Eric Ries: The Lean Startup

my name is JC Sam Bona and I am part of the entrepreneur services group I run the life science and healthcare IT practice for se B for the early-stage market it's my pleasure to introduce the next keynote speaker at Eric Ries who many of you know is a serial entrepreneur and was co-founder and CTO of IMVU but beyond that he he has recently published a book called the Lean Startup which debuted at number 2 on the New York Times bestseller list so with your help I would please help me welcome Eric author serial entrepreneur and mr. Lean Startup himself Eric Ries whoo hi everybody thank you for being here thanks for giving me a very warm welcome it's this is a hard day to do this on for obvious reasons and I know guy gave gave a very moving tribute this morning to Steve and I just I don't know I thought I thought I would be fine when I heard the news I thought it wouldn't affect me that much and to be honest it really has and so I can't just give the usual talk I just I can't do it so I apologize if I'm totally incoherent for the next I don't know how long it is it's just it's been really it's been really a difficult day and I was thinking a lot about my very first computer first computer I ever bought it was a 1984 vintage beige Mac plus I bought it used it was you know a physical object that really changed my life because I grew up as a programmer programming computers was something I did for fun when I found out that you could get paid to program computers that was one of the best days of my life and I remember you know teaching myself how to program on that old beige Mac plus just doing it because I thought it was the most incredible thing I could imagine programming is a skill that lets you take imagination and make it real directly it's such a such a gift and so I it just feels like something really has been lost today I was thinking a lot about I used to have this volume of a book called inside Macintosh and remember this was a five volume set and then I added a sixth volume inside Macintosh it was the detailed book that told you all the system calls and all the details of how the Macintosh computer worked I could not afford to buy inside Macintosh the set and my local library had only volume 6 so my friends and I would just check out volume 6 over and over again and we would try to guess we would try to infer what was in the previous 5 volumes from the corrections and additions that have been added to this you know they would tell you this system call is no longer available we'd like oh really immediately go start calling it to see what it did and that was my that was my introduction to programming so it's been it's been a long time that the Steve Jobs has touched my life like so many of us in this not a lot I can say about it except to just want to be up here on stage and share with you that it is meant a lot to me and so I was getting the car to come down here and I thought I was fine I was like okay he died yesterday I was sad god I gotta get to get into game mode because I got a walk of work to do I turn on the radio just to see I wonder if Steve Jobs made the news today just curious and right as I turn on the radio they decide they're going to play the entirety of his 2005 commencement speech at Stanford so I came down here I listened to the whole speech and I have a confession to make it was actually the first time that I had listened to it I'm probably the only person in Silicon Valley who had managed to avoid listening to this speech all this time since he was gave it in 2005 it's very very inspiring I'm sure all of you have seen it but I hadn't listened to it because I've been really resisting the last few years the cult of personality around Steve Jobs I hate the hype and the pretending like he is a one man who built this entire company through his raw perseverance and vision and determination because as entrepreneurs we look up to Steve we want to know how did he do what he did and how can we all do it and not all of us I can only imagine has spent this whole day thinking a lot about how can I do what he did how does what I'm doing now live up to what the standard that he set for all of us and the truth is none of us really know how he did what he did the the biographies are yet to be written and we'll learn more but because we don't know it leads a lot of us into wasting an incredible amount of time doing what I call putting on the black turtleneck trying to put on a show about how we're just as good as Steve Jobs as best we can copying the things that we do know about him that he was kind of mercurial and you know even in the Stanford speech he makes a dig at Windows for copying the Mac nor that little moment like deal you're giving a Stanford commencement address you won you don't have to punch Bill Gates in the face right now can't resist you know so that he could be mean he could be cruel but he was he was a righteous jerk so he meant it in the spirit of changing the world so we can freak it as entrepreneur's we can forgive him but that doesn't mean that if you are a jerk you'll be successful it doesn't mean if you put on a show of vision you'll be successful and when I wasn't life first became an entrepreneur that's what I thought it meant I understood entrepreneurship from the stories that we see in the movies and then we read in magazines the stories that are all being repeated today you notice how in the obituaries and the biographies and the stories of Steve as when all the great entrepreneurs the story is like very simple it's like step one be in the right place at the right time have vision to see the future have the right idea and just persevere make sure you work really hard you just don't give up no matter what step two is kind of vague it's like dot dot dot something happens and anyway step three is you get to be on the cover of magazines and you know you and your co-founders