ABOUT THIS EPISODE

Eric Ries is disrupting the world of entrepreneurship. His book 'Lean Startup' has become a movement and a community for big and small business people alike.
He's the father of the MVP idea and tools like the Lean Canvas. So embark on a journey to discover the essential ideas behind the worlds leading product development methodology.
English
United States

TRANSCRIPT

00:00:09hello and welcome to the Moon shots podcast it's a huge episode 42 and a mule co host by the international did Chad Owen good afternoon good morning Mike how are things I hear you've settled into a new Abode there and lovely Sydney this fall spring spring you're the Fool on the screen yet I have to report to you Chad into Allison is I have survived to renovating my own ass I have to credit my lovely wife he did all the work so I'm talking to you from my new studio I am very happy I am as they say a pig in mud and very excited to get back to recording to share with you because Chad usually I'm the one that zipping all around the world but you are hands-down have been traveling more than made the last 4 weeks where have you been and what have you been up to
00:01:09sing Mike but yeah I've been really fortunate to have some fantastic clients in San Francisco San Jose Scottsdale Arizona London England it's been a whirlwind 6 weeks but I'm excited too kind of hunker down settle and maybe pick up some more books of people for us to potentially profile take it easy and Caicos into the new year so yeah that sounds perfect has the winter sets in to Brooklyn I can see you nestled in there reading up on some inspiration in new ideas and boys so far in this series I mean we've had clay Christensen Peter Drucker Woodhead Simon sinek I mean we are really damn picking some of the best Innovation writers in history but we've got one more left as part of our writer series shed are we going to dive into today we are going to
00:02:09end the series the person kicked off this latest craze in the product world Innovation world's I'm sure all of you heard of The Lean Startup why all these ideas aren't necessarily his he's very much inspired by many of the people that we've profiled Eric Reese author of The Lean Startup yes and I cannot tell you personally Chad like The Lean Startup the work of Eric has inspired my were great in fact when I was living in San Francisco I got to work with Eric when together we're at the start of the fast which program said General Electric and that really helps me on to this idea of focusing on just the essential part of a product and really testing whether it's not only a good idea but whether it's truly viable and it has radically change
00:03:09the way I thought about our dads and I can't tell you how much this topic of getting just the minimum product and making sure it's viable is something that is as of just today after the show I'll be with a client and we're actually building a number of products together and the essence of a conversation is he's a brand new products never been on the market for Salt Lake version 2.0 or anything like that and the whole discussion is about navigating between what is just enough of the first iteration of the product and what we need to do to prove its viability and within all of this isn't a huge dialogue of what are we learning and I think that's what Eric Reese has given us he has packaged how to build a product in the modern age in such a powerful way Chad you must just run into this all the time that you're talking with all these Innovative entrepreneur is creating whether they know it directly or indirectly they're old
00:04:09kind of using versions of the distilled the things that were working in Silicon Valley and elsewhere and created an understandable model and wrote a very good book with a great story kind of bass in his own experience in founding IMVU and his struggles which will hear directly from him about that experience but others like Steve blank go even further back into the history of of Silicon Valley you know begun this science of Entrepreneurship and Eric really kind of brought it to the masses and made it accessible to everyone ways of thinking about entrepreneurship and different methodologies and I remember picking up the book 2011 too long after it came out and while I'm not a traditional techie entrepreneur type person I really latched onto it as I can. I think most anyone can kind of operate their businesses in this way and so I'm really excited to dive into
00:05:09different Frameworks that Eric lives out in the Lean Startup East pools from so many different interesting perspectives like the Japanese with a Toyota lean management system please don't get me started I love the five Improvement there's so much I can't wait to get into it back on what we both thought was the essential also on how to build product in the modernized meaning whether you have built a product or whether you're thinking about building a product this show has a time for you because for all the season product guys that listen to a show we know there's a lot of use this might remind you some principles or might just one or two little things that you've been telling with whether it's what you measure the hell you how do you think about the rate of learning pivoting all of that kind of stuff however it is you're thinking about
00:06:09creating a product Absher even dreaming of having a successful app on the iTunes Store vases the show to you and in fact the reason why we picked Eric as well as the two most contemporary office of Simon sinek is all about leadership and how you behave and Eric is really about what you do it's the art of building great product so together you've got really the two essential books you need for entrepreneurship in the Modern Age and both of them chat my gosh Simon sinek Eric can I tell a story of what these clips just be sure we can get through all of them I think there's so many Fantastic ones in I think it's probably best to just hear from Eric about his own struggles as an entrepreneur and I think we're many of his ideas were were tested in the real world so that's actually exist
