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strategy and business
 / Winter 2013 / Issue 73(originally published by Booz & Company)


Why Eric Ries Likes Management

S+B: First, the basics. Define lean.
Lean refers to a body of thought and practice that originated with the Toyota production system developed after World War II. Over the course of the 20th century, lean revolutionized traditional business in a range of industries and functions, eliminating waste and boosting efficiency in manufacturing, the back office, healthcare, marketing, and so on. Later it spread to product development.

At the core of the idea is that you can look at an enterprise through the eyes of a customer and discover which things really deliver value versus which do not. Everything that does not is wasteful and can be eliminated. Maybe the most famous lean idea focuses on the fundamental cycle time between when you receive an order from a customer and when the customer receives a high-quality product that meets his or her needs on time at a good price. You do everything possible to drive that cycle time down to increase efficiency.

S+B: And your definition of startup?
It’s a human institution designed to create something new under conditions of extreme uncertainty. I’ve been using that definition for a long time, and during the last couple of years I realized that the most important aspect of that definition is what it doesn’t say. It doesn’t say you’re in a garage. It doesn’t say what industry you’re in, or the size of the company. It’s completely agnostic.

With the “lean startup” concept, we take ideas from lean manufacturing—fast cycle times, boosting efficiency, eliminating waste—and apply them in situations where the traditional tools of planning and forecasting don’t work because of uncertainty.

S+B: Applying the principles of a 60-year-old manufacturing process doesn’t sound like a rallying cry that will get the blood pumping for aspiring entrepreneurs.
We make movies about brilliant entrepreneurial visionaries because that’s what’s interesting, but a startup is an organism—a human institution. It is not just the creation of a heroic individual. It is a system of individuals working together toward a common goal.

And so entrepreneurship is management. It is fundamentally about organizing people to do something. Everything else that happens is a side effect of that organization. Nothing gets me in more trouble than when I speak to audiences about this, because I’m supposed to talk about cool, hip startup stuff like minimum viable products [MVPs], and I come in and say, “We’re going to talk about management, and in a minute we’ll talk about accounting.” In San Francisco, that’s considered uncool. But that’s what startups and entrepreneurship are really about. And I think we’re going to have to confront that if we’re going to get better at it.

S+B: So a core tenet of your approach is the need to apply rigorous management in a context that’s naturally resistant to it. Is that fair?
That’s definitely fair. But I wouldn’t necessarily put it that way, because I want us to reclaim the word management and take it away from an association with bureaucracy, checklists, and rigid ways of thinking.

We need management more than ever because we are confronting more and more uncertainty. We must cease to think of it as a way to organize people. Management must be a way to predict the future, keep things orderly, and drive out variation. We’ve seen that in manufacturing, but it also needs to apply to the practice of innovation, even as we try to provoke variability and cause disruption.

S+B: It sounds like you’re telling the wild-eyed entrepreneurs they need to rein it in, and the established company that it needs to loosen up.
I have experienced the phenomenon of being unwelcome in both camps. From the point of view of many entrepreneurs, launching something new is all about punching the universe in the face till it does what you want. It involves machismo and making things happen through sheer determination. To those people, talking about management seems really boring. But in a traditional organizational context, to some I sound crazy.

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