get to sue each other and you get to decide how to divide up the spoils and that's that's honestly what I understood entrepreneurship to be and if you mean it's just it's been all over that all over the TV all day today all over the internet I can't look on Twitter find out anything else about the most interesting and exciting parts of the story step 1 and step 3 fact I learned today an anecdote about Steve I didn't know that when Time magazine decided to choose the personal computer as Man of the Year he called them up they were profiling him as part of that story he called them up repeatedly to try to convince them that they had made a horrible mistake that he should be the one who was Man of the Year so this is not someone who exactly didn't care what other people thought of him contrary to publicly he wanted he thought it would be a terrible mistake in it he was probably right it probably was a terrible mistake that's the thing so irritating about these stories how you going to live up to the ghost of Steve Jobs you can't do it and yet the parts of the story that we know that parts that are interesting the parts that are fascinating to us I think are actually the least important parts when I first became an entrepreneur I told you I owe this is the story I knew the 3-step process and so I was in college and I had what I like to call the first half of the movie the social network experience I did everything just like in the movies except for the ending everything else was exactly the same we had a great brilliant idea we were in the right place at the right time in 2001 we had the idea that college students should create online profiles for the purpose of sharing did that seem like a good idea I heard that somewhere but we were convinced that they should share them with employers for the purpose of getting a job so so close right so close and yet hopelessly far away I'm sad to admit and you know in the movies as I said this it's an act in three-part so we were there we did the hard work and the perseverance and being in the right place at the right time with the right idea and in the movies step two I said we kind of kind of gloss over it I call it the photo montage it lasts usually like one or two minutes it just you know you see them like pounding on keyboards and drinking some beer and the social network they draw in those really cool windows with the markers member that's seen I love that but we did that to course a law college entrepreneurs that's what that's how it's done and then you can move on to step three and my question is why is the photo montage so vague why is there no dialogue in the photo montage why does it only last two minutes and how come we never talk about it as entrepreneurs we only want to talk about acts one in three the answer is the sad truth the photo montage is really boring it's excruciatingly ly boring it's unbearably boring what happened think about what happens in the photo montage we're all entrepreneurs here so we know what happens there it is things like product prioritization meetings who's been in a product cart ization meeting recently yeah okay pretty much everybody who felt like it was movie worthy really interesting which wishes that with a camera crew there of course not it's too boring it's things like deciding which customers to listen to and which to ignore its things like deciding the most difficult thing of all how do you know if it's time to pivot or should you persevere in your vision it's the stuff that we never talked about it's too boring and yet I believe that 95% of what determines the outcome of startups happens during the photo montage in the boring parts and that's you know for all of our vaunted lionizing of Steve and how great he was and the great ideas that he had it was the building of that organization that could do the boring stuff exceptionally well over many years that is the thing that I honor him for today and so how do we get better at the boring stuff we're not going to do it by reading more profiles of famous entrepreneurs because they don't talk about the boring stuff it's too boring to make it into them movies is too boring to make it into the magazine profiles and yet I really think that's what we need to focus on I don't know if you guys have noticed but entrepreneurship has gotten cool all of a sudden and that's not good entrepreneurship is not cool let's be honest entrepreneurship is boring it's painful and humiliating and you want it being wrong all the time and that's not cool so for those who understand what I mean winter is coming and we need to be ready for that there's going to be a time when entrepreneurship will go back to being uncool and boring and then we can really be focused on the things that are true about entrepreneurship the things that actually allow us to create organizations of lasting value so that's all it's like a very complicated way of saying that my initial startups most of them actually most of I've ever built or be involved with have failed and that's not how you're supposed to start one of these talks I know I'm off message now it's like hi I'm an expert and most of my companies have failed and if you follow me you too can have most of your companies fail but look any one is telling you the truth about entrepreneurship is going to be talking about failure all the time because unlike contrary what we read in the magazines when you get down to your last dollar and things look bleak estándar movies that's always when like the first customer walks in right at that last moment when things are darkest and just to cheer perseverance you're just barely managed to get the plane to achieve liftoff but in the real law in real life the people they don't make movies about are people like me who when you get down to your last dollar you then immediately proceed to your zero with dollar and it's over so how can we prevent that from happening