Entrepreneurs Are Everywhere

Whether they're found in a garage or inside an established enterprise, startups struggle with decisions about process and infrastructure. The speed at which a startup can learn is its competitive advantage and the defining factor in its success. But startups can't rely on the processes and infrastructure that their established competitors use, because those "best practices" tend to kill disruptive innovation.

Still, startups develop some kind of process — whether it's disciplined, haphazard, bureaucratic or empowering — because building a great product depends on it.

They just need to balance process with innovation. Companies that insist on building a world-class infrastructure before shipping a product are doomed to "achieve failure," because they're starved of feedback for too long. I learned this lesson first hand in a previous company (read the sad story here). On the other hand, companies that take a "just do it" attitude without any process at all are also taking a major gamble. High-profile startup Friendster had first-mover advantage in the social networking space, but created openings for competitors when it could not scale to meet demand.

Finding the right balance requires an understanding of the fundamental feedback loop that powers all startups. It begins with an idea, which is translated into a product via the "build stage." When customers interact with that product, they create data, which startups harvest in the "measure stage." And, with any luck, that data will inform the company in the "learn stage," and that learning will influence the next set of ideas. This three-stage feedback loop sounds simple, but it's powerful nonetheless. It gives rise to this heuristic for evaluating any process or infrastructure change in the context of a startup:

Always choose the option that minimizes the total time through the feedback loop.

In other words, any change that accelerates learning is a win, and everything else is waste. This is very different from the trade-offs that need to be made in situations where the goal is to optimize for profit, margin, or growth.

Price: $26 $14
Fall 2011
The Crown Publishing Group
A division of Random House, Inc.

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