Jan 2, 2019 · 50m · a16z
a16z Podcast | Beyond Lean Startups
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of the a16z Podcast, author Eric Ries discusses the five-year evolution of 'The Lean Startup,' illustrating how its principles of scientific experimentation, Minimum Viable Products, and strategic pivots apply beyond Silicon Valley to transform corporate enterprises and public sector institutions.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The host holds 13.4% of the talking time here. How this is scored →
The host as informed peer 4.2 Guest teaching 5.4 Guest disagreement 2.5 The host pushing back 3.1
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:48 Ries rejects Sonal's ethnographic objection
Ries dismisses the premise of Sonal's ethnographic critique by comparing customer feedback uncertainty to a chemist complaining that electrons don't talk in focus groups.
Hardest push from the host ▶ 10:23 Sonal challenges corporate uncertainty premiseSonal directly interrupts Ries to point out that large corporations already possess formal R&D portfolio management systems designed specifically for decision-making under uncertainty.
Biggest teaching moment ▶ 6:50 Ries explains history of managerial accountingRies educates the hosts on the origins of 1920s accounting under Alfred Sloan, explaining that formal budgets were created as accountability systems rather than money-tracking tools.
The host holds their own ▶ 10:23 Sonal demonstrates corporate finance and acquisition expertiseSonal displays deep industry knowledge by outlining how corporate R&D operates like VC portfolios and explaining market cap ceiling constraints on enterprise acquisitions.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Core Principles of Lean Startup and Addressing Critics | 5 | 6 | 4 | 5 | Sonal challenges Lean Startup from an ethnographic perspective, arguing customer feedback undermines internal creative vision. Ries counters using a chemistry analogy, explaining that testing hypotheses refines strategy without sacrificing the underlying vision. | |
| Why Lean Startup Resonated and Democratization of Entrepreneurship | 4 | 4 | 1 | 3 | Michael questions why the movement resonated outside Silicon Valley, leading Ries to cite post-2008 economic timing and democratization of entrepreneurship. Michael playfully pushes back on Ries' Karl Marx reference by pointing out Amazon's ownership of modern cloud infrastructure. | |
| Evolution of Management Thinking and Accounting Systems | 3 | 6 | 1 | 1 | Sonal sets up the shift in management thinking required for large corporations. Ries educates the hosts on the history of modern accounting systems from the 1920s, explaining they were created for managerial accountability rather than financial tracking. | |
| Pressures Facing Big Companies and Market Realities | 7 | 5 | 2 | 6 | Sonal offers strong pushback, pointing out that big companies already possess formal R&D portfolio management frameworks similar to VC funds. She extends her analysis to include market cap dynamics that prevent large firms from acquiring startups. | |
| Organizational Barriers and Bureaucratic Impediments | 4 | 5 | 5 | 5 | Michael asks whether corporate decay and death are simply natural economic cycles. Ries takes a candid tone, describing how he bluntly tells enterprise clients he does not personally care if their company lives or dies. | |
| A Unified Framework for Corporate Entrepreneurship | 3 | 6 | 1 | 1 | Sonal brings up Google employee turnover as an example of enterprise talent drain. Ries presents his grand unified theory of corporate entrepreneurship, categorizing four distinct enterprise roles operating under extreme uncertainty. | |
| Reinventing the Firm and the Leader's Internal VC Role | 4 | 5 | 1 | 3 | Sonal frames the overarching theme as reinventing the modern firm. Ries explains how executive leaders must shift from pitching entrepreneurs to internal venture capitalists who establish proper accountability metrics. | |
| Lean Methodologies in Government and the Public Sector | 6 | 6 | 3 | 2 | Sonal highlights government adoption of Lean Startup practices. Ries shares an anecdote about paper immigration forms stored in a Kentucky cave alongside a failed billion-dollar IT contract, contrasting it with rapid digital transformation. | |
| Lean Startup as a Neutral Function and Hardware MVP Case | 3 | 6 | 3 | 1 | Ries explains how Lean Startup acts as neutral functional terrain across hardware and finance. He illustrates this with a story of a hardware team physically carrying a prototype 100 yards to an internal model store for real customer pre-sales. | |
| Transforming Bureaucracy: The Finance-IT Committee Example | 2 | 6 | 2 | 1 | Ries shares a story of transforming a 25-person joint Finance-IT committee into a nimble 5-person cross-functional team that iterated software directly on-site with P&L leaders. | |
