A how-to guide if there was one, The Lean Startup by Eric Ries details how entrepreneurs can develop a vision for their company, steer it through challenges and accelerate its growth.
Why I chose this book: Many companies claim to be agile, or lean, but I had no idea what this meant. It turns out that the “lean” refers to lean manufacturing. Ries was inspired by how companies like Toyota treated every product, process and campaign as an experiment designed to achieve validated learning. This attitude would determine how startups create value and grow.
My three biggest takeaways
- If you cannot fail, you cannot learn: Growing up, I was taught to avoid failure at all cost. In Singapore, academic success is still highly valued. If you own a house, get promoted and are married before the age of 30, you are seen as having made it. But Ries argues that in order for a startup to succeed in the long-term, it has to fail over and over again. The caveat, however, is that start-ups deliberately fail, by identifying certain assumptions they want to test.
- Value and Growth: On Page 61, Ries defines two hypotheses start-ups need to rigorously and thoroughly examine.
The value hypothesis looks at whether a product or service delivers value to customers.
The growth hypothesis tests how new customers will discover a product or service.
Using the example of Facebook, Ries explained how Facebook validated its value hypothesis by measuring the amount of time Facebook’s active users spent on the site. For social networks, time spent is valuable, because of the advertising revenue it can attract.
Facebook also passed the test for growth. In 2004, it was only widely adopted by college students. But those college students were able to rapidly invite their friends onboard.
Reading this was like a lightbulb moment for me. Although I was previously familiar with metrics such as the cost of acquisition and viral coefficient, I never really understood why that mattered. Having a theoretical framework has really helped me see the importance of big data for startups.
- Minimum Viable Products: Prior to reading this book, I thought a MVP was a beta version of an application. But Reis deftly shows how even a landing page or a video works.
Take Dropbox. The technical wizardry needed to drag and drop files would take years to develop. But Dropbox made a three-minute video demonstration, showing how files could be imported from one’s computer onto the Internet, with changes synchronized in real-time.
That video was good enough for 75,000 people to sign up as early adopters and was part of Dropbox’s application to Y Combinator.
As a non-techie, I’ve always been intimidated by how startups are built. Reading about different kinds of MVPs made me realize how many options exist to prove a business concept.
Real-life applications
- At my job: As part of the Lean Startup methodology, Ries writes how every entrepreneur faces a turning point where they will have to decide whether to pivot or persevere. A pivot is a specific kind of change that tests a new hypothesis about the product, strategy and engine of growth.
As a journalist, readers are our customers and articles are our products. Although I had been writing about Covid-19 testing extensively since mid-2021, I realised that Singapore was moving towards living with Covid-19. Meanwhile, scams were on the rise since Dec 2021. The decision to pivot came naturally.
- Startups I know: While I am not aware of the founding story behind Love, Bonito, I’ve heard many accounts of how it began as a blogshop run by three friends in 2005. A blogshop seems like the perfect Minimum Viable Product for a retail brand. In the early 2000s when online retail was first taking off in Asia, the value hypothesis would have been whether customers would want to buy clothes they aren’t able to try on.. And the growth hypothesis would have been whether they would share this website with their friends and family. Today, Love Bonito is one of Singapore’s leading retailers.
The Lean Startup was a thoroughly enjoyable read. Concise, well-organised and with real-life anecdotes, it deserves all the accolades.
If you enjoyed this review, feel free to leave me a message here or share this post. I will be reviewing The $100 Startup in my next post in a few weeks’ time.
BOOKS TO BUILD 