Eric Ries2013-05-22T10:32:24-04:00Eric Rieshttp://www.huffingtonpost.com/author/index.php?author=eric-riesCopyright 2008, HuffingtonPost.com, Inc.HuffingtonPost Blogger Feed for Eric RiesGood old fashioned elbow grease.A Startup Inside a Fortune 500 Company? The Nordstrom Innovation Labtag:www.huffingtonpost.com,2011:/theblog//3.10684492011-11-04T18:20:19-04:002012-01-04T05:12:01-05:00Eric Rieshttp://www.huffingtonpost.com/eric-ries/The Lean Startup that is most often met with skepticism. Seeing is believing, so rather than try and convince you, take a look for yourself.
Nordstrom is currently ranked #254 on the Fortune 500 (yes, I looked it up) with over $9 billion in revenues. Scrappy startup they are not. And yet they face the same competitive pressures that are causing every modern company to take a long, hard look at the process they use to innovate. Anyone who has read The Innovator's Dilemmaknows just how hard it is for a company that has been successful to invest in potentially disruptive innovations.
JB Brown is the manager of the Nordstrom Innovation Lab. He has been working inside Nordstrom to accelerate their process of innovation. Nordstrom sent a camera crew to document the Lab at work. When I saw the rough cut of the videos they were producing, I knew they would be a powerful teaching tool. It's one thing to talk about "rapid experimentation" and "validated learning" as abstract concepts. It's quite another to see them in action in a real-world setting.
Below, you'll find two videos: one about the lab, and one containing a case study of the team at work. Watch as they build a complete app (to help sell sunglasses) in exactly one week. They walk into the store not knowing what would be most useful to build. But with the help of customers, salespeople, managers -- and a healthy dose of experimentation -- they're able to figure out an answer and execute it in a matter of days.
Here are some highlights that I found especially interesting:
One-week iterations. One of the hardest things about corporate innovation is breaking through the slowness that is the default speed for most initiatives. The Nordstrom Innovation Lab solves this problem by working in one-week increments. In the second video above, you'll see them build an entire new product in one week end-to-end.
Genchi gembutsu. This is one of my favorite concepts from the Toyota Production System. It translates roughly as "go and see for yourself" -- it's the Toyota version of "get out of the building." By talking face-to-face with customers, salespeople, and managers in a physical store, the innovation team is able to identify an opportunity that they can execute against extremely quickly. But they go beyond simply "getting out of the building" -- they actually set up shop physically in a retail store for the entire week. They build products, test new features, and get feedback all out in the open. You really have to see it to believe it.
Simple, rapid, experiments. I hear all the time that developing for iOS, with its myriad approval delays and deployment obstacles, means that you can't use rapid development techniques on that platform. Yet in the video you'll see this team overcome that bias with a little ingenuity. They simply brought two iPads with them. While the app is in development, the sales team is using one iPad, and the developers are working on another. At every break, the sales team swaps iPads with the developers -- always using the latest version of the app. (The same technique works with paper prototypes, too.)
Have questions for JB and the rest of the Nordstrom Innovation Lab team? Post them as comments, and I'll try to get them answered.
]]>Startups: Winter Is Comingtag:www.huffingtonpost.com,2011:/theblog//3.9234662011-08-10T13:46:54-04:002011-10-10T05:12:02-04:00Eric Rieshttp://www.huffingtonpost.com/eric-ries/George R. R. Martin would call them summer's children.
Summer will end. When, how much, and why -- I don't know. These are questions for financial analysts and investors, people with their ears (and attention) much lower to the market-ground than entrepreneurs can afford. But the signs of winter are all around us: persistently high unemployment, market shocks, ill-timed austerity measures. For a while, startupland can stay insulated from these broader forces, but not indefinitely. The LP's that fund booms are, after all, pension, municipal, and sovereign wealth funds. Consumers need disposable income to invest in the latest products, as do the companies who serve them and advertisers who reach them.
We've enjoyed these years of summer. But winter is coming.
