Date: August 20, 2013
Title: Transorted Testing Tachydidaxy
Presenters: Chris Gammell, Chris Gammell’s Analog Life and Dave Jones, EEV Blog
Guest: Eric Ries, The Lean Startup
Episode link: http://theamphour.com/the-amp-hour-159-transorted-testing-tachydidaxy/
Source file: http://traffic.libsyn.com/theamphour/TheAmpHour-159-TransortedTestingTachydidaxy.mp3
Dave: Hi, welcome to the Amp Hour. I’m Dave Jones from the of EEVBlog.
Chris: I’m Chris Gammell of Chris Gammell’s Analogue Life.
Eric: Hi everybody, I am Eric Ries, author of the Lean Startup.
Dave: Welcome Eric it’s great to have you here.
Eric: It’s great to be on, thank you for having me.
Dave: And for those who don’t know it’s a book?
Chris: The Lean Startup.
Dave: Well you now ….I don’t know what is it a website? Is it a blog, is it a video? I don’t know … I mean there’s so many mediums these days.
Eric: What we actually do is we take this thing called ink and we smear it onto dead tress and we pack it in huge boxes basically and mail it to people.
Chris: This is the future I think.
Chris: It’s going somewhere.
Eric: It’s like an heirloom crafted vintage object is the way I think about it.
Dave: The future is here and we are seeing it.
Chris: And also people can see it online. You type it into Google you also get the leanstartup.com. You get all the – you guys have a conference now right? That’s another thing you guys are doing?
Eric: Thank you for all these plugs, yeah we do do a conference, Dec 9 in San Francisco.
Chris: That’s exciting.
Eric: It’s become something of a movement much to my surprise … people getting passionate about these ideas.
Dave: Who’s we?
Eric: Well so there’s a lot of people who have joined this grassroots thing. I obviously run the company that puts on the conferences and I work a little bit as a consultant but there’s no like shadowy corporation behind it. It’s pretty much what you see online. There’s a bunch of bloggers. There’s a bunch of links to people on my site that I kind of consider kindred spirits like Steve Blank and Ash Maurya, Patrick Vlaskovits and Brant Cooper. I’m sure I’m leaving people out as you guys have me on the spot but …
Eric: You know, I actually think that far more important than the individual personalities involved are the fact that there’s a lot of entrepreneurs who have taken this idea seriously and formed their own meet up groups, in a couple hundred cities now. 0:02:31.2
Eric: They are the ones acting as the laboratory, pushing the cutting edge of this. More than I just as a talking head.
Dave: Well I think there is you know 2 or 3 here in sydney of that meetup.com thing. There’s 2 or 3 internet entrepreneurial business start up groups. They seem to be starting up all the time.
Eric: One of the first most surreal experiences of my life was .. boy 3 or 4 years ago, I spent exactly one day in Sydney. 0:03:04.1
Dave: Right [Laughs]
Dave: What you flew all the way here? You flew 15 hours to get here and spent a day?
Eric: No luckily I was in New Zealand and I got this request from the lean startup meet up group in Sydney Australia on my way home from New Zealand so I thought well sure why not? So we did an event in a pub in Sydney. I would have told you I knew not a soul in Sydney in my life mate I don’t know anybody in Sydney. I have met a few since then and there’s like a packed house, all these people in the pub to hear me talk and I give my presentation. Every time I give a presentation I try to change it up a little bit and make it a little bit different, cause you can see the videos online, I try not to make it too boring.
Dave: Of course
Eric: But I kid you not first question number one from the audience was how come you didn’t do that bit about such and such topic?
Eric: They watched the video they knew what to expect and they were actually disappointed that there was a certain point I hadn’t made and actually I sought that guy out as I was so disturbed. Whats going on? And he said listen I’ve seen your videos, there was no book at that time, I’ve read your blog, and he had actually brought his development team from this company to this event because he wanted them to learn about that specific topic and I hadn’t bothered to mention it. He had a really good reason to ask the question, it was one of the early indication that there was something going on here with Lean Startup.
Dave: Here’s my business card I do consulting you know? I’ll come to your company.
Eric: Oh god it’s a long flight.
Chris: Uh oh. Dave do you hear that?
Dave: Yeah I heard it.
Chris: That was weird.
Dave: Buzzing sound I have no idea what that was. I think we had a dodgy switch there folks in our Samsung mike – hardware issues.
Eric: This why I loves software so much – this kind of stuff never happens. 0:05:05.3
Dave: Never happens? [laughs]
Eric: Yes, unless there’s cosmic rays that flip a bit back by random chance.
Dave: Yeah exactly, you can get flaky hardware that you are developing software on – it happens.
Eric: If anything ever goes wrong it’s always the hardware’s fault that’s one of the things I have learned as a software engineer – early in my career.
Chris: That’s it – it’s over guys we are done here …
Chris: Well tell us a bit about your background a little bit just for people that haven’t read the book yet. I mean everyone definitely should be reading the book.
Eric: Oh thank you.
Chris: Where did you come from? And how did you get to this point?
Eric: Listen no one’s more surprised than I am about how this has all turned out. I’m one of those kids that was programming computers in their parents basement from a young age. So you know you can picture me like all the other nerds. Spending way too much time on the computer and not enough time with other people, and to my parents credit they were worried about it but they were kinda willing to let it go and kind of see what happened. I really thought, you know that I would be programming computers my whole life. Something that I really loved. I found out you could get paid to write software which was like one of the greatest things to happen to me in my life.
Eric: Really, it was an incredible and very unexpected experience and I was like this is it, this perfect… this is all I ever have to do. And so I did a lot of freelance programming as a kid and did like internships and just like anytime someone would pay me for programming I was all there. I eventually realized that in the early days of the internet you could get paid to write books about writing software because there was a desperate short supply of programmers who could write – or who would even want to. So as a kid I did that and then when I was in college the dot-com boom was in full effect and everyone said if you want to do software you should become an entrepreneur and start companies. It just seemed like everybody was doing it so I thought alright let’s give it a try and by the way that’s not a very good reason to start company.
Dave: Well it was in the dot-com era
Chris: That’s right it was
Eric: It seemed like a good idea but actually I do not recommend it.
Chris: In the dot-com era it seemed like if you had indigestion and it seemed like a good idea people said yeah here’s a couple of million.
Eric: So I did classic dot-com failure from my dorm room at school. If you have seen the Social Network, I like to say I had the first half of the social network movie experience. So all the the parts about working really hard and getting my friends to join the company… We did all the stuff just like they did in the movie but we didn’t have the second half where anybody wanted our product. No one got rich, dot-com bubble burst and in the movie and any movie that has an entrepreneurial protagonist, there’s all the people that told you – you know you were wrong to start the company and that you shouldn’t do it and it’s a bad idea etc. In the movie the most satisfying part is you go back to those people and say ha ha now I’m a big success, you should have whatever – wrong. So in real life, the most embarrassing thing to, you can possibly imagine is you have to go back to those people and say yeah you know you were right. It didn’t work out.
