Why We Falsely Link Effects to Causes When two things happen together, it’s tempting to believe that one caused the other. For example, in the previous chapter, we saw that the economy improved while crime rates dropped. This seems like a satisfying explanation, until the data show the economy couldn’t have had a large effect. In reality, many correlated phenomena are correlated purely by chance. This gives rise to the well-known saying, “correlation does not imply causation.” (Shortform note: this underlies a lot of popular superstitions, like people who wear their “lucky hats” to baseball games because they think it
Dropbox is now a technology giant, valued at $10 billion in a 2014 funding round. It’s a very complex product, honed over a decade of development and hundreds of millions of dollars of investment. But Dropbox didn’t start with the slick, seamless product you use today. So let’s go back to the beginning, before Dropbox had a polished product and thousands of employees. Back to Dropbox’s original Minimum Viable Product (MVP). If you’re an aspiring entrepreneur, be emboldened by the idea that Dropbox started with just about as much as you have right now.
The ideas in The Lean Startup came about when Eric got frustrated working on products that failed to get traction. As an engineer, he initially thought they failed due to technical problems, but this was never the right answer. In reality, they just spent a lot of time building things nobody wanted. So when he started his new company, IMVU, he wanted to try something different. One inspiration was Steve Blank’s idea of Customer Development: a rigorous methodology for the business and marketing side of a startup. Another inspiration was Japan’s lean manufacturing systems, made famous by Toyota. Eric Ries
The Myth of the “Crack Millionaires” Let’s set the stage. The 1980’s were marked by a tide of rising crime in The United States. A great deal of the violence in the inner cities was driven by crack-cocaine. According to one study, crack accounted for a shocking 25 percent of homicides in New York City in 1988. It was in this context that the conventional wisdom of “crack millionaires” was born. The myth was largely propagated by police officers, criminologists, and others in the law enforcement community. They argued that dealers were making money hand-over-fist and living extravagant, luxurious lifestyles.
In lean management, what does Genchi Genbutsu mean? Why is it so important for your business? Learn the principles of “go and see” to better meet your customers’ needs and build a winning product.
Entrepreneurs seem to resist management by nature – that’s why they started the company in the first place! But just like any project or organization, entrepreneurs and startups really do need management. What is entrepreneurial management? How do you manage well as an entrepreneur? Learn more, from Lean Startup and Eric Ries.
Much of business strategy in the past few decades has focused on competition, including Michael Porter’s five forces and SWOT analysis. In these red oceans, market structures are known, and companies try to outperform rivals to grab share of existing demand. Over time, markets become crowded, products become commodities competing on price, and profits dissipate. This trend is aggravated by technological improvements that allow incredible creation of supply that can outstrip demand, causing further price competition.
The Strategy Canvas is an important analytical tool from Blue Ocean Strategy. How do you use it in your business strategy to illustrate how your company differs? Learn more about the Strategy Canvas here.
Natural Experiments and Economics Economics is not an easy field in which to conduct randomized controlled experiments. Since much of economics focuses on quantities that are very large (national GDP, effects of fiscal policy on employment) and involves the study of individual decisions made by billions of people, it’s rare for economists to be able to test their hypotheses in a lab. For this reason, economists must observe events in the real world that happen create “variable” and “control” groups that can substitute for the classical design of a laboratory experiment. These real world events are called natural experiments. Throughout
Does your startup need to pivot? Is it at the brink of failure, and you need to find a new business model or customer segment? Figure out how to pivot your startup correctly in this guide from Lean Startup.