Entrepreneurs should be prepared. Obviously, those who depend on raising money at a specific time in the future should be on their guard. Anyone whose plan is to "raise money in six months" is really saying, "I am planning on no significant financial crises happening six months from now." I wouldn't want to be making such specific predictions right about now. As every expert has been saying: if you can raise money on fair terms right now, do it. If you can spend money fueling your engine of growth, do it. If you need to double-down on a major pivot, on a drive to hit product-market fit, do it.
But we have much bigger questions to tackle about what will happen in winter. For example, entrepreneurship will suddenly stop being cool, and go back to being seen as risky, a little crazy, and a little dangerous. Those of us promoting the idea that entrepreneurship is a viable career option need to be ready. Right now, the "startup career" is an easy case to make. It's going to get harder. We need to be ready.
Those people working to nurture and support new startup hubs may see all of their hard work destroyed. I am especially worried about the burgeoning scene in places like New York. Will Union Square become another Silicon Alley? I hope not. We need to be thinking about this now. The endless networking groups that thrive on hype and sizzle will suddenly wither. Do we have enough groups that are focused on the nuts-and-bolts of real entrepreneurship to keep those ecosystems vibrant? Which kind of group are you investing your time and energy into right now?
I expect that a shocking number of the current crop of incubators, accelerators, and other startup-support programs will suddenly disappear. In summer, it's all-too-easy to have your program look like a success, because there is an endless supply of talented people becoming first-time entrepreneurs and an endless supply of investment dollars chasing them when they graduate. It's hard to know, in summer, which of these programs actually add value and which are glorified admissions officers. Winter will tell. If you depend on one of these program for support, be ready.
This may sound like all doom and gloom, but I'm feeling personally very optimistic. Hype gets in the way. Every ounce of energy invested in vanity metrics and success theater could have gone into building real value instead. As I've been saying in my talks for a while now, the real entrepreneurship -- not the caricature from pop culture and mass media -- is boring, tedious, and extremely difficult. It's anything but cool: product prioritization meetings, deciding which customers to listen to and which to ignore, and valiantly trying to keep the vision alive in the face of contradictory facts. To recruit people into that business, the real innovation business, should be our goal. I hope all of us are ready to reach out to those founders and would-be founders and nurture and support them through the hard times. That will create real value.
As I see it, the big opportunities to change entrepreneurship come in winter. During the last crisis, I was asked constantly for my advice on how to save money and cut costs. Most people didn't really expect my answer to be about the Build-Measure-Learn feedback loop and all the rest of the Lean Startup methodology. But the truth is: to save money, we have to cut any costs that are slowing down our ability to find validated learning about whether we're on the path towards a sustainable business. Cutting any other costs just help us go out of business more slowly.
But this begs the question: if we're spending money on something that is slowing us down, why are we doing it all? And why did we have to wait for a financial crisis to cut those costs? Why not cut them now?
Fall is a pretty good season to get serious about discovering which actions really contribute to creating value and which are waste. It's harder to act in a disciplined way in summer. All around you, you see excess and nonsense, companies being bought or funded for zillions of dollars without traction. It's hard to stay focused. Remember: most of those "lucky" companies die inside their new parent companies. Remember: in the long run, the surest way to be successful is to create more value than you capture. Remember: the truly great entrepreneurs didn't get in this to make money, but to change the world. Stick to that plan, and -- even if you fail -- you'll feel good about yourself in the morning, in any season.
This post originally appeared on StartupLessonsLearned.com]]>The New Startup Arms Racetag:www.huffingtonpost.com,2010:/theblog//3.5075102010-03-21T14:43:25-04:002011-05-25T15:55:20-04:00Eric Rieshttp://www.huffingtonpost.com/eric-ries/
America's future prosperity depends on our ability to maintain this lead. But today, it is getting harder and harder to maintain. A quick glance is the rear-view mirror reveals that other countries are catching up and at an alarming rate. Part of this is due to their determination to overtake us, but part is due to structural changes in the nature of entrepreneurship.
Startups are the lifeblood of our economy. In the past two decades, they have accounted for nearly all the net job growth in our country. Many of these companies are started by entrepreneurs, and are now household names: Google, Yahoo, eBay and Intel. But many more are true American success stories, out of the limelight, quietly creating jobs and securing our future.
