The Lean Entrepreneur: How Visionaries Create Products, Innovate with New Ventures, and Disrupt Markets

"The Lean Entrepreneur" is not a book about theory or big ideas. It's more like a field guide, because it takes a hands-on approach. It's full of actionable tips, exercises, and strategies you can use right now to manage change, solve problems in your business, disrupt your market, create value, and stop making so many mistakes.

These are all pretty familiar topics if you've browsed the business section of your local bookstore lately. But there are a few things that set this book apart.

First, the book focuses heavily on "disruptive innovation," which the authors believe is the future. There are dozens of stories and case studies that give you a real-life look at this concept in action, and you'll be hearing more about this later.

The book is also full of exercises and worksheets to help you put ideas into context. And there's a raft of online videos you can use alongside the book.

Last, the authors hired a cutting-edge artist to create one-of-a-kind illustrations for the book. These pictures really help you understand some of the trickier concepts. They're also fun to look at, and they're free to use in your own presentations, reports, or blog posts.

The book was written with start-ups in mind, but you can use these principles within existing organizations. The authors say that both new and established organizations, even the U.S. government, have adopted strategies from the lean philosophy to eliminate waste, and become faster and more competitive.

Both Brant Cooper and Patrick Vlaskovits have decades of experience with start-ups and entrepreneurship. Together they wrote "The Entrepreneur's Guide to Customer Development," a best seller that's now required reading in many top MBA schools. Both are sought-after consultants and speakers.

So, keep listening to find out why value trumps wealth in today's economy, how to work out what your customers really want, and why the most common test used by new entrepreneurs could ruin your business.

"The Lean Entrepreneur" is divided into 10 chapters, and finishes up at just under 230 pages.

The information is dense, to the point, and there's a lot of it. The authors start out explaining why lean is so important today. This applies whether you're in a brand-new company or an established organization or non-profit.

You then learn how to choose the right customers, and communicate the value you're creating for this group. Next comes customer interaction, and how important it is to test your product with experimentation. You also learn how to wade through all the data you're going to collect and make sense of the information so you can actually use it.

Last, the authors guide you through the ups and downs that come with uncertainty.

The book opens with a chapter about our complicated, crazy, hyper-connected world. Today, change is the only guarantee. The Internet has transformed everything from consumer behavior to social revolutions. And entrepreneurs who try to predict the future usually fail pretty quickly.

The key concept in this first chapter is that we're moving from a wealth-generating economy to a value-creating economy. And you'll see this concept drives quite a bit in the rest of the book.

In the past, the focus of many companies was creating wealth for shareholders. How they did this was more important than what customers really wanted or needed. Of course this is a broad statement and doesn't apply to every organization. But in general, this is still the status quo at many organizations.

The authors argue that this business style now sounds the death knell for organizations. The most successful businesses are those that work to create real value for other people.

It's easy to think of value creation in terms of product-based businesses. But the authors provide many examples that show how value creation is transforming other types of activities, such as healthcare treatments, higher education, and soldier training in the U.S. Army.

Put simply, when you create real value for your customers, you show that you understand them and their needs at a deep level. In turn, your customers feel empowered and engaged in the relationship.

This engagement lies at the heart of disruptive innovation. When a disruptive innovation comes along, it changes the scope of the entire industry, forever. It rewrites the rules.

To some readers, the word "disruptive" might sound like a negative thing. After all, if you walk in and disrupt a meeting, you're being crass and inconsiderate. But some people believe disruption is positive when it comes to business. A disruptive innovation shakes up the status quo and forces everyone else to adapt or die. This is how progress is made.

Cell phones and personal computers are both good examples of disruptive technologies that forced change and led to thousands, if not millions, of other innovations, big and small.

Many startups don't fully understand the value they're creating, and they don't really know who they're creating that value for. They only think they know. But if the innovation you're about to showcase has a predictable effect on your known market, you're sustaining an existing market. You're not disrupting.

Chapter two looks at vision and values, and why they're both less important than you might think. According to the authors, your vision isn't as important as your desire to make change happen.

This is why you need to begin by understanding your driving force. What's really compelling you to start this business, or pursue this innovation?

There are an endless number of motivators, and the authors list the most common.

For example, you might be motivated by a market segment. This means you might be inspired to bring a product to a specific group of people. There's a wonderful case study in this chapter about a company that merged two existing technologies to create artistic and beautiful prosthetic limbs for amputees.

The company's founder wanted to improve the lives of a specific group of people: amputees. That driving force defined his company, and his innovative new prosthetics.

There are many other driving forces. You could be inspired by a specific problem you want to solve. You might be motivated to produce a specific product you've thought of. You might also be driven by a technology you've invented, or you may have an idea for a new sales channel.

If you're not sure which of these is your driving force, think of your driving force like a pivot. If your product failed, what aspect of your business model would you be most likely to keep?

