Chaos Management and Innovation: Experiments, Change of Course and Learning Processes

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Text comes from: Lean Startup: Schnell, risikolos und erfolgreich Unternehmen gründen (2014) from Eric Ries, published by Münchener Verlagsgruppe (MVG), Reprints by friendly permission of the publisher.
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A startup is in its deepest interior a catalyst that transforms ideas into products. As customers interact with these products, they generate Feedback and data. How does management work in lean startup metheode?

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Eric Ries 80Eric Ries has established the lean start-up method and made it popular.


From the author:


How does a startup work?

As we may now be clear, by concentrating on validated learning processes, we can avoid a large portion of the waste which is putting the start-ups down today. As with Lean Manufacturing, the knowledge of where and when to use energy optimally saves time and money.

Feedback is provided both at the qualitative level (for example, what they like or dislike) and at the quantitative level (for example, how many people use the product and find it useful).

Learning as a result of experiments

The products that make a startup are, in reality, experiments; to learn how to build a viable business model is the result of these experiments.

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For start-ups, this information is more important than money, awards or press reports because they can influence and shape the ideas that arise from them. This build-test-learning feedback loop is the heart of the Lean Startup model.

Specialists - caught in the feedback loop

Many people have enjoyed a professional training that focuses on a particular element of the feedback loop. Engineers learn how to design their designs as efficiently as possible. Executives are masterful strategists and tinklers on the whiteboard.

Entrepreneurs also often focus their energy on individual aspects: they make every effort to develop the best product idea or the best possible starting product, or are almost compulsorily dealing with data and operational parameters.

The gold standard

The fact is that none of these activities, on their own, encourages entrepreneurial thinking and action. Real entrepreneurs focus their energy on the reduction of the total time taken by the feedback loop.

This is the gold standard when controlling a startup. We take every single element of this build-test-learning feedback loop under the microscope. We want to explore the importance of learning processes as the yardstick for the success of a start-up.

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Advance of trust and growth hypotheses

To apply this scientifically based method to startups, we need to determine which hypotheses need to be reviewed. I refer to the particularly risky elements of a start-up business plan, on which everything depends, as assumptions that involve a confidence advance.

The two most important are the benefit and the growth hypothesis. They generate the variables that allow fine tuning of the growth motor. Each iteration is an attempt to give gas to see if the engine is starting.

From the idea to the product

As soon as it runs smoothly, the process repeats to switch from one gear to the next. Once these assumptions, which include an advance of trust, are identified, the first step is to get to the construction phase as soon as possible with a minimally functional product (MFP).

The MFP is the product version that enables a full run of the build-test-learning feedback loop with a minimum of effort and development time.

From prototype to beta phase

The minimally functional product lacks many features or functions that may later prove to be important. However, creating an MFP requires additional work:

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We must be able to measure its impact. For example, it would be nonsensical to build a prototype, which is assessed by engineers and designers exclusively with regard to the quality of the company's internal characteristics.

It depends on the customer opinion

We also need to be in direct contact with potential customers in order to assess their reactions and to make the prototypes as useful as possible.

When we enter the fairs, the biggest challenge is to decide whether product development efforts are making real progress.

If we produce a product that nobody wants, it does not matter if we remain in the time and budget. An effective quantitative approach, which shows whether our learning and fine-tuning activities bear fruit, is the so-called innovation balance.

Milestones in the learning process

The innovation track enables us to create milestones in the learning process, an alternative to the classic milestones in the achievement of company and product objectives.

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These milestones in the learning process are important not only for entrepreneurs to accurately and objectively assess their progress, but also for the leaders and investors that entrepreneurs need to answer.

Correct the course in time

However, not all parameters are carved out of the same wood and the dangers of facade metrics are soon visible which, unlike the application-oriented parameters, do not contribute to the analysis of customer behavior and the balance of innovation.

The most important element is and remains the course correction. As we go through the Build-Measure Learning Feedback Loop, we face the toughest question an Entrepreneur needs to address: whether we should change or maintain the original strategy.

Early warning systems for change of course

If one of our hypotheses turns out to be wrong, then it's time to start a change of course and come up with a new strategic hypothesis. The lean startup method builds capital efficient Company Because startups recognize earlier when a change of course is advised, and thus waste less time and money.

Although we speak of a building-measurement-learning feedback loop, because the activities take place in this order, our planning proceeds in the reverse order:

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Products arise from learning processes

We explore what we need to learn, find out what needs to be analyzed and validate learning processes, and then determine what a product we need to develop in order to carry out experiments and achieve this result.

All techniques are designed to minimize the total throughput time through the build-measurement-learning feedback loop.

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  1. Peter

    Great contribution to the topic of starting a business, I'm always happy to be here.

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