00:07:09Tennessee to company that he found it called IMVU so here's him really just talkin about the Genesis of much of what he learned while trying to build a fantastic product it will go on to become a unicorn company but we'll find out that it didn't quite turn out that way I don't know if you wouldn't do a plan like this but maybe you have a friend who's attended this or maybe thinking about attempting this in the future so let this be a lesson because we did something I call achieving failure we weren't about $49 building this company and and after the five years of South R&D we felt pretty pretty spectacularly what you got understand nothing I say the rest of this lecture can make any sense at all if you don't grasp that we didn't failed to execute the plan that was not our issue we had a Flawless execution we build a really amazing product really compelling technology we did hire the best and the brightest and we had a great lunch and we were in New York Times Wall Street Journal CNN at all the right blogger saying this is the future of the internet and we
00:08:09small problem which is that although we got all these mainstream customers and try our product none of them liked it and so we couldn't convert all that energy into a workable business until you ask what how could all those smart people having worked on it for such a long time have come up with such a bad plan is because we were crippled by when I called Shadow belief is our beliefs that were universally shared within the company it we're never ever spoken out loud or ever written down I'll share three of them are with you right now the first that we know what customers want which you have to believe if you're going to devote 120% of your time and energy into building a company but the thing is entrepreneurs have this ability we call it the reality Distortion field disability to get a people in their vicinity to believe things as if they were true they're not strictly speaking literally true and one of those things that people right now desperately need this new technology that we're building inside the reality Distortion field and I don't want you to get the idea that there's something wrong with that
00:09:09entrepreneurs have it garage doors. Entrepreneur is the issue is that does another category of people that use a real Distortion field make all them crazy people
00:09:17rice if you want to create a cult is extremely useful to have the reality Distortion field to the Crux of the issue is how do you know if your in a startup and for those who were in a start today I will I know you're not in this situation but maybe you have a friend think about whether the vision that you're following is a vision of a brilliant startup founder or of a crazy person will get to how to tell the difference in a moment or two that we can accurately predict the future which is something that crazy people sometimes do say also startup founders of a business plan if you're a startup and business plan. Have a spreadsheet in the back of which you explain to your investors that in year five you make a hundred million dollars anybody that inspection the back of their plan. Nothing wrong with having a spreadsheet in your business plan that's a good idea the issue is what happens when we start to believe those projections are literally true like we're Nostradamus and we know what's going to happen in certain number one we had the spreadsheet that said in your one we would have a million simultaneous users so on the engineering team we were really excited while that means we need to Bill
00:10:17a serious heavyweight architecture to support those million chances when they show up and push them they didn't show up not only if we wasted a lot of time on an architecture that no one was going to use even worse we've lost the agility necessary to change that architecture cuz it was this big heavyweight monstrosity that was patent pending but ultimately useless and shut up with number 3 that advancing the plan is progress
00:10:41in conditions of extreme uncertainty and we don't know what to do it's natural to just kind of fall back on what we can see and measure in the easiest thing to see in measuring a start-up is Milestone sew-in start number one we were very rigorous about making sure that we hit deadlines and we did what we said we were going to do and we made the plan and there's a reason why we were able to execute that good plan we held everybody accountable for really doing good work no promise we didn't have a mechanism for asking ourselves is this plan any good but is it worthwhile to advancing
00:11:12yeah I was so nice to hear from Eric himself in to hear the kind of candidate mittens that they made a 40 million-dollar missed a call from that what he called a shuttle beliefs and Chad what for me this is all about if I just occurred this idea for our audience he's like it was all gases everyone was guessing it was going to be the numbers in the spreadsheet for the G5 Revenue was I guess everything was a guess and to me this is the greatest source of product failure people guessing and but yet the guesses somehow become these trees that nobody questions and so and he's Story 5 years later million dollars later they realize they didn't have anything and it was only because they were guessing so to me the biggest thing we can take from Eric is stop guessing about
00:12:12customers want from your product and transition into knowing learning and validating I think it's such a powerful story that you check yeah and it's funny cuz it begs the question well okay so we have maybe I am guessing but what do I do now he doesn't leave us hanging this framework of build measure learn in this idea of testing so I'll just let him help answer his own question that he's asking how do we move Beyond trying to predict the future like a crazy person
00:12:50different ways to conduct experiments that can test the assumptions in a business plan we can talk to customers in person or on the phone to really get a sense of how they react emotionally qualitatively to our ideas we can build a minimum viable product some early for the type that it's designed a test to see whether customers 1 gauge or purchase or we can do split test or a B experimentation or we create different variations on a theme and see how similar groups of customers react to each each of these kinds of experiments is appropriate in different situations has merits in different Industries at different stages and asked you to choose the right approach for the right situation she is in contrast to the traditional way of Building Product in particular technology products we're going to the bathroom and spend three or four years implementing the newest and Grace