| Unlocking Human Potential and Work Automation | 4 | 5 | 4 | 4 | Sonal frames automation and software work in terms of human judgment and creativity. Ries strongly rejects the framing that routine work should remain human, arguing all employees deserve creative agency in their jobs. | |
| Avoiding Lean Washing and Rigid Cult Dogma | 5 | 5 | 3 | 4 | Sonal presses Ries on how organizations can adopt lean principles without falling into rigid dogma or lean washing. Ries agrees and describes secret internal employee groups adapting vocabulary to bypass corporate non-invented-here bias. | |
| Debunking MVP Misconceptions and Sustaining Vision | 6 | 6 | 4 | 6 | Sonal challenges the over-application of MVPs, noting big visionary moonshots often require significant upfront investment rather than under-resourced prototypes. Ries reframes MVPs as essential tools for visionaries to sustain funding without resorting to success theater. | |
| Defining the Pivot: Changing Strategy Without Changing Vision | 3 | 5 | 1 | 1 | Sonal guides the discussion to the definition of a pivot. Ries clarifies that a pivot represents a change in strategy while maintaining the core vision, citing Google AdWords and Netflix streaming as prime examples. |
Statements from this episode (35)
Ries: Even correct entrepreneurial visions usually have fatal strategy flaws
“If you get the real story with actual entrepreneurs, what you discover is that even if the vision is right on and they see the future, the specifics of the strategy often have fatal flaws.”
Ries: Entrepreneurs can now rent the means of production to scale
“We are now living through a time where you can rent the means of production, which means that if you want to test an idea, if you want to start something in your dorm room at Harvard, You know, just because you started small doesn't necessarily mean it can't s…”
Ries: Open platform strategies create smaller pieces of larger aggregate markets
“If you make those tools available to other people so that you don't have complete control, if you turn it into a platform, if you give people open access, the sum total of the creative power that you unleash when you do that means that you have a smaller piece…”
Ries: Forecasts are accurate only when extrapolated from stable history
“A forecast is accurate only to the extent that it is an extrapolation from a long and stable operating history.”
Ries: Entrepreneurship is defined by extreme uncertainty, not job title
“Since my definition of entrepreneurship is trying to create something new under conditions of extreme uncertainty, then you are an entrepreneur no matter what it says on your business card.”
Ries: Corporate entrepreneurs are as visionary as Silicon Valley founders
“There are real honest to God entrepreneurs just as visionary, just as exciting to work with inside some of these large organizations as you walk down the street here in Silicon Valley.”
Ries: Most corporations planning internal startups lack an actual execution plan
“The idea that you're going to act like a startup or have internal startups is like almost to the point of cliche here. And yet most of the companies that I meet that have that as a plan, there's no plan. They don't actually know how to make it happen.”
Chokshi: Startup valuations have grown too large for corporate acquisition strategies
“These big companies, which before could have quickly acquired startups to help them do some of these things, now those companies get too big. They reaches a point where their market cap is too big. We've observed this for them to even consider affording the ab…”
Ries: Functional silos block enterprises from spending $2M to commercialize breakthroughs
“These companies can spend through their technology readiness level, you know, analysis and portfolio, like they can do the smart research to spend five, 10, 15, fifty million dollars To have a breakthrough. And then they often are not able to spend the like tw…”
Ries: Consumer services will all be tech-enabled within 10 years
“I know that five or 10 years from now, the person who provides me this service, it's going to be technology enabled. It's going to be developed and According to these principles, it's going to be rapidly evolved to suit my needs.”
Ries: Corporate bureaucracy and slowness at scale are choices, not inevitable
“I have become a believer that even that the bureau, that the bureaucracy and slowness and kind of ossification that we take for granted as a result of scale is not an inevitable development, but it's a choice about the systems of management that we use.”
Ries: Large corporations make terrible partners for startups
“Most big companies are terrible partners. They don't understand how to pilot things. They don't understand how to work with startups in a way that don't kill them. They spend way too much time on contract negotiations, and they just, they're unreliable.”
Ries: Enterprise CEOs cannot name anyone accountable for continuous innovation
“I ask these CEOs that I meet with all the time, who's in charge of making sure that that happens? And they don't know. There's not, there's nobody in the organization they can point to for accountability on that score.”
