Is the Lean Startup Dead?

Instead of setting your best engineers to work creating the best product, they're busy recruiting and dealing with company growing pains from the get-go. The mythical man-month and scarcity of great people combine to diminish your returns on this hiring. Furthermore, battleships don't turn on a dime, and you may be hiring a lot of irrelevant expertise if you have to pivot later. This is why Stripe took 6 months to hire its first 2 people.

Furthermore, huge funding means investors are looking for a huge returns. A $1b sale is now failure?? My gut says this "go big or go bankrupt" pressure encourages tunnel vision among leadership rather than innovation.

Essential Products was overfunded in late 2015 and is already up for sale. I think Magic Leap and Desktop Metal will end up as similar cautionary tales.

I see good arguments for overfunding if (1) there's huge capital costs for development and high probability of large exit regardless of technology success (e.g. biotech) or (2) you're trying to capture a market with a strong network effect. The second case seems dangerous though, e.g. is Uber's popularity really a moat? What if they had spent their billions on developing a product with a real technological advantage instead of scaling to the world first?

As a huge fan of his book, I'm sad to see Steve Blank largely ignore these ideas in his article.

To be fair, Ries stole a lot of nice bits from different schools of thought. There's stuff his books that actually works.

But you would have to be soft in the head to think that his book represented wisdom. In fact, wisdom does not come from a book – it comes from reading a lot of books, making a lot of mistakes, working with a lot of people, building a lot of stuff, and still understanding that this does not necessarily represent something that can be distilled into bullet proof heuristics. There's always unseen and uncounted factors that you will miss.

In contact with large, established organisations this book tends to produce cargo cults. Simplistic management self-help literature combined with institutional mediocrity, stupidity, fear of change, and hard-shelled delusion is a horrible mix.

The good thing is that these cargo cults tend to die after a few years. The bad thing is that anything associated with them then gets tainted.

The Lean Startup was a management fad and it didn't make people any smarter. It just gave them different ceremonies to perform in order to feel good about themselves. And as all fads, it has now passed. It is okay to move around the cabin and think for yourself again.

I would recommend "Functional Stupidity" by Mats Alvesson as a form of inocculation against this type of self-pleasuring heuristic-seeking.

A) Maybe the most important is time. You need time in a good environment to actually develop something. Which has become a lot more costly.

B) Large companies are controlling more areas than ever. People often wary of regulation as a barrier, but as time goes by the market participants creates their own barriers. Many areas are just harder to have an impact in than it used to be.

C) And then there is just competition, especially for things like talent.

I guess it isn't the lean startup that is dead so much as the environment for it. You can say the same thing about co-operatives, non-profits, community establishments and a lot of other things that are good ideas (probably more so than ever) but not able to flourish because of other interests.

The spotlight only shines on "Startup X raises millions in new round".

Side projects are the new Lean startup.

There's this great presentation by Don Reinertsen "Second Generation Lean Product Development Flow": https://www.youtube.com/watch?v=L6v6W7jkwok&index=55&list=LL...

Which is a perfectly valid way to fix some of the worst offenses of the original Lean movement, which were to throw out the baby with the bathwater by focusing on only doing things that had low option value and low risk. Sort of the opposite of what you need to do in a startup, which is to do something genuinely new and creating value while taking calculated risks.

Don does a great job of providing some nice economic rationalizations of how deal with things that are risky but valuable, planning and estimating these things, etc. He also makes a great argument for shipping value fast, which is to maximize the economic life span of your product and prioritize getting revenue earlier vs. getting revenue later with a potentially better product. Many tech startups get sucked into building the perfect thing and missing their window of opportunity for both raising funding and monetizing their product.

Unless of course your startup is not about the tech, in which case definitely avoid taking risks on the tech front and focus on shipping a product fast. If you are building a market place, the last thing you want to do is reinventing how those work. You instead want to focus on whatever the hell it is you are selling. Lean was always popular with those type of startups. I tend to think of them as no-tech startups. You get a bunch of MBAs, marketing and other non techies and then bring in the full stack hipsters to copy paste a bunch of crappy js files together to fake it until you can afford to hire a proper team.

On Mixergy, I interview founders who try to make their bones or get attention for their messages by disagreeing with the Lean approach.

