The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

partner with installers before becoming fully operational. Similarly,
BrightSource raised $291 million to build and operate large-scale
solar plants without delivering a watt to a single customer.
Instead of having to invest time and money in expensive
fabrication facilities, Alphabet is able to take advantage of the
massive existing infrastructure that produces silicon wafers for
computer electronics. As a result, Alphabet can go from a product
concept to holding a physical version in its hand in just six weeks
from end to end. Alphabet’s challenge has been to nd the
combination of performance, price, and physical shape that is a
match for early customers. Although its technology has
revolutionary potential, early adopters will deploy it only if they
can see a clear return on investment.
It might seem that the most obvious market for Alphabet’s
technology would be power plants, and indeed, that was the team’s
initial hypothesis. Alphabet hypothesized that simple cycle gas
turbines would be an ideal application; these turbines, which are
similar to jet engines strapped to the ground, are used by power
generators to provide energy for peak demand. Alphabet believed
that attaching its semiconductors to those turbines would be simple
and cheap.
The company went about testing this hypothesis in small batches
by building small-scale solutions for its customers as a way of
learning. As with many initial ideas, their hypothesis was disproved
quickly. Power companies have a low tolerance for risk, making
them unlikely to become early adopters. Because it wasn’t weighed
down by a large-batch approach, Alphabet was ready to pivot after
just three months of investigation.
Alphabet has eliminated many other potential markets as well,
leading to a series of customer segment pivots. The company’s
current e orts are focused on manufacturing rms, which have the

---

current e orts are focused on manufacturing rms, which have the
ability to experiment with new technologies in separate parts of
their factory; this allows early adopters to evaluate the real-world
bene ts before committing to a larger deployment. These early
deployments are putting more of Alphabet’s assumptions to the
test. Unlike in the computer hardware business, customers are not
willing to pay top dollar for maximum performance. This has
required signi cant changes in Alphabet’s product, con guring it to
achieve the lowest cost per watt possible.
All this experimentation has cost the company a tiny fraction of
what other energy startups have consumed. To date, Alphabet has
raised approximately $1 million. Only time will tell if they will
prevail, but thanks to the power of small batches, they will be able
to discover the truth much faster.
10
The Toyota Production System is probably the most advanced
system of management in the world, but even more impressive is
the fact that Toyota has built the most advanced learning
organization in history. It has demonstrated an ability to unleash the
creativity of its employees, achieve consistent growth, and produce
innovative new products relentlessly over the course of nearly a
century.
11
This is the kind of long-term success to which entrepreneurs
should aspire. Although lean production techniques are powerful,
they are only a manifestation of a high-functioning organization that
is committed to achieving maximum performance by employing the
right measures of progress over the long term. Process is only the
foundation upon which a great company culture can develop. But
without this foundation, e orts to encourage learning, creativity,
and innovation will fall at—as many disillusioned directors of HR
can attest.
The Lean Startup works only if we are able to build an
organization as adaptable and fast as the challenges it faces. This
requires tackling the human challenges inherent in this new way of
working; that is the subject of the remainder of