that's what I want to talk about and as a technologist someone who grew up programming computers I thought I knew the answer to that question it was like we'll just be more like my idols and make better technology so I what spent 10 years as an entrepreneur most of that time I spent trying to find better technology better products smarter people better engineering methodologies anything possible to make the technology better and I kept having this experience that some of you may be familiar with and if not you're probably about to be familiar with of building incredible products that nobody uses they're amazing they're incredible they change they could have changed the world if only anybody was using them and today most of those products are sitting on a shelf and if you think about that that is not a technology problem so what is it that's what the Lean Startup is all about I have been trying to figure out how do we prevent ourselves from getting into that horrifying position of building products that could have changed the world but didn't and I think most of us right now not you of course but the people to your left and to your right are in the process of wasting their time building stuff that people don't want and I think we are doing that on an industrial scale as an entrepreneurship ecosystem that most of the companies we build most of the products we build actually have no impact on anybody whatsoever and we're used to making excuses for that well we're taking a lot of risk and failure is obviously part of risk but things have changed it's not like it was in the old days when if you wanted to build a company around a new product you had to take dramatic technological risks I mean I don't none of us are working on teleportation here if anyone's working on teleportation by the way please go do that don't don't be here get good on that cuz that's exciting but the rest of us are living in a time when we can build anything we can imagine as entrepreneurs so the thing that we're used to focusing our energy on namely can something be built is really not the right question for our time the question of our time is should it be built is it possible to build a company around this series of products and services and that is a really different question than our you know forebears in the 20th century would have understood it's a it's a new question built of our incredible capability especially here we are in the Computer History Museum especially because of the semiconductor revolution why because as I said for almost first thing I said today that software is imagination made real so in an economy based on software our future prosperity will depend on the quality of our collective imaginations and you know how can that not make you think of Steve Jobs so what can we do with that imagination to use that precious commodity more effectively that's what I think we need to be talking about as entrepreneurs so let's start with a definition what is a start-up see we all think we know what a start-up is they all of you are in start-up so we know it when we see it it's obvious but let's just think about it for a second bear with me for a second here's my definition of a start-up a startup is a human institution designed to create something new under conditions of extreme uncertainty so therefore entrepreneurship is a kind of management that's why it's so boring by the way it's kind of management it's just different than a 20th century general management we're used to talking about it is the management discipline that deals with situations of high uncertainty what is the uncertainty we face as entrepreneurs it's that we don't yet know who our customer is we don't know what product they're going to want we don't know what the business model is going to be we only think we know we hope we know we pretend to know we try to convince everyone in our vicinity to believe a very important fact as if it was true that is not strictly speaking actually true which is that after we build all this cool stuff then customers are going to want it it's very handy the original term to describe this was the reality distortion field that was a phrase coined to describe Steve's talent and the problem is if you're sitting there in the reality distortion field you might be asking yourself this question not you but maybe you have a friend your friend might be asking this question which is that I'm following a visionary who's got the reality distortion field who can make people in their vicinity believe things as if they were true they're not strictly speaking actually true how do I know if I'm following the next Steve Jobs or I'm following a crazy person because there's another set of people who have the power of the reality distortion field and we call them sociopaths if you want to create a cult is very handy to be able to put on the black turtleneck and make up this field and then get people to believe things so what do you do right should we put on a show about how visionary we are and we definitely can see the future or do we acknowledge that we don't yet know these things and our job as entrepreneurs is to find them out I've been talking to a lot of entrepreneurs lately I have this book you probably have heard of it came out and I keep being he bi me to ask people this question do you want to be right or do you want to change the world because most of us when we think of our brilliant idea in the shower it just seems so incredibly brilliant you know what I'm talking about I mean the terms that I built when I had that idea everything I did every person I talked to every focus group I conducted every research report I read every every thing that happened reinforced my belief that my idea was completely right it was just like I was collecting evidence everywhere I was learning so much about how great my idea was nothing could dissuade me from it and if you ever had that