Eric doesn’t debate, correct or engage with them. So they get to make statements without anyone credible taking them on.

Listen to my latest interview it’s Rand Fishkin and you’ll see what I mean. He’s not anti-Lean, but he’s disagreeing with it his book to make get attention for his message. With a bit of pushback from me, he admits as much.

Each one of these mini-attacks from accomplished entrepreneurs hurts Lean’s credibility.

Only Eric has the credibility and social grace to disagree and explain in a way that builds up The Lean Startup.

I’d love to see him step into the conversation more. He and pg defined how to run a successful startup more than any two people I know.

We need to hear more from both of them.

1. The Lean Startup isn’t dead.

2. For most organizations, Lean is now essential to deliver innovation at speed, and the Innovation Pipeline is more relevant than ever.

3. But when capital is readily available at scale, it makes more sense to go big, fast, and make mistakes than it does to search for product/market fit.

"All this is driven by corporate funds, sovereign funds and even VC funds with capital pools of tens of billions of dollars dwarfing any of the dollars in the first Dot Com bubble – and all looking for the next Tesla, Uber, Airbnb, or Alibaba."

Yes, but this is the other reality of today, from Calculated Risk:

"CR Note: Currently the target range for the federal funds rate is 1.75% to 2%. With inflation running close to 2% by most measures, the real Fed Funds rate is still negative."

In other words, investors still can't find enough investment opportunities that they find attractive, so they are still willing to give huge amounts of money to the government for free. Some of this can possibly be attributed to the Great Stagnation, the slowdown in innovation, growth, productivity and technology which began in 1973. Some of this can certainly be attributed to rising pools of savings all over the world. But it remains a fact that there are not enough software startups (nor enough manufacturing startups, nor enough legal startups, nor enough medical startups, nor enough of any kind of startup) to absorb enough capital to bring the world's capital markets back to "normal", if we can agree that "normal" means most investors expect to make at least a small profit on their investments, including their bond investments.

I mean, power to the people that have invested, but this looks like an investment graveyard.

To me, Lean startup is not about money. It's about building the most efficient process of finding product/market fit. Once you've found something that really works, then it's time to look for big money and scale up. In most cases, what you need in the beginning is $50K-500K which can come from savings/FFF/consulting/seed round.

Too much money in the world now. A result of the decade of near-zero interest rates.

Definitely worth looking at both approaches objectively.

1. Lean Approach: Stay lean, build MVPs, find PMF, then go big.

2. Big bang approach: Have conviction in your idea, use capital to launch big from get go.

Given capital is not a constraint, the next most important thing is time i.e. which approach would help us build a thriving business fastest.

Big bangs take up extra time/energy in ancillary tasks like hiring, PR and so on. Pivots take time, even to communicate internally. Lean let's you operate the whole thing as a series of cheap experiments to validate your assumptions. Pivots are natural and cheap.

Big bang would be beneficial over lean only when your first set of assumptions were on the mark and the company required almost no major pivots. That's rare, maybe Katzenberg can pull it off.

Even if you have raised $2 billion, shouldn't you know if people want short form content?

Actually, isn't it more important to know if people want it if you have a lot of money you spend?

Can't you still launch an MVP quickly, and iterate up and then pour on the rocket fuel?

This idea that scarce capital is what made lean startup important seems contrary to the original premise of the lean startup.

Lean is about experimentally approaching hypothesis about business models. Then scaling up when you find something that works. Short videos targeting mobile isn't new. If I allowed him too, my son would watch dumb youtube videos all day on my phone. This is a gamble that consumers might want better quality content. Not a huge gamble :\

The capital is there, there’s a very good chance you’re going to fail anyway, you might as well fail while eating something other than ramen.

A piece of an adequate analysis: https://hackernoon.com/the-rise-and-fall-of-yplan-is-the-mos...

As more entrepreneurs enter the space, competition will only become more fierce. Even selling the tools to the gold rush has become commoditized with the choices available.

I wish there was a way to short a startup...

Osterwalder's business model canvas lives on in its original form and variations of it. Use it to organize important ideas on paper.

Get "out of the office" early in the process and speak with prospective customers.

Create a product that does the minimum required to achieve your goals.