Chris: Yeah .. Could you have just avoided it at that point? Is that like a thing?
Eric: Maybe I should have just changed my name and gotten a new identity and moved to a different place but it didn’t occur to me. I didn’t have that international man of mystery skill at that time.
Dave: You have to tell us what was this startup? 0:08:45.4
Eric: Ok listen – see if this sounds like a good idea to you ok?
Dave: It might work these days! Who knows?
Eric: Ok I kid you not I’m not making this up here goes…Picture us in 1999 we had an idea that college students from top universities starting in the Ivy League should create online profiles on the web for the purpose of sharing…
Dave: No. Who is gonna want to do that?
Eric: That sounds like a pretty good idea, if I do say so myself! But unfortunately, and this is so classic of the dot-com era to me, we were very focussed on building a real business, everyone was saying we don’t want to be just like Yahoo, you know we want to be a real business. And so we wanted to use that technology for online profile sharing to the purpose of getting jobs. So it was a resume database the profiles were called resumes, so you would put up your little resume and companies could pay for access to the resume and help you find a job.
Eric: Even if you had a time machine and went back and told my idiotic 20 year old self, dude theres going to be this thing called facebook it’s gonna be huge, you have the technology ready to go you are in the perfect location. You should do it! I would have said in my very arrogant way at that age – you’re an idiot. I’m trying to make a real business here not just kids sharing …I had no idea what it meant to make a business. Which is what happens when you start a company because you heard it is a cool thing to do rather than for any good reason. 0:10:20.1
Chris: Uh huh
Eric: So we went down in flames.
Dave: So are you saying that sometimes if you go into it too seriously, that can be your downfall? Thinking oh I’m going to start a business, rather than I’ve got this cool product and I’m going to do it and if it turns into a business fine but if not meh.
Eric: Well right but people forget. It’s hard to explain this to someone that hasn’t been through it but you think that you create a company in order to make money but that’s just wrong. A company that is succeeding in it’s mission will make money as a sideline. You need to breathe oxygen and take in food in order to stay alive but we don’t just live to carry out those metabolic processes. Hopefully we seek out some higher purpose. And starting a company is like that, you have to have an instinct to make the world a better place in some specific way – what we call a vision. I think that is very important and you have to be willing to change your strategy in order to achieve that vision if your original idea turns out to be wrong. I had a no concept of that in my earlier companies. I was just like you built a business plan and if the business plan is good things go well like it says in the plan you get rich somehow.. But I didn’t have any real understanding of why you do this in the first place. What do you have to believe in to sustain you through the difficult times when inevitably things in the plan don’t work out like they are supposed.
Eric: Skipping way ahead of course a lot of my work now is about helping people understand that distinction between the vision that you try and keep as immutable as you can and the specific strategy which is subject to changes. You get a learning from what really works in the market. We call that change a pivot – a change in strategy without a change in vision. That’s something I did not understand at that time. I wish I did.
Chris: It seems like a lot of places still don’t understand that, I’m thinking like businesses playing competition. It seems like there is so much focus on how are we going to do this thing? Well the thing doesn’t matter. You’re building another Instagram or you’re building this little sensor board? Whatever, you know no big deal. So whats the plan though? That’s the important part.
Eric: Can you make some predictions for me about whats gonna happen in the future?
Chris: [Laughs] Yeah, soothsayers as it were.
Eric: Sometimes I like to think of what we are doing at Lean Startup is trying to move away from business astrology towards business science.
Chris: I like that
Eric: The people that do start ups get really offended when I claim that they believe in astrology, cause a lot of them are engineers or scientists and have a technical background and they don’t like to think of themselves as astrologists. They take that quite offensive but if you ask most startup people, really anybody doing product development, how’s it going? You know what the answer is?
Chris: Going great, going great!
Eric: Always going great.
Eric: How do you know? How do you know it’s going great? Well let me tell you…
Chris: I’m not fired yet. [Laughs]
Eric: Last month we shipped this awesome product, we did this great campaign.. whatever something happened in the past and now we are killing it. Our numbers are all up into the right. And you are like, OK well I have an alternate theory. Last month mercury was in retrograde and I heard that every time mercury is in retrograde numbers go up and to the right. So that’s my theory and if you ever try that they get so angry with you. How could suggest such a thing? I’m like listen, neither of us knows why numbers go up and to the right but I’m just visiting – you live here. You actually believe this stuff.
Chris: Show me some data!
Eric: Where is the evidence that what you are doing is causing the thing you are celebrating. If you read the tech press, read the launch announcements of startups, they are full of vanity metrics. You know the company has 30 billion messages sent and it’s launching today and it’s really exciting and you are like whoa what does that really mean? Is that 30 billion customers ?
Dave: The alternative term for this of course is bullshit.
Dave: Come on you used a buzzword there, you should have used bullshit.
Dave: Sorry that’s just one of my favorite terms.
Eric: I’ll leave the professional judgements to you guys. 0:14:31.8
Chris: Yeah so Dave is nothing if not professional.
Dave: Vanity stuff goodness sake…
Eric: It’s in the book though.. And there’s the other side of that is ….. there’s a whole other thing about the accounting.
Eric: Oh innovation accounting – yeah that’s the one .
Eric: Yeah as you can see I’m a bit of a buzzword factory but ….
Chris: That’s how ideas are kind of spread right?
Eric: Well yeah listen I’m not apologetic about it at all. In order to talk about things in an intelligible way you have to have terminology that people can agree on.
Chris: Yeah I agree.
Eric: It just has to go through the buzzword phase because…Buzzword is an intermediate stage between no one knows what it is to being universally accepted truth.
Chris: Kaizen – eughh. I know the Japanese have all these words for all the lean stuff but man, Kaizen always just rubs me up the wrong way for some reason, you know it’s just…
Eric: Let me just put it this way. Words and phrases don’t ever achieve that escape velocity to become universally accepted or very vulnerable for this very reason, because they take cultural significance that is not related to the initial thing, but has to do with the fact that a certain group uses that term and then it becomes a thing.
Eric: Anyway, the fact that it has entered the universal business lexicon I take as a victory for this trying to help people understand this concept which is obvious in retrospect, I can’t believe we ever thought we could talk intelligently about startups without the ability to talk about this thing that happens to every start up along the way, where they have this total failure that gives them a key learning and then allows them to make a vital success. And so yeah, I do believe that part of the problems we have with start ups has to do with the way we do accounting and people are always disappointed when they hear me talk and I’m like hey we are going to talk about accounting. I thought we were going to talk about something cool like startups, like who wants to talk about accounting? But so many of our problems in new product development in innovation really are rooted in accounting and so we have to make changes to ways we account for progress otherwise we are going to keep having those problems over and over.
Chris: So I was wondering about the lean side of things, based on your background, where did you get introduced to lean because obviously I have stated my displeasure for Kaizen I understand the benefits of it, some of the lean stuff kind of ….
