The Startup Way · Eric Reis · 2017
A must read for those trying to bring an entrepreneurial mindset into larger organisations. When the Lean Startup came out, it seemed exciting but a little unrealistic to work that way inside a larger organisation. This book explains how to bring that small company agility to larger companies. Another great book by Eric Ries.
Key Messages
The Startup Way is a comprehensive system for continuous innovation that combines traditional management's need for discipline with entrepreneurship's experimental mindset. It helps organisations repeatedly uncover and scale new growth opportunities while maintaining core operations.
Core Principles
- Continuous Innovation: Create structures for ongoing, repeatable innovation at all levels
- Startup as Atomic Unit of Work: Treat entrepreneurial teams like internal startups capable of rapid experimentation
- The Missing Function: Establish entrepreneurship as a formal discipline with distinct practices and metrics
- The Second Founding: Install this discipline as a significant transformation, especially for established companies
- Continuous Transformation: Build organisations ready to reinvent themselves repeatedly as markets evolve
Traditional management frameworks—built on stable planning, rigid forecasts, and precise accountability—fail under high uncertainty. Modern companies need two complementary systems: one to produce high-quality offerings at scale, and another to discover what to build in the first place.
The contrast between traditional and modern companies is stark:
- Steady, capacity-driven growth vs. continuous innovation through small experiments
- Specialised functional silos vs. cross-functional teams iterating toward customer needs
- "Failure is not an option" culture vs. productive failures that enable pivoting
- Traditional competitive barriers vs. constant, data-driven innovation
Entrepreneurship as a Missing Function
Most organisations lack formal systems for turning new ideas into outcomes. Treating the internal startup as the "atomic unit of work" addresses uncertainty through teams that test assumptions quickly before heavy investment. To embed entrepreneurship as a core discipline, organisations need seven capabilities:
- Islands of Freedom: Safe zones for limited-liability experiments
- New Funding Models: Investments based on evidence rather than forecasts
- Redefined Milestones: Learning-focused targets that guide pivots
- Professional Development: Training and mentoring for entrepreneurial skills
- Networking: Communities of practice for "corporate entrepreneurs"
- Talent Alignment: Systematic assignment of people to high-uncertainty projects
- Incentives: Evaluation systems that reward experiment-driven progress
Lean Startup Tools and Approaches
Teams identify "leap-of-faith assumptions" about their initiatives and design quick experiments to validate them. A Minimum Viable Product (MVP) tests these assumptions with minimal effort. The build-measure-learn loop creates continuous iteration where teams build an MVP, measure outcomes, and learn whether to pivot or persevere.
Leaders must emphasise learning over blame, replacing adherence to plans with a discovery mindset. The approach shifts teams from fearing mistakes toward learning through small-scale tests.
Innovation at Scale: A Management System
The Startup Way contrasts general management with entrepreneurial management across four dimensions:
- People: Experts become cross-functional teams; optimisers become two-pizza teams; consistent managers become entrepreneurs; specialists adopt a founder's mindset.
- Culture: "Failure is not an option" transforms to "I eat failure for breakfast"; risk mitigation gives way to productive failures; innovation shifts from noun to verb; compliance evolves to "black swan farming."
- Process: Functional hand-offs become highly iterative processes; huge programs transform to build-measure-learn cycles; quality through reduced variability becomes economies of speed; economies of scale evolve into portfolios of rapid experiments.
- Accountability: ROI transforms to innovation accounting; cost reduction gives way to leading indicators; market share shifts to future absolute cash flow; margins become metered funding.
Three-Phase Transformation
- Phase One - Critical Mass:
- Start small and build success stories through experimentation
- Recruit champions to make exceptions to company policies
- Enlist early adopters and establish criteria for scaling
- Demonstrate that new methods work better than old ones
- Phase Two - Scaling Up:
- Rapidly expand successful methods across the organisation
- Build coaching programs and accountability mechanisms (like the "whiteboard method")
- Establish "metered funding" to replace traditional budgets
- Implement growth boards that award resources based on validated learning
- Phase Three - Deep Systems:
- Transform gatekeeping functions (finance, legal, HR) into enablers
- Create simple guidance documents with preapproved parameters for experiments
- Revise core processes to align with rapid experimentation
- Achieve full organisational adoption of entrepreneurial behaviour
Innovation Accounting
Innovation accounting measures progress when traditional metrics are near zero. It uses leading indicators to predict success early, focuses teams on crucial assumptions, bridges gaps between innovation teams and finance, and provides audit-ability for value creation.
It operates at three levels:
- Dashboard: Track simple leading metrics to show improvement
- Business Case: Transform assumptions into input metrics for a business plan
- Net Present Value: Update financial models with real data from experiments
Growth boards use these metrics to make evidence-based decisions about which projects receive continued funding, following a venture capital approach within the organisation.
The Way Forward
Managers create small, cross-functional teams empowered to test assumptions in safe “islands of freedom.” Finance, HR, and legal shift from blocking to facilitating experiments. Leaders hold teams accountable for genuine learning, not inflated projections. Employees know they can try bold ideas, retain ownership if they succeed, and learn valuable lessons if they fail.
Such a culture raises overall productivity, keeps older companies relevant, and makes the economy more inclusive: people from all backgrounds can attempt new ventures. The Startup Way sets out a repeatable process for harnessing human creativity and renewing organisations.
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What I’m reading this week
Cutler on the Big Problem with Frameworks · Article
Is UXR Overrated? · Article
What Makes AI Agentic? · Tweet
Developer Velocity Index · Paper
Outcomes Are Hard · Article
The Tension of Early Product Communication · Article
Powerful AI Is Coming. We're Not Ready · Article
Beyond Accuracy: Evaluating Recommender Systems by Coverage and Serendipity
Mouzhi Ge, Carla Delgado-Battenfeld, Dietmar Jannach. 2010. (View Paper → )
Coverage and serendipity. Based on a literature review, we first discuss both measurement methods as well as the tradeoff between good coverage and serendipity. We then analyse the role of coverage and serendipity as indicators of recommendation quality, present novel ways of how they can be measured and discuss how to interpret the obtained measurements. Overall, we argue that our new ways of measuring these concepts reflect the quality impression perceived by the user in a better way than previous metrics thus leading to enhanced user satisfaction.
Traditionally recommender systems are evaluated on their predictive accuracy. Clearly looking beyond accuracy there are other measures that could be considered. It’s important to understand if your system is allowing for serendipity - if not at the recommender level then at least at the product level. Increasing serendipity is often an important goal of products.
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Book Highlights
We should think about how many resources an opportunity will require. While I do not encourage trying to “guesstimate” your insights, your strategy must align with your resources and the company’s capabilities. So this is the time to make sure that your selection realistically reflects your ability to execute those items when the time comes. Nacho Bassino · Product Direction
Complexity is the degree to which an innovation is perceived as relatively difficult to understand and use. Any new idea may be classified on the complexity-simplicity continuum. Some innovations are clear in their meaning to potential adopters while others are not. Although the research evidence is not entirely conclusive, we suggest the complexity of an innovation, as perceived by members of a social system, is negatively related to its rate of adoption. Everett M. Rogers · Diffusion of Innovations
When we’re engaged in object recognition, our eyes are looking for familiar shapes, known as geons. Geons are simple shapes such as squares, triangles, cubes, and cylinders that our brains combine together to figure out what an object is.... Dan Saffer · Microinteractions
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Quotes & Tweets
Rule 1 of Marketing: Nobody cares about your product, they care about themselves. Unkown
The act of forcing yourself to write is the only thing that gives you something to say. Jack Butcher