Take the example of Indiana's Passageways. Paroon Chadha came to the US for his graduate education, and was bitten by the entrepreneurial bug immediately after school. He started Passageways Inc. immediately upon graduating, and has spent the last 8 years struggling to work around visa restrictions. Luckily for the rest of us, he was able to find his path to a green card, and now employs 24 Americans in West Lafayette, Indiana. For every success story like Paroon's, there are dozens -- hundreds -- of similar cases that end in failure.
Like other industries -- from publishing to automobiles -- entrepreneurship is in the process of being disrupted by globalization. The cost of creating new companies is falling rapidly, and access to markets, distribution, and information is within the reach of anyone with an Internet connection. The result is a profound democratization of the digital means of production.
When Steve Jobs and Steve Wozniak created Apple computer in a garage in Palo Alto, it heralded the beginning of the PC revolution that ultimately dealt a death-blow to dozens of older companies. That could only have happened in Silicon Valley or one of a few specialized technology hubs that had the manufacturing, engineering, and software specialists required to build their first products.
But when Mark Zuckerberg started Facebook in his dorm room in Boston, he unleashed a revolution, too. But something had changed -- it's our good fortune as Americans that Facebook began in an American dorm, but there is nothing necessary about it. It could have happened elsewhere. And it's our good fortune that Mark was already an American citizen, and so could move to Silicon Valley without difficulty, where he now leads a company that employs hundreds -- and soon, thousands.
If the next Facebook, Google, or Amazon begins in another country, the economic growth that it sparks will benefit us, too. But the jobs will be created over there.
The United States is locked in a new arms race for that most precious resource -- the future entrepreneurs upon whom economic growth depends. Substantial research shows that immigrants play a key role in American job creation. For example, over 25% of the technology companies founded between 1995-2005 had a key immigrant founder. These companies produced over $52 billion dollars in sales in 2005, and employed 450,000 workers that year. Similarly, 24% of all the patents filed in the US in 2006 had a foreign resident as inventor or co-inventor.
If we allow other countries to welcome these immigrants, support them and nurture them, we will lose out in this race. We will not lose on their products -- after all, most of them are global. We will not necessarily harm investors, either: as capital is increasingly global, they will be able to invest wherever good ideas are born. The cost will be felt in jobs -- thousands of new jobs that could have been created here, but weren't.
There is much that public policy can do to support American entrepreneurs. Health insurance reform will make it easier for entrepreneurs to take a chance on a new business without putting their family's health at risk. Tort reform will make it easier to take prudent risks on new products in a number of sectors. And the clean energy revolution requires extensive policy support.
These policies are important, but they do not address this fundamental concern: America is losing the global arms race for entrepreneurial talent. There is a solution, called the Startup Visa. There is a special visa for international investors that want to bring capital to this country to start a business with. It's called the EB-5 visa, and we already set aside 10,000 every year for this purpose. Yet this policy does nothing to bolster our position in the arms race -- the visa attaches to the investor, not the entrepreneur.
With a small change to the EB-5 definition, we can reverse that priority, making the visa available to qualified entrepreneurs seeking to raise capital from American investors to create jobs, economic growth, and assure our future prosperity.
The Startup Visa Act of 2010 is currently pending in the Senate, co-sponsored by Senator John Kerry and Senator Richard Lugar. Similar legislation, originally sponsored by Congressman Jared Polis, is being considered in the House. This bipartisan and bicameral progress is the result of the thousands of people who have spoken out in support of this idea since the launch of StartupVisa.com last year: entrepreneurs and investors, professors and students -- citizens from almost every state in the union (see a map here). This grassroots support is essential as the Startup Visa bill has a chance to become law this year.
Every potential founder that has to leave this country in order to create their startup is a lost opportunity. These lost opportunities are not consonant with American values, they are not smart public policy, and -- most of all -- they represent thousands of lost jobs.
To learn more about the Startup Visa, its specific provisions, and to lend your support, please see StartupVisa.com.