So, would you keep your product but change your market segment? Would you keep the segment, but look for a different problem to solve with the same product? Would you keep your segment and try a different product instead?

Now, the authors aren't saying here that vision isn't important. Vision has its place. But they add an important point. You need to be flexible with your vision. Obstinately sticking to a specific picture or goal means you won't change to accommodate what the market is telling you. And that's a recipe for failure.

The culture you create in your organization is also really important. It needs to align with your values and your vision.

The most successful organizations create a culture of learning. The leaders in these organizations learn their way towards change and growth. They make mistakes, they learn from those mistakes, and they react to the market. Learning organizations test and experiment to reduce risk. They use data to resolve conflict and they interact with customers in order to understand them deeply.

So as you create your startup, think about how you can create a culture of learning and curiosity. If you're trying to build a start-up culture in your existing organization, you'll want to read the enlightening interview with a PayPal executive who did this successfully, which is included in this section.

We really liked this interview because it shows that existing organizations can redefine their culture and become more like a lean startup. If you're feeling overwhelmed trying to do this in your own organization, this case study has some good tips and plenty of inspiration.

Chapter three is titled "All the Fish in the Sea." And this is an important chapter because here you learn how to identify your market segment.

When asked who their target customers are, the most successful entrepreneurs don't talk about demographics. They talk about specific customers, and their pains and needs.

The authors say that you have to choose your customer. And, this choice might be more important than the product or service you're coming out with. Your market segment can be one of the pivots that your entire business revolves around. This includes your marketing, distribution, and sales plans.

One of the concepts we really liked in this chapter is called pull. In lean thinking, pull means you do nothing until the customer expresses a need or a demand for the product.

Pull has two characteristics. First, pull means you've discovered something of value. And second, there's no overproduction because only the features contributing to the value are included. In a lean startup, pull can lead to a perfect product-market fit.

Now this sounds all well and good. But how do you actually figure out what your customers are looking for?

One way is by looking at product requests from your customers, which can give a clue about what a particular segment wants.

Another way is to look at month-over-month growth rates for each of your market segments, not all your customers in general.

It shouldn't be your only goal to figure out what your customers want most. A more important goal is to figure out why customers want a particular product or feature.

One of the best ways to do this is to create a fake customer, who is an archetype of actual users. You need to create one person, or several, who represent your market segment. Then you identify his or her wants, goals, and desires.

Once you do this it's a bit easier to create something wonderful that this particular person will want. Or, you can customize existing products and services to solve this person's problems, or meet their desires and needs.

The authors include a useful tool here called the Opportunity Matrix that you can use to define and choose your market segments.

Chapter six is another useful chapter because it focuses on experimentation, and how important it is to test the critical parts of your business model before you dive in and build.

This means interviewing potential customers in the market segment you've chosen to make sure you've identified their needs and problems correctly. You need to confirm the product or service you're about to offer is something that people actually want.

Any part of your business that's shrouded in uncertainty needs to be tested, and tested again.

One common test is the Landing Page Experiment. Entrepreneurs often use this approach to test market response and gather email addresses from potential customers. But it's one of the most abused and misinterpreted tests you can run.

Here's how it works. Entrepreneurs put up a landing page, which is a one-page website that communicates their message and a call to action. They drive traffic to the page, and then measure the clicks on the call to action.

The reason why this test is so lousy is that it's highly subjective to a number of different factors.

Here's an example. If you're driving traffic with Google AdWords to your landing page, but no one is searching for your solution, you're not testing your value proposition. You're testing your ability to drive traffic with search marketing.

The authors outline several other holes in this popular test. By the time you're done with this section, you'll know enough never to use this approach in your own business or organization.

We think testing and experimentation is really important for new businesses and products, but it often doesn't get the attention it deserves. All the strategies and tips the authors lay out in this chapter can be used by new and established organizations to better test their own products and services.

So, what's our last word on "The Lean Entrepreneur?"

We think this book gives entrepreneurs and innovators an in-depth look at how to do a better job launching a new business or shaking up an existing market.

There are a lot of topics covered in this book, and we only covered a tiny fraction of what's in there. Some of the concepts are a bit cutting edge and might be new to some readers.

For example, the idea that we're moving from a wealth-generating economy to a value-creating economy could be a revelation. Essentially, the authors are saying that companies have to stop focusing solely on generating wealth for shareholders. They have to start focusing on creating real value for customers, or they're going to be overrun.

There's a lot of information in "The Lean Entrepreneur," and the reading can get a bit dense because there's so much to process. It's not something you can skim over a weekend. You really need to take your time with this book, and give it your full attention. But if you do, you'll be well rewarded. We feel that applying the tips and strategies in this book could mean the difference between success and failure in your organization or start-up.

"The Lean Entrepreneur," by Brant Cooper and Patrick Vlaskovits, is published by John Wiley and Sons.

That's the end of this episode of Book Insights. Thanks for listening.