00:13:50what has been done for years it's what we called the waterfall approach and it all starts with these massive requirements which a complete gases and it defers all interaction with customers and uses until actually product is launched Eric is really promoting and I cannot recommend enough he's actually start with testing emoni with your stuff together prototype interview really get to know what the pains and gains that affect your customer and then you start to actually test whether you can relieve the pain and create the games and this is a massive learning that we can all take which is done start with a long business plan start with what you think is a big problem and how can you apply a radical solution to create is simple to say Chad but it actually it's a bit harder to do is the ideas that Eric is really
00:14:50I think really were pioneered by Steve blank and so if any of you are really interested in kind of this very early-stage entrepreneurship I'd highly recommend you take a look at everything this evening, but he's kind of the father of what's known as customer development and these are the things like how to ask potential customers the right questions to know if there's a day are there if there's a big enough problem for you to try and solve at that point you really not even thinking of a solution that you may build you're really just understanding truly what the pain point is only you understand the pain point to begin building something so those of you that maybe thing and I don't necessarily know if you can actually get really good at the things that Eric is laying out doing customer interviews doing MVP prototyping and doing a b testing you'll be Leo
00:15:50how many times have you and I work in produce to get away with visually seen Executives have that with testing in the morning I mean at least two dozen times and you probably didn't want for you and it's magical for them because it's Innovation is really not that hard in the end and Technical really hate it empathetic right in the end it's just caring about the paint if your customer and I think this really launched as into this next side ear is some of the advisory has for us when we thinking now about building this product how do we actually know if people want it how can we from the gas to The Knowing so let's have a listen now to Eric Reese on how to know if people want a product
00:16:46when do Innovation accounting and we make very specific per customer Behavior predictions like you know one thing people do is is sell the magic version of their product on a landing page somewhere and it's like don't even say what the product like how it works just say benefited gives you and see if you can get people to sign up if you don't sign up for the magic they certainly not going to sign up for your product is Magic is always better if magic isn't even good enough of the conversion rate on Magic is too low then yeah you already know that you have a problem not that that means therefore give up go home it just means there isn't already enough latent demand for what you're doing until you're going to be in a different kind of market and maybe you expected
00:17:25this is kind of revolutionary to me when I first moved to New York City I cannot go to some people that were doing just this they were inventing a product and service ideas and just creating landing pages to sell the services that did not exist so they had these sexy pictures of you know a new scooter rental service which is funny because they had the pricing everything when you clicked by it actually took you to like a survey where you know you answer some questions because it's such a brilliant way to test if there's true demand for what you're offering it would be better if you got them to actually like putting some credit card information but then I think you're kind of walking in the shadow a line there. I was just so amazed that people were testing sometimes it doesn't ideas in a weekend until they found something that was working and only then did they get the band together to attack should try and make it
00:18:25and we can look at companies like Dropbox who are enormous now but started with this very process and the crazy thing is this client that I'm actually going to see Lady today earlier in the last month we actually had seven teams doing this demand testing and I can't begin to tell you how much inside this gives you certain is there a market there is there a need that however the one thing I would say is to compliment that you really need to do deep prototyping to know that there's a pain in a gang and that you might be able to address those but already what was starting to see is this culture of learning and testing and not holding onto your product Vision like a stubborn mad scientist Type R A the saying I'm going to go out there and solve a big problem and I will test many times and Babs
00:19:25my idea is going to change it quite a lot based on what I'm getting back and it's that feedback that is where we do risk a project and tradition that's not what we have done so already when is huge learning this practical advice of test and learn continuously different was the concept of what you in a client wants to build at first versus where you are now after having gone through these several teams several weeks worth of testing I would say that what's interesting is sort of the general notion of choice or a pain in the market and we wanted to address it I remember 17 is probably 25-30 Executives this was a serious accelerated program full time 8 weeks the mission the general ideas have not changed too much the ID to
00:20:25the particular segment in a market in a particular area that has not changed but boy Chad how we will address the Pains of the user in the games they looking for that already has changed dramatically with a combination of these two principles testing market demand and prototyping with real customers and we just haven't very very basic prototypes and we're about to launch into some deep design and user insights so we've got a long way to go and already it's that is what's changing dramatically to what was supposed to mention that it's really interesting that the kind of mission and core purpose or what you're doing doesn't necessarily change but how you get there can be wildly difference based on your first assumption exactly exactly be the life of the end-user and that's where you've obviously made lots of assumptions and cray cray
