What Has Eric Ries Learned Since 2011?
Interview at SXSW Interactive 2015. Interviewer: Ted Greenwald from the Wall Street Journal.
Can you summarize the Lean Startup for those who aren't familiar
- No rigorous, longitudinal study to determine whether Lean Startup is true or not, but he’s hoping there will be.
- A startup is just anything new being created under conditions of extreme uncertainty.
- Use science and not astrology to figure out what’s supposed to happen. That's what is in the book.
- A pivot is just a change in strategy w/o a change in vision.
What are the limits of the theory?
- The answer is getting crazier and crazier. When I originally presented Lean Startup, I wrote a slide saying it works for companies "independent of size or market cap" or something like that.
- Now, we're starting to get very far from SV
- External factors are the ones that make it impossible to implement (regulatory, for example)
- How many of you founded your companies because you hate big companies? (Some hands go up.) Okay, why are you creating another one? Do you want to be successful or not, and if you're successful, won't you have a "big" company?
- To founders/execs: If you don’t like the results you’re getting in your company, look in the mirror.
- What kind of company do you want to create?
- Do you want to build the kind of company that had the one good idea? Or one that has sustaining innovation?
We're doing a lot of work for GE. "It’s a weird thing doing this for a living". Purpose in writing the original book was to stop ppl from doing this waterfall nonsense.
Funny thing is that we've been asked to consult at Toyota even though they invented this whole lean manufacturing thing in the first place! Why? The missing half at Toyota: what is the thing i should be building in the first place?
Also, if your company is built to the same 20th century corporate blueprint (organizational structure, etc.), your outcomes are going to be the same, no matter the size (startup or GE)
- Most executives think they don’t have the right people (engineers or whatnot) to do this
- Engineers of course point the finger at senior management
- Everyone’s got a reason why it’s someone else’s fault.
- No matter how old the company, the entrepreneurs are already there
- Entrepreneurship is the missing "function" of almost all our companies. It’s like if we were missing a marketing department - which at one point, companies didn't have that either.
Another issue with corporate America, Wall Street expectations and whatnot: if you're an established, mature one, you make projections and you think you're doing pretty good if you're +/- 5% of target. However, if you’re an entrepreneur you’re likely to miss your target by thousands of percent! But within a company you’re likely to get fired if you delivered those kinds of results!
By the way, multitasking is the devil. No multitasking, build a cross-functional team where individuals on that team focus on one area. You can't do "agilefall" where you do "agile" just to crap out a binder of specifications and then implement in a waterfall way. What happens is you get to the build phase and you have questions/clarifications but the "agile" people say "I put it in the big binder of specifications". This is crap. You must do learning & development through the whole process.
How do you give a cross-functional team the same runway as a startup?
Well, one thing you need to fix first is budgeting. The way we do budgeting at companies is like the Congressional appropriations process. You fight and fight to get on the "deck", to show what you're doing is valuable and should be funded. But once you’re on the "deck", you’re funded in perpetuity. (entitlement funding). But the problem is that folks who have entitlement funding don’t have any urgency.
The alternative is metered funding. Development cost, personnel cost, etc. It’s your money spend it on whatever you want, but under no circumstances come back to ask me for more money unless you have some validated learning. VCs don’t ask you what you’re going to do with your money, but God forbid if you ask for more w/o learning anything.
The issue of ownership: How do you give teams in large orgs a stake in the game?
The best way is equity ownership. A lot of companies believe that they can’t do that, but actually if you talk to the CFO, it's relatively easy to do.
However, it’s also not that important. The research on financial comp shows that ownership & mission is a much bigger motivator for people. Dedication is critical. Often folks inside orgs make a "deal with the devil" with their boss like, "if it goes badly, I take the fall, if it goes well, you get the credit" . This is horribly demotivating. Whereas think of Toyota, where the cars' code names are after the name of the engineer ("it's Senji's car") so the chief engineer is responsible for all outcomes, positive or negative.
How do you deal with the fear of failure?
Yeah, it's extreme. Many folks end up retroactively adjusting the plan to "avoid failure" -- it's very Orwellian. Just having the concept of the pivot is critical. It’s really hard to drill that into people's heads that a pivot isn't bad: it's just a change in strategy to align closer to the vision. Just because the strategy didn’t work doesn’t mean the vision goes in the trash.
There are also a lot of HR practices and perf mgmt practices required for this.
One idea: # of productive failures as a line item in the yearly perf eval matrix. If a person has “no failures”, either they’re lying to you or they didn’t do anything that year.
Productive failure: you learned something, or you stopped doing something (zombie project). The project in its initial incarnation failed and led us to do something we wouldn’t otherwise have been able to do.
What about your next book?
I swore I'd never write another book because if you know how hard it is, you don't want to do it again. It's like having a baby. However, when people ask you the same hard questions over and over, it’s time to write a new book.
But -- traditional publishing is really slow and not lean/agile in any way. So I'm actually here at SXSWi to launch a Kickstarter campaign MVP concept for book. (Julian's note: I contributed so I'll get an e-book as soon as they launch) One-time-only, Kickstarter, one print run, limited scope
The book will be a deep dive: in the trenches, oh shit, trying to do Lean Startup.. what do you do? I need to know ROI, financial projections, blah blah blah. Questions that come up in real life.
If you back the campaign you will get the guide.
You will also get a private community and Eric wants to learn from backers of the campaign. Everyone who backs the campaign will also get the new book when it comes out.
Does any of this lead towards certification?
(Shakes head.) "Being a certified entrepreneur seems like the dumbest concept to me." There is one thing I never want to have in Lean Startup. (goes on a diatribe about Six Sigma) I’m hoping there will never be colored belts, but I guess never say never.
I think software people have an advantage when it comes to management b/c we have a systems background. So they’re good at human systems management. Debugging human problems is hard, but not that hard.
Fundamental attribution error — in most times the behavior you see in other people is strongly influenced by the environment they’re in. So, if my systems are so bad that people are making this error then shame on me as a manager for that.
What about orgs abroad and what was your biggest cultural shock? how to do business across borders?
I was actually shocked how little cultural differences mattered. Now once you translate the concept into the local culture people will get excited about it. but everyone thinks the cultural difference will not work. Everyone has their stereotype.
When do you call it a day? What do you think about timeboxing startups like in the Netherlands?
Are there other reasons for an entrepreneur to stop? Entrepreneurs only stop when they run out of money. Which is actually a problem, because our industry has a lot of zombie startups out there. A zombie startup is worse than failed startups. There should be techniques for stopping zombie startup but I don’t think an arbitrary timebox is it.
Don’t waste time talking about should you give up and go home. You can put a deadline on a strategy, though - is this strategy taking us closer to the vision or not? If not, then pivot.
Questions about MVPs are questions about experiment design. A good MVP balances the fidelity of learning with the speed of learning. You’re much better doing something quick than to ship a high-fidelity product where nobody cares.
Quick & fast only makes sense if you’re committed to doing something long-term — that’s the interesting paradox.
In other words, "we are going to keep experimenting with this until we get the right product or we run out of money" -- that should be the commitment inside a team.
Also, sometimes customers like the shitty MVP than the complicated one - go back and look at google.com's about page from years ago, with the "hey, sorry our front page is so basic, we swear we're going to build a directory just like Yahoo! when we get the search algorithm right" - well we know where that went.
How to choose between viral, paid and sticky engine of growth?
Companies have a problem picking one. I recommend you choose one. However you should pick a date on a calendar and have the argument then but until then we focus on that one thing and that one engine of growth. Everyone wants growth - that’s the only difference by sector.