How could these ideas possibly be dead? Maybe "Lean Startup" as a turn-key solution to entrepreneurship has died and it has become more difficult for the Ries and Blank to monetize. However, they promoted many valuable ideas and practices that live on.

There are two main thoughts from this that occurred to me: 1. There are very few Katzenbergs out there, so him personally raising that money is not surprising. If Spielberg or Lucas wanted to create a short form video company I am certain that they would be able to raise similar amounts. I am not him; therefore the lean rules still apply to me

2. the times that I have had enough money to buy my way out of problems has not yielded the best results. In my 30 years of doing this the clever answers have always come when my resources have been restricted, with often the best results from the most constriction. Extra money can bring bad results sometimes, the beauty is in the restraints.

TL;DR You are not Katzenberg. Neither am I.

A company that is restricted on cash and "lean" is more inclined to be risk-averse and calculated in their business model decisions because they have to 'do more with less'. Whereas a company pumped full of cash has a greater 'trial and error' risk-tolerance because their goal is to overpower a target market to become the dominant player as quickly as possible. Investors still want to see a pleasing return either way.

A small company can't afford to spend a lot of resources on data integrity and protection, encryption and retention best practices, keeping up with laws like the GDPR, and they're that much closer to going bankrupt and having the data they've collected become part of asset liquidation and auction. It seems like these days, the discerning consumer ought to put more trust in a larger company's offerings in a given space than a smaller company, and even be wary of a smaller company that's offering something truly novel if that novelty isn't worth the price of private data being at-risk.

Starting a startup in 2002-2005 was hard, just the mechanics of it. Incorporating took several thousand dollars of lawyer time; there was no Clerky, and online LLC-generators were largely unknown. Accepting payments meant getting a merchant account with a CC; no Stripe, Square, or other payment processors. Payroll meant dealing with ADP or PayChex; benefits meant hiring a person to manage those relationships. There was no YC, generally no seed funding ecosystem other than angels, no AngelList, no gigantic startup blogging scene where everybody gives advice on everything.

As a result, there were plenty of unfilled pain points, and potential customers were overjoyed when someone would actually come talk to them about it rather than assuming they knew what was best, a la big companies or massively VC-funded startups.

Now, everybody and their brother is founding startups, which means that if you do happen across a genuine pain point, there are already 2 dozen startups working on it. Customers get weary of even talking to prospective entrepreneurs because they've had that conversation so many times before. I've done the Lean Startup methodology, and have several friends that have tried it; the most likely outcome today is that you'll talk to a 100 customers (after trying to talk to several hundred more who don't respond), and then discover that there's no actual market need addressable with current technology and you should keep your day job.

Like most knowledge related to markets, once everyone believes it's true, it ceases to be true.

Regarding the main point of the article: I always liked the idea of lean and sometimes bootstrapped startups. The current trend of mega financing perhaps comes from all of the money slushing around in markets looking for investments. Part of the effect of increasing wealth disparity is the the very rich have much more capital than they need to live and want to invest.

There are quasi-legendary cases in history (think Spartan and Byzantine super-soldiers) of a tiny band with no resources executing ludicrously successful military campaigns, so I guess it's not completely impossible.

I guess the idea is that they are starting a studio to create short content, and hope to make billions selling the content?

There are plenty of very successful ones but you just don't hear about them as often.

It's common sense. And that's how I'd summarise much of the philosophy involved in the lean startup.

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And conversely; if you invest a lot of money in an idea without testing it, you're gambling.

The lean startup is alive in well in most entrepreneurial ventures. Starting a food truck? Grocery store? Custom t-shirts? Indie video game? Small focused SaaS?

The echo chamber is real. "I looked outside and saw no lean startups, its dead!"

businesses and risk capital are not related. Proof: businesses existed long before risk capital.

After reading Bad Blood, I am not convinced that Holmes (at least initially) intended to perpetrate a fraud. She may have believed it was possible to produce the machine she dreamed off, and it was a question of putting in the R&D. (It still might be possible).

If this is the case, the "lean" methodology would have saved her if she had just started out small and focused on developing the tech first.

Saved in the sense of convincing her it did not work and that it was best to return the rest of the money.

There was a time when the distribution deals were signed and the tech wasn't read and the deals were used to raise cash that really must have felt like things have gone too far.