00:21:25testing correct you on that in the end all my gosh this is like the worst thing that we've got Farm Simon and I wanted to point out to our listeners I think you and I always sleep big fans of Lean Startup and the interesting thing is that I'm so he's got Lean Startup which do you think there is a bigot Bible in Silicon Valley Chad it is used by more people than the lane satellite recent cynic would have to be the two biggest most influential orifices for set of contemporary Tech entrepreneurs can you take creases practicon every startup Founders the Shelf others may have some other books by thing everyone has the Lean Startup on their bookshelf
00:22:25play the startup way which deals a lot more with the internal machinations of startups and large companies as they start to go into they grow to maturity phases so I want to highlight that the start-up Waze another book by Erick f i listening are interested in of course as usual will have links to all of these in Ash but before we go into MVP and measurement skills tactics and ideas I wanted to ask you Chad in reflection since 2011 when you first read Lean Startup what stands to use like one or two of the biggest things that you've taken away from that book and embodied if you look at how you've worked in the last seven years since you're reading the book where is Eric's book filling set up inspired you the most for me all of us myself definitely included have so many hidden assumptions
00:23:25conscious assumptions that were making when we're working with clients are building products I'm always amazed that kind of my own ignorance and assumption make sure there's going to be a limitless capability for us humans to think it we know and can predict the future the way things will be of that for me the way I hack that is to really just be in conversation and dialogue with his many people as I can and so you know the story telling me like I love interviewing people I love and bettering myself with interesting teams that are building cool and Innovative products and I think as long as I continue to keep my finger on the pulse and really am just sure that I'm engaging in talking with people and doing these kinds of interviews and that is how I can work through and past many of the assumptions that I'm making I'm very much the same and my reflection
00:24:25Wingstop I wish I'd Reddit approximately like 15 years before it come out I started an internet radio station in Australia in 1997 and if only I'd had Lean Startup then I would have learned so many crucial lessons and you're right I was just guessing so much of it the product itself was bringing cool but it just wasn't viable of breaking at how to make money on internet radio in 1997 and now you have all those learnings it's in farming what you're doing now that I love from Eric is why he does kind of called spending $49 and 5 years of failure T talks about walking away with lots of insights and Innovation accounting I think we know what that implies is that there is a way to put some metrics and measurements on a vague idea of like do I know enough about my customer and Dua
00:25:25about the problem and there is a way to begin to track this thing so here's am actually talking about how we can measure our way to success or failure which are about 4 customer behaviors things that can be measured at microscale and the first thing I want to do is establish the Baseline and now we can put the purpose of the minimum viable product on a much more rigorous for setting somewhere in our business plan there is a model that says hey a customer's behave in this way they will have zillions of them over time and we can't get into all the details of how to build those models of course is a great book coming out you can read all about it in the meantime what we want to do is just figure out what are the real numbers for each of those inputs at microscope parts of the minimum viable product or so if there's some number some spreadsheet somewhere that says hey 10% of customers who come to our website should register for our product then we should I bake a big banner in our office somewhere that's like we must have 10% conversion or we die and then we'd have a minimum product as soon as possible to find out what that number is today and most likely when you do that
00:26:25Baseline will be horrible like it'll only be 1% it supposed to be 10% and like oh my God but we need to change that we need to say finding out the truth or where we are right now is progress It's a milestone that we should celebrate and then we do Step 2 which is weak to in the engine we make product development changes that are not designed to drive huge gross numbers but to make those conversion numbers go from the horrible Baseline to the ideal and discipline and whatever I've done this with teams I've only ever seen two cases case one is supposed to be 1% is what percent of got to be 10% so a few iterations and its 1% 3 % 6% 6 1/2 % turn a percent now it's not 10% yet so the model isn't exactly working but you can kind of say are we going to get there yeah probably something that we do seem to drive the number up a little bit we seem to be kind of heading in the right direction with split testing to make sure that the changes were making our FAQ driving the chainsaw good situation number to its 1% 3% 4 1/2 % 3.75% 3.8% 3.1%
00:27:24the numbers are going up every time so it's not like I was going to zero but you might ask yourself a question 4 5 6 months into hitting an asymptote we ever going to be 10% I think it's safe to conclude the answer is erratically it is possible the next iteration will be that magic one more feature that gets you to 10% but in reality that's not the case when the team gets to the point where he did not diminishing returns everybody knows you're not going to make it and you enter the land of Death March
00:27:52yeah those key metrics that story he tells is so bang on these I'm managing the success of their product I'm very what he gross numbers which is how much traffic are we getting in very top line numbers but it actually like the conversion rates the retention rates the repeat visit rights old ride the success of a business and its really comparing what he's saying instead of focusing on a very broad number one key metric light conversion rate like retention and really focus on shifting that to the point of viability I think this is the source of success when we talked about measuring your way to success but it also means that if you just not going to get that don't beat around the bush just kill it and actually killing product sounds like traumatic in many many ways it can be a relief because it ends up