experience and then the problem is not that we shouldn't have great vision not that we shouldn't you know really reach for the stars the problem is that most the time was wrong the idea is almost brilliant it's like I was saying before online profiles for the purpose of sharing accept oops slightly off a little bit off from the true business and if you'd gone back in time to me in 2001 and told me listen Eric you're almost onto something great but there's God dish the recruiting thing and you've got to create this online social network so that college students can poke each other I would have been like that is so stupid come on I'm trying to build a real business here some poke thing give me a break so I would have called Facebook which is about to IPO for honor how many hundreds of billions dollars not a real business and lots of us said that about the early days of Facebook we couldn't tell that this was something that was about to be one of the biggest business successes of all time because in the early days of any idea it's impossible to distinguish between brilliant and crazy because it depends the differences depending subtle details on what's really true will customers engage in this behavior is it valuable for them to do so so the only way to find that out I believe is to test those ideas empirically so the Lean Startup is a scientific approach to entrepreneurship where instead of asking the question we've all been trained to answer as engineers as marketers as product developable of any stripe we're trained to say how can I achieve the specification at minimum effort we want to change that to say how can I learn whether the vision is true with minimum effort so it's a slight shift that says everything a start-up does exist not to make money not to serve customers not to do anything except help us learn whether we're on the path to a sustainable business so I'll give an example I helped found a company called M view which today is very successful and I'm very proud of it blah blah blah you know all entrepreneur advice you must drive you crazy used to drive me crazy it's all like hi I did thing and then I got really rich and so if you do thing X you also will get really rich it's like so what how do I know that thing X actually caused you to get rich I don't even know that you got rich how do I know that what worked in your industry will work in my industry how do I know that what worked in the past will work in the present I mean it's really frustrating these syllogisms that just say oh so and so did this famous thing right Steve Jobs put on the black turtleneck and then he changed the world therefore it's absurd so don't listen to me because somebody told you that I got rich or I'm famous or doesn't matter ask yourself whether these principles can be useful to you and whether you could test them yourself so here's the story we started in view we wanted to create a 3d instant messaging social network because this is 2004 and instant messaging was still the hot new social technology this is before Facebook and we had this really good idea that you everyone knows that instant messaging is a network effects business people familiar with this so the value of the network is proportional to the square of the number of participants and therefore it's impossible to just bring a new ones to messaging network because since everyone already has an iamb network in order to switch to a new network they'd have to bring all their friends with them that's a high switching cost and therefore I am is a business characterized by high barriers to entry does that sound familiar anybody he would get that when I talk to MBAs and do a lot of talks in MBA classrooms people this is the only part of my top usually people start nodding to they're like oh that sounds good that's corporate strategy we know what that is and I'm like well if you like that you're going to love this check this out to avoid the problem of the barrier to entry we will create an instant messaging add-on that interoperates with all the networks and then when you use our product it will be inherently viral because in order to use it you have to use it with one of your friends and whenever you did that we would actually send a text link right over the IM client to invite the other person to download our product and join you in the chat isn't it sound clever can't you just picture interview spreading through the whole I am networks is it's like viral epidemic that's going to take over the world it's a very compelling picture I'm very proud of that strategy it is excellent in every respect except one and that is that everything I just told you is not true but doesn't it sound good C sounds good are the two most dangerous words in entrepreneurship everything sounds good if you have a compelling speaker you know who can tell you the principles of sound strategy most strategies fail not because they are incoherent and stupid but because they're simply not true picture this we would bring a customer into our office for usability tests and they would say what is this thing we've like it's just instant messaging add-on that interoperates within I'd be like what is that or like we'll just add on and it will help you avoid having to learn they're like understand we're talking about is it an IM network or not we're like sort of but not like it was just a huge problem they'd be like no thank you like listen we're paying you to be here and this usability test so if you want to get the twenty-five dollars you're going to download this probably big fine and they would try it and it would customize your avatar they love the avatar part of the technology and then here's what would happen we would say okay now it is time to invite one of your friends maybe like no thank you why not well I don't know if this thing is cool yet so I'm not going to invite one of my friends until I find out if it's cool or not