Eric: I do understand. So it’s funny because, those who don’t know lean comes from lean manufacturing which was a distillation of the Toyota production system. Just in time production as you say Kaizen, Andon cord, Kanban all this Japanese terminology coming of Toyota, really starting after WW2 but becoming very popular in the united States in the 80s and 90s. And it’s funny, I actually have no background in manufacturing whatsoever, I have never set foot in an actual factory in my entire life.
Chris: Ohhh that’s gotta change. That’s awesome
Eric: Listen I’m a software guy through and through, you know mechanical things was no forte of mine I could never even get a red port to do anything but catch on fire.
Dave: That’s a start
Eric: That’s step one. So what interesting is by the time .. so I talked about the failed start up .. early 2000s I moved out to silicon valley and started doing start ups out here and had a bunch more failure. But then finally had a chance to do things differently.
Eric: I’d always been an advocate for agile software development and I was a big extreme programming fan. I had this instinct that if we worked faster, if we had customers more involved, if we kind of did things in quicker sprints with more automated testing, less documentation, that kind of stuff. That was kind of my intuition and I was always the kid on the team agitating for those thing where other people would be like no we’re going to do things the traditional way kid. By agitating enough we could kind of reach some kind of compromise. So like we would do it a little bit more agile, instead of doing an annual release we would do a release every 9 months or something and we would call that a victory.
Eric: When I finally got the chance at a company called Inview to set the technology direction from the very beginning as the CTO I was like no we’re going to do things as close to real time as possible. And so, we developed this set of practices that today has a lot of terminology associated with it but at the time we didn’t even know what to call it, we were just doing it. Take something called continuous deployment, where as we write software we put it directly in to production as soon as the automated tests certify it, without having any kind of manual interventions. So we were able to release production every 10 minutes, 50 times a day on average.
Eric: Really fast.. And we could do that without causing problems because we had the infrastructure to do that. So if you study manufacturing you will be familiar with single piece flow and the Andon cord you pull when there a defect on the manufacturing line to stop the line and immediately intervene.
Eric: So without knowing it we were doing something really similar in software. As soon as you would write a module of code, we would immediately deploy it to production in single piece flow. Because that makes debugging so much easier if theres a problem. You know instantly what caused it, namely the thing you just deployed, rather than when you deploy in large batches, imagine god forbid a monthly release or annual release. You take 10000 different features an deploy them at the same time now theres a problem how do you know which feature is the problem?
Eric: That works great in software because when you are building something new, something like 80% of the work of that newness is in underlying systems and infrastructure, it’s not even user visible. So we make for every one user visible change, we make 1000s of supposedly side effect free infrastructure changes. My claim is ok so if they are supposedly side effect free lets just deploy them now – you said there were side effect free. Then people are like whoa wait up I’m scared, help me mommy! 0:20:25.3
Eric: I’m scared of it because I am worried that maybe there is a side effect. There’s no ghost in the machine either there is or their isn’t a side effect. There’s no spooky action in the disc [?] Either the systems are tightly coupled or they’re not. So let’s find out immediately. Then the flip side of it is every time we have a surprise, like if there is a side effect and we have to roll back – lets immediately invest and prevent that from every happening again through automated testing and suddenly we call the cluster immune system which allows us to automatically certify each release is good. I give you that background because at the time, you gotta go back this is 2004-05, I’m using these techniques to great effect, I mean our team at Inview was incredibly productive because we had a better development methodology than most people who we were competing against. Everyone always wanted to know why we were so productive. The general presumption here in silicone valley is if something that is good is happening then whoever is in charge of it must be some kind of super genius.
Eric: Which couldn’t be more wrong. It’s almost rarely the cause maybe even never the cause I don’t know. So I had this reputation as some kind of technical super genius and yet what I would try to explain to people why we were getting these results, no one understood what I was talking about. I would talk to them about continuous deployment and investors who would wanted to invest in our company, employees I would try to hire…. I had people working for me who were 10 year veterans of some enterprise software company. On their first day of employment I would say listen you are going to deploy to production today your first change. Right now you and me we’re going to fix a bug at your desk in the next hour.
Dave: And they wet their pants!
Eric: That’s exactly right! It was really scary for some of them, their first reaction was always the same. They’d be like listen kid – this isn’t how it is done and they would explain to you how software is made. I had to be listen with all due respect Sir …try it you’ll like it.
Chris: Sir I’m paying.
Dave: Sir Im paying you.
Eric: I’d want to be respectful but you do work for me and listen the deal that I would offer all you have to do is try it. If you try it my way and you don’t like it and you think it doesn’t make sense then..
Eric: I said convince me that we are doing something wrong, if there is a better way I’m all ears. I called it the green eggs and ham defense – try it and you will like it and you know everybody liked it pretty much. It was so self evidently true that this was a more productive way .. I mean using it, no one ever goes back. But, just being able to show people that something works is never enough because like think about we would raise money VCs. VC would ask their tech due diligence guy to take a look and make sure that the company was on sound footing right? Can you see where this is going?
Dave: Oh yeah..
Eric: Tech due diligence guy is a 20 year veteran … gray haired veteran with a software history ..
Dave: At IBM!
Eric: And I’m doing it all wrong! Listen kid this isn’t how it’s done and I’d be like listen with all due respect let me show you the evidence that this works. If you ever met any 20 year veterans of any industry, the last thing they are interested in is evidence that the way they have worked their whole career is not the best way. Nobody wants that.
Chris: Yeah my field is littered with – analogue engineering is just like nothing but gray hairs and just most of the time I love that patronizing, let me know you actually how to do that but sometimes it doesn’t work like that.
Eric: Yeah and listen and I don’t mean to say we never learned anything from anyone who was experienced… far be it. Many of our best engineers in that team who advanced the system quite a bit were, were quite a bit older than I was but the problem was for the people who were viewing it from the outside, it was my job to explain to them what worked and why it worked and to be honest I didn’t know why it worked .
Eric: The theory of traditional engineering theory and this goes back to pre lean manufacturing, back to the logic of mass production, says this kind of small batch development with rapid feedback it shouldn’t work. The overheads should dwarf the benefits, but that turns out to be wrong. So I was studying anything I could get my hands on that would help me figure out what the hell was going on.
Eric: It really bothered me that I was doing something I couldn’t explain and therefore I couldn’t answer people’s questions about it as I started to be ….Remember I had this reputation for being a super genius so all these companies are asking me for advise, like I’m on all these advisory boards and people are asking me what to do and listen here’s how we did it in Inview and at blah blah blah. People would get really angry like I was saying something really insane, like that will never work! I’m not telling you a theory I’m just telling you a story it literally works for me come visit and I’ll show you.
Chris: You should have cut out the wa ha ha ha at the end of very story
Eric: Right that’s how the super genius becomes the super villain.