00:28:52should have subconsciously we all knew it wasn't going to get there but we didn't have the heart to admit it I mean I just love this story Chad when I first heard about this idea of MVP I know this sounds great building the minimum viable product but for me still that was even kind of like too big of a concept I didn't really understand it but in this club I think he does a good job of tying it so the minimum viable product is the smallest most concise simplest version of your product or service that you can use to measure that one single metric so you kind of have to come up with the metric first choose the Target and then what your building is like the least time-consuming cobbled together but it will still measure that accurately it took me a long time to understand that new ones because we're always tempted to keep adding things in there was like nope if you can measure that one metric that you're trying to hit then that's what you need to work on and to
00:29:52and it's all about getting to building something that is sufficient to Delight early adopter customers just sufficient. Just enough because what we want to avoid is 5 years 40 million dollars is on and he's very candid about what you want to do is you want to invert that you want to do as little as possible to create enough value for your car early adopter customer in order to know if you're on the path to success but Eric also has some thoughts for us on how you actually build the minimum viable product let me say a word about minimum viable product I know people will have heard of this phrase at least a little bit the idea here is we want to have torn between these two different approaches to Building Product one which I call maximizing chance of success says what we're only got one shot at this so let's get it right right that's why I talked about starting number one we're going to ship it when it's right
00:30:52and actually is perfectly rational if you only have one shot you want to take the best shot you can build the most perfect product you can the issue is of course you know you can spend I don't know say 5 years of stealth R&D Building a product you think customers want and then discovered to your Chagrin. They don't so the other possible extreme approaches Us 2 release early release often people heard that phrase just throw whatever crap we have out there and then we'll hear what customer saying we'll do whatever they say but the issue there is if you show a product of three customers you get 30 opinions and now what do you do so many viable product is kind of sentence is supposed to possible extremes you want to figure out what's the minimum set of feature is necessary to engage with those early Vangelis to start the learning feedback loop going he said it way better than I did but you shouldn't be too hard on yourself. Because it is a really big Nuance here is talking about these one-hit one shot projects vs. shipping fail fast approach what
00:31:52trying to do is to navigate through that to learn enough from enough paper without building too much and it is and not being beholden to the whims of the masses you in a bit could pull your products servicing a million different directions absolutely kill your company you know Death By A Thousand Cuts encouraging us to limit the actual product building he's almost jumping into the product build until you know enough so he's now it is perfect follow-up to this idea is that before you get to that building make sure you got the lessons and you've tested before we build so let's have a listen to Eric Ries giving us some wisdom before you
00:32:42yeah it is amazing when you really think about all right I want to what do I want to learn classic thing to learn is Will customers sign up for my product at all if it was already built by already had it perfect you know what they want to buy it for me what easiest way to do that test is to put up a single one page landing page or we describe what the product is that we pretend work we've already built it and simply say would you like to pre-order this product right now in most cases when I done that test I didn't even have to make page to where I apologize at the park doesn't exist because nobody even wants it it's also possible to build a much less functional prototype than you would normally think about you know an engineering building
00:33:23the key is to simulate as much of the experience for customers as possible so there's a very famous company called Dropbox it today when I saw them as hot as companies they had this very complicated technology for file-sharing they were trying to build in the whole idea was it would give you this magical experience that just walked across all your computers magic synchronization and the way they built their MVP was that with an ounce of Technology they just made a video a video of this kind of prototype that they had done building a computer that made it look like it would work like magic but the video showed you what they experience would be in the use of video to get people again to sign up to pre-order to commit to be part of their community and that was enough for that any technology to show them they were on the right track
00:34:06I'm curious cuz the timing of The Lean Startup and things like Kickstarter like it's not a coincidence the Brilliance of spending the time and effort to create a video instead of spinning like for 5 years in research and development millions of sign ups for the service comes from different ways to explore market demand to build a product like Dropbox is going to take you a thousand a good six months to do in a meaningful way to get to MVP so if I could get some crafty storytelling Geico Chad in Brooklyn to make this beautiful film that inspires what a great signal off before I high in my dozen-or-so team development is the beautiful little film that I've just made has had a huge viral success is tells me one thing there is a
00:35:06pain in the world that we might be able to sow cuz people on that suffering from this music problem I've got files in the cloud on my desktop I want to sing them all magically I typed that is great signal it's positive signal that is so important in those days if you could say hey I got a hundred thousand views and a thousand comments I actually consider that to be a meaningful test that we can learn from why don't we look and see what people said what did they mention as the biggest pain points to be larger files are teens to be Photoshop files documents from Outlook I mean who knows the point being you can and that's why it's so interesting that a guy he's an engineer he's like you can do all these things before you do any engineering