we're like no but it's going to be so cool once you invite one of your picked and they're like not going to do it then we of course resort of that same trick again listen we are paying you to be here so you were going to do it and I kid you not more customers and not would not do it they're like keep the $25 because I will list somewhere of Commandments of mission critical software if you will who are in enterprises like you people in consumer don't make mission critical software oh yeah try getting the phone call from some teenager when you've actually made them look lame in front of their friends that's that's a list of Commandments of mission critical software like that is clearly number one do not make teenager look lame in front of friends and we couldn't get them to do this key behavior that our whole strategy was predicated on and so to make a very long story short we had to pivot away from the instant messaging add-on strategy and I was really sad because I was a CTO of this company the chief technology officer my job was to make this amazing technology that would support this strategy so we had worked day in day out I mean killing ourselves for six months to build what we thought was what we would now call the Minimum Viable Product the least amount of effort necessary to discover whether our businesses sound we're very proud of ourselves that we cut so many corners if we could get it out in six months but we were also a little bit nervous because any of you who are engineers in the room will know the saying time quality money pick - oh that's just engineering speak for this product suck okay it really was bad because only six months to build it it was this huge virtual worlds thing with micro currencies and social network and photo share in everything and there's no way to make that work in that amount of time it's said to cut a lot of corners and so the product really Aminu I want to be clear this would be about as likely to crash your computer as it would be to give you a delightful 3d avatar experience I'm gonna come clean about that now and so we were pretty nervous and I was like gosh are we going to ruin our reputations by launching this thing I had this image in my mind of you know newspaper journalists are going to discover this product we were launched it I gonna write this huge article idiots that I envy you don't know what quality software is you know big mug shot of me therapy I don't hire this guy ever again but we decided to get over that fear because we didn't want to spend years of our lives building something that nobody wanted as we've done in previous companies and so we we shipped the product and at first I was actually relieved that nobody would use it customers wouldn't even download it to find out how bad it was so it's like well least my reputation is safe you know that's that's good and I was like wait a second hold on how could I be relieved that nobody's even using as terrible is the worst possible outcome people weren't even getting far enough into our product to discover the horrible design decisions that we had made and how buggy our software was and to make a long story short as I said before we had to pivot into this other business and pivot is such a clinical word it makes it sound so simple like in basketball pivot takes two seconds you move on but oh no you some of you see you're laughing because you know guess whose work had to be thrown out because of the pivot you're looking at them my beautiful software my well factored well documented perfectly architected code if I do say so myself all of it thousands and thousands of lines had to be thrown away because we didn't need all this technology for I am interoperability the good code gun thrown away and the crappy ugly code gun thrown away the code that was under test coverage got thrown away and the code that wasn't all of it failure is the great equalizer of quality so I was pretty sad and I asked myself this question I say wait a minute why did I even have to be here if all my work got thrown away could in the company affair just as well without me and I could have been on a beach somewhere you know drinking a mai tai and having a good time while the and of course you all know the excuse I use to make myself feel better it's the same excuse all of us use when we failed to execute it's like well if I had done this thing if we hadn't put this product out we wouldn't have learned this important thing about customers right everyone familiar with that excuse it's like last excuse in the book it got nothing left you can resort to learning for those of us in general management know that someone who claims to have learned some of you're a manager and you're like I learned so much you're about to be fired why because someone who learned something only two things is possible either one they didn't put a very good plan together so now they learned how to make a better plan great fire that person or the work even worse they put together a good plan and they failed to execute it that person should be double fired that's even worse so is there any way I don't think it's that confusing my learnings become a four-letter word we try to hide from and part of our goal in Lean Startup is to rehabilitate this concept of learning because in entrepreneurship because of a high uncertainty because no one really knows what the future holds we're always failing all the time we're always learning but now go back to what I said before that everything a start-up does is an experiment and so I use the learning excuse to feel better until I had this question which really bothered me which is like wait a minute it's my goal for the last six months was to learn this important thing about customers why did it take six months how come the word learning is only coming up now as an excuse my co-founders and I never used the word learning when we were talking about what to