Eric: Right that is what was happening to me. The first thing that I read that really helped explain on the product development side what was working for me were books on lean manufacturing book. Like oh here is a theory that has a straightforward application of what I’m talking about, that helps understand the logic of batch size, the importance of feedback, the quality benefits of going faster etc. And so that was a big relief to me. So then I would start talking to people who asked me … well Istarted talking to them about Kaizen and all this Japanese crap and you can imagine that wasn’t so great either cause there were a bunch of people saying listen I want to learn about software why are you talking to me about manufacturing ? 0:26:11.3
Eric: And to be fair, there is an important conceptual difference and this really gets to the heart of what lean start up is really about. Lean manufacturing and in fact all our previous business management systems from the 20th century, I mean going back to Six Sigma and Scientific Management and Alfred Sloan and General Motors … the things we teach to our MBAS. Those systems are really designed around known problems, so if you know in advance what the customer wants they can help you give the customer what what they want more efficiently and in order to do that they use all these tools of planning and forecasting.
Eric: So the reason we have all these business plan competitions and people are obsessed with business plans…. It’s not because they love astrology, it’s because in the old system we could make pretty good forecasts of what was supposed to happen because the world was a lot more stable than it is today. The likelihood was if you are in business, you are building something that’s a new version of something you have done before. So version 95 of an old, old product of an automobile or pick your favorite product category, has a lot more certainty than uncertainty in it and the uncertainty tends to be technical uncertainty about a new technology or some new feature.
Eric: The insight behind Lean Startup was to say listen in a start up situation, what our defining characteristic is uncertainty. We don’t know what is going to work, we don’t know the customer is going to. The customer doesn’t read the business plan so they don’t do what we think they are going to do. Our job is to act like scientists and discover what is going to work and that means planning and forecasting is out because we don’t know what is going to work in the future, but it also means that we can use all these lean techniques like pull and batch size etc but we have to apply them to a new standard of value. Not just what the customer wants because that’s something we don’t know. We have to apply those same techniques to our hypothesis about what’s going to work.
Eric: So this is really a system of rapid experimentation to discover what works and that framework unlocked a lot of explanatory power for me. It allowed me to make sense of a lot of things that I had been doing in my own careers that worked. As as other people started to latch onto what I called the Lean Startup, I started to write about it. We started to take it into other industries, people started asking questions like ok sure it works for consumer software but what about enterprise software, what about clean tech, health care; what about energy, what about hardware … you know at first my thought was I don’t know if it’s going to work in these other domains, I mean logically it seems like it should but I don’t know . Luckily since the book came out 2 years ago, a lot of people said ok I accept your challenge that I didn’t even know I had issued. Lets go find out if you are right. I believe this is a general purpose management system to be used in situations of high uncertainty and so far so good as we have tried to apply it more and more strange and strange domains
Dave: Can it be applied to the one man band. To just the sole software or hardware developer in their garage – the midnight engineer? 0:29:30.0
Eric: I think it is even more important in that situation. When you are doing a job for somebody else and listen as much as we glamourize the individual entrepreneur the companies that you are familiar with there’s a lot of employees involved. It might have been Steve Wozniak and Steve Jobs alone in their garage for a little while but pretty soon theres employees ok. Like way, way before the auto pod theres a lot of people working and to be fair even most entrepreneurs who take outside money… you’re fundamentally working with other people’s money in a lot of entrepreneurial situations. So if it fails, you know sure you’re upset, but you didn’t bear the loss directly, it’s someone else’s money and you got a resume. You got a good benefits out of it you got paid, you got a resume line you built useful skills, all these good things happened to you as an employee. If you’re a solo entrepreneur, if you really are a one man band, it’s your life were talking about. The ultimate finite resource so to me their greatest crime is to spend all this time and energy working on something and then nobody wants it. And so you basically wind up saying well that was a total waste – I wish I’d found out about this a little bit sooner.
Dave: Well not always because the one man band, often their reason for doing it is because they want to do it. It’s their hobby, it’s their passion. Even if it fails, it doesn’t sell, it doesn’t matter to them.
Eric: Well lets distinguish doesn’t sell from doesn’t have any impact because I think it’s the rare person. I mean listen occasionally I do meet a true artist who is like a real [?] who believes in art for arts sake. But you never hear about these people because they don’t care if anybody hears about them, they are happy to just do their art in their basement and they’re done. So they don’t even need to distribute it. The vast majority of artists and inventors and scientists, like the vast majority, want to change the world, through their work in some way. Not always in a commercial way and that’s not important to me but they want to have an impact. As soon as you say that they are like well if you want to have an impact it’s gonna involve other people so the question is will other people do the thing you expect them to do or not? And a surprising number of times the answer is no. Others[?] are stupid and irrational and you know… poor and they lack your vision and they refuse to use your thing and it’s so classic. If you look at … if you don’t want to look at commercial failures then go on Source Forge and add up the total number of man hours that have been invested in open source projects that have never had anybody download them.
Eric: That’s a huge waste of time and listen I have plenty of those projects myself so I’m no better than anybody else at this. A lot of those projects are a very sad outcome, where you say gosh it would have been better if they had had actual customers in mind earlier and more involved in the process. They could have avoided this situation where they built something that nobody used.
Dave: Often you don’t know what people want to use until you build it. You have to have a finished product – bang here it is – and theres so many examples of that.
Eric: So here’s my claim – this is very controversial not everybody agrees but my claim is that for any product there are ways to test if people are going to want it before the final finished product is done.
Dave: In theory of course there are yeah.
Eric: We call it the minimum viable product or MVP. The version of the product necessary to get that initial testing and insight into the market. The reason it’s such an important concept, I could prove to you it is a necessary step if you believe in something called the technology life cycle adoption curve. So people are familiar with crossing the chasm?
Chris: Is that like the hype curve or is that something different?
Eric: It is different although I think it is related. The idea is that as technologies or any new product diffuse into a population, early adopters try it before mainstream customers. So there is certain products and those of us who live a little bit more on the cutting edge know this extremely well. There’s certain products you can tell your parents about, they are ready for prime time and they can just go buy them in a store and set them up by themselves. And there are certain products where you gotta tinker with the settings and you gotta know how to download them it and you it’s not ready for mainstream consumption.
Dave: 3D printers
Eric: 3D printers fit squarely in that category of early adopters only. Entrepreneurs of course are rarely satisfied by early adopters they have visions of building a product that everyone will want to use. Whereas there is actually really good research says it is impossible for a product to be used by mainstream customers first. It has to go through the early adopter phase and I can prove it to you, it’s a very simple proof.
Dave: I don’t think you have to prove that to anyone here.
Eric: If everyone on this podcast considers this self evident then we are way ahead of a lot of the audiences I talk to, let me say.
Dave: Well our audience is smarter than your average bear they are hardware people you know. You go in there and try and tell your corporate suits you know they just don’t get it whereas us, ehhh??? Us hardware people get it.
Eric: You should hear what the corporate suits say about you guys.
Dave: We don’t care because we are smarter than they are.
Eric: Amen I couldn’t agree more, you guys are definitely the smartest and best looking podcast and audience I have ever seen.
Dave: There you go
Eric: So if you believe what I’m saying that you have to work with early adopters before you work with the mainstream, then everything I’m talking about follows logically from that because you say alright, if you do extra work to make a product more polished more ready for the mainstream before you give it to an early adopter, all that extra work is waste.