00:36:06replicating for everyone in kind of baking that philosophy of testing and learning from the market before you're even building in a little bit and I think many of the ideas products that are showing up there and projects are a little more fully baked this than Eric would probably advise you but the smaller prism for platform into this enables at least tens of thousands if not hundreds of thousands of Maker's seem to get products and services in films and music out to the masses and there's this idea that ties together the testing before you build is an idea in this path of MVP and those mini key metrics that we were talking about and it's really huge topic is critical shift towards what is the rate of learning that a product created an entrepreneur at boundaries having how much are they earning and this really
00:37:05is at the core of Eric spoken he gives us lots of different things to learn about so let's hear from him and talkin about how to the success of building a great product the core problem of a startup as you don't know who your customer are is you don't know if you're on the path to a sustainable business always problem so the unit of progress in a startup is learning what we call me sir validated learning scientific proven learning that you actually are know what you're talkin about and so if and that sounds pretty good most entrepreneurs at that point I like yeah who's not for learning on everyone's for learning but if we say that is a unit of progress anything else you do it doesn't contribute to learning actually is a form of waste including the building to robust of a product launching it too big in the Press I mean launching the Press classic sign of started that's about to fail we should get depressed right about that would be great if they don't actually help you learn because of a hundred customers don't like your product then what does it matter what the hell
00:38:05the first customer doesn't like your product what's the learning value of a thousand customers a hundred thousand and so a lot of the companies I've built failed so spectacularly not because the technology wasn't good it didn't work because we literally couldn't get anybody even to try it to tell us how bad it was okay but that's the kind of failure that Squat and we talked about well often times the minimum viable product is simply an experiment that allows customers to sign up you know would you even have to create page to where you apologize the pots not available yet not if nobody signs up and and that's the most common case actually says that you can't even get anyone to find out that you haven't felt the product yet and I understand that your idea that's the problem I understand when you are in it it seems impossible but that's what I'm trying to do is not you are people get really fixated on the parts of Lean Startup that fit in a bumper sticker in a bumper sticker bits of them are people's favorite Starbucks MVP I know when you go on YouTube is Right funny video where the Lean Startup expert is trying to convince a drug dealer they need to iterate more like it's got out of control
00:39:05stop people love both of the heart of it is trying to apply the scientific method to the process of Entrepreneurship itself so that whatever you have to do as an entrepreneur that will help you learn faster that's what you do and sometimes that's the simple as a landing page experiment sometimes it's more complicated in Uno tactics or not but we're trying to teach, teach this set of principles about learning in measuring the right thing
00:39:29for me this new or new to me mental model of viewing entrepreneurship through the lens of kind of the scientific process that to me is the magic of what Eric wrote In The Lean Startup I totally agree to put this into context entrepreneurship Innovation it is really hot and the odds are incredibly Louis success and so therefore having a method with checkpoints measures Frameworks is essential is your Leach Lee embarking on one of the hardest things ever I mean one in 10 startups trying to make it that's it and incorporate Innovation it's like 5% of things make it yeah is that so he's giving us some sort of map with stops along the way and freeways and side roads and also it's in order to get us a night time
00:40:29justifying what is one of the hottest most complex beings it's odd it's signed to everything in between it's really important if any of our listings are embarking on building a product starting a company just read Lean Startup right I actually had kind of a small Revelation listen to that last clip with regards to a client of mine that I have now and miss so great that I'm revisiting this book let's see here 7 almost seven years later that's one huge fun part about doing this podcast with the mic is like you and I have similar trust these people in our careers but I think driving back into their insights you know their wisdom that I could have learned from Dieter Rams you know the Sierra you know mr. Eric Ries here but to get back to the client's story they have a relatively big list that they send out their thought leadership and content marketing out too and they've been trying to push
00:41:29service offering and it didn't it didn't take off and the light bulb just went off and it's like oh my gosh they went behind the scenes and figured out what they thought that their customer wants to put it in front of them already fully baked and then he is so powerful and so what wait till he died his right of learning that's inspired by Eric Ries earning a tall is better than what most people are doing nowadays I'm realizing our hair is that most products out there don't last very long and a full of assumptions like when Segway launched its product and it couldn't go upstairs they didn't have charging base and people feel really awkward when they got on them at least his massive when we really truly get to it they opportunity here is to put learning at the center and that's also what we doing on
