Does the Lean Startup Perpetuate Oversimplified, Harmful Fallacies in Entrepreneurs?
A review of the book’s key ideas in the context of entrepreneurship theory and practice
Eric Ries is a technology and design engineer, author, consultant, and currently — an entrepreneur. The Lean Startup movement he established is one of the most discussed methodologies in modern entrepreneurship. Why?
You either love it or hate it.
The principles introduced are so divisive, they deserve to be discussed.
I, like many others, believe that the ideas are valuable, yet often self-conflicting, oversimplified, or even contradictory to the purpose of the book. Let’s review the main themes in Ries’s book, provide alternative viewpoints, and discuss how his ideas can create harmful fallacies for young entrepreneurs.
‘Entrepreneurship is Management.’
Ries’ methodology claims successful entrepreneurship is a scientific process and should be approached in a task-oriented, structured way.
This aligns with what we know from academic literature as entrepreneurial management, where although innovation and creativity are needed for the launch of a business venture, it is organization and control that drive the company to success. In order to grow, all ventures must cultivate innovation and endorse it throughout its structure.
Ries takes this notion to the extreme by claiming that entrepreneurship itself is management.
His method involves a Build-Measure-Learn Loop, designed to either confirm or deny the growth hypothesis of the company through customer feedback. Using it, the entrepreneur decides whether to pivot his original concept or persevere along the current path.
According to a summary by Cleverism:
The Build-Measure-Learn loop pertains to the cyclical process of turning ideas into products, measuring the reactions, response, and behaviors of the customers against the products that have been built, and learning whether to persevere or pivot the idea.
Well, many times the market just isn’t ripe for innovative products.
This view of entrepreneurship as oversimplified process management and can be toxic to those just starting out.
As Helen Walton points out:
The fault does not lie in the principles of Lean Start-Up, but in their application as a universal recipe to innovation success. Simple solutions are tempting — but they are rarely effective.
The author touches upon several issues with the 'entrepreneurial nature' throughout the book. Just some of these things are the notion of entrepreneurs having a narcissistic personality, risk propensity, fear of failure, all of which are likely experienced by many, who chose to comply with the principles of the book.
Confusion can arise as readers were previously reassured that everyone with a managerial (yet innovation-accommodating) mindset, operating in conditions of high uncertainty is in fact an entrepreneur.
What this means is that there are two clashing ideas here:
- Entrepreneurs are born — they have certain traits and are narcissistic, risk-taking, and fail-fearing in nature.
- Entrepreneurs are made — any manager can be an entrepreneur if they follow the build-measure-learn structure.
This is also noted by other academics, who dwelled on the author’s ideas. Bloomberg notes this as an apparent paradox:
The Lean Startup entrepreneur needs to balance their entrepreneurial biasedness and excitement with the unsympathetic reality. Further they need be willing to iterate or pivot their initial ideas if the gathered data tell them so.
There are studies that justify to some degree or another both arguments.
For instance, Fisher and Koch argue that entrepreneurship is a complex combination of skills, mindset, and personality traits, which cannot be taught or adopted. Therefore, managers would not be able to become entrepreneurs, unless they are ‘born’ as such.
Alternative thinking is not illustrated in the book and would result in entrepreneurs believing simultaneously that they can be entrepreneurs if they work on their managerial skills, as well as that they can’t be as they do or don’t possess a list of arbitrary traits.
‘First Products aren’t meant to be perfect!’
The concept promotes product updates as opposed to finished products, through the use of MVPs (Minimum Viable Products). Ries argues that through constant improvements and modifications, a product would adapt most successfully to serve the purpose of consumer’s need satisfaction prior to its actual launch. He praises prototypes because of their cost- and time effectiveness.
MVPs are amazing, yet again hardly widely applicable. I find using this concept frequently, however, I have noticed a few things that could quickly reduce the effectiveness of it:
- the industry — fast-paced industries are much more likely to enable prototyping for short-term competitiveness
- the organizational processes — agile organizations are likely to endorse the idea of prototyping
- your clients — whether your product is B2B (see point two) or B2C could also impact the effectiveness of the concept as clients in some industries would expect nothing less than perfect.
In this case, it really wouldn’t matter much whether you accept MVP if the industry and the organizational processes of the companies you work with or are dependant on your products in any way are not willing to accept your work in progress.
In Ries’ book, the examples of MVPs are primarily based in the technology and online services sectors. Even though the author claims that the methodology applies to all fields of business, it much more challenging to imagine examples outside the IT industry. The reason being that acquiring customers for testing and investing in rapid prototyping would be near impossible without a significant injection of cash without an expectation of returns early on.
I mean, just look at Neuralink.
While evident for a seasoned reader, this oversimplification could lead to confusion in new entrepreneurs. Ries fails to show the much-needed investments in research and development needed for MVP creation.
Ries doesn’t acknowledge the need for IT developers and market researchers for complying with the methodology and building a market-ready MVP. An application of this model would be significantly more challenging and arguably unsuccessful throughout other areas of business.
He also has equity ownership in many of the companies, which have been illustrated throughout the book. This feels a bit disingenuous, especially considering the author’s desire for emphasizing the generalizability of the concepts discussed. Alternative examples are not provided. Failures using the MVP concepts are not discussed.
While different than traditional entrepreneurship models, the Lean Startup could lead to at least a few confused and disappointed new entrepreneurs.
The concepts proposed should be used as supplementary to other more seasoned business management strategies. At least this is what was suggested by a controlled experiment with 116 startups. As analyzed by Mollick for HBR:
the evidence strongly suggests that startups should engage in experimentation along the lines pioneered by the Lean Startup Method. Rigorous experimentation is clearly important to startup success.
An open mind about whether the principals will serve a new company’s best interests must be applied by all lean enthusiasts and new entrepreneurs.