build you know what our conversations were like every conversation was epic dragged down arguments about what about do we really need this feature in the MVP or can we live without it is can we even call this a version 1.0 if it doesn't have do we absolutely have to fix this bug or could we let it go okay are we on time on budget are we doing things with sufficiently high quality but my question is if we're building something that nobody wants why would we be proud of having done it on time on budget and with high quality it's like we're driving a car off a cliff and being like all we're getting great gas mileage as we go over the side it's embarrassing and that was really put me into a serious depression because I was like wait a minute we supported something like 12 different instant messaging networks for interoperability in version one it had to be that way because remember we wanted to spread like a viral epidemic if we supported too few networks and you wouldn't be able to be confident that your friend could use a product given I'm thinking do we when we've had the same amount of learning if we'd supported only six networks anybody obviously what about only three duh what about only one still the same we'll listen that's very easy for me to be like ah 12 6 3 1 but that's 10 times less work with the same amount of learning that was pretty depressing and then I had this thought this really freaked me out I said what if we had only created a single web page with a screenshot of the product we proposed to build and a big download button would we even have had to create page to where we apologize that the product doesn't exist yet or what a 404 have been adequate obviously the 404 would have been fine because what did I say before I said people wouldn't even download the product that means they wouldn't even click the button so what did it matter what's on page 2 and now I was really disturbed because remember I told you what I said in my business card what did it say it said chief technology officer it did not say chief one our crappy landing page experiment officer and yet hero was having the realization that the work I had done for the last six months my beautiful thousands of lines of code had the exact same value to the company as that one our experiment that even a web designer could have done that was really embarrassing and that is at the heart of why this is so freakin difficult because when we change our definition of progress from making stuff to learning we call it validated learning scientific learning about what's really true it totally destroys our conventional notions of what productivity means startup productivity is not making stuff more efficiently it is efficiently figuring out which stuff to build and it's not that quality isn't important as in all modern product development methodology is from agile to lean to code craftsmanship all all modern part development systems have quality deeply baked in as a core tenant here's the problem if we don't know who the customer is then we don't know what quality means so what we need to do is find out what quality means so that we can apply these other methodologies I'll give you one last example of what I'm talking about I mentioned envy is a 3d avatar product and but most of you have played 3d avatar based video games like The Sims and you'll know the standard is in such a game when you like click the mouse somewhere your avatar wants to move around you're a betrayer literally gets up out of the chair walks over to the place of voiding obstacles in their path their feet make contact with the floor as they walk it's called inverse kinematics from an engineering point of view for those that don't know it's actually phenomenally difficult you need an entire physics model of the space so you can figure out the path that the avatar would take you have to figure out how to make the feet mat it's actually really hard we couldn't afford that in our MVP and so even as we pivoted and started to get customers we didn't have that technology we were so embarrassed about it that we just made the product so that your avatar could only stay in one place so our social product to express yourself you had to be sitting in one chair the whole time couldn't move not the greatest plan actually in retrospect and customer feedback was really clear customer feedback was I feel claustrophobic feel stuck and trap this is a horrible experience I want to be able to move around and we were like oh god this is terrible because that means we're to spend months and millions of dollars building out this whole physics system what a pain and then just one night we were like you know I had this idea for a hack it was so such a bad hack I was kind of embarrassed even to bring it up to my co-founders it's like well what if just what if when you clicked your avatar to a different place we just moved your avatar there instantly and didn't like make you have to walk her and we were in there like ah geez you got to be kidding me that's gonna look horrible I mean I'm talking about some fancy animation we're talking about like literally one frame your avatar is here shaking hand to the next frame boom over here standing at the podium it's like really psychologically jarring it's violating every rule of 3d everything but we're like well let's try it what's the worst that can happen so we ship this feature and meet we not have the courage to ask any customers about this we were so embarrassed okay we did not ask anyone dunno we had a regular tracking survey we never asked what do you think about this thing the avatars did the psychological jarring thing no couldn't ask about it immediately when we asked me what are your favorite features about in view this jump new feature jumped immediately to the top they said we love avatar teleportation it's so much more advanced than the Sims we're like what are you talking about well