00:42:29I think we just learning out loud to get around this next topic that erec spiese to is something that you and I have discussed as we've created this new Venture this podcast together the stakes aren't quite as high maybe an animal 500 company that's trying to create the new product that's going to help them crush the competition but there's this idea if so I'm learning about man to pee I'm iterating it I'm getting my learnings but how do I know if I'm on the right track or if I should kill it or if I should do something different and it's kind of like the entrepreneur The innovator's Dilemma of hike not knowing exactly how to proceed in so Eric has a really fantastic laying out of whether or when you should prove it and when you should persevere
00:43:203 months from now 6 or whatever it is we're going to have a meeting to decide whether to Pivot or persevere and by that meeting we will have the data about whether or efforts to tune the engine are working or hitting diminishing returns we have always constant in entrepreneurship like product-market fit that are very vague this system allows us to put those Concepts on a much more quantitative basis we can't turn whether to Pivot into a formula I can't tell you what to do if still relies on human judgment just like science does but if we make specific predictions if we use innovation accounting as an accountability model and we can be training our judgment to get better over time to to increase the odds of success we need to figure out how can we prove it sooner we need to bring our Focus to validated learning if you can get the real story of what actually happened in the early stages of a company you will find out that successful startup Founders do not do not have better ideas than the failed ones contrary to what you see in the movies most startup founders of successful companies had a ludicrously bad
00:44:20ideas at the beginning and what's amazing about the successful startup Founders is not that they just persevered indefinitely but they have this funny combination that when they run into difficulty it's not just that they gave up ship and went home neither do they persevere the plane straight into the ground do we call the pivot by knowledge the basketball one foot firmly rooted and what we've learned changing one other thing about the business at a time and the premise of The Lean Startup is as follows if we can reduce the time between pivots we can increase our odds of success before we run out of money
00:44:54this one is like serious professional level products inside and I just want to dig into this a little bit what he's talking about is not just the testing and learning but actually if you want to survive the key is to test and learn and each moment that you're doing a test if you want to try and make it as close to the next moment that you conduct your test it's not just that you're learning but how quickly you'll learning will help you succeed and it does it for a couple of reasons festival at 10 I text him and then I revise my prototype and at 10:05 I test again if I keep this right of learning in 1 hour I could have between Satan and 12 customer interactions where I've tested Lux I am miles ahead of where I was at 10
00:45:54get to 11 and the whole new ones here is the traditional approaches to product design have very long gaps between these moments of learning weeks if not months between Lenox absolutely so what he said yourselves in a room and told a long hundreds of times with hundreds of different customers this is the ultimate because not only do you actually make progress into solving the customer problem you actually align the entire team that created around it and it becomes this huge momentum shift if you have a test today for half an hour every day Monday to Friday and you do this for 2 weeks to months or for a whole year if you are open to
00:46:54earnings I guarantee success will come because you will have just conducted enough tests that your odds of success a massive Lehigh I also guarantee that your product and service will be in a very different place than when you thought it would be and that's a good thing because if you stick to what you thought you should have built then you know you're going to end up like Eric spending $49 over five years to build something that no one wanted to use no one could even get there to tell them how awful the product was that was like how few people refusing that's right so I wanted to share a story about the same client I was doing a program with the study of different startups and what was really powerful is I would have made Eric re-sprout I was dropping all these tests and Loan on them and showing them had apartheid and it was so infectious for them because the validation finally.
00:47:54mystified so much of what they would dreaming about that glitch after a session had finished so we gone for like half a day one of my clients is text me to buy cold eeze execs are running around the building testing their prototypes and they hoped that like they're addicted that's all I want to do because then this is the real message for everyone the more you test the more you look into the eyes of a customer asked them to do something with your prototype trim it revised it make it better and then you just eat it right that prices and number of times you just get to like I think I know what I want I think I know what's going to work vs. I've got a nice PowerPoint deck and I'm going to shop story but I'm guessing everything inside of these days that's it that's the idea yeah and I think what Eric is asking all of us to do is choose to Target in metric that you can test with your MVP inmate not tasks completed
00:48:54are lines of code written be dinner the measurement of how successful you are building the product it's actually your rate of learning that is the most important metric for your entire organization to be operating under all of that time in between tests in some ways it's just waste because Learning Zone is the gold to be mined inside of the startup and that gap between the moments of testing line allows you the time to fill in your own bias and perception so you should have been distracted and get a bit of track speed if you testing so much it's very hot to get our check cuz the message from customers and their experiences their interactions is so strong but I think we got one last big song from Eric and it's really when you're in this testing and learning by men either with customers or asking why there's a very powerful