Dave: Oh totally
Eric: Because it doesn’t help you to the mainstream and the early adopters don’t care. That’s why early adopters are awesome, because they don’t need to have all the polished guard rails and they are happy to go onto the advanced settings and muck around. In fact if you don’t have the advanced settings there – they get kinda pissed! It’s counter productive to make things too slick too polished before you show them to early adopters, therefore one way to think about minimum viable products is to say what is the least amount of work we must do to get that initial engagement from those first customers in.
Chris: Well we’re all about the least amount of work around here that’s for sure.
Eric: One thing I know about engineers hardware or software is that they are lazy. 0:35:56.7
Chris: Yes, definitely.
Eric: And I think that’s one of our great virtues as Larry Wall said.
Chris: Speaking of hardware let’s get into that a little bit because I think that’s one of the places where I start to have issues with lean stuff or lean start up is kind of defining the MVP for a piece of hardware because, theres always the ambiguity between, is Arduino with a breadboard attached is that MVP like how do you actually define that for a hardware situation?
Eric: So the first thing that’s critical to understand about MVP, is it’s industry and situation specific, so it’s not important that your MVP is fast as like a software guys MVP. Obviously we are building something in hardware you know, well Iwon’t say obviously because I know some pretty slow software guys and some pretty fast hardware guys. Often, the MVP for a piece of hardware is longer than for a piece of software but that’s irrelevant it’s not an important comparison. The question is, who is learning fastest in your market, your segment, you want to be the fastest learner to the extent that if your competitors are doing anything you absorb what they are doing faster than they can absorb what you are doing.
Eric: So if you think about that, often times there is a way to prototype the experience for the customer without having the full bells and whistles. So I’ll give you an example from a car company I was working with, where they have an idea for a new in-dash entertainment system to replace what you would normally get in your car you know navigation, entertainment podcast kind of stuff. So the traditional way to change that would be to do a massive research development project integrated into the supply chain and for the model year 5 years from now l[?] and we said OK let’s do something a little different.
Eric: Let’s, use the MVP, it’s always the MVP in this experience, we want to see customers using this in actual car, to see if the experience we are creating for them is actually better than the old experience as measured by their lived experience. I think I’m using the word experience too much but by whats actually happening in the car versus some focus group or some more abstract thing. So you kind of see where this is going. We mocked up an alternative plastic housing [?]took a couple of days and put an Android tablet in it.
Dave: A tablet in a … yep. I was going to say that it’s obvious!
Eric: Yeah we wired up an Arduino board so that it could get access to the cars internal electronics and next thing you know we got some volunteers, you know early adopter types who were like, oh yeah you wanna much around with my cars electronics sign me up no problem. These guys were overwhelmed with the initial early adopter response. They initially only… they literally put one ad on Craigslist to say – it didn’t even say which company it was. It was just like – we are thinking about messing around with your electronics for a new auto product. Are you interested? Please fill out our survey – and hundreds of people, hundreds decided to try something new. If you think about people who like have a long commute every day, the in-car entertainment is so important to them and like an innovation you’re awesome.
Eric: So from the customer’s point of view, they take their car into the shop and visually it looks like the in-car navigation screen has been replaced, but actually whats happened is we’ve slotted in an Android tablet in front and it integrates…so it is very plugy [?] on the backend… It’s totally non scalable, absolutely no supply chain behind it. It’s manually done one car at a time. This company went from concept to having customers in 30 days instead of 5 years. And then this is the second part about MVP, the phrase MVP causes come confusion because it just sounds like it’s all product but really what we are trying to do is start the build, measure, learn cycle of learning. So if you just do one MVP and launch it, that’s like doing one science experiment. You can never tell if that goes wrong, you don’t really know if the experiment was flawed or the hypothesis was flawed. Right it could be either.
Chris & Dave: Yeah
Eric: So you have to keep going with a series of experiments with a first version of this that they put in people’s cars that people actually didn’t like very much and didn’t use nearly as much as they thought and turned out that certain features were a lot more important than others. I’ll make something up, this is not actually their thesis because I don’t want to give away, I want to respect their confidentiality. So you go we don’t need radio controls cause no one listens to the radio we’ll just cast instead and podcasts care better than radio and lo and behold like… Not everybody actually feels that way. So whatever your thesis is you have to go in there and discover…..
Dave: Sorry Chris! 0:40:54.0
Eric: Sometimes you want to listen to a sports game live and then you are like where’s my fricken radio?
Dave: See to me that’s self evident, that is so bleedingly obvious! I would call you a dumbarse if you thought otherwise. [?] Inaudible 0:41:10.4
Yeah, to not put a radio in it …
Eric: This is what’s so great – I actually just made that example up because I can’t tell you what really happened because I want to respect this companies confidentiality but..
Eric: In almost every case when Ive been involved with a company that’s done this at least one of the things they viewed as completely obvious turn out to be 100% wrong.
Eric: The problem is you never know in advance which of your ten obvious truths is that fatal flaw that you just missed. And I think this is the only way to find out.
Chris: And then you always have someone fighting tooth and nail for it right? You have someone saying – in this case no it has to have a radio it has to have a radio and if you tested and it did say you didn’t need it or you did need it that kind of thing is – it get into all the ego of people designing …
Eric: Oh totally
Dave: But you have to be careful though, because when you take a feature out and you don’t give it to them to begin with …. right, you take that radio feature out and you don’t give it to them they might go oh where’s the radio? Oh ok, it hasn’t got one I guess that that’s ok, you know and you can get a false sense of success there – if you understand what I mean.
Eric: Yeah, this is when it goes to experimental design so in this particular case these guys did something really clever which was the initial customers … I don’t remember the exact details but something like, the customer who had agreed to have this thing installed in their car for a week and then at the end we are going to take it out of your car. So what happened is at the end of the week we would come to you and say listen … we were paying people to beta test so you get your usability $100 gift certificate or whatever your prize was. But they would say at the end of the week, you know if you would rather us not take it out of your car, if you want to keep it you can and forgo your $100 gift certificate and keep it in your car for another 30 days. So it was a way of gauging if people were just like, cause people might say, oh yeah sure it sounds fine give me my gift certificate.
Eric: And they had some people who were not that interested, anybody willing to have the product removed from their car is not really an early adopter or the product is not really as good as we thought. Some customers were like, this thing had one killer feature in it – that was so good that certain customers would say yeah I’ll give up my radio for that. Yeah I’m annoyed that it doesn’t have a radio but I can’t live anymore without this feature, it’s so critical to me. And that was the kind of validation that they were looking for.
