Do lean startups mean less IP?

Can principles of management impact on the creation of IP? The question has taken on potentially greater significance with the ever-increasing emphasis on innovation and entrepreneurship and the search for the best ways to manage such activities. Within this context, there are few managerial notions that have attracted more attention than Eric Ries’s notion of lean start-ups. As set out in his 2011 best-selling book, The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, here, Ries argues that product development cycles can be significantly shortened by adopting “validated learning.” The idea is to put the customer’s needs as the focus of product development rather than adopting what has been described as a Field of Dreams approach—“build it and they will come”, here. Under this view, the emphasis is on constant iteration of trying to find out what customers really want. As described in The Economist (“Tech Start Ups: A Cambrian Moment”, January 18, 2014), here, this

“involves building something [in the world of Ries, a minimum viable product that is used to ascertain consumer interest],measuring how users react, learning from the results, then starting all over again until they reach what is known as “product-market fit.”

The claim is that the constant process of iteration enables the startup to remain lean by

“eliminat[ing] wasteful practices and increas[ing] value producing practices during the product development phase so that startups can have a better chance of success without requiring large amounts of outside funding, elaborate business plans, or the perfect product.” 

In the world of Ries, where almost anything “can be made”, the real question is not “can it be built?’, but rather “should it be built?” In support of this “lean” function, a form of “accounting for innovation” has been developed, which requires the entrepreneur to maintain detailed records of their iterative activities and to analyze how they impact on “meaningful metrics” that measure the innovation function. Not surprisingly, a cottage industry has grown up around this so-called “lean movement”, including over 1,000 “lean-startup” groups, an organization (Lean Startup Machine) that offers workshops, tools to chart a company’s “lean” performance, all of this augmented by related printed materials, YouTube presentations and the like.

Before considering how lean startup approach may impact on IP, it is important to consider forms of push-back that have been expressed, as suggested by the piece in The Economist. First, there is a psychological dimension. Entrepreneurship is often described as a journey in following one’s passion, even when no one else buys into your notion. But the lean startup approach has built into it the need to constantly admit that you may be wrong (so wrong that, in the lexicon of the field, one should “pivot”, meaning scrapping the current product idea and starting over). In the word of Joel Gascoigne, an adherent to the approach, “as an entrepreneur you’re meant to be bullish about your opinion. But leans means that you constantly remind yourself that you could be wrong.”

Another criticism can be bundled under the claim that lean startups are not really acts of entrepreneurship, but merely the disciplined activities of “empiricists who try to find a profitable niche.” As such, there is inherently in the lean approach a very low ceiling for innovative potential. As venture capitalist Scott Nolan observed,

“lean provides a useful toolkit, but it can bias you towards the incremental rather than the transformational. You cannot simply iterate your way into orbit.” 

Ries himself seems to acknowledge that the lean approach can lead to “analysis paralysis” if not properly applied (though this is an occupational hazard of any approach that is heavily driven by metrics and the responses to them). A more general criticism, which applies both the lean approach and the current world of startups more generally, was expressed by consultant Venkatesh Rao, who argues that what is happening is less about fostering the next world-beating startup and more about creating the managerial framework in which today’s knowledge workers can flourish. In his view, this process is analogous to what Rao claims happened to artisan steelworkers at the end of the 19th century, as their skills were commoditized, the goal being to create a reliable and productive working class with the requisite knowledge.

So what about IP? At a certain risk of generalization, this Kat wonders whether the lean approach, if it becomes the norm for a critical mass of knowledge workers, may dampen the conditions by which innovation and invention take place. The suggestion that startup activity should be aspiring to a form of assembly line for knowledge workers, engaged in constant empirical iterations in the search of “the product”, would seem to narrow the scope for the kinds of creations and inventions that are the staple of IP rights. Incrementalism has its place, but it should also have its limits, lest it have a pernicious dampening effect on the ability of knowledge workers to continue to create and invent.