For Startups, How Much Process Is Too Much?
Eric Ries, author of the StartupLessonsLearned.com blog, has been speaking and writing about lean startups. His particular focus is on software startups, and perhaps even more focused on those that are web-based and broadly distributed products. However, his thoughts on how to use lean principles such as experimentation, structure, and rapid learning in a startup are right on the money and drawing lots of interest from the startup community. I’m very glad to see this.
Recently he posted on the Harvard Business Review blog the post For Startups, How Much Process is Too Much? Here is an excerpt:
Startups develop some kind of process â€” whether it’s disciplined, haphazard, bureaucratic or empowering â€” because building a great product depends on it….
Finding the right balance requires an understanding of the fundamental feedback loop that powers all startups. It begins with an idea, which is translated into a product via the “build stage.” When customers interact with that product, they create data, which startups harvest in the “measure stage.” And, with any luck, that data will inform the company in the “learn stage,” and that learning will influence the next set of ideas. This three-stage feedback loop sounds simple, but it’s powerful nonetheless. It gives rise to this heuristic for evaluating any process or infrastructure change in the context of a startup:
Always choose the option that minimizes the total time through the feedback loop.
In other words, any change that accelerates learning is a win, and everything else is waste. This is very different from the trade-offs that need to be made in situations where the goal is to optimize for profit, margin, or growth….
The lean movement has been preaching waste reduction for many years, and anyone familiar with those ideas will understand how it applies here. The only difference here is that instead of measuring the creation of value by our ability to produce tangible high-quality artifacts, startups measure value by validated learning about customers.
I think this highlights a few key points.
- Lean is about learning first. A startup certainly should be clear about that. And clear about what it’s trying to learn about.
- Once a company has a track record, they turn more of their focus towards cost management and waste elimination. They try to optimize what they created, instead of continuing to create. I believe this is the difference between a stagnating company and one that continues it’s entrepreneurial spirit. Learning should still predominate our thoughts and focus, not eliminating waste.
- Define what areas you need to focus your learning on. Build a feedback loop around that. Feedback loops require process. Yes, even startups have process.
Eric’s got some great stuff, and I hope you’ll check out his blog and absorb some of what he’s been sharing.