In this lecture, you're going to learn about the five principles of Lean Startup. But before we get there, let's talk about the origin of Lean Startup. In the last decade or few, there has been a significant rise of Lean Startup, but not only that, there has been many failures as well and that results in a lot of waste in terms of the capital and then also in terms of the passion, the morale and the expertise of these individuals. So Eric Ries learned from these examples or these failures and his own failures and defined the concept called Lean Startup. That is a set of principles, practices and tools in his book, The Lean Startup, that helped manage innovation not only in a startup but also in big organizations where there is extreme uncertainty. So how Eric defines Lean Startup as a human institution designed to create new products and services under conditions of extreme uncertainty. So as he says it's a human institution, so it involves humans, and it can be applied to any product or services in any industry. And it is applicable where the situation is extreme uncertainty, which means the future is very unpredictable. So let's dig into the principles now. The first principle is Entrepreneurship is Management. So, as soon as you say the word management people equate that to bureaucracy, and that's why a lot of startups avoid management and they want to avoid any kind of process that slows them down. And they have the attitude of just do it and so they will try to get their product out as soon as possible without any management. Well, that leads to a lot of failure and that's what Eric identified. So according to Eric in his book The Lean Startup, he's suggesting that we do need management but a different kind of management that supports extreme uncertainty. And so in terms of that management, the first thing he talks about is how do you measure progress? The unit of progress is very different when you're doing a startup concept. So in a traditional way you will define the measure of progress by production of high quality products, whereas in lean startup the unit of measurement is validated learning which is scientifically validating each element of your startup vision by running series of experiments. Where anytime you have an assumption, you are validating whether that is correct or not by scientifically creating an experiment. So that is the second principle of Lean Startup or validated learning and that is backed by a special type of accounting, a couple of concepts that are well-suited in terms of accounting for a lean startup called Innovation Accounting. And that's another principle of Lean Startup. In terms of approach, instead of a traditional approach where you do a lot of user research, you create complex plans and you'd have meticulous execution to make that product work and then you do a flashy launch to launch the product. Instead of that approach, in Lean Startup, Eric suggests a quick or iterative build-measure-learn cycle in which you learn iteratively and quickly. And that is the fourth principle of Lean Startup. Now when you're going through this cycle, you're going through a lot of pivot and persevere. And so if you're going in the right direction then you persevere but if you think that you need to change the direction then you pivot. And continuing with the approach at a very, very high level, Lean Startup has vision which is backed by a strategy and with the strategy is backed by the product that they deliver. Now the product changes very frequently based on that build-measure-learn cycle, but the strategy changes less frequently and that happens once in a while and when you decide whether you're going to pivot or you're going to persevere. But the vision rarely changes. So vision always remains the same in most cases. Now you may ask, is this concept applicable to only startups? Well, according to Eric, it is equally applicable to the enterprise, whether it is a small or a large enterprise, whether it's a profit or a nonprofit, commercial or a government organization. As long as it is applicable to the Lean Startup ecosystem where we are trying to create new products and services under conditions of extreme uncertainty. That gives to the fifth principle of Lean Startup called Entrepreneurs are Everywhere, which means that entrepreneurs could be in an organization, in a big enterprise and it's called Intrapreneurs, which means entrepreneurs that are trying to build a start-up inside an established organization. So all the concepts, all the principles that we talked about could be equally applicable into an established organization as long as there is innovation going on, as long as there is this extreme uncertainty in what they are building.
