Eric Ries's book "The Lean Startup" has revolutionized the way entrepreneurs approach small business growth strategies.
Thrive spoke with one serial entrepreneur, Boston-based John Lohavichan, about how he uses Ries's strategies. Lohavichan recently founded his third company, Mattervest, which provides sophisticated equity crowdfunding analytics to investors.
When did you first come across "lean startup" ideas?
I heard Eric Ries speak in Boston several years ago, even before he wrote "The Lean Startup". He was talking about a new approach to building a startup. Actually, I was working on another startup then, and it wasn't working out at all. I was having a mental collapse at the time. I was looking for a new way to think about doing a startup, and Eric offered a great one.
What was so new about Ries's business growth strategies?
Before The Lean Startup, you were like an explorer, but you didn't know what tools you had in your backpack. You didn't know you had a compass to guide you and that you had rope to climb ... You just stumbled around.
When and how did you start adopting the principles of "The Lean Startup"?
Right after Eric's talk. It was pretty easy for me to say, "I'm going to build a small thing. I'm going to go test it. If it doesn't work out, I'm going to change it based on what I learned." So I built some small prototypes of software intended to help public relations professionals and started testing the prototypes with users. I built the smallest MVPs [i.e., minimally viable products] and then sought to iterate the product based on our user feedback.
What did you see when you started using Ries's "build-measure-learn" feedback loop?
That there's going to be a lot of failure in there as you go, but at least you learn where you're going. It's more of a change of mindset. You're like, "I'm just experimenting to see what works and what doesn't." I think the experiments you make are based on your experiences, insights and passions, but those must be tested.
For example, with Mattervest, we initially had the idea that it should be like an online game. We built it and then discovered that our users wouldn't engage with it. Our theory was wrong. We trashed the gamification approach and built Mattervest again based on a whole new idea. The only way we can find out what's working or not is following the data.
How do you define the lean startup method?
You look at the data. The data is the ultimate arbiter of the result. It's not the founder's opinions or assumptions. When you come up with a theory, like, "I think ABC is going to be great," you move to the metrics and say, "What metrics would indicate that ABC is great?" Would it be a 100 clicks, 10 clicks, one sign-up or whatever? You need to test assumptions, measure and learn.
What has been the book's impact across the entrepreneurial landscape?
Everybody uses it now. It's pretty much the de facto approach. You can easily gauge who's a real entrepreneur by saying "I'm using 'Lean Startup'" If they say, 'I've never heard of it,' then you know they don't know what they're doing. But if they say, 'Yeah, I'm using that, too, tweaking my startup this way or that way,' then they've done their homework. They're trying to use the right methodology to build a business.
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