20/01/2014 10:31 GMT | Updated 20/03/2014 05:59 GMT

Lessons From the Lean Startup Conference 2013

It's mid-January. By now, festive treats have found their way down thousands of miles of digestive tracts and been replaced by as many new year's resolutions. This might be the time to touch on the art of executing upon these commitments and of thinking lean.

Widely employed by business innovators around the world, lean methodology preaches an iterative cycle that offers a way to manage risk. A cycle of Build-Measure-Learn is designed to ensure that in circumstance of great uncertainty, the greatest amount of information should be retrieved from the most simple product. This cycle instructs innovators to build a basic item that generates value as a service or product (a Minimum Viable Product). By measuring early responses to new product releases, companies can figure out the needs of their customer and find market fit before scaling in development.

In December, San Francisco's Masonic Centre hosted a bustling set of entrepreneurs and business people who had gathered on Nob Hill to share their experiences of using lean methodology. The main organiser of the Lean Startup Conference was Eric Ries, author of 'The Lean Startup', and now one of the leading forces in the lean movement. Alongside Ries were a colllection of some 500 entrepreneurs who presented over the three-day conference.

Craigslisting lean manufacturing

Among the speakers on the first day were Matt Kressi and Vinuth Rai who told the story of how they implemented lean methodology at Toyota when designing in-car computer systems. After getting hold of an Android tablet, they posted an ad on Craigslist to find people who wanted to complain about their driving experiences. Though Toyota were at first cautious of employing a method proposed by two young engineers, the programmers eventually ran the program and have been able to secure a retention rate of 60% and referral rate of 40% with the new product.

Revenue equals information divided by time

In the same session, Dan Milstein from Hut 8 Labs outlined the mighty opportunity cost in choosing to work on something that isn't highly important. He went so far as to say that entrepreneurs should be terrified of failing to prioritise tasks. In claiming that information equals money, Milstein argued that revenue comes to the amount of information acquired divided by the amount of time taken to acquire it, and so mitigate against risk in future decision making.

Developing network effect

To end the morning, Ries joined Reid Hoffman in a fireside chat. Hoffman spoke on the topic of early users and product releases, urging attendees not to be embarrassed by what they ship early. When talking about the early days of LinkedIn, Hoffman admitted that network effect was so critical for them that the company placed a laser focus on getting 1 million users really liking them, so long as other people didn't hate them. Hoffman highlighted that in order to be found and to grow a networking product, you need to show early users how they are placed within the community, who else is knocking around the site. His closing tip was to ensure startups continue to think longterm and about hiring, a task that Hoffman admitted he had difficulty with at LinkedIn.

Running the tear test

In a breakout session, Mariya Yao, Founder and Creative Director of Xanadu, encouraged entrepreneurs to isolate and promote an emotive feature of their product, using the 'tear test' as a good metric. When getting feedback, she suggested asking beta testers how they would feel if the product ceased to exist - would they be upset or would they care at all. For Yao, a good feedback threshold is to find out whether 40% of the userbase would be very disappointed if the product was to disappear.

Finding traction

During his chat with Eric Ries on the second day, Marc Andreesson presented his perspectives on lean methodology. Arguing that the output of any tech company is innovation, and that all industries are becoming driven by software of some type, companies need to operate according to Newtonian mechanics and take a look at the real world. Though companies can build cars that are essentially computers on wheels, they need to be able to match this technology with the force of some early adopter demand. Andreesson raised the relevance of big data and how learning more about customer behaviour can inform the next steps in product development.

For more on the conference, have a skim through these webcasts: