Why Scientists Trump Engineers, or What the Hell Is a Lean Startup Anyway

Within the pantheon of startup buzzwords, there is perhaps no term more dominant than lean startup. It is almost impossible to find a credible startup anywhere in the world that doesn’t describe themselves as lean. I know. I’ve tried. Not only do entrepreneurs use the term lean but they delight in throwing around the jargon of lean startups—words like iterate, product market fit, and the always popular pivot. Lean has even penetrated the corporate world and government. GE is making the lean methodology required reading for aspiring executives. The White House has created a swat team of lean development experts with 18F.

Despite all of this excitement, the only thing greater than the buzz about lean startups is the level of confusion around what lean thinking actually involves. This is unfortunate because understanding lean really is incredibly important for the success of startup founders.

So what is the lean startup methodology? Let’s start with the text book definitions. According to www.theleanstartup.com:

The Lean Startup provides a scientific approach to creating and managing startups and get a desired product to customers’ hands faster. The Lean Startup method teaches you how to drive a startup-how to steer, when to turn, and when to persevere-and grow a business with maximum acceleration. It is a principled approach to new product development.

Hmm. It sounds kind of like defensive driving. Let’s check out Wikipedia:

Lean startup is a method for developing businesses and products… [that] shortens their product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and… “validated learning“.

What does this actually mean? It’s defining buzzwords with even more buzzwords. The unfortunate thing is that there are some really crucial insights buried in the jargon. It’s with this in mind that I take my own stab at explaining this idea for entrepreneurs and investors–and institutions who want to work with them.

The essential truth of the lean startup methodology is simple: it’s better to be a scientist than an engineer.

When most first time entrepreneurs sit down to build a company, they instinctively think of entrepreneurship as an engineering challenge. They have a problem that they want to solve and a vision for what the solution looks like. They sit down and draw out the blueprints for that solution and how they’ll turn it into a business. Those blueprints are traditionally referred to as a business plan. They take their business plan and break down all of the work necessary to execute on it. Whether on paper or merely in their heads, they end up with a giant project plan with all the steps and critical paths necessary to get them to a magical milestone: launching their business.

This approach is seductive for a number of reasons. First, it’s easy to understand because it’s linear. You simply have to work incredibly hard moving from one step to another with success waiting just after that magical launch moment. Second, it provides regular reassurance of progress as you tick tasks off the list. You can tell yourself that you’re X% of the way to success based on your project plan. Third, it tempts founders into the dangerous hubris of thinking that they are visionaries, rather than cultivating the ability to listen intensely to customers.

There is one crippling problem with the engineering approach: the odds are pretty close to 0% that the blueprint that you’re building toward is right—and in fact it’s probably very wrong. As a founder, if you lack the humility to recognize this from the beginning then no amount of reading blogs about lean startups will help you.

Rather than thinking of yourself as an engineer, you should think of yourself as a scientist. You need to be incredibly passionate about the problem that you’re solving but incredibly humble about discovering a scalable business model and product that solves it.

Scientists start with hypotheses that they test through experimentation with the real world. Lean founders start with business model canvases that they test through experimentation with actual customers.

Scientists ensure that each experiment is falsifiable, meaning that a successful test is often one that proves the hypothesis wrong. Lean founders do the same thing—with the goal of quickly eliminating possible approaches rather than justifying their preconceived ideas.

Scientists construct the simplest experiments that allow them to test their hypotheses. Lean founders build minimum viable products or features—often simply a landing page to test a particular message or customer acquisition strategy—rather than rushing to build any feature or infrastructure unnecessary to the immediate goal of finding a scalable business model.

In short, the lean startup methodology is simply the scientific method applied to discovering scalable business models. Once you really internalize that truth and why it’s important, the rest of the jargon and buzz words suddenly make a whole lot more intuitive sense.

Of course being a scientist is a famously lonely and frustrating pursuit. So it is with being a lean founder. Approaching your startup as an engineer feels good, right up until you crash into a massive wall of failure. Approaching it as a scientist feels like a little bit of failure every day. If you have faith in the process though, each of those failures is moving you closer to building something truly extraordinary. The persistence required to fail a little bit each day in pursuit of a much greater good is rare though. Managing your emotions, staying focused, and really listening to what the customer data is telling you is what separates great founders from ones parroting what they hear on TechCrunch.

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Regulatory Hacks

Does the startup world need to develop a whole new kind of hack? The answer is yes: regulatory hacks.

Just asking this question feels a bit irritating—like something from the next season of Silicon Valley. Startups are already bursting with buzzy jargon. Lean, pivots, seed rounds, elevator pitches… the list is numbing. But startups are beginning to see huge opportunities in highly regulated industries and that requires evolving a new method of problem solving.

Before I make my case for why regulatory hacking needs to be a thing, please indulge me in a quick history of the idea of hacks.

Hacking in general is pretty tough to define. Used negatively, it implies using secretive, expert knowledge to gain unfair access to something, as in hacking into someone’s account. Used positively, it implies using creativity, expert knowledge, and experimentation to create something much faster than a non-hacker—if they could do it at all. In this sense, every smart startup would rather have one or two hackers over scores of “regular” engineers.

Extending this idea, growth hacking applies a hacker mindset to acquiring users or customers. In the best sense, growth hacking implies creative experimentation with a variety of channels and techniques—all to accelerate customer acquisition. Growth hacking is particularly important for business models with strong network effects where getting to critical mass is, well, critical. For example, Whitney Wolfe used networks of sororities across America to quickly build a critical mass of women on Tinder. The growth hack for Tinder was to think creatively about where to find lots of young, single women at one time and how to efficiently reach them.

Just like hacking in general can be controversial, so to can growth hacking. In some cases, growth hacking can imply numbers inflated by marketing techniques that won’t scale—often to build momentum for another round of funding from investors. In other cases, growth hacking can imply the use of techniques that invade privacy, spam people, or trick people. Regardless of whether it’s used for good or evil, growth hacking is usually applied successfully in consumer or SaaS businesses where the best product—marketed effectively and efficiently—will win customers. This faith in the power of free markets is central to the ideology of Silicon Valley. Hacking—whether products or growth—is merely another form of the idea that the smartest person with the best solution will win.

Back to my original question: What happens when the best solution cannot win? Many of the sectors most ripe for disruption today—education, healthcare, energy, transportation, agriculture, financial services, and more—all suffer from the reality that the public sector has major influence in picking winners. In some cases, this is because the public sector is the primary buyer of goods and services. For example, it’s very difficult to reinvent the way teachers use student data in America—at least at large scale—without crashing into a fragmented labyrinth of public sector procurement processes. In other cases, it’s because the public sector is setting the rules of the competition, sometimes in subtle ways. They may define who is allowed to offer a particular service or they may place requirements on what someone offering a service must do or be.

Why deal with this hassle? First, many of the most important challenges facing our world sit squarely in the middle of some of our most highly regulated sectors. Second, these same sectors are the ones with the huge, juicy problems to be solved. Third, these sectors are absolutely massive. Education, health, energy, transportation, agriculture, and financial services together represent more than 50% of the GDP around the world. Finally, if you’re the entrepreneur that’s able to hack a business model that scales in a highly regulated industry then the odds are good—fairly or unfairly—that you’re also building barriers that will keep other competitors out.

As startups begin swarming these industries, they’re running straight into these realities. Some lament this fact. The winning startups deal with it pragmatically. Hacking regulation—whether navigating procurement rules or running end-arounds past taxi commissions—is becoming an essential skill set for success. If you really want to change the world by tackling an important problem, you have to have a revolutionary new product and business model and you need to figure out how to change—or circumvent—the regulations that are keeping the world the way it is. And you’ll likely have to do so in the face of huge entrenched interests trying to stop you.

The startups that win will be the ones with access to the elite regulatory hackers.

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Hello World

Welcome to my personal blog. This isn’t my first experiment with blogging. In fact, you can read some of my attempts over the past few years here, here, and here. This is, however, my first attempt to start blogging on a regular basis, ideally almost every day. I have a habit of obsessing over my writing, editing and editing until I think it’s worthwhile to post. With this blog, I’m aiming to get short, regular ideas out quickly. If you think an idea or observation is worth developing further, then let me know and I’ll try to turn it into something more rigorous.

I’ve thought a lot about the audience for this blog. If you’re a hardcore startup junkie, then you’ll no doubt find a lot of what I write about to be pretty basic. I spend a lot of time travelling and talking with startups though and I find that a lot of smart people use a lot of buzz words without actually understanding what they mean. A lot of what I write about will be most interesting and relevant to people interested in the intersection of startups and the big problems facing our world. Anyway… here goes.

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