Eric: Let me point to another thing that’s really important cause you said something that was key which is, some people are sometimes nervous that if you are missing a key feature and you piss people off in MVP then that’s bad. But actually, it’s actually a good thing. If you have a couple of customers who you put a thing in there and it has no radio and they are like what are you a moron? There’s no radio! Then first of all you can say I’m sorry, take it out of their car and thank them for your time. You got really valuable learning that this thing turns out to be actually really important. You immediately go remember – build, measure learn. You immediately go to the next version that does have a radio and now we’re better of than we were. 0:44:29.5
Dave: Of course yeah
Eric: So it’s always better, even if you are missing a critical feature and you are convinced it is critical, you’re still better off running the experiment till that customers verify that in fact something that is important to them versus insisting that it has to have every last thing that everyone on the team thinks is critically important before you launch it to anybody.
Dave: But if it costs you not much in terms of time or money to put that feature in you’re probably better off going with your gut saying hey, I like the radio so I’m gonna put it in. So then you can avoid that build measure…
Eric: Listen we always want you have to believe in your hypothesis, if you can’t learn anything, so this is an old lesson in the scientific method, you can’t run an experiment unless the person running the experiment believes that it’s true. Because otherwise, you wont be surprised when it doesn’t work. So yeah if you really are convinced that it has to have radio then amen, that’s what it has to have.
Eric: What the danger is, especially in a team situation, if you have 5 people working on a product, they will have 5 different ideas about what is essential. What we don’t want to do is say well everybody has to get their pet thing in before we can even run them on experiment. It’s better thinking we’ll just add features one at a time and we will experiment, one experiment at a time and hopefully that way learn which of these five features is critically important and which one isn’t.
Chris: So with regard to the adding stuff in, one of the things with hardware it seems like a limitation is kind of the discrete nature. I think of PCBs right and trying to roll a new component or even a new big chunk of a circuit. In that case, it seems like it has to have these discrete steps – I’m going to do this, I’m going to do that… How do you actually decide when to make that jump because that seems like another big issue with iterating.
Eric: There’s a couple of different ways. The first is, as you guys know depending on the thing we are talking about there is often … most technology platforms there’s a high technology count and a low production count version of the product. Think about the [?] ..rays inaudible versus burns silicon. But also I’ve worked in some industrial applications where….I’ll give you a funny example from an appliance company that makes appliances where you have to do injection moulded plastic.
Eric: You’ve to build out the tool to produce millions of the unit. But because it is appliance sand appliances are regulated in order to prove that you pass the energy star standard and various other regulatory requirements, you have to boost a prototype version much earlier in the process than the one you can mass produce. You can do that using soft tools, so you have spent a lot less money for soft tools that burn out a lot sooner but nonetheless allow you to produce a pretty reasonable quality products. A consumer will look at it and say that looks like a real appliance, it works completely functional, it passes your regulatory.
Eric: So I was with a company that does this and they were trying to build a high end appliance, not a mass produced one. The high end appliance market at the very high end it’s not that big. The number of people in any given year that can afford the most expensive appliances is relatively small so we’re talking about 1000s upon millions. Yet their internal company rules required them to build out the hard tools as part of their normal product development process so they are going to spend a year building up the tooling for something where ..
Eric: So I was talking to them and I said listen, you think of it this is a very uncertain proposition that customers are even going to want this incredibly fancy thing. So I said alright how about if we could sell one appliance, how long would that take? And they were like what do you mean? Listen you don’t understand manufacturing. Producing one is the same as producing a million, once you have the line set up you can produce as many as you want. I was like oh no no no I’m sorry, my mistake. I don’t mean one line of appliances. I mean what if I was to sell one individual appliance? They laughed at me and they were like well we have one in our office right now. I was like what you’ve already built this appliance? And like sure we had to, it’s in our office we use it everyday. I said ok, could you sell that appliance? They’re like well you know our company has a [?] store where we allow people to come and see our latest products. So I was like oh really is that really far away or something? They were like no it’s in the main building that we work in. So it was literally 100 meters from where this demo unit is. I was like could you go back to your office and get a dolly and walk this unit 100m to the other place and put a price tag on it. See if anyone wants to buy it. They were like you cant do that! And I was like why not?! Well our product development process says blah blah blah…. And they had every dumb bogus reason. Listen software guy you don’t understand hardware. Listen you actually already have the tooling necessary to produce more of this thing, that you already built, than you probably will sell in your first year. You’d be lucky to sell that many in your first year. So you’ve talked yourself into this complicated situation when we could be doing the validation right now.
Eric: And what’s awesome was that’s a business where new appliances, like really new models, tended to come out every 5-7 years because it took a long time to design. The industry structure was set up for slow iteration. So we worked through a plan where they could be on an annual release cycle with the suppliants. Software annual releases have gone the way of the Dodo, like we don’t do Windows 95 anymore. We don’t put the year the thing came out and the name of the product. 0:50:18.2
Dave: Some companies still do.
Eric: And you know something’s gone horribly wrong cause it’s at best once a year – no good. So, in hardware, in this particular hardware situation, annual releases are gonna kick the pants out of their competitors so it’s a really good situation to be in. And now here’s my favorite part. Any time you are selling a product that has a long cycle time for the sales process, cause it’s not like people buy an appliance on a whim. At this price point it’s like part of the design installation, it’s complicated. You can actually can do 2 build, measure, learn loops working on the actual product iteration, the soft tooling , celebrating the development of the actual thing. But you could also be iterating in the sales cycle with the product concept.
Chris: Through 3d images and stuff like that do you mean?
Dave: Selling the product that doesn’t exist yet.
Eric: Exactly right! Every customer buys a product based on your vision of what it’s supposed to be. Which is the easiest thing to get right en route. I was working with a diagnostic company that makes an extremely high tech health diagnostics physical device. I mean the science of this thing blew my mind. It’s incredibly complicated has patents up the wazoo and is something that is very difficult to sell because it’s an expensive fragile ..
Chris: Yeah regulatory …
Eric: But on the other hand the benefits of this thing …customers what they can do with this device is evil. But once they can find out what it can do they are like holy shit I’ve gotta have this. So, the problem was that this is not yet an approved device and for sale. So we cant sell it yet but regardless of the sales regulatory issues, is an even bigger problem which is that it is unclear what the workflow would be for this device . The version of it I saw working in a lab and it’s a very complicated workflow and it needs to get a lot easier before they will be able to boost sell it at the rate they want. But how much easier does it have to get is an unknown. So you can see where this is going…
Eric: So ok … 0:52:40.4 inaudible [?] Start printing plastic manufacture and why don’t we do a complete to scale replica of what we think the workflow is supposed to be. So imagine, it’s like printing all the external shell component of all the parts of the device. This device had a lot of components to it. So they are like well that we can do right now. We have a proposed schema of what we think the final design is supposed to be. So we actually built in very little time a replica lab that looks like it has this technology installed in it, that has the workflow set up as model example and then we could bring customers into this lab. And the customer we’d say listen sit down try the workflow see how it works here’s the specification document, here’s all the details here’s the pricing … all the things you would need to know to make an informed decision about whether you might want to purchase this or not. We asked them to make a purchase decision and all the flows are mocked up so there’s a man behind the curtain …no matter what you do with the shell you see the same images on the screen. It’s a demo, the customer doesn’t know that it doesn’t work, it looks like it works.
