Tech start-up supremo, Harvard entrepreneur-in-residence and author of New York Times bestseller The Lean Startup Eric Ries talks to Siliconrepublic.com about how entrepreneurship is the management discipline of high uncertainty.
Ries is the creator of the Lean Startup Methodology, author of the book The Lean Startup and author of the popular entrepreneurship blog Startup Lessons Learned. He co-founded and served as CTO of IMVU, his third start-up. In 2007, Business Week named him one of the Best Young Entrepreneurs of Tech. In 2010, he became an entrepreneur-in-residence at Harvard and consults and advises start-ups and venture capital firms.
He was in the UK and Ireland over the past week to address entrepreneurs, including the iGap 3 programme organised by Enterprise Ireland in Dublin.
Avoid wasted energy
I begin our interview by asserting that often start-ups are anything but lean – by that I mean the vision or idea isn’t crystallised.
“My experience has been that most of the energy put into start-ups is actually wasted energy. The classic mistake is building a beautiful product that nobody uses, to start with."
This is the perfect lead into to my next question, which centres on the art of the pivot – changing the strategic direction. I point out that few companies today end up in the place they intended.
“The term ‘pivot’ has become a bit of over-used jargon, but that’s because it’s so useful. We know that every successful start-up pivots along the way and so while some people think of it as a bad thing (or failure), it’s an important insight; if we can get to the moment of pivoting sooner, we can get to the moment of success sooner.
“The reason we recommend (in The Lean Startup) you cull out all the bulls*** is so you can figure out if it’s time to pivot rather than waste time building something that isn’t going to work."
I venture that anyone who has worked on any enterprise that demands commitment becomes incredibly loyal to that idea or direction, and the idea of pivoting in another direction must be hard.
“What we try to do is get start-ups to be tenacious and stick to the vision but be agile and adaptive with regard to the strategy by which they’re actually going to get there.
“That’s where people get really stuck; they confuse the vision – the destination – with the route. ‘I’m trying to get from Point A to Point B and there’s a brick wall in my way, do I keep banging my head against the wall over and over again or do I go around?’ And I think that is something that start-ups really struggle with."
Don’t be afraid to pivot
I ask him if he thinks venture capital investors are sympathetic to the idea of a firm pivoting in a new direction or is it something that alarms them.
“I would say that the best investors out there who understand pivoting are very supportive of it, but that most investors struggle with it."
A classic example of this, he points out, is Twitter, which he says is the most famous pivot of them all.
Twitter emerged during a brainstorming session at podcasting company Odeo, when Jack Dorsey suggested the idea for an SMS shortcode. "It wasn’t going well at first and the entrepreneurs actually offered investors their money back and they took it back, and its cost them (the investors who pulled out), like, a billion dollars. It’s really hard – especially when you get it wrong."
The core lesson Ries says is that you’ve got to be ready to pivot at any stage. "It’s about forming a new hypothesis. There’s no guarantee that the pivot is going to work but you have to be willing to try different things until you find what works."
Be agile, iterate rapidly
I ask him about his journey to writing The Lean Startup. "I had plenty of failures, a lot of failure along the way. When I finally started enjoying success it was because I did things that people thought was crazy. Releasing products far too often, getting customers involved far too early and being much more adaptable than what was right.
“And I could see that it worked, but I couldn’t explain why it worked and I tried to understand why. That’s what led to me writing about it and trying to codify it – why do things work when conventional wisdom says they don’t?"
Ries’ methodology advocates the creation of rapid prototypes designed to test market assumptions, using customer feedback to evolve them much faster than via traditional product development practices. He documents case studies on laundry companies in India to clean-tech companies making thermoelectric material, not to mention software companies.
“The thing they all have in common is the combination of high uncertainty about the future and the ability to iterate rapidly.
“As long as you have those two things together you can do a great start-up. You don’t have to, I’m not saying everybody has to do it, but it is a framework that people in those situations find helpful."
Change is constant, get over it
Ries says that these are uncertain times and people in traditional industries and jobs, including the public sector, are coming to terms with the fact that unemployment looms large on the horizon.
I suggest that perhaps the best way to survive is to take your destiny into your own hands and be a start-up and that in 2012 the most healthy thing you can do is just decide your future is uncertain, and that can be liberating.
“People like me think its great news, but for our colleagues in established industries and government, it is very stressful.
“And it is a stressful time – but for entrepreneurs it’s a time of great opportunity. The case I try to make in my book and this is very controversial in some circles – but I really believe in it – it is that entrepreneurship is the management discipline of high uncertainty.
“Whenever you find yourself in a situation of high uncertainty, entrepreneurship can help you. The ideas we’re talking about are useful in a lot of different contexts and in society it is clear that we need to renegotiate the social contract.
“It’s going to be different because the world our parents and grandparents built for us – institutions and the social safety net and the economic formula – has worked incredibly well for the last 100 years but it really is starting to fray. Part of that is because we’ve been deliberately hacking at the foundations through our own stubborn stupidity, but the world truly has changed."
Own – or rent – the means of production
Ries says that in an utterly changed world, entrepreneurship is going to be a much bigger part of the new social contract.
“Entrepreneurship used to be the privilege of the few. Karl Marx said (in Das Kapital) that if you own the means of production then you have the power. Well we live in a world now where you can rent the means of production.
“Anyone in the world can become an entrepreneur at any time and as a society we have to nurture that and support it and that means celebrating entrepreneurs, teaching entrepreneurship to our children and mitigating the cost of failure when things go awry, because we have to admit that in an entrepreneurial world most of the things we try aren’t going to work.
“Failure can’t be a stigma like going bust – I heard that a lot when I was in Ireland, people there are afraid of going bust. We have to say no – that it’s honourable … at least you tried something, you learned something and that means you will try again."
While I’m energised by what Ries is saying, I have to ask him does he think this will necessarily be a better world?
"I think it has the potential to be, but I don’t think we can take it for granted. If we think about the apocalypse of World War II and the institutions that came out of that experience and the courage it took to face that level of uncertainty and monstrosity and to say: ‘We are going to rebuild a better world from the one that we inherited from our parents even though we’ve been through this terrible trauma.’
“We take that for granted today even though they did that for us. It was an act of tremendous courage and really thoughtful dedication. And the same forces that today are claiming that we are doomed and can’t be anything and the best we can do is give up, are the same forces of power and privilege that wanted to have unlimited access to anything they wanted.
“They didn’t want to have to create opportunity for others. Those forces are as strong today as any time since World War II and our grandparents had to face them down."
This brings us to the 99pc versus the 1pc debate that is raging in the US right now in the aftermath of the economic collapse as the differences between who has what become more incredibly stark.
“We are at a point of crisis just like they (our grandparents) were and we can no longer rely on the blueprint that they laid down for us because you’re right the institutions they’ve built were around the 9-to-5 job, long-term tenures at companies with stable employment and those conditions don’t matter anymore. And that’s a good thing.
“Our grandparents’ worlds revolved around very monotonous, routine kind of work and our world is going to be much more dynamic and creative – and that’s a huge opportunity. But if we just say that everybody who has been put out of a job by these forces is on their own, ‘tough, luck to them’, then we are going to have a major problem.
“But, if we realise that every unemployed person is a potential entrepreneur who has the creativity and talent to do something interesting and we give them the tools and the support and the encouragement to do that then we are going to live in a dramatically better world," Ries concludes.