Today, I will be picking an article from a book by Eric Ries, The Lean Startup is a set of practices for helping entrepreneurs increase their odds of building a successful startup. To set the record straight, it’s important to define what actually startup is:
“A STARTUP IS A HUMAN INSTITUTION THAT IS DESIGNED TO CRAETE A NEW PRODUCT OR A NEW SERVICE UNDER THE CONDITION OF EXTREME UNCERTAINTY.”
I have come to realize that the most important part of this definition is what it omits. It says nothing about the size of the company, the industry, or the sector of the economy. Anyone who is creating a new product or a business under the conditions of an extreme uncertainty is an entrepreneur whether he or she knows it or not and whether working in a government agency, a venture-backed company, a nonprofit, or a decidedly for-profit company with financial investors.
Let’s take a look at each of the pieces. The word institution connotes bureaucracy, process, even lethargy. How can that be a part of a start? Yet successful startups are full of the activities associated with the building an institution: hiring creative employees, coordinating their activities, and also creating a company culture that delivers results.
We often lose sight of the fact that a startup is not just about a product, a technological breakthrough, or even a brilliant idea.
A startup is greater than the sum of its parts; it is an acutely human enterprise.
The fact that a startup’s product or service is a new innovation is also an essential part of the definition and a tricky part too. I prefer to use the broadest definition of product, one that encom-passes any source of value for the people who become customers. Anything those customers experience from their interaction with a company should be considered part of that company’s product. This is a true of a grocery store, an e-commerce website, a consulting service, and a nonprofit social service agency. In every case, the organization is dedicated to uncovering a new source of the value for their customers and cares about the impact of its product on those customers.
It’s also important that the word innovation be understood broadly. Startups use many kinds of innovation: novel scientific discoveries, repurposing an existing technology for a new use, devising a new business model that unlocks value that was hidden, or simply brining a product or a service to a new location or a previously underserved set of customers. In all these cases, innovation is at the heart of the company’s success.
There is one more important part of this definition: the context in which the innovation happens. Most businesses—large and small alike—are excluded from this context. Startups are designed to confront situations of extreme uncertainty. Top open up a new business that is an exact clone of an existing business all the way down to the business model, pricing, target customer, and product may be an attractive economic investment, but it is not a startup because its success depends only on execution—so much so that this success can be modeled with high accuracy.
(This is why so many small businesses can be finance with simple bank loan; the level of risk and uncertainty is understood well enough that a loan officer can assess its prospect.)
Most tools from the general management are not designed to flourish in the harsh soil of extreme uncertainty in which startups thrive.
The future is unpredictable, customers face a growing array of alternatives, and the pace of the change is ever increasing.
Yet most startups—in garages and enterprises alike—still are managed by using the standard forecasts, product milestones, and detailed business plans.
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