You thought founding a company was all about disrupting incumbents, or scaling up, or getting rich? Eric Ries’s 2011 book, The Lean Startup, said no—a startup is a lab. Its purpose is to conduct experiments in a business environment where the only certainty is extreme uncertainty.
Actually, there is one other certainty: That popular business books will introduce rafts of new acronyms. According to The Lean Startup, a startup’s purpose is to launch MVPs—“minimum viable products”—into the world to discover whether the founders’ LOFAs—“leap-of-faith assumptions”—pass the reality test. If so, your startup might have a shot at achieving PMF—“product-market fit”—and unleashing exponential growth. If not, you’ve failed early enough to keep your losses small, and you’re free to pivot—to fulfill your original vision with a new plan.
Borrowing ideas from agile software development and lean manufacturing, Ries’s book found its own PMF, and it kicked off a movement that’s still working its way through the tech industry. Now the author is back with a follow-up book, The Startup Way, aimed at propagating lean startup thinking inside General Electric-size corporations, government institutions, and nonprofit organizations that covet Silicon Valley-style nimbleness. He’s also unveiled a new project called the Long Term Stock Exchange, aimed at creating a different kind of capital market that rewards long-view strategies over quarterly profits.
Affable and voluble, Ries is a fast talker who puts each new sentence forth tentatively, as if the words themselves are an MVP he’s testing out on his listener. Over a recent brunch in San Francisco’s Cole Valley, he spoke with me about how people inside large organizations can be motivated to work with the initiative and drive of startup acolytes.
Scott Rosenberg: The Startup Way argues that you can transplant the stuff that drives founders—the motivation and passion, and the openness to experimentation and learning from failure—into big old companies and institutions.
Eric Ries: Absolutely.
That feels so counterintuitive.
It can’t possibly be true. I know.
Everybody knows founders are motivated by ownership, belief in a mission—things that are a function of independence, self-determination, and the absence of a boss. How did you come to this alternate view?
Accidentally. I come at this from product development. The reason I became an entrepreneur was none of those things you listed. Having to build a company—that was a burden. But I was like, “At least I can have this impact.” I wanted to build knowledge. I’m an engineer. I make software.
And so when people started asking me to work with their product development team, to use these principles, it didn’t even occur to me to ask, “Is this a startup or not?” This is entrepreneurial management. Yes, it works in a startup. But there’s nothing foundational about it that requires it to be a small company, or to have equity, or any of that other stuff—the surface characteristics of a startup. I committed myself to the theoretical proposition that anyone could use these ideas.
Then what kept happening over and over again is, I’d see these incredible transformations take place, and wonder, “What am I witnessing?”