in the Sims you haven't have to wait we have their walks over to the other place and in view boom you just teleport and we were like oh God but now here's my question which version of the product is higher-quality teleportation or walking around so our understanding of what quality means is that is entirely dependent on really understanding how our customers see the world and that is the genius of the great entrepreneurs is not that they can just make stuff up in their head have a grand vision but that their vision is actually right or more correctly they discover which elements of their vision are right and which ones are hopelessly crazy quickly before they tell the world about how brilliant they are before things go crazy and you create these monster expectations so that's what the Lean Startup is about I want to leave us with time for questions so I'll I'll close obviously you can read the book and you can learn a lot about these techniques in a lot more detail but I just want to say these raise your hands oh yeah so the microphones going around we'll take a few questions I just want to say that it's really an honor to share what has been you know kind of a morose day with all of you there's no better place than to me to be at the Computer History Museum on a day like today there's no better way to spend the day than with a bunch of entrepreneurs who I hope what I hope for you is that you probably will fail it's okay but my hope is that failure of your idea won't lead to failure of your company you'll have the opportunity you'll still have the runway left to pivot to something new that you'll dedicate yourselves to finding out what is actually true about your vision and which parts are crazy and that you will eject the crazy parts as soon as possible and that by the time you're ready to launch you will already have been successful you will be launching announcing you're a pre-existing success rather than doing the success theater bragging about the vanity metrics putting on the black turtleneck that you will actually have the opportunity to change the world thank you all very very much thank you happy Russians I think we have time for two three questions we have some mics around around the room thanks Eric that's a great talk thank you Guy Kawasaki was up here this morning and I asked him a question about customer development which I don't think you have the perspective to really understand what the question I was asking and immediately started to talk about focus groups and this net' I wanted to didn't really have a time to explain what I actually was asking but obviously you you understand that and looking outside at Apple how would you look at how they did customer development here's the truth as far as I can tell nobody knows what happens behind the closed door is that Apple the problem is that we all want to be Steve Jobs today we want to get up on the stage and announce our product Sooey generous to the world everyone's caught unsurprising everyone realizes what a genius we are and who has it fantasized about that come on let's be honest we're entrepreneurs here we can speak candidly with each other that's what gets you on the cover of magazines that's exciting but there's an insane amount of work that leads up to that and we don't yet know what really happens I firmly believe that it is impossible to do what they've done on a consistent basis without killing lots and lots of bad product ideas that don't work out and I just don't believe that the way it works is that you bring the prototypes to Steve he says these are the good ones these are the bad ones let's go there has to be some more empirical testing than that I just that's what I believe now nobody knows so somebody knows please tell me but I don't I think the anecdotes that have leaked out are all vetted by Apple PR to be okay and if you were doing when Apple was doing would you really want your competitors to actually understand how your process work of course not so I don't believe most of the stuff that we hear but but from what we what we know of the history of Apple I think the right thing to do is not look at what does Steve do today but what did he do before there was a time when he was just a dirty hippie at the homebrew Computer Club with no resources no one took him seriously and he built this thing the first time so the inspiration I take is not from Steve on the stage being lauded by everyone from the President on down as the biggest genius of our time I take inspiration from the guy that nobody would take seriously because he was completely crazy and go go look at a picture of the Apple one not the iPad the Apple one go read what he said then and you can see that there is some vision there he is talking a big game but he's not letting that visionary talk get in the way of building what is a very simple computer I mean it does not do very much it is not fulfilling the vision of what Apple would be it was you know and it was not launched on stage in front of millions of people it was launched at the homebrew Computer Club it barely worked that's the Steve Jobs I think we as entrepreneurs unless any of you have that kind of media profile same as Steve again why you here right though the rest of us what we need to do is take a take a lesson from from from not from Steve Jobs but Steven was you know what does that team look like how did they do what they did the standing up on stage and the faking out your competitors who secrecy that's all corporate strategy stuff from later which I still admire are great to copy but that's that's all I can really say about it I think we have time for one more question all right I had dinner with fellow who we actually all know I won't say who it is but he's about to become CEO of a giant retail company and I asked him what he was going to do when he laid out his vision for the company and and I said what's so wow I said gee