Eric: So what’s cool about it is, every time you bring a customer in you can change the experiment you can operate it at a different price point you can change the configuration to make the workflow easier or harder. The big question for this thing was should it have robotic arms that do a bunch of things for you, or could we have humans do it themselves? As you can imagine adds a lot of cost and complexity to the device and that has to be fully automated for something that is mostly automated. So those meant huge differences to the amount of engineering complexity required.
Eric: So by figuring out whether customers actually would pay a price premium for that automation or not … We’re able to do a much better job of setting up the specification that we have the engineers working on. And in almost every case where I’ve done this .. I’ve done this in gas turbine engines, healthcare products like we are talking about, equipment that’s used in fracking, really heavy industrial hardware stuff as well as obviously more consumer electronics products. The way we get the MVP to get to market a lot faster, is by making the specification document easier, by reducing the requirements.
Dave: Of course
Eric: When we are sitting at the whiteboard with some product manager and a bunch of scientists and we are imagining what we think a customer requires in order to buy the product. We tend to get a little carried away with the technical standards.
Dave: No ….
Eric: The efficiency has to be off the charts… I’ll tell you a company I was working with, here’s how they chose the efficiency ….a requirements document. I hate the word requirements by the way. Nothing is required at this stage except the laws of physics, everything else is a hypothesis.
Eric: So they showed me this requirements document and it had this efficiency target. I said where is this efficiency target coming from? They said well that’s what is going to be required to win in the market. I said how do you know? Well, we took all of our competitors efficiencies and what they are today …we projected 5 years into the future when this product is scheduled to come out, for what we think the competitors best efficiency using their best technology blah blah blah will be and then we added on 10% for good margin. To make sure we are the most efficient. So we extrapolated a thinking we don’t have any clue about, based on information we don’t have, and then we added 10% just for the cherry on top. I’m like ok how much of the fact that this thing is gonna take 5 years to produce, is in the fact that you set this ambitious efficiency target? 0:56:13.5
Dave: If you’re done next year you could just get it out there …
Eric: I can prove to you conclusively prove to you that customers wont pay a premium for that efficiency target. How much time could we save from this product development effort ? And in this case it was something like 4 of the 5 years could be saved. It was really dramatic. I’m not saying that customers don’t value efficiency, I’m saying we need to go find out.
Chris: Lets find out if they ‘ll pay for it that’s the key thing
Eric: Exactly right. That’s the logic. This elaborate business plan … these guys had this business plan 100 pages and all these spreadsheets and it was a very disciplined detailed business plan. Buried in footnote 25 and appendix D in the very fine, fine print is what we call this leap of faith assumption that says – by the way customer customer will pay a premium for this efficiency. If you take that statement and make it false then the whole house cards comes tumbling down.
Chris: So how do you deal with it then because the thing that always bugs me about it.. and you talk about this in the book obviously .. is the siloed structures. For established companies, theres these siloed structures. Here’s marketing here’s R & D
Eric: Oh yeah
Chris: Here is sales and then like at some point the price gets set, at some point the specs get set, at some point you know, how you’re gonna sell it gets set and it’s like unless you … I don’t get how that happens otherwise unless you just smash everyone together.
Eric: You make gazpacho …yeah.
Eric: So what we’re talking about is a completely different management system. It’s like a different compatible operating system than people are used to using in established companies. You have to change …
Chris: So when you come in are you… when you go to a company consulting, do you pretty much say well you have to do this or you’re screwed? How do you actually effect the change in these big monolithic corporations?
Eric: I’m the world’s worst consultant because … think about it someone like me gets called in as a consultant what happened? Some manager somewhere read my book and they gave it to their boss and said hey you will love this book. Anyway someone important finally reads this book – and they say lets get this guy in as a consultant and some underling calls me and says you gotta come in so and so important person wants to talk to you and I say ok. I come in and give him the talk or something and my talk is just hey exactly what was in the book but in a talk and so we have a conversation. A senior manager alway comes in, if they like it they say ok I want to do this in my company but they are hoping it’s gonna .. What do we do next I’m going to pay you a lot of money as a consultant do something for me. What I think they are usually hoping is that I will tell them – you gotta fire all your employees and get some new fancy more entrepreneurial employees, put up some posters to tell everybody to be more innovative… looking for like easy cheap fixes. I am the worlds worst consultant because I tell them, listen if you are not getting the innovation you want out of your company, look in the mirror – now you are looking at the problem.
Eric: All the innovation problems in corporate America originate first and foremost with senior management because they are setting the accountability standards and the management process that is required to be used across the whole company and it’s the wrong one.
Chris: Eric can you start telling them to throw out .. my favorite phrase is the MBA playbook. Can you start telling them to start throwing out the MBA playbook ,can you make that a thing? Cause I’ll never make it a thing.
Eric: I am honest to god working on that.
Chris: Ok good I like that
Eric: And what’s interesting is of course I’m not telling them that they should never hire any MBAs and that the traditional management systems that worked for them in the past – they still work for certain kinds of business. Every modern company has a portfolio and some parts of the portfolio are those things. Those products you’ve been making for a hundred years and you’re on version 95 and you know the customers well and it’s an incremental improvement. Traditional management forecasting works great for those kind of products. What I’m saying is when you’re at the start up part of portfolio. You have to use a different playbook, to use the phrase, a different standard a different set of management practices. That means no silos, no hand offs, no part time work. We need full time engaged small teams with secure funding, with a clear mandate and the ability to pivot. And most senior managers that I’ve said that to have been – get the hell out of here, you’re scary like. No way, I wanted posters inaudible [?] … so you’re fired! 1:00:46.0
Chris: What they are really saying is I’m afraid for my job.
Eric: Yes the things that I did in my career that made me successful, that got me to this senior job, you’re telling me they aren’t the best things? I have to change .. It’s not easy and we have a lot of problems in corporate America including the short term focus on the stock market and all this kind of stuff that says hey maybe if you just hang on a little longer in your high paying senior managers job this will be the next persons problem.
Dave: Golden parachuuuuute!
Eric: Theres actually a very small number of extremely impressive, to me anyway, managers who have had both the integrity and the foresight to say ok let’s go test that. If I’m the problem, let’s go see if I can be the solution. The last year if my life was spent in very large companies, working to make this transformation happen and I was a sceptic at the beginning I didn’t think big companies could do this kind of stuff but I’m now seeing first hand that it is possible. If senior management is willing to change the way they behave, you can create the environment that allows internal start ups to succeed.
Dave: What you need to do is approach them when they are in the position of going under. Losing their jobs and everything else. Then they are a bit more willing, they’re a bit more willing, when their feet are on fire.
Eric: Yeah fair enough.
Chris: So we just have .. we have to get going soon so a couple of quick questions from the audience. One thing that came up in some of the questions is just about the iteration of hardware in general which we kind of touched on a little bit. So I can’t read this name .. ohhh I can’t read this name on Reddit of course …
Eric: Of course
Chris: How do you fight the need to get it right the first time thing? I mean we kind of talked about that a little bit but you know .. You set the MVP at a year at some places, when you come in and you say this is what we have .. someone is saying we have to get it right first time around how do you respond to that kind of thing?
