Lesson 2 Entrepreneurship

ISABELA STATE UNIVERSITY- MAIN CAMPUS
2
COLLEGE OF EDUCATION
Lean Startup
p
LESSON
LESSON
At the end of the lesson, students
should be able to:
• Differentiate assumption from
hypothesis
• Identify principles of lean
methods
• Integrate various validation
techniques with stakeholders
WORD BANK
Assumption- something that is believed to be true or probably true but that is
not known to be true : something that is assumed
Hypothesis- A hypothesis is a proposed explanation for a phenomenon. For a

hypothesis to be a scientific hypothesis, the scientific method requires that one can test
it. Scientists generally base scientific hypotheses on previous observations that cannot
satisfactorily be explained with the available scientific theories
Lean Startup - A lean startup is a method used to found a new company or

introduce a new product on behalf of an existing company. The lean startup
method advocates developing products that consumers have already
demonstrated they desire so that a market will already exist as soon as the product is
launched.
Bachelor of Technology and Livelihood Education

SUBJECT: Entrepreneurship/ Entrepreneurial Mind
1
PREPARED BY: CHRISTIAN LLOYD D. TAGUBA
Lean Startup: How it Started?
STEVE INSKEEP: And now let's talk about the drive to increase innovation. Some of
the best business ideas supposedly come to people in the shower - or maybe not.
ERIC RIES: When we're in the shower, when we're thinking about our idea - boy,
does it sound brilliant. But the reality is that most of our ideas are actually terrible.
INSKEEP: That's entrepreneur Eric Ries. He's some up with his fair share of good
and bad ideas, and now he has some new ideas for how to start a business. One of
them is that it's okay to put a totally unfinished product out into the market. Not only
that, sometimes it's actually better than trying to get the product perfect first. Ries'
new book is called "The Lean Startup," and he joined us to talk more about it.
RIES: When we start to think of all of our work as an experiment that is designed for
learning, not just making more stuff, new and interesting possibilities come up. So,
for example, I once spent six months building a product that customers wouldn't
even download off the Internet, so it didn't really matter how buggy it was or what
kind of problems it had. And what I realized is that if we had just created a single
Web page to offer people a chance to download that product without having even
built it, we wouldn't have even needed to build page two, where we apologize for the
fact that it didn't exist yet, because nobody would even click that download button.
(SOUNDBITE OF LAUGHTER)

2
INSKEEP: So start small. That's another one of your suggestions, here.
RIES: It's a really paradoxical thing. We want to think big, but start small. And then
scale fast. People think about trying to build the next Facebook as trying to start
where Facebook is today, as a major global presence. And it's hard to remember
that that started only on one college campus, and that proved that the model could
work as they went from campus to campus. They didn't need massive scale at the
beginning. The current management tools that worked so well in the 20th century
that have to do with planning and forecasting and being able to put together a
rigorous plan that you can then beat with execution, that actually gets in the way of
innovation.
INSKEEP: Although, when you think about people who've been making money, even
in the difficult economy of recent years, it seems like a lot of capital-intensive
businesses - I mean biotech, health care, defense contractors. It's challenging to
think about starting small scale in anything and going up against any of them.
RIES: It certainly is daunting. One of the things that I am really excited about in the
current environment is what I call the rentership of the means of production, turning
Marx's old dictum on its head. It used to be if you wanted to compete in
manufacturing, you had to build a factory, which is very expensive.
INSKEEP: You had to own the means of production.
RIES: You had to own the means of production. But now you can rent them.
INSKEEP: What does that mean, exactly?
RIES: I'll give you an example from software, and then we can talk about how it
would look actually in manufacturing.
INSKEEP: Sure.
RIES: If you have an idea for a new software product you want to sell on the Internet,
as I did in my last company IMVU, you only need about $5 a day to get started. You
need enough money to be able to put up an initial website, and then you need to be
able to advertise it and get distribution to customers. Well, in the old days, that would
have been expensive, too: billboards or magazine advertising. Today, you could go
with Google with their AdWords product and you can buy clicks and buy customer
attention at pennies each. And so the first advertising budget we had literally was $5
a day. We were paying five cents a click, and that allowed us to get 100 clicks. And
so if our product had turned out to be a complete disaster and, you know, had no
chance of success, we could have found it out at a cost of five bucks instead of $5
million. That same capability is being unlocked in manufacturing. So even if you want
to build a physical device, you don't necessarily have to go build a factory. You can
just build a computer schematic of what you want, and there are manufacturers now

