of management, Ries notes the centennial anniversary of Frederick Winslow Taylor's scientific management principles. He critiques the outdated methods still prevalent today, arguing for a more modern approach to managing innovation and entrepreneurship.
"management discipline that deals specifically with situations of high uncertainty the idea of management is exactly 100 years old this year so happy birthday management it is your 100th anniversary in..."
The Flaws of Traditional Efficiency
Ries critiques the traditional focus on efficiency in entrepreneurship, questioning the value of building products that no one wants. He uses the metaphor of driving off a cliff while bragging about gas mileage to illustrate the dangers of prioritizing efficiency over market relevance.
"should be done well if you read in he will then take the counterarguments one by one and the most prevailing counterargument from the 19 century was if somebody found a way to do work better what do y..."
Lessons from IMVU's Launch
Ries shares his experience with IMVU, a 3D avatar social networking company, detailing the challenges faced during its launch. He reflects on the missteps made in product development and the importance of understanding customer needs and market dynamics.
"entrepreneurs so that's my claim entrepreneurship is management just not the general management of Fred Taylor the unit of progress of that new entrepreneurial management is something I call validated..."
Understanding Network Effects
Discussing the strategic challenges of launching an instant messaging product, Ries explains the concept of network effects and high switching costs. He highlights the misconceptions that led to flawed strategies in product development and market entry.
"at the time we thought it was a 3D avatar instant messaging company because this was 2004 and our aspiration was try to become the next AOL back when that was still cool and so we built this 3D avatar..."
The Dangers of 'Sounds Good'
Ries warns against the pitfalls of assumptions in entrepreneurship, particularly the phrase 'sounds good.' He recounts the challenges faced when launching IMVU and the disconnect between perceived and actual customer interest in the product.
"in like proper NBAs we said instant messaging is a business with high barriers to entry therefore we cannot build an instant messaging client making sense so far so we had a strategic Brilliance check..."
Customer Feedback Missteps
Ries discusses the importance of customer feedback in product development, sharing anecdotes from IMVU's focus groups. He emphasizes the need to listen to customers while also recognizing the limitations of their feedback in guiding product innovation.
"let me tell you a little anecdote that I found out the hard way we shipped this product in about six months took us to build it and um I guess I should I should explain those of you who are Engineers ..."
Building for the Wrong Audience
Ries concludes with insights on the challenges of creating a product that resonates with users. He reflects on the misalignment between customer expectations and the product's value proposition, underscoring the necessity of understanding the target audience in entrepreneurship.
"after running out of trying everything we could think of we finally resorted to that absolute Last Resort which is talking to customers we said all right let's find out what's going on here and I want..."
The Pain of Pivoting
In this segment, Ries discusses the painful process of pivoting in entrepreneurship. He reflects on the challenges faced when a product fails to meet customer expectations, leading to the need for a strategic shift. Ries emphasizes that a pivot is a change in strategy without altering the overarching vision, illustrating the emotional toll it takes on entrepreneurs.
"kept saying let me just try it myself first to see if it's cool and then I'll invite one of my friends and we were from the video game industry and we knew exactly what that meant it meant single play..."
Learning from Failure
Ries delves into the concept of learning from failures in product development. He recounts his experience of building a product that ultimately had to be discarded, stressing that the real lesson was understanding what customers do not want. This segment underscores the importance of learning in entrepreneurship and the need to embrace failure as a stepping stone to success.
"for those who are not familiar with the most overuse buzzword of 2011 a pivot is a change in strategy without a change in vision and it was pretty painful and I want you to sympathize with me personal..."
The Misconception of Learning
In this thought-provoking segment, Ries critiques the traditional view of learning in business. He points out that learning is often only acknowledged when justifying failures, rather than being a continuous focus. Ries challenges entrepreneurs to prioritize learning throughout the development process, rather than treating it as an afterthought.
"pivot incidentally managers who claim to have learned something are generally on the brink of being fired so this is actually not that fun an excuse to use let me explain if you're a general manager s..."
The Value of Minimal Viable Products
Ries discusses the concept of minimal viable products (MVPs) and the potential for significant learning with minimal effort. He reflects on how a simple landing page could have sufficed to gauge interest in a product, emphasizing that entrepreneurs should focus on efficient learning rather than extensive development. This segment highlights the importance of agility in product development.
"did it take six months for example we supported I think 12 different IM networks for interoperability out of the gate would our learning have been the same if we supported only six yeah what if we sup..."
Rethinking Management Paradigms
In this segment, Ries critiques the outdated management paradigms that rely on forecasting and planning. He argues that modern entrepreneurship operates in an environment of high uncertainty, requiring new management principles. Ries calls for a shift in how businesses approach innovation and accountability, advocating for a more adaptive and responsive management style.
"at the heart of what I'm trying to get at that the value in an entrepreneural situation is learning whether we're on the path to a sustainable business everything else that we do is waste and that's r..."
The Role of Accounting in Management
Ries explores the historical roots of modern management practices, particularly the reliance on accounting as a predictive tool. He contrasts this with the realities of entrepreneurship, where uncertainty prevails. This segment emphasizes the need for new metrics and accounting methods that reflect the dynamic nature of startups and innovation.
"skills remember in a pre-digital age to do the math to look at all the macroeconomic indicators of how the economy was doing right now and make predictions how many cars should we sell quarter by quar..."
