Swimming with Asian Sharks - Business Secrets from the Pacific Rim

The Lean Start-Up Method

Doing business is not easy. More than 90% of businesses fail within the first year.  Another 80% of the ones that survive the first year fail after five years.  How do you increase your chances of success?  One of the answers is education.  I don't mean an MBA; I mean reading books.  Read as much as you can whenever you can about how to create a business that meets the needs of the customers and makes a healthy profit to stay alive.

Reading is the beginning, but to take it to the next level you must adopt a philosophy for business.  What are the underlying principles that you will follow while conducting the business day to day?  A great book for helping you develop a winning philosophy is The Lean Startup by Eric Ries.

While working on my big data company, a friend recommended that I read the book fully before doing any more work.  Up until that point, I was following the philosophy of just getting something out there and seeing what happens.  The problem with "see what happens" is something will always happen, but it may not be useful to you.  The lean start-up philosophy or methodology helped me correct my underlying principle for business.  Lean start-up is based on lean manufacturing, also known as the Toyota way.  The lean start-up philosophy is based on treating your business as a science experiment. Your business is there to answer a single question: your hypothesis.  For example, my hypothesis for the big data company was "Big data analysis on wealthy Chinese consumers will be valuable for companies enter the Chinese market."  With this hypothesis, we set the company in motion to prove that this is true.  When I discovered that my hypothesis was too broad, we pivoted, and created a new one, "Location data on wealthy Chinese will help companies, in a web-based format."  When this didn't work, we pivoted again.

Imagine the total money left in the bank as the runway of your business.  The runway can be measured in the number of pivots or amount of learning you can do before the business goes bankrupt.

The book also covers the technique of the five whys.  Often we only see the symptoms of a problem.  If we set out to correct only the symptoms, the problem is still there and will continue to cause the symptom and potentially more problems in the future.

For example, if you hear a loud knock at the door, you could easily just put on ear buds.  You may not hear the knocks anymore, but this creates a whole set of new problems, and doesn't address the original problem of someone at the door.  The five whys method allow you to find the root cause of a problem.  In the case of the door knocking, the first why is, why is there a door being knocked?  There is a person at the door.  Why is the person at the door? This is the second why.  Because they are upset at you.  Why are they upset at me?  Because I'm making too much noise.  Why am I making so much noise?  Because I'm power sawing at 2 a.m.  Solution: stop power sawing, no more knocking.  If I had just put ear buds on, eventually they would have the police at my door.  The key is to prevent small problems from becoming big ones, which will save you both time and money in the long run.

The book has many great examples in other businesses. I highly recommend you give it a read.