3
who will send you a batch of, you know, say, 40 of those at a very low cost. We
profile one such company in the book, and we tell a story of them building a field
array for a military contractor that was a very complicated contraption that had to be
able to defuse landmines and bombs, a very technically demanding product. And in
the old days, that would've taken years to develop, and we show the timeline in the
book of them going from concept to 40 physical prototypes they could test in the field
in just about 15 days.
INSKEEP: Rather than 15 years, which would be more common for a military
contract.
RIES: And the cost of only a few thousand dollars, instead of millions.
INSKEEP: So you're trying to put a dollar value - when a company looks at the value
of itself - a dollar value on the speed and nimbleness with which new ideas are tried
and fielded, and then sometimes even knocked down.
RIES: That's exactly right. Right now, we're really focused on efficiency as a society.
We always want to increase productivity, build stuff more efficiently. And the truth is,
we actually have more stuff than we know what to do with. So, building more of it,
more efficiently, actually doesn't help. We have to be focused on the efficiency with
which we can test new ideas, to discover which are brilliant, and which are crazy.
INSKEEP: Eric Ries, thanks very much.
RIES: Thanks for having me.
DAVID GREENE: And Eric Ries's new book is called "The Lean Startup."
The Lean Startup Model

“Startup success can be engineered by following the process, which means it can be
learned, which means it can be taught.”- Eric Ries
The Lean Startup provides a scientific approach to creating and managing startups
and get a desired product to customers' hands faster. The Lean Startup method
teaches you how to drive a startup-how to steer, when to turn, and when to
persevere-and grow a business with maximum acceleration. It is a principled
approach to new product development.
Too many startups begin with an idea for a product that they think people want. They
then spend months, sometimes years, perfecting that product without ever showing
the product, even in a very rudimentary form, to the prospective customer. When
they fail to reach broad uptake from customers, it is often because they never spoke
to prospective customers and determined whether or not the product was interesting.

4
When customers ultimately communicate, through their indifference, that they don't
care about the idea, the startup fails.
“The Lean Startup method teaches you how to drive a startup-how to steer, when to
turn, and when to persevere-and grow a business with maximum acceleration.”
+THE LEAN STARTUP PROCESS - DIAGRAM
“Using the Lean Startup approach, companies can create order not chaos by
providing tools to test a vision continuously.”
“By the time that product is ready to be distributed widely, it will already have
established customers.”
ELIMINATE UNCERTAINTY
The lack of a tailored management process has led many a start-up or, as Ries
terms them, "a human institution designed to create a new product or service under
conditions of extreme uncertainty", to abandon all process. They take a "just do it"
approach that avoids all forms of management. But this is not the only option. Using
the Lean Startup approach, companies can create order not chaos by providing tools

5
to test a vision continuously. Lean isn't simply about spending less money. Lean isn't
just about failing fast, failing cheap. It is about putting a process, a methodology
around the development of a product.
WORK SMARTER NOT HARDER

The Lean Startup methodology has as a premise that every startup is a grand
experiment that attempts to answer a question. The question is not "Can this product
be built?" Instead, the questions are "Should this product be built?" and "Can we
build a sustainable business around this set of products and services?" This
experiment is more than just theoretical inquiry; it is a first product. If it is successful,
it allows a manager to get started with his or her campaign: enlisting early adopters,
adding employees to each further experiment or iteration, and eventually starting to
build a product. By the time that product is ready to be distributed widely, it will
already have established customers. It will have solved real problems and offer
detailed specifications for what needs to be built.
DEVELOP AN MVP
A core component of Lean Startup methodology is the build-measure-learn feedback

loop. The first step is figuring out the problem that needs to be solved and then
developing a MINIMUM VIABLE PRODUCT (MVP) to begin the process of learning
as quickly as possible. Once the MVP is established, a startup can work on tuning