that sounds like a huge change from where where this company is today and I said how do you roll out how do you test that how do you roll it out and he said we're just going to go and roll it out to all the stores and and I went you've got to be kidding me because this is such a huge change how are you going to do this without testing it and he said this is the test I mean it's you know it's all or nothing he's it's all or nothing so I'm gonna carry us as to which what you think of that particular approach because this guy is you know it's probably the most successful grand retail you know in the country yeah yeah yeah here's the thing general management works in a limited context it's just the bin the most important context until now so I don't want to belittle that approach because it has worked right if you think about what general management is it is a series of tools and techniques that are all based in planning and forecasting as they're as our primary tools you know a general manager gets promoted if they beat plan that's not familiar to anybody right if we do things as over on track on budget on time on target that means we're doing a good job and if you do worse than plan you get fired that's the rules of general management but think about that just enough to understand that planning and forecasting requires that we have a long and stable operating history from which to make the forecast right who feels like the world is getting more and more stable every day nobody nobody's ever I've asked that question audiences all over though no one has ever raised their hand if I guess gosh I'm really getting a much better understanding of how things work gosh the world seems so complicated before but it's so simple now no one feels that way so we don't have the stability that those tools in need so what an earlier era that would have been a perfectly fine plan would have been the best plan available you just analyzed you know from all the market research figure out what needs to be done and then executes the transformation but it doesn't work anymore and so this is not just about startups I mean I know we're all startups here today but we got a lot of people on the livestream not every single one of them will be your classic garage entrepreneur and I want to take us back to that definition I mentioned at you know earlier startup is a human institution designed to create something new under conditions of extreme uncertainty notice that that doesn't say anything about size of company doesn't say anything about sector or industry it is a general-purpose technique for figuring out in situations appliance or do what products will lead to a sustainable business well that is a tool that is just as useful for the world's largest companies as the world's smallest if they can figure out how to take advantage of it and I'll close with a story I guess I won't name this name on they all name this company either but but this company bought a pretty successful startup that all of you have heard of and they put the founders to work in their company on a new product and these founders were incredibly frustrated in no time you know you know the story right well we when a company exits we celebrate but that's generally the funeral that's the beginning of the the the slow death of the public markets or the fast death of being acquired so I don't know exactly what we're celebrating that's for another day here's why they were so frustrated it came to me one of my workshops and I said look we're big believers in Lean Startup you know they were very early adopters of this approach it helped them in their startup they were constantly having meetings with senior VPS at this giant company and the senior VPS would have this exact same interaction they'd be like we're going to launch this amazing new corporate initiative blah blah blah blah blah and they would say awesome I love that idea it sounds great let me break it down for you into a series of hypotheses and proposed some tests and they got the universal like the same reaction from every SVP every time the like wow that's so brilliant you're such a smart guy it never occurred to me to think with that level of rigor I want you on my team and they'd be like no I didn't do anything brilliant just now all I did was apply a different framework for looking at this it's like just as good as a framework you were trained in but it's different and and they could not see the opportunity they were really being handed by these entrepreneurs the opportunity wasn't just get some smart people on your team and hope for the best that's pretty much how we run things today it was systematically change our thinking about what productivity means about what success could look like and how we could test how we could be scientists not stralla Jers in this situation and since none of the SV P's get paid to do that none of them would listen to him and so pretty soon he was out doing another startup and that's great for us but for those of our colleagues who are in established organizations this is the change that is coming and you know personally as an entrepreneur I am indifferent as to between the two possible outcomes of our major established corporations make the transition and change to the new way of thinking or they get disrupted and destroyed by startups to do either way this is going to be the way this is how work is going to be done when we look back on this time decades from now we are going to laugh at the way that we manage innovation and entrepreneurship today the way that today we laugh at the people in the early 20th century couldn't even run a factory so you know suit up it's coming thank you all very much appreciate it

Channel: Silicon Valley Bank

Views: 60,697

Rating: 4.9097743 out of 5

Keywords: Eric, Ries, Lean, Startup, ceo, summit

Id: J4rOdxoCnwY

Length: 42min 25sec (2545 seconds)

Published: Fri Oct 07 2011