How Eric Ries Changed the Framework for Startup Success

Photo credit: Nick Wilson

Eric Ries may be synonymous with startup success now, but in college he was just another kid with a business plan. The entrepreneur behind the Lean Startup philosophy started his first business while still in school at Yale, an online database of student resumes. The company, CatalystRecruiting.com, was a casualty of the dot com crash. Looking back, Ries isn’t surprised his first venture didn’t succeed. “We had no language or process methodology, we just built this gorgeous business plan, a 40 page long masterpiece. We had census data, we had the market research, we really did everything right in the business plan,” he says. “If things weren’t going the way they were in the business plan, we just thought we weren’t trying hard enough. We just kept trying harder and harder. Businesses like that only fail in one way, straight into the wall.”

After graduation Ries decided to go to the tech headquarters of the world and join a company as an apprentice. “It turned out the company I joined in Silicon Valley almost did the exact same things that we had done in my dorm startup, but with far more professionalism and way more money,” he says. “Way more money lost, and way more time. The mental model was not that different, so it was the same result.” Ries says these experiences taught him the hard way that the path to success never does run smooth. “I had thought in my life that if you work hard, you would get a good result. Reason is, we only really hear about the stories where hard work pays off. No one ever writes a newspaper profile of someone who worked hard and got no result, because those stories are boring,” he says. “That was the beginning of a process of understanding that entrepreneurship is a domain where hard work is not in any correlated with success. You can wind up throwing your life away if you’re not willing to change the process by which you decide which work is valuable.”

By 2004 Ries says he had several failures under his belt, and decided to launch a new company, IMVU. He started looking outside of software for models he could adapt to running his business, which led to applying methodology based on the Toyota production system in Japan. “What I discovered was we could take a lot of the principles and modify and adapt them to our problems,” he says. It was the first time he realized that the way he was running his startup was unique. “We were starting a new company and we started doing practices that were really weird to most people,” he says. “I didn’t have anything I could articulate, but I had an intuitive feeling of what we were doing before is wrong.” Ries says not many people from outside the company understand their practices, and even his co-founders pushed back at first. “We had the odd experience for about a year doing things that didn’t make sense to other people and being very, very successful. When we would hire people, it was a problem. We’d bring people in and they’d say ‘this isn’t how it’s done.’”

While acting as an advisor to several startups in Silicon Valley, Ries said he got into disagreements with startups that called his methodology crazy. “I kept getting all these ideas and questions about how it worked, why it worked and the questions came in faster than I could answer them and that’s what gave me the idea to put it in a more coherent framework, give it a name, identify the different concepts, name them, make it a little bit more rational,” he says. He articulated his practices into a methodology he called the Lean Startup, which he introduced in a blog post in September 2008. ”That is when it started to take over my life.” In that initial post he said Lean Startups were classified as companies that are low-burn, and that are an application of Lean Thinking. They use platforms enabled by open source and free software; apply agile development methodologies that reduce waste and unlock creativity; and practice customer-centric rapid iteration.

Pretty soon after coining the Lean Startup idea Ries says it was taking up all of his time. “I just viewed it as a hobby for about a year, something I was doing in between two other things and then eventually I asked myself is there anything I can think of that is both more interesting and would have more impact than what I’m doing right now?” The answer was no, so he decided to focus on the project full-time. The Lean Startup methodology quickly gained followers in Silicon Valley and beyond, and has led to worldwide meetups and a book by Ries released in September 2011 that became a New York Times Bestseller. He says there are several myths about the Lean Startup, namely that “lean” equals “cheap,” and that only technology companies can apply the principles. “The Lean Startup movement has grown so much. There are so many entrepreneurs applying it. We profile big companies, small companies, venture-backed, bootstrapped, clean-tech – really a wide range of companies and industries to show that these ideas are quite doable.”

The latest generation of entrepreneurs looks to Ries and his Lean Startup ideas for ideas on how to succeed with their startup. He says one of his biggest pieces of advice for founders is to learn how to code. “When I tell people looking for a technical co-founder to learn to code, it annoys them, they hate the message,” he says. “If you’re going to run a factory, but heavy machinery scares you, you’re fired.” He says founders have to be able to see the work, to see what’s going on, to physically be on the ground. “With software there is no ground, there’s no place to go to observe. Watching engineers at their keyboard is not observing the work; it’s all gibberish to you. You have to understand the workload.”

In order to avoid failure, something Ries knows all about, the lean startup methodology praises the idea of constant iteration that can sometimes lead to a complete change in direction. “We call it a pivot, where when you encounter difficulty or some part of your idea is proven to be crazy, you don’t give up and go home. But you also don’t keep stubbornly keep banging your head against the wall,” he says, but says a pivot doesn’t mean changing the company’s vision. “There’s a structure to the way great entrepreneurs think about how to react to failure, and call it a pivot. The analogy is you’re keeping one foot rooted in what you’ve learned, while changing the rest of your model one piece at a time.”

But though Ries knows a lot about failure, lately he knows just as much about success. He says his failures and successes were measured by how they fit the norm, which Ries started to break out of with the Lean Startup. “When we had been failing horribly but doing it the standard way, everyone thought we were being geniuses. Now that we were being successful, but in an unusual way, we were getting more negative feedback.” Thankfully Ries is making that unusual way of succeeding the norm – and keeping startups from failing along the way, one pivot and iteration at a time.

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Eric Ries is taking your questions about the Lean Startup methodology LIVE Thursday, December 8th at 3:15pm EST. Submit a question now, or view the full Q&A at sprouter.com/ericries.