Eric: The problem is .. there’s 2 different kinds of risk with MVP that we need to deal with.. whats called external risk and internal risk. So an external risk is something like if the device doesn’t work as advertised someone could die. It could explode. I mean the reason I like software so much more than hardware is that things rarely actually literally explode but you know in hardware things explode, people die. So we have safety standards, regulatory issues. Those kinds of risks most of the companies and professionals that I work with know how to mitigate those risks and MVP is not about compromising on those standards. That would be a laughably bad idea. But a huge amount of the delay in building a new product in hardware is often stuff to do with internal risks.
Eric: My personal professional pride, you know I’m embarrassed about the way this thing looks. It’s not on the schedule, the official internal process. I am amazed at how many companies that have regulatory approval before they will even take the product to the regulator. They will go through years of their internal bureaucracy to decide that it is time to go and talk to someone outside so it’s all these internal delays. People are like it’s the risk of .. What if the thing comes not on time? What if we have a delay in the schedule? That’s not actually a risk. Customers don’t care. What if I don’t follow the checklist – nobody cares. What if it comes in over budget? Nobody cares – like your customers don’t care that’s all purely internal.
Dave: Customers don’t care about anything at all! Except the final product and can I get my hands on it? When and how much?
Eric: Exactly right. Does this solve a problem for me does it help me in some way ? Does it work at a good price? That is what matters. So most of the delays with MVPs are really internal. People’s egos, internal process. So once you clear that crap out of the way it’s a rare company that can’t get to market a lot faster. Then you have the courage to take in that initial feedback and keep iterating, keep experimenting, keep going. So there’s still that requirement to have perseverance and dedication. In fact, I think of the Lean Startup as a system for short term action in the service of a long term vision. If you don’t have a long term vision this is all a waste of time.
Chris: One last thing here- cause I know you have to go. With hardware and shipping it quickly.. How do you actually segment if it works or not, if it’s half baked .. You cant just ship it them out of the product that kind of thing.
Eric: Yeah, you have to set up the architecture of both a business model and the physical architecture to allow you do do physical iteration. You do that in one of two ways. For some products, you come out with a new version when you come out with a new version. So think about the early original Iphone. It didn’t have copy paste, it didn’t have 3g, it was missing all kinds of features. Some would just go and launch it you know – and a year later you come out with a better product and that’s one possibility. 1:05:47.7
Eric: Give you another completely different example and again it comes from another hardware… this is another heavy industrial equipment company. This is the product that’s used in power plants so it has a very, very long life. You put this product to market traditionally and it runs for decades. Of course there’s a service contract so your parts wear out you come in and fix them but basically it’s a huge up front sale and the customer runs it. So we were talking about how do we get into a faster build measure learn cadence with our customer in this situation? One one of the things that … this happens to be a product where because parts wear out there’s actually two different kinds of components there’s the actual physical frame architecture of how the thing is actually built and put together and then there are the high tech components inside of it that wear out. Does that makes sense?
Dave: Yeah yeah
Eric: So what if we were to give you today a product .. instead of waiting 5 years for a product to come out, we’re going to give you a product today that has the new architecture but today’s materials and today’s technology. So it will have all the benefits of inevitable thing but here’s what we proposed. Instead of a service contract let’s do a business model innovation. We’re going to offer you this product on an upgrade path. So every year we’re gonna come back to you and give you the option for us to install the latest, greatest materials on the inside of this architecture. So we can upgrade it for you every year and we will have a pre-negotiated contract where you pay us for the performance improvements of those upgrades. So if we improve the efficiency of the machine etc then we get paid more than we do today. Then instead of just getting one major improvement 5 years from now – we can promise you yearly improvements from now for the next 30 years.
Eric: So think about whats required to do that? This goes back to your question about silos and stuff like … That requires a complete change in the way we build the product, the way we market the product, who our customers are. The service agreement is now completely different, the way the customer pays is different, the financial models, remember the margins are … It changes a lot of things about the corporation.
Chris: It does
Eric: In order to do a product like that you have to have a really truly cross-functional team. A startup – working on it together.
Chris: I was also reading about the transition as well the I know the thing of transitioning from a start up mentality. Maintaining that throughout as you move into a longer term life cycle as well.
Eric: Yeah exactly right.
Chris: Alright well, Dave you got anything else for Eric here?
Dave: No we better wrap it up. I know we do have some Reddit questions but I’m not sure if ..
Chris: A lot of them were covered in the …
Chris: Not directly as we asked them but a lot of good stories there. I hope that someday you are able to publish all those stories somehow that would be really cool.
Eric: If only there was some kind of technology that for capturing stories as some data archival system .. smearing it on some kind of dead tree surface.
Eric: If anyone has an idea …
Chris: We’ll get there
Eric: One day in the future we will have that..
Chris: We’ll need a paper start-up
Eric: We have the power
Dave: Where can people buy your book and where can they follow you and read your stuff ?
Eric: OK so let’s see the book is called the Lean Start-up, you can buy it at Amazon and anywhere fine books are sold.
Dave: Is it available on Kindle? 1:09:22.8
Eric: It is on Kindle and god knows what else.. you can see all the different platforms at the leanstartup.com. We have a conference once a year called the lean start up conference that has a website called leanstartup.co. Our next conference is the week of December 9th in San Francisco.
Eric: I’m @ericries on Twitter, you can follow me and get all kinds of spam about all the great things that I’m doing including what I ate for lunch etc. And the most Important resource I think, far more important than any of the stuff I have to say, is the fact meet-up groups are around the world so if you google for lean start up circles or lean start up meet ups unless you are in a very very remote place, in which case how are you getting this podcast? It’s very likely that there’s already a lean start up meet up in your city, a lot of places have a monthly or more frequent get together where entrepreneurs can work with each other to advance the state of the art in entrepreneurship and I think that’s when the most important work is being done.
Dave: One last quick question. Do you see any competition with other forms of start up methodology? If I’m using the correct…
Eric: Listen I wish we had more competition.
Dave: That’s the correct answer than you very much!
Eric: There’s a lot of good work being done in startup theory if you will now. Steve Blank who is a mentor of mine who writes about customer development and a lot about lean startup which I think is a very important resource. Theres Business Model Generation and other kind of … there’s a great book called ‘Founders Dilemmas’ by an academic at Harvard that talks about a research based look at some of these entrepreneurial challenges. But honestly the biggest competition is just the inertia of people doing things the old way and just assuming that’s the only way. I think that’s the number one issue.
Dave: Awesome. Thank you very much for joining us Eric. It’s been awesome and this has been by far our largest wank word filled episode so far.
Chris: And it’s been awesome.
Eric: Thank you very much, I appreciate the compliment.
Dave: No worries. Thanks mate.
Eric: Alright take care guys bye bye.
Chris: Bye bye.
Dave: See ya. 1:11:38.0