Ries: Distinguishing enterprise Lean Startup from startup Lean Startup is silly
“So people talk about lean startup for startups and then lean startup for the enterprise, which I think is really silly. I, you know, I understand why people do it, but it doesn't make sense to me.”
Ries: Founder CEOs at scaled companies act as internal venture capitalists
“For the people inside their company, they're the VC. They're the source of funding and political capital that everybody needs to sustain what they do.”
Ries: A small group of passionate customers outweighs indifferent users
“A small number of extremely passionate customers is way better than a large number of people who kind of are indifferent about your product”
Ries: Continuous corporate disruption requires hundreds of simultaneous experiments
“If you want to have a new successful disruption every couple of years, you need to have hundreds of experiments going at any one time.”
Ries: USDS digitized 40% of immigration applications in six months
“They sent a lean startup team in, I think, from the United States Digital Service at the White House, and You know, they partnered. It wasn't just IT people coming and telling everybody what to do, but they had real partnership, real user centered design, real…”
Ries: Traditional upfront project management systems are obsolete
“That system of managing work is not a good one for our time. Maybe it was a good, maybe it made sense in a different era, but it really doesn't make sense now, and there is a better way.”
Ries: Lean Startup provides neutral ground across corporate functions
“Lean startup has created a neutral terrain where different functions can come together to do this, and I think there's just a natural resistance to doing a methodology from someone else's function.”
Ries: Lean Startup reduced a client's hardware iteration cycle to one week
“And they eventually got to a place where they can show, they can iterate on this so quickly now, they can build a new version of that device every week. Used to take them three to six years to build a new model. Now they can do a new version every week.”
Ries: Entrepreneurial transformation is a management problem, not a technology problem
“This, before it is anything else, is a management issue. It is not a technology issue. It is not a process or tools issue. It is really about how do we manage people. Most companies have all the raw material they need to work in this more entrepreneurial way”
Ries: Customer feature requests are hypotheses, not strict requirements
“The word requirement just does not apply to like a giant worldwide focus group of random things that customers ask for. Those are not requirements. Those are hypotheses. Those are guesses about what customers might want.”
Ries: Initiatives should scale incrementally from X to 2X step-by-step
“Prove that it works at scale X, then prove that it works at scale two X, and just repeat until you have the whole thing.”
Eric Ries: Monotonous work should be automated to unlock human creativity
“Work that is monotonous and routine should be automated because every human being has a right to use their creativity in their job.”
Eric Ries: Multitasking and Siloed Work Kills Organizational Innovation
“No multitasking, no passing work between silos. That is the death of innovation.”
Ries hosts a secret tech meetup where Lean terminology is banned
“I have a secret product managers, like a meetup group that I do for one of the big tech companies where we get together. It's secret. I can't name the group... Because they work in a company that has a real strong, non-invented here culture, and lean startup i…”
Ries: Shared clear language matters more than official Lean Startup terminology
“What matters is that you have a precise and clear language that you can communicate with your coworkers about. I don't care if you use my language or somebody else's, as long as it has a rigorous foundation.”
Ries: Lean methodology must continuously evolve and obsolete its own prior teachings
“Lean startup stands for what works. So if I said something wrong, if we discover ourselves as a movement, we use our own scientific process to discover new things, they obsolete the old things, and we should always be getting better, and what we wrote five yea…”
Ries: 'The Lean Startup' Focuses on Management Accounting, Not Jargon
“If you read the book, the vast majority of it, the bulk of it by weight is not about, you know, This jargon, but it's about the management system. It's about the innovation accounting. It's about the math that underlies this way of working.”
Ries: MVPs are for testing consequential visions, not cheap features
“The core mistake I think people make is they think that it's a minimum product, right? Like if you're trying to do something small in this world, you don't need to do an MVP. You just do it. Like if it's, if the thing itself is cheap and easy and has an obviou…”
Ries: Forcing founders into 'success theater' distracts from product execution
“And I think every ounce of energy we force visionaries to put into success theater is an ounce of energy they didn't put in to making their vision a reality. They didn't put into serving customers.”
Ries: MVPs Maintain Stakeholder Interest Before Hockey-Stick Growth Hits
“So I think of Lean Startup and MVPs in particular as a way to demonstrate progress towards the vision to sustain that interest over time during the long flat part of the hockey stick when the vanity metrics are really low and there isn't Instantaneous, overnig…”