6
the engine. This will involve measurement and learning and must include actionable
metrics that can demonstrate cause and effect question.
The startup will also utilize an investigative development method called the "Five
Whys"-asking simple questions to study and solve problems along the way. When
this process of measuring and learning is done correctly, it will be clear that a
company is either moving the drivers of the business model or not. If not, it is a sign
that it is time to pivot or make a structural course correction to test a new
fundamental hypothesis about the product, strategy and engine of growth.
VALIDATED LEARNING
Progress in manufacturing is measured by the production of high quality goods. The
unit of progress for Lean Startups is validated learning-a rigorous method for
demonstrating progress when one is embedded in the soil of extreme uncertainty.
Once entrepreneurs embrace validated learning, the development process can
shrink substantially. When you focus on figuring the right thing to build-the thing
customers want and will pay for-you need not spend months waiting for a product
beta launch to change the company's direction. Instead, entrepreneurs can adapt
their plans incrementally, inch by inch, minute by minute.
“Progress in manufacturing is measured by the production of high quality goods. The
unit of progress for Lean Startups is validated learning-a rigorous method for
demonstrating progress when one is embedded in the soil of extreme uncertainty.”

PRINCIPLES
1. ENTREPRENEURS ARE EVERYWHERE
You don't have to work in a garage to be in a startup.
2. ENTREPRENEURSHIP IS MANAGEMENT
A startup is an institution, not just a product, so it requires management, a

new kind of management specifically geared to its context.
3. VALIDATED LEARNING
Startups exist not to make stuff, make money, or serve customers. They exist
to learn how to build a sustainable business. This learning can be validated
scientifically, by running experiments that allow us to test each element of our
vision.

7
4. INNOVATION ACCOUNTING
To improve entrepreneurial outcomes, and to hold entrepreneurs accountable,

we need to focus on the boring stuff: how to measure progress, how to setup
milestones, how to prioritize work. This requires a new kind of accounting,
specific to startups.
5. BUILD-MEASURE-LEARN
The fundamental activity of a startup is to turn ideas into products, measure

how customers respond, and then learn whether to pivot or persevere. All
successful startup processes should be geared to accelerate that feedback
loop.
Assumption VS Hypothesis
Viktor Todorov, MBA
In science hypothesis and assumption are concepts that are similar in nature and
are used commonly in research and experiments.
So what is Hypothesis?
Something that has yet not been proved to classify as a theory but believed to be
true by the researcher is labeled as a hypothesis. A hypothesis is merely a
proposition that is presented or put forward by a scientist to explain a natural
phenomenon. It does not become a theory until it is proved and tested under
different conditions and circumstances. At best, it is an assumption that has been
made working.
What is Assumption?
An assumption is any statement that is believed to be true. Many times, people pay
dearly when they jump to conclusions based upon their assumptions. Thinking about
the feelings of others is merely assumption as there is no way to tell what a person is
thinking or feeling.
What is the difference between a Hypothesis and Assumption?
• Hypothesis is an argument put forward to explain a phenomenon or sets of

phenomena
• Hypothesis is not a theory until it has been proved and verified under different
circumstances
• Anything taken for granted is an assumption, and a hypothesis is at best a working

assumption

8
• Hypothesis is a theory in waiting as it can be called theory only after verification
Source: http://www.differencebetween.com/difference-between-hypothesis-and-vs-
assumption/#ixzz36nojxXoh
Webster's Dictionary presents the following definitions for these terms:
• Fact - the assertion or statement of a thing done or existing;

• Assumption - the act of taking for granted, or supposing a thing without proof;
• Observation - the act or the faculty of observing or taking notice; the act of
seeing, or of fixing the mind upon, anything.
• Hypothesis - something not proved, but assumed for the purpose of argument,
or to account for a fact or an occurrence
So what interpretation the Lean Start-up practice is suggesting?
In his article “Difference Between a Hypothesis and an Assumption“, Sean Murphy

argues that hypothesis is what is being tested explicitly by an experiment. An
assumption is tested implicitly. By making your assumptions as well as your
hypotheses explicit you increase the clarity of your approach and the chance for
learning.
The two things that can trip you up most often is an unconscious assumption that
masks a problem with your hypothesis or an unconscious bias in who you are testing
the value hypothesis on.
Source: http://tiny.cc/w1zmix
The two most important assumptions entrepreneurs make are what I call the value
hypothesis and the growth hypothesis. The value hypothesis tests whether a product
or service really delivers value to customers once they are using it.
The growth hypothesis tests how new customers will discover a product or service.
As soon as we formulate a hypothesis that we want to test, the product development

team should be engineered to design and run this experiment as quickly as possible,
using the smallest batch size that will get the job done.
Here is the process suggested by Steve Blank:

9
Personally my interpretation on the difference between assumption and hypothesis is

the following:
Assumption is a general feeling about a business problem. In order to test if it’s true
or not one should develop a sound hypothesis (one or many) relevant to the
assumption and the business problem.
For example:
Let’s say that you like to develop ice-cream business.
One of the assumptions may be that most kids like to eat ice-cream.
However, you like to develop this business in your city X. So in this case, you might
like to test the following hypothesis: More than 50% of the children in city X eat ice-
cream.
Next step is to come-up with a good test to validate this assumption.

10
REFERENCES
'Lean startup' advice: Think big, start small (2011). . Washington, D.C.: NPR.
Retrieved from https://www.proquest.com/other-sources/lean-startup-advice-
think-big-start-small/docview/904362906/se-2?accountid=207335
The Lean Startup. (n.d.). Methodology. The Lean Startup | Methodology. Retrieved
April 3, 2022, from http://theleanstartup.com/principles
Torodov, MBA, V., 2014. Assumption Vs Hypothesis in Lean Start-up practice.

[online] Linkedin.com. Available at:
<https://www.linkedin.com/pulse/20140707174655-7214044-assumption-vs-
hypothesis/> [Accessed 3 April 2022].

11

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ISABELA STATE UNIVERSITY- MAIN CAMPUS

Hypothesis- A hypothesis is a proposed explanation for a phenomenon. For a

Lean Startup - A lean startup is a method used to found a new company or

Bachelor of Technology and Livelihood Education

Lean Startup: How it Started?

Bachelor of Technology and Livelihood Education

INSKEEP: So start small. That's another one of your suggestions, here.

INSKEEP: You had to own the means of production.

INSKEEP: What does that mean, exactly?

Bachelor of Technology and Livelihood Education

INSKEEP: Eric Ries, thanks very much.

RIES: Thanks for having me.

The Lean Startup Model

Bachelor of Technology and Livelihood Education

turn, and when to persevere-and grow a business with maximum acceleration.”

+THE LEAN STARTUP PROCESS - DIAGRAM

providing tools to test a vision continuously.”

Bachelor of Technology and Livelihood Education

WORK SMARTER NOT HARDER

A core component of Lean Startup methodology is the build-measure-learn feedback

Bachelor of Technology and Livelihood Education

“Progress in manufacturing is measured by the production of high quality goods. The

demonstrating progress when one is embedded in the soil of extreme uncertainty.”

You don't have to work in a garage to be in a startup.

A startup is an institution, not just a product, so it requires management, a

Bachelor of Technology and Livelihood Education

To improve entrepreneurial outcomes, and to hold entrepreneurs accountable,

The fundamental activity of a startup is to turn ideas into products, measure

What is the difference between a Hypothesis and Assumption?

• Hypothesis is an argument put forward to explain a phenomenon or sets of

• Anything taken for granted is an assumption, and a hypothesis is at best a working

Bachelor of Technology and Livelihood Education

• Hypothesis is a theory in waiting as it can be called theory only after verification

Webster's Dictionary presents the following definitions for these terms:

• Fact - the assertion or statement of a thing done or existing;

So what interpretation the Lean Start-up practice is suggesting?

In his article “Difference Between a Hypothesis and an Assumption“, Sean Murphy

As soon as we formulate a hypothesis that we want to test, the product development

Here is the process suggested by Steve Blank:

Bachelor of Technology and Livelihood Education

Personally my interpretation on the difference between assumption and hypothesis is

Let’s say that you like to develop ice-cream business.

Next step is to come-up with a good test to validate this assumption.

Bachelor of Technology and Livelihood Education

Torodov, MBA, V., 2014. Assumption Vs Hypothesis in Lean Start-up practice.

Bachelor of Technology and Livelihood Education

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