Innovation Accounting Explained
In this segment, Ries introduces the concept of Innovation Accounting, a framework designed to measure progress in uncertain environments. He discusses the limitations of traditional metrics and the need for a new approach that focuses on learning and customer behavior. This segment sets the stage for a more scientific approach to innovation.
"only works when we have a long and stable operating history from which to extrapolate show of hands who feels like the world is getting more and more stable every day nobody I can't believe it it's ju..."
The Future of Innovation
Ries concludes with a vision for the future of innovation, emphasizing the importance of rigorous learning and experimentation. He encourages entrepreneurs to embrace uncertainty and adapt their strategies accordingly. This segment encapsulates the essence of 'The Lean Startup' philosophy, advocating for a more scientific and enjoyable approach to entrepreneurship.
"uncertainty and I'm just going to close with a little flavor of it to get the details obviously you'll have to buy the book or I see many of you actually already have it so thank you uh but what are y..."
The Importance of Community in Startups
In this segment, Eric Ries discusses the significance of local startup communities and their role in fostering innovation. He highlights how entrepreneurs can support each other by sharing real progress and challenges, rather than just success stories. This accountability is essential for growth and learning within the startup ecosystem.
"fun so I really want to get to some Q&A I really want to ask some questions so I'll I'll stop here and just say thank you all very much for coming thank you so we have two mics in the audience if you ..."
Facing the Truth in Entrepreneurship
Ries emphasizes the need for entrepreneurs to confront the reality of their startup's progress. He explains that sharing struggles and setbacks is often counterintuitive but necessary for genuine growth. By creating safe spaces for honest discussions, entrepreneurs can hold each other accountable and foster a culture of transparency.
"professional expert was that I would do my best to only say things that are actually true not just things that sound good even though as a professional expert people only care if what you're saying so..."
Metrics That Matter
In this segment, Eric Ries encourages entrepreneurs to focus on the metrics that truly reflect their business's health. He stresses the importance of accountability in reporting these metrics and challenges the notion of presenting only positive results. This approach helps startups identify areas for improvement and fosters a culture of honesty.
"making real progress and it's hard sharing what's really going on with your startup is probably the most um counterintuitive and painful thing any founder is asked to do because we all we all intuitiv..."
The Role of Strategy in Startups
Eric Ries addresses the role of strategy in startups, explaining that while it's important, it should not overshadow the need for experimentation and learning. He argues that many entrepreneurs fail not due to poor strategies but because they base their plans on incorrect assumptions. Understanding the right questions to ask is key to successful innovation.
"focused on is um ask each other what are the metrics that really matter for your business and where are they going to be a month from now and then report back a month later hey I know you tell your in..."
Customer Insights vs. Customer Development
In this thought-provoking segment, Ries discusses the limitations of traditional customer development methods. He argues that customers often cannot articulate what they want, and instead, entrepreneurs should focus on running experiments to uncover true customer behavior. This shift in perspective is crucial for effective product development.
"important thing so thank you very much for doing that really means a lot to me okay we have a question at the back and then one here pivot to a different microphone oh thank you yeah could Lean Startu..."
Just-in-Time Scalability
Eric Ries introduces the concept of just-in-time scalability, emphasizing that startups must be prepared for growth without overextending themselves. He shares insights from his experiences with rapid iteration and continuous deployment, highlighting the importance of being able to scale technology effectively as demand increases.
"Manhattan which that's pretty cool that's a powerful concept if you could destroy Manhattan so thank you I think that as a compliment um and and I appreciate the question actually not just because it ..."
The Curse of Prevention
In this engaging segment, Ries discusses the challenges of anticipating problems in startups. He critiques the conventional wisdom that prioritizes prevention over experimentation, arguing that this mindset can hinder innovation. By focusing on running experiments rather than preventing hypothetical issues, entrepreneurs can better navigate the uncertainties of startup life.
"questions you need to ask so by doing things like analoges and analogues looking at what other business patterns are business models business model canvas all that stuff is useful if you're confused a..."
Just-in-Time Scalability
In this segment, Ries advocates for 'just-in-time scalability,' where startups should prioritize agility and rapid response over preventing potential problems. He argues that by systematically refactoring systems, both technical and organizational, startups can effectively scale without falling into bureaucratic traps.
"because scalability is always on everybody's mind and yet when you have five customers like you don't have any scalability problems and the answer is to say let us not invest in prevention but rather ..."
IP Protection vs. Agility
Ries addresses the trade-off between intellectual property protection and the agile experimentation necessary for startups. He emphasizes that agility should never be sacrificed for IP protection, sharing insights on how to navigate the complexities of patent law while maintaining a focus on rapid innovation.
"now we call it just in time scalability because what's going to happen is we will be able to adjust so quickly to what's really happening we can constantly and systematically refactor our system so th..."
Out-Iterating Competitors
In a compelling narrative, Ries shares a personal story about his startup's experience with a larger competitor. He illustrates how the ability to iterate quickly and adapt is far more valuable than the initial idea itself, reinforcing the notion that speed and flexibility are key to success in the startup world.
"being stolen by a big company and that is to do nothing because big companies can't steal your idea because they're incompetent see that's the whole reason to start companies in the first place and so..."