Jordan Ogren

February 2, 2022

The Lean Startup <> Book Review 05

I'm fascinated with startups. They're a concrete reflection of what is needed to succeed in business. 

They don't have moats or establish revenue channels to rely on. They must build quickly, pivot when needed, and develop revenue sources.

Most established organizations could learn a thing or two from startups. And that's what I hope today's book review brings; a few lessons you can apply to your business.

The Lean Startup.jpg

The book: The Lean Startup by Eric Ries

Why you should read: To understand how entrepreneurs use continuous innovation to create successful businesses and how to implement innovation principles into your business to grow and sustain it.

TL;DR: The Lean Startup provides a framework, questions to ask, and mental models to use when infusing innovation into your company to not only grow but survive in the unknown future using real-world examples.

The main points:

Point 1: There are two main reasons startups fail: 
Reason 1: The allure of a good plan, a solid strategy, and thorough market research. 

Planning and forecasting are excellent, but they bring little value and do more harm than good in an uncertain future or unstable market conditions.

Reason 2: Going too far from the old management style and adopting a "just do it" mindset. 

Chaos is not the answer to growing a startup. Instead, you need processes and plans to ensure you can measure and pivot when things aren't working.

Point 2: The two assumptions (hypothesis) entrepreneurs make
Value hypothesis: This tests whether your product or service really delivers value to the customer.

Growth hypothesis: This tests how new customers will discover your product or service.

By having a firm hypothesis for both, you can test and figure out whether you're correct or way off. If way off, you must pivot with a new hypothesis to succeed.

"The problem with most entrepreneurs' plans is generally not that they don't follow sound strategic principles but that the facts upon which they are based are wrong."

Point 3: The critical strategic advantage startups (and companies) possess is learning
The company that can learn from their customers and marketplace the quickest wins.

"The ability to learn faster from customers is the essential competitive advantage that startups must possess."

The key is that learning must be as objective as possible. Too many times, we cherry-pick information to suit our hypothesis. Instead, we need to be honest and view the learning without subjectivity.

Point 4: The build-measure-learn loop is the key to continuous innovation
The first step–after having an idea–is to enter the build phase with a minimum viable product (MVP). Get this in the hands of ideal customers, leading to the next step, measure.

Measure is where you determine whether product development is improving the product or not by having key metrics, not vanity metrics, that you track. This leads to the point of learning whether the idea (or improvement) is something you should continue—was your initial hypothesis correct or not. If not, you pivot.

"If you've discovered one of the hypotheses as false, it is time to make a major change to a new strategic hypothesis." 

Point 5: The three engines of growth for startups
  1. The sticky engine of growth
    1. Where companies depend on customers sticking with them
    2. Companies using this engine track their attrition rate or churn rate very carefully
  2. The viral engine of growth
    1. Growth happens automatically as a side effect of customers using the product
  3. The paint engine of growth
    1. The margin between the LTV and CPA determines how fast the paid engine of growth will turn

The main quotes:

"Entrepreneurs need to focus their energies on minimizing the total time through the build-measure-learn feedback loop. This is the essence of steering a startup."

"A startups earliest strategic plans are likely to be hunch–or intuition–guided, and that is a good thing. To translate those instincts into data, entrepreneurs must get out of the building and start learning."

"The critical first question for any lean transformation is: which activities create value and which are a form of waste?"

The main question:

How are you learning from your customers? 

If you do not have a process, how will you guarantee reliable and consistent insights to help you avoid extinction?


While this book is mainly for startups, many business runners could gain value from understanding the core principles Eric lays out.

My main takeaway was that the best way to win over the competition is to learn from customers faster. And then have a system to implement those insights against hypotheses.

🧠 + ❤️ // JO