00:49:54idea that what you can do to get Beyond surface-level problems and get to the real Crux of things so let's wrap up with Eric Maurice and hearing from him talkin about how to solve problems with the power of asking why system called 5y we run into a problem we have a server crash or car that doesn't work we want to get to the root cause of what caused it to fail and then fix that root cause behind every seemingly technical problem is actually a human problem waiting to be found Lincoln example my last company is a server crashed we would ask a question like why did the server crash it would be because a new API was pushed in that server but why was that it's because we just launched a new feature that use that API in the wrong way but why is that is because we had an engineer who was new and didn't know how to use that API properly why is that is because that engineer
00:50:54was never trained well why is that it's because their manager didn't believe in training so it seemed like a technical problem of a server crashing is revealed to be a managerial problem with that Engineers manager the technique of five wise is to make a proportional investment in each of the five levels of the hierarchy so fix the server and improve at API and teach that engineer the proper way to use it and also have a conversation with the engineers manager I don't do this nearly enough to probably use this right now yeah I think what I'm taking away from here is I'm getting more and more interested in uncovering my clients biggest challenges that I'm hoping to solve the in you know the collaborations that we kick off in the engagements and might be asking why once but yeah I can definitely see myself really using this technique to
00:51:54yeah just get closer to the heart of what's really going on yes and I cannot tell you in a product lens or whether you're just running your business has this out of its really critical thinking what he's proposing here and it's really establishing fax asking why and systematically going in discipline way to the core of the problem and whether you're trying to do that on your business to do with customers and the service of giving them what's really powerful he is if you're testing a learning your wife through the 5 whys Keys what starts to happen if you're building a product you serve an immediate use case or problem what tends to happen and this is another sort of Doc out of product design is that once you address a more surface-level problem for a customer they will allow you don't give you permission to understand the bigger problems. Fire order of
00:52:54things that trying to achieve and so a great product often goes right from the bottom of Maslow's hierarchy of human needs to be right up to the very top so you offering a product or service that does a thing to have some features which has some benefits which helps people serve the emission of having fulfillment have an impact on the world and that's what great companies do they did a suite of products it get right out there so she use this solving problems by asking the 5 whys whether it's a just a tactical business problem solving the problems of your own customers it is a great mechanism to unlock like a truckload of value I love how I can tactical that last bit is I can use that like tomorrow you could go on and on with Sarah Grace the body of work is so good I really feel
00:53:54I wake up this grape soda rocket ship ride from my stop testing don't jump into Building & product ask the right questions before make sure there's some sort of Market latent demand or it and whatever you do from A to Z learn all the way I mean Phil measure learn Bill measure learn I've been really excited packaging these episodes in different series from Apple to designers to now authors I'm also excited to turn to our next series here and go into the world of investing in my gosh I am so excited for this 100 Chad well the two Classics we're going to follow a similar vein to that of which we do with the author's to Classics in to mow contemporaries to the classics
00:54:54Warren Buffett and Charlie Munger who have so much wisdom I am a pot excited and overwhelmed pulling together all the research for that shy because Warren Buffett rides in annual shareholder letter that is gold every single year at least as investment wisdom dripping out of it so it's we've got those guys and then four more contemporary ones who you like I just read an interesting book about Peter teal call conspiracy which doesn't necessarily relate to his Investments but he is a very interesting person and you know has very interesting philosophy is a while I understand the mental models of someone like Charlie Munger in Warren Buffett I don't as much about Peter TL so yeah I'm interested in looking at what he's dying he has a great book code 0 to 1 which does essentially he's whole philosophy and it is an amazing book it's up there with the hard thing about hard things it's up there with Simon sinek
00:55:54Grace is amazing so that'll give you a little sense of that and then what about someone from I don't think we could skip over Paul Graham I think his essays that he's been published he's probably got over a thousand are fantastic in required reading for everyone that to come and go in a little special edition people loved hot or not we might sleep in something what's the French word when you have a little something in between two meals this a fancy word I'll have to look that up from Nick show do you want to do something special before we jump into the investor series I think it probably depends on some scheduling but we definitely want to bring back favorite OK I don't want to pick favorites sorry I didn't say that one of our fantastic guests here on the show Gary Cooper to talk about the history of Destruction which forward to
00:56:54and just as a teaser after the investor series we will dive in and do a full pot series of the greatest architects and there is a lot for us to get into this much ahead I just want to say thank you to you for being with me on this journey as we lit out loud together and who have given so much great feedback and I want to thank them for coming along the ride for the last 40 Bus shows and for them staying with his right to the very end of 42 with Eric grease I've really enjoyed it Chad I hope you're ready to rest up a little bit now that it's the evening in New York you can probably hear my phone in the background there alright Chad's going to Jackson technical thank you ever so much Chad and to Allison's that's it for another show of the Moon Schultz podcast
00:57:54that's a wrap

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