I just finished reading Eric Ries’ excellent book, The Lean Startup. It was one of those books you pick up and tear through in two days. I recognized so much of what I learned from entrepreneurship in Eric’s description of the flawed way to develop new products – make them perfect to give them the best chance to Wow! the customer. What folly!
Instead, he shows how to focus on releasing a Minimum Viable Product (MVP) in rapid learning cycles, so the venture can discover what the customer will truly value. In effect, Ries shows us how new ventures can learn what to build through well-designed experiments. Think of it as the Scientific Method applied to our business.
At Peer Insight, we use split-test experiments—a central technique in The Lean Startup—every week in our work on service innovation. In fact, where Eric advocates A-B tests to isolate the differences in two groups, we typically explore three alternative approaches, which I guess would be called A-B-C tests. And his description of scrappy ways to deploy a Minimum Viable Product ring true – I’ve personally used half of the shortcuts he mentions.
The most fascinating part of Eric’s thesis is what he calls “innovation accounting.” He criticizes typical startup accounting as “success theater”—OK, who among us hasn’t been guilty of that?—and goes on to offer an approach that truly focuses on the two key proof points that startups have to get right: (1) how do we know we’re creating value for the customer, and (2) how do we know we can grow profitably?
This focus on assumption testing as the true day-to-day work of startups is incredibly refreshing. As he puts it, “The only true